UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended March 31, 2020
Commission File Number 001-35754
Infosys Limited
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Electronics City, Hosur Road, Bangalore - 560 100, Karnataka, India. +91-80-2852-0261
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) : o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) : o
TABLE OF CONTENTS
DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Infosys Limited (“Infosys” or “the Company” or “we”) hereby furnishes the United States Securities and Exchange Commission with copies of the following information concerning our public disclosures regarding our results of operations and financial condition for the quarter and year ended March 31, 2020.
The following information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On April 20, 2020, we announced our results of operations for the quarter and year ended March 31, 2020. We issued press releases announcing our results under International Financial Reporting Standards (“IFRS”) in U.S. dollars and Indian rupees, copies of which are attached to this Form 6-K as Exhibits 99.1 and 99.2, respectively.
On April 20, 2020, we held a press conference to announce our results, which was followed by a question and answer session. The transcript of this press conference is attached to this Form 6-K as Exhibit 99.3.
We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters and year ended March 31, 2020 and 2019 (as per IFRS); revenue by client geography offering, business segment, revenue by offering; information regarding our client concentration; employee information and metrics; and consolidated IT services information. We have attached this fact sheet to this Form 6-K as Exhibit 99.4.
On April 20, 2020, we also held a teleconference with investors and analysts to discuss our results. The transcripts of the teleconference are attached to this Form 6-K as Exhibit 99.5.
We placed form of releases to stock exchanges and advertisements in certain Indian newspapers concerning our results of operations for the quarter and year ended March 31, 2020, under Ind AS. A copy of the release to the stock exchanges and the advertisement is attached to this Form 6-K as Exhibit 99.6.
We have made available to the public on our web site, www.infosys.com, the following: Audited Condensed Financial Statements in compliance with IFRS in US dollars and the Auditors Report for the year ended March 31, 2020; Audited Interim Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report for the quarter and year ended March 31, 2020; Audited Ind AS Condensed Standalone Financial Statements and Auditors Report for the quarter and year ended March 31, 2020; Audited Ind AS Standalone Financial Statements and Auditors Report for the year ended March 31, 2020; Audited Ind AS Consolidated Financial Statements and Auditors Report for the quarter and year ended March 31, 2020; Audited Ind AS Consolidated Financial Statements and Auditors Report for the year ended March 31, 2020. We have attached these documents to this Form 6-K as Exhibits 99.7, 99.8,99.9 and 99.10 respectively.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
Infosys Limited /s/ Inderpreet Sawhney | |
Date: April 24, 2020 |
Inderpreet Sawhney General Counsel and Chief Compliance Officer |
Exhibit No. | Description of Document |
99.1 | IFRS USD press release |
99.2 | IFRS INR press release |
99.3 | Transcript of April 20, 2020 press conference |
99.4 | Fact Sheet regarding Registrant's Statement of Profit and Loss for the quarter and year ended March 31, 2020 and 2019 (as per IFRS); revenue by Business Segment, revenue by Offering, Client Geography, information regarding Client Concentration; Employee Information and Metrics and Consolidated IT Services Information |
99.5 | Transcript of April 20, 2020 06:45 p.m. IST Earnings Call |
99.6 | Form of release to stock exchanges and advertisement placed in Indian newspapers |
99.7 | Audited Condensed Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with International Financial Reporting Standards (IFRS) in US Dollars and the Auditors Report thereon |
99.8 | Audited Interim Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with IFRS in Indian Rupees and the Auditors Report thereon |
99.9 | Audited Interim Condensed Financial Statements of Infosys Limited for the quarter and year ended March 31, 2020 in compliance with Indian Accounting Standards (INDAS) and Auditors Report thereon and Audited Financial Statements of Infosys Limited for the year ended March 31, 2020 in compliance with INDAS and Auditors Report thereon |
99.10 | Audited Interim Consolidated Financial Statements of Infosys Limited and its subsidiaries in compliance with INDAS for the quarter and year ended March 31, 2020 and Auditors Report thereon and Audited Consolidated Financial Statements for Infosys Limited and its subsidiaries for the year ended March 31, 2020 in compliance with INDAS and Auditors Report thereon |
Exhibit 99.1
IFRS USD Press Release
37.8% growth in digital portfolio leads to strong 9.8% growth in FY 20
Bengaluru, India – April 20, 2020
“I am proud of the Infosys team that has worked exceptionally well to achieve 93% remote working today and ensuring consistent service delivery for our clients in this rapidly changing environment. Our focus on the health of our employees and our commitment to our clients helped us navigate the past few weeks,” said Salil Parekh, CEO and MD. “We had an exceptional year in financial year 2020 with growth of 9.8% and operating margin of 21.3%. While the immediate short-term will be challenging, looking ahead, we can see that there is a strong interest to consolidate with partners with high-quality and agile service delivery and strong financial resilience. I am confident we will emerge from this stronger.”
· | FY20 revenues grew by 8.3% in USD, 9.8% in constant currency |
· | FY 20 operating margin at 21.3% |
· | FY 20 Free Cash Flow at $2.15 billion; Free Cash Flow to net profit conversion at 92% |
· | Q4 20 revenues grew year-on-year by 4.5% in USD; 6.4% in constant currency |
· | Q4 20 revenues declined sequentially by 1.4% in USD; 0.8% in constant currency |
· | Q4 20 Digital revenues at $1,341 million (41.9% of total revenues), year-on-year growth of 31.7% and sequential growth of 2.6% in constant currency |
· | Announces final dividend of 9.50 per share |
· | Considering the business uncertainty emanating from COVID-19, the company is unable to provide guidance on revenues and margins for FY 21 at this stage. The company will provide guidance after visibility improves |
1. | Financial Highlights – Consolidated results under International Financial Reporting Standards (IFRS) |
For the quarter ended March 31, 2020 Revenues were $3,197 million, growth of 4.5% YoY and decline of 1.4% QoQ
Operating profit was $674 million, increase of 2.6% YoY and decline of 5.2% QoQ. Operating margin was 21.1%.
Basic EPS was $0.14, growth of 4.2% YoY and decline of 5.7% QoQ |
For the Year ended March 31, 2020 Revenues were $12,780 million, growth of 8.3% YoY
Operating profit was $2,724 million, growth of 1.0% YoY. Operating margin was 21.3%.
Basic EPS was $0.55, growth of 8.3% YoY |
“We completed a satisfying year on multiple counts – growth in all verticals and geographies, significant increase in large deal wins, good client mining and operational discipline”, said Pravin Rao, COO. “The impact caused by COVID-19 since last few weeks of March has led to significant displacement in the operating model while severely testing business continuity plans of companies. We demonstrated what a ‘Live Enterprise’ truly is by improving the infrastructure and technology enablement for our employees in a short time span and ensuring business continuity for clients.”
“We continue to remain focused on execution excellence in a period of high uncertainty. Our relentless focus on liquidity will be supported by our strong Balance Sheet of $3.6 billion cash, backed by accelerated cost take-outs and operational rigor”, said Nilanjan Roy, CFO. “The final dividend of 9.50 per share is a testimony of a strong free cash flow performance for FY 20.”
1. | COVID-19 update |
As the world comes together to manage the impact of the crisis caused by COVID-19, Infosys is making every effort to tackle the turbulence. The company is prioritizing employee well-being, assuring services for business continuity and strategizing offerings to improve business resilience for its clients, while also supporting community initiatives. Over 93% of our workforce is enabled to work from home, in countries still under lockdown, and from the company’s offices, wherever possible – are all in sync with the company’s priorities and working tirelessly to help make sure clients are running their businesses and preparing for a future of resilience. (Please refer to the separate press release on our COVID-19 response released today)
2. | Update on whistleblower matters |
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 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal Securities Laws. The Company is presently unable to predict the scope, duration or the outcome of these matters.
3. | Board changes |
DN Prahlad, Independent Director, has resigned from the company to devote more time for his other business commitments with effect from April 20, 2020. The Board placed on record its appreciation for the services rendered by him during his tenure.
The Company announced the appointment of Uri Levine as an Independent Director of the Company, effective April 20, 2020, based on the recommendations of the Nomination and Remuneration Committee of the Board. The appointment is for a period of three years and is subject to the approval of shareholders.
Uri Levine is a passionate serial entrepreneur and disruptor. He co-founded Waze, the world's largest community-based driving traffic and navigation app, with more than 500 million drivers around the globe, which was acquired by Google on June 2013 for more than $1.1 billion. Uri has been in the high-tech business for the last 30 years with half of them in the start-up scene.
4. | Client wins & Testimonials |
· | “Thank you. For employing great people at Infosys. For above and beyond service. And, for a long and prosperous relationship. Not all of our partners were able to get their teams fully up and running. With great pride, I was able to tell the leadership team that Infosys is fully operational for us. Thank you! May Infosys and India weather this storm well and emerge stronger”, Head of US Operations at a global financial services firm. |
· | “Your team has supported a historic shift of office-based employees to work-from-home-status in record time here in the US. The planning, execution and subsequent experience of our staff in the new work modality has been outstanding. The CEO and our board have recognized the incredible efforts that have taken place from the IT teams”, CIO of a leading healthcare company. |
· | Reckitt Benckiser (RB), a FTSE 100 company, has renewed its partnership with Infosys to reimagine its infrastructure and application operations. As part of this engagement, Infosys will bring in advanced AI and Automation to build a Cognitive First IT Enterprise at Reckitt Benckiser, offering a seamless digital experience for its enterprise users. |
· | E.ON has awarded Infosys a multi-year engagement to run and transform its future workplace services. Infosys would transition the workplace services for the E.ON group from the existing incumbent and then continue to transform and operate it till 2025. This expands the strategic partnership between E.ON and Infosys and builds upon the existing contract which Infosys has with E.ON’s subsidiary innogy. Infosys would leverage its Digital Innovation Center in Düsseldorf, Germany, to deliver services for this engagement. |
· | Infosys has been selected by Siemens to deploy Wingspan, Infosys’ Digital Learning and Talent Transformation Platform. The company-wide deployment of next generation, talent transformation platform will enhance learning experience for 385,000 Siemens employees. |
· | Infosys entered a long-term strategic partnership with GE Appliance, a Haier company, to effectively streamline IT operations. As a part of this alliance, Infosys will assist GE Appliances to accelerate their digital and workplace transformation through automation-driven managed IT services support across global command centres, service desks, end-user computing, IT infrastructure, and applications. |
· | A large CPG company selected Infosys to accelerate the transformation of the company’s digital technology capabilities and optimize costs. In addition to being the strategic transformation partner Infosys will also provide end-to-end support for enabling integrated operations across Applications, Infrastructure and Cybersecurity. |
5. | Recognitions |
· | Infosys was positioned as a leader in IDC MarketScape: North American Distributed Energy Resource Management Systems Strategic Consultants and Systems Integrators 2020 Vendor Assessment |
· | Positioned as a leader in IDC MarketScape: Worldwide Business and Industrial IoT Consulting and Systems Integration Services 2020 Vendor Assessment |
· | Recognized as a leader in IDC MarketScape: Worldwide Business and Industrial IoT Engineering and Managed Services 2020 Vendor Assessment |
· | Positioned as a Leader in the IDC MarketScape: Worldwide Integrated Payment Platforms 2019-2020 Vendor Assessment |
· | Ranked as a leader in NelsonHall NEAT for Cognitive and Self-Healing IT Infrastructure Management Services |
· | Ranked as a leader in NelsonHall NEAT for Digital Manufacturing Services |
· | Infosys BPM has been recognized with the elite international award- Brandon Hall Human Capital Excellence Awards, 2019 under three diverse categories. |
· | Infosys BPM has won the Best Practices in CSR Awards 2020 for the Skill Development Initiative of IBPM at 6th International Conference of Corporate Social Responsibility by Institute of Public Enterprise, Hyderabad. |
Infosys is a global leader in next-generation digital services and consulting. We enable clients to navigate their digital transformation, leveraging our teams from over 46 countries. With over three decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next. |
Safe Harbor
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Mehak Chawla Mehak.Chawla@infosys.com |
Chiku Somaiya Chiku.Somaiya@infosys.com |
Infosys Limited and subsidiaries
Audited Condensed Consolidated Balance Sheet as at:
(Dollars in millions except equity share data)
March 31, 2020 | March 31, 2019 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 2,465 | 2,829 |
Current investments | 615 | 958 |
Trade receivables | 2,443 | 2,144 |
Unbilled revenue | 941 | 777 |
Prepayments and other current assets | 739 | 827 |
Income tax assets | 1 | 61 |
Derivative financial instruments | 8 | 48 |
Total current assets | 7,212 | 7,644 |
Non-current assets | ||
Property, plant and equipment | 1,810 | 1,931 |
Right-of-use assets(B3) | 551 | – |
Goodwill | 699 | 512 |
Intangible assets | 251 | 100 |
Non-current investments | 547 | 670 |
Deferred income tax assets | 231 | 199 |
Income tax assets | 711 | 914 |
Other non-current assets | 248 | 282 |
Total non-current assets | 5,048 | 4,608 |
Total assets | 12,260 | 12,252 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 377 | 239 |
Lease liabilities(B3) | 82 | – |
Derivative financial instruments | 65 | 2 |
Current income tax liabilities | 197 | 227 |
Client deposits | 2 | 4 |
Unearned revenue | 395 | 406 |
Employee benefit obligations | 242 | 234 |
Provisions | 76 | 83 |
Other current liabilities | 1,321 | 1,498 |
Total current liabilities | 2,757 | 2,693 |
Non-current liabilities | ||
Lease liabilities(B3) | 530 | – |
Deferred income tax liabilities | 128 | 98 |
Employee benefit obligations | 5 | 6 |
Other non-current liabilities | 139 | 55 |
Total liabilities | 3,559 | 2,852 |
Equity | ||
Share capital- 5 ($0.16) par value 4,800,000,000 (4,800,000,000) equity shares authorized, issued and outstanding 4,240,753,210 (4,335,954,462) equity shares fully paid up, net of 18,239,356 (20,324,982) treasury shares as at March 31, 2020 (March 31, 2019) | 332 | 339 |
Share premium | 305 | 277 |
Retained earnings | 11,014 | 11,248 |
Cash flow hedge reserve | (2) | 3 |
Other reserves | 594 | 384 |
Capital redemption reserve | 17 | 10 |
Other components of equity | (3,614) | (2,870) |
Total equity attributable to equity holders of the company | 8,646 | 9,391 |
Non-controlling interests | 55 | 9 |
Total equity | 8,701 | 9,400 |
Total liabilities and equity | 12,260 | 12,252 |
Infosys Limited and subsidiaries
Consolidated Statement of Comprehensive Income for the:
(Dollars in millions except equity share and per equity share data)
Unaudited | Audited | |||
3 months ended March 31, 2020 | 3 months ended March 31, 2019 | Year ended March 31, 2020 | Year ended March 31, 2019 | |
Revenues | 3,197 | 3,060 | 12,780 | 11,799 |
Cost of sales | 2,133 | 2,028 | 8,552 | 7,687 |
Gross profit | 1,064 | 1,032 | 4,228 | 4,112 |
Operating expenses | ||||
Selling and marketing expenses | 161 | 174 | 664 | 638 |
Administrative expenses | 229 | 200 | 840 | 778 |
Total operating expenses | 390 | 374 | 1,504 | 1,416 |
Operating profit | 674 | 658 | 2,724 | 2,696 |
Other income, net (A3) (B2) | 84 | 94 | 395 | 411 |
Finance cost(B3) | (6) | – | (24) | – |
Reduction in the fair value of Disposal Group held for sale(A1) | – | – | – | (39) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from “Held for Sale” (A2) | – |
– |
– |
(65) |
Profit before income taxes | 752 | 752 | 3,095 | 3,003 |
Income tax expense (A4) | 160 | 171 | 757 | 803 |
Net profit | 592 | 581 | 2,338 | 2,200 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurements of the net defined benefit liability/asset, net (B4) | (2) | – | (24) | (3) |
Equity instrument through other comprehensive income, net | – | – | (5) | 10 |
(2) | – | (29) | 7 | |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair valuation of investments, net | 2 | 3 | 3 | – |
Fair value changes on derivatives designated as cash flow hedge, net | – | (2) | (5) | 3 |
Foreign currency translation | (473) | 74 | (720) | (560) |
(471) | 75 | (722) | (557) | |
Total other comprehensive income/(loss), net of tax | (473) | 75 | (751) | (550) |
Total comprehensive income | 119 | 656 | 1,587 | 1,650 |
Profit attributable to: | ||||
Owners of the Company | 590 | 580 | 2,331 | 2,199 |
Non-controlling interests | 2 | 1 | 7 | 1 |
592 | 581 | 2,338 | 2,200 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 117 | 655 | 1,582 | 1,649 |
Non-controlling interests | 2 | 1 | 5 | 1 |
119 | 656 | 1,587 | 1,650 | |
Earnings per equity share | ||||
Basic ($) | 0.14 | 0.13 | 0.55 | 0.51 |
Diluted ($) | 0.14 | 0.13 | 0.55 | 0.51 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 4,240,181,854 | 4,347,129,592 | 4,257,754,522 | 4,347,130,157 |
Diluted | 4,245,981,386 | 4,353,023,863 | 4,265,144,228 | 4,353,420,772 |
NOTES:
A. | Notes pertaining to previous year | |
1. | During the year ended March 31, 2019, the Company had recorded a reduction in the fair value amounting to $39 million in respect of its subsidiary Panaya. | |
2. | The Company had recorded an adjustment in respect of excess of carrying amount over recoverable amount of $65 million in respect of its subsidiary Skava during the year ended March 31, 2019. | |
3. | Other income includes interest on income tax refunds amounting to $7 million for the year ended March 31, 2019. | |
4. | During the year ended March 31, 2019, on account of conclusion of an Advanced Pricing Agreement (APA) in an overseas jurisdiction, the Company had reversed income tax expense provision of $14 million, which pertains to previous periods. |
B. | Notes pertaining to the current quarter / year | |
1. | The audited condensed consolidated Balance sheet and Statement of Comprehensive Income for the year ended March 31, 2020 have been taken on record at the Board meeting held on April 20, 2020. | |
2. | Other income includes interest on income tax refunds amounting to $2 million for the three months ended March 31, 2020 and $37 million for the year ended March 31, 2020. | |
3. | On account of adoption of IFRS 16- Leases effective April 1, 2019. | |
4. | Includes unrealized losses on certain investments carried in the PF trust for the quarter and year ended March 31, 2020. |
C. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com |
Exhibit 99.2
IFRS INR Press Release
37.8% growth in digital portfolio leads to strong 9.8% growth in FY 20
Bengaluru, India – April 20, 2020
“I am proud of the Infosys team that has worked exceptionally well to achieve 93% remote working today and ensuring consistent service delivery for our clients in this rapidly changing environment. Our focus on the health of our employees and our commitment to our clients helped us navigate the past few weeks,” said Salil Parekh, CEO and MD. “We had an exceptional year in financial year 2020 with growth of 9.8% and operating margin of 21.3%. While the immediate short-term will be challenging, looking ahead, we can see that there is a strong interest to consolidate with partners with high-quality and agile service delivery and strong financial resilience. I am confident we will emerge from this stronger.”
· | FY 20 revenues grew by 9.8% in INR; 9.8% in constant currency |
· | FY 20 operating margin at 21.3% |
· | FY 20 Free Cash Flow at 15,250 crore; Free Cash Flow to net profit conversion at 92% |
· | Q4 20 revenues grew year-on-year by 8.0% in INR; 6.4% in constant currency |
· | Q4 20 revenues grew sequentially by 0.8% in INR; declined 0.8% in constant currency |
· | Q4 20 Digital revenues at $1,341 million (41.9% of total revenues), year-on-year growth of 31.7% and sequential growth of 2.6% in constant currency |
· | Announces final dividend of 9.50 per share |
· | Considering the business uncertainty emanating from COVID-19, the company is unable to provide guidance on revenues and margins for FY 21 at this stage. The company will provide guidance after visibility improves |
1. | Financial Highlights- Consolidated results under International Financial Reporting Standards (IFRS) |
For the quarter ended March 31, 2020 Revenues were 23,267 crore, growth of 8.0% YoY and 0.8% QoQ
Operating profit was 4,927 crore, increase of 6.7% YoY and decrease of 2.7% QoQ. Operating margin was 21.2%.
Basic EPS was 10.19, increase of 8.7% YoY and decrease of 3.1% QoQ |
For the Year ended March 31, 2020 Revenues were 90,791 crore, growth of 9.8% YoY
Operating profit was 19,374 crore, growth of 2.6% YoY. Operating margin was 21.3%.
Basic EPS was 38.97, growth of 10.0% YoY |
“We completed a satisfying year on multiple counts – growth in all verticals and geographies, significant increase in large deal wins, good client mining and operational discipline”, said Pravin Rao, COO. “The impact caused by COVID-19 since last few weeks of March has led to significant displacement in the operating model while severely testing business continuity plans of companies. We demonstrated what a ‘Live Enterprise’ truly is by improving the infrastructure and technology enablement for our employees in a short time span and ensuring business continuity for clients.”
“We continue to remain focused on execution excellence in a period of high uncertainty. Our relentless focus on liquidity will be supported by our strong Balance Sheet of $3.6 billion cash, backed by accelerated cost take-outs and operational rigor”, said Nilanjan Roy, CFO. “The final dividend of 9.50 per share is a testimony of a strong free cash flow performance for FY 20.”
1. | COVID-19 update |
As the world comes together to manage the impact of the crisis caused by COVID-19, Infosys is making every effort to tackle the turbulence. The company is prioritizing employee well-being, assuring services for business continuity and strategizing offerings to improve business resilience for its clients, while also supporting community initiatives. Over 93% of our workforce is enabled to work from home, in countries still under lockdown, and from the company’s offices, wherever possible – are all in sync with the company’s priorities and working tirelessly to help make sure clients are running their businesses and preparing for a future of resilience. (Please refer to the separate press release on our COVID-19 response released today)
2. | Update on whistleblower matters |
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 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal Securities Laws. The Company is presently unable to predict the scope, duration or the outcome of these matters.
3. | Board changes |
DN Prahlad, Independent Director, has resigned from the company to devote more time for his other business commitments with effect from April 20, 2020. The Board placed on record its appreciation for the services rendered by him during his tenure.
The Company announced the appointment of Uri Levine as an Independent Director of the Company, effective April 20, 2020, based on the recommendations of the Nomination and Remuneration Committee of the Board. The appointment is for a period of three years and is subject to the approval of shareholders.
Uri Levine is a passionate serial entrepreneur and disruptor. He co-founded Waze, the world's largest community-based driving traffic and navigation app, with more than 500 million drivers around the globe, which was acquired by Google on June 2013 for more than $1.1 billion. Uri has been in the high-tech business for the last 30 years with half of them in the start-up scene.
4. | Client wins & Testimonials |
· | “Thank you. For employing great people at Infosys. For above and beyond service. And, for a long and prosperous relationship. Not all of our partners were able to get their teams fully up and running. With great pride, I was able to tell the leadership team that Infosys is fully operational for us. Thank you! May Infosys and India weather this storm well and emerge stronger”, Head of US Operations at a global financial services firm. |
· | “Your team has supported a historic shift of office-based employees to work-from-home-status in record time here in the US. The planning, execution and subsequent experience of our staff in the new work modality has been outstanding. The CEO and our board have recognized the incredible efforts that have taken place from the IT teams”, CIO of a leading healthcare company. |
· | Reckitt Benckiser (RB), a FTSE 100 company, has renewed its partnership with Infosys to reimagine its infrastructure and application operations. As part of this engagement, Infosys will bring in advanced AI and Automation to build a Cognitive First IT Enterprise at Reckitt Benckiser, offering a seamless digital experience for its enterprise users. |
· | E.ON has awarded Infosys a multi-year engagement to run and transform its future workplace services. Infosys would transition the workplace services for the E.ON group from the existing incumbent and then continue to transform and operate it till 2025. This expands the strategic partnership between E.ON and Infosys and builds upon the existing contract which Infosys has with E.ON’s subsidiary innogy. Infosys would leverage its Digital Innovation Center in Düsseldorf, Germany, to deliver services for this engagement. |
· | Infosys has been selected by Siemens to deploy Wingspan, Infosys’ Digital Learning and Talent Transformation Platform. The company-wide deployment of next generation, talent transformation platform will enhance learning experience for 385,000 Siemens employees. |
· | Infosys entered a long-term strategic partnership with GE Appliance, a Haier company, to effectively streamline IT operations. As a part of this alliance, Infosys will assist GE Appliances to accelerate their digital and workplace transformation through automation-driven managed IT services support across global command centres, service desks, end-user computing, IT infrastructure, and applications. |
· | A large CPG company selected Infosys to accelerate the transformation of the company’s digital technology capabilities and optimize costs. In addition to being the strategic transformation partner Infosys will also provide end-to-end support for enabling integrated operations across Applications, Infrastructure and Cybersecurity. |
5. | Recognitions |
· | Infosys was positioned as a leader in IDC MarketScape: North American Distributed Energy Resource Management Systems Strategic Consultants and Systems Integrators 2020 Vendor Assessment |
· | Positioned as a leader in IDC MarketScape: Worldwide Business and Industrial IoT Consulting and Systems Integration Services 2020 Vendor Assessment |
· | Recognized as a leader in IDC MarketScape: Worldwide Business and Industrial IoT Engineering and Managed Services 2020 Vendor Assessment |
· | Positioned as a Leader in the IDC MarketScape: Worldwide Integrated Payment Platforms 2019-2020 Vendor Assessment |
· | Ranked as a leader in NelsonHall NEAT for Cognitive and Self-Healing IT Infrastructure Management Services |
· | Ranked as a leader in NelsonHall NEAT for Digital Manufacturing Services |
· | Infosys BPM has been recognized with the elite international award- Brandon Hall Human Capital Excellence Awards, 2019 under three diverse categories. |
· | Infosys BPM has won the Best Practices in CSR Awards 2020 for the Skill Development Initiative of IBPM at 6th International Conference of Corporate Social Responsibility by Institute of Public Enterprise, Hyderabad. |
About Infosys
Infosys is a global leader in next-generation digital services and consulting. We enable clients to navigate their digital transformation, leveraging our teams from over 46 countries. With over three decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next. |
Safe Harbor
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Mehak Chawla Mehak.Chawla@infosys.com |
Chiku Somaiya Chiku.Somaiya@infosys.com |
Infosys Limited and subsidiaries
Audited Consolidated Balance Sheet as at:
(In crore except equity share data)
March 31, 2020 | March 31, 2019 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 18,649 | 19,568 |
Current investments | 4,655 | 6,627 |
Trade receivables | 18,487 | 14,827 |
Unbilled revenue | 7,121 | 5,374 |
Prepayments and other current assets | 5,595 | 5,723 |
Income tax assets | 7 | 423 |
Derivative financial instruments | 62 | 336 |
Total current assets | 54,576 | 52,878 |
Non-current assets | ||
Property, plant and equipment | 13,699 | 13,356 |
Right-of-use assets(B3) | 4,168 | – |
Goodwill | 5,286 | 3,540 |
Intangible assets | 1,900 | 691 |
Non-current investments | 4,137 | 4,634 |
Deferred income tax assets | 1,744 | 1,372 |
Income tax assets | 5,384 | 6,320 |
Other non-current assets | 1,874 | 1,947 |
Total non-current assets | 38,192 | 31,860 |
Total assets | 92,768 | 84,738 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 2,852 | 1,655 |
Lease liabilities(B3) | 619 | – |
Derivative financial instruments | 491 | 15 |
Current income tax liabilities | 1,490 | 1,567 |
Client deposits | 18 | 26 |
Unearned revenue | 2,990 | 2,809 |
Employee benefit obligations | 1,832 | 1,619 |
Provisions | 572 | 576 |
Other current liabilities | 9,992 | 10,371 |
Total current liabilities | 20,856 | 18,638 |
Non-current liabilities | ||
Lease liabilities(B3) | 4,014 | – |
Deferred income tax liabilities | 968 | 672 |
Employee benefit obligations | 38 | 44 |
Other non-current liabilities | 1,048 | 378 |
Total liabilities | 26,924 | 19,732 |
Equity | ||
Share capital- 5 par value 480,00,00,000 (480,00,00,000) equity shares authorized, issued and outstanding 424,07,53,210 (433,59,54,462) equity shares fully paid up, net of 1,82,39,356 (2,03,24,982) treasury shares as at March 31, 2020 (March 31, 2019) | 2,122 | 2,170 |
Share premium | 600 | 396 |
Retained earnings | 57,506 | 58,848 |
Cash flow hedge reserve | (15) | 21 |
Other reserves | 4,070 | 2,570 |
Capital redemption reserve | 111 | 61 |
Other components of equity | 1,056 | 882 |
Total equity attributable to equity holders of the company | 65,450 | 64,948 |
Non-controlling interests | 394 | 58 |
Total equity | 65,844 | 65,006 |
Total liabilities and equity | 92,768 | 84,738 |
Infosys Limited and subsidiaries
Audited Consolidated Statement of Comprehensive Income for the:
(In crore except equity share and per equity share data)
3 months ended March 31, 2020 | 3 months ended March 31, 2019 | Year ended March 31, 2020 | Year ended March 31, 2019 | |
Revenues | 23,267 | 21,539 | 90,791 | 82,675 |
Cost of sales | 15,501 | 14,283 | 60,732 | 53,867 |
Gross profit | 7,766 | 7,256 | 30,059 | 28,808 |
Operating expenses | ||||
Selling and marketing expenses | 1,172 | 1,226 | 4,711 | 4,473 |
Administrative expenses | 1,667 | 1,412 | 5,974 | 5,455 |
Total operating expenses | 2,839 | 2,638 | 10,685 | 9,928 |
Operating profit | 4,927 | 4,618 | 19,374 | 18,880 |
Other income, net(A3) (B2) | 614 | 665 | 2,803 | 2,882 |
Finance cost(B3) | (45) | – | (170) | – |
Reduction in the fair value of Disposal Group held for sale(A1) | – | – | – | (270) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from “Held for Sale” (A2) | – | – | – | (451) |
Profit before income taxes | 5,496 | 5,283 | 22,007 | 21,041 |
Income tax expense (A4) | 1,161 | 1,205 | 5,368 | 5,631 |
Net profit | 4,335 | 4,078 | 16,639 | 15,410 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurements of the net defined benefit liability/asset, net (B4) | (21) | (3) | (180) | (22) |
Equity instruments through other comprehensive income, net | (2) | 1 | (33) | 70 |
(23) | (2) | (213) | 48 | |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair value changes on derivatives designated as cash flow hedge, net | – | (15) | (36) | 21 |
Exchange differences on translation of foreign operations | 237 | (70) | 378 | 63 |
Fair valuation of investments, net | 15 | 25 | 22 | 2 |
252 | (60) | 364 | 86 | |
Total other comprehensive income/(loss), net of tax | 229 | (62) | 151 | 134 |
Total comprehensive income | 4,564 | 4,016 | 16,790 | 15,544 |
Profit attributable to: | ||||
Owners of the Company | 4,321 | 4,074 | 16,594 | 15,404 |
Non-controlling interests | 14 | 4 | 45 | 6 |
4,335 | 4,078 | 16,639 | 15,410 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 4,545 | 4,012 | 16,732 | 15,538 |
Non-controlling interests | 19 | 4 | 58 | 6 |
4,564 | 4,016 | 16,790 | 15,544 | |
Earnings per equity share | ||||
Basic () | 10.19 | 9.37 | 38.97 | 35.44 |
Diluted () | 10.18 | 9.36 | 38.91 | 35.38 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 424,01,81,854 | 434,71,29,592 | 425,77,54,522 | 434,71,30,157 |
Diluted | 424,59,81,386 | 435,30,23,863 | 426,51,44,228 | 435,34,20,772 |
NOTES:
A. | Notes pertaining to previous year | |
1. | During the year ended March 31, 2019, the Company had recorded a reduction in the fair value amounting to 270 crore in respect of its subsidiary Panaya. |
2. | The Company had recorded an adjustment in respect of excess of carrying amount over recoverable amount of 451 crore in respect of its subsidiary Skava during the year ended March 31, 2019. |
3. | Other income includes interest on income tax refunds amounting to 51 crore for the year ended March 31, 2019. |
4. | During the year ended March 31, 2019, on account of conclusion of an Advanced Pricing Agreement (APA) in an overseas jurisdiction, the Company had reversed income tax expense provision of 94 crore, which pertains to previous periods. |
B. | Notes pertaining to the current quarter / year | |
1. | The audited interim consolidated Balance sheet and Statement of Comprehensive Income for the three months and year ended March 31, 2020 have been taken on record at the Board meeting held on April 20, 2020. |
2. | Other income includes interest on income tax refunds amounting to 8 crore for the three months ended March 31, 2020 and 259 crore for the year ended March 31, 2020. |
3. | On account of adoption of IFRS 16- Leases effective April 1, 2019. |
4. | Includes unrealized losses on certain investments carried in the PF trust for the quarter and year ended March 31, 2020. |
C. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com |
Exhibit 99.3
Press Conference
“Infosys Press Conference”
April 20, 2020
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer and Whole-time Director
Nilanjan Roy
Chief Financial Officer
MEDIA
Agam Vakil
BloombergQuint
Chandra
ET Now
Mugdha Variyar
CNBC TV18
Megha Mandavia
The Economic Times
Nikita Periwal
Cogensis
Rukmini Rao
Business Today
Ayushman Baruah
Mint
Sharon Thambala
IANS
Shilpa Phadnis
Times of India
Swathi Moorthy
MoneyControl
Sankalp Phartiyal
Reuters
Sarita Rai
Bloomberg
Srinath Srinivasan
Financial Express
Mehak Chawla
Good evening everyone and thank you for joining us today for Infosys Q4 FY20 financial results. Thank you for your patience and we apologize for the delay. I am Mehak and on behalf of Infosys, I would like to welcome you all to this press conference. I want to start by saying that these are unusual times and we hope, you, your family and your dear ones are safe and well.
Before we begin the conference, I would like to share a few points for our attendees today. Please note that all journalists will be on mute by default throughout the press conference. You will be unmuted when your name is called out for asking a question. Should you drop out, please rejoin using the same invite link. With that let me invite Mr. Salil Parekh, CEO Infosys to give us some highlights of the quarter gone by. Salil over to you please.
Salil Parekh
Thank you Mehak. Good evening everyone who have joined to this virtual press event. As Mehak said first apologies from our side for the delay. I trust each of you and your loved ones are safe in this environment and in these times. There are several things that I want to share with you, so a slightly longer opening set of comments.
Among the four points that are critical for us; first we had an exceptional strong performance in the financial year that has just completed, and I will share some highlights. Second, we have done a transition into this new environment in a very efficient and accelerated way and I will give you some highlights of that. We see some near-term challenges in the business environment and we also see a strong level of confidence. As we go through this in the next few quarters, we will emerge stronger from this at the end of it.
The financial year that just ended was truly exceptional for us. We grew at 9.8% constant currency, we were 21.3% of operating margins, we grew our digital revenue by 38% in constant currency and now in Q4 it has become 42% of our overall business. We did all of this with $9 bn+ of large deals for the full year. Our earnings per share grew at 8.3% in dollar terms. We had the highest cash collection in Q4 and indeed for the full fiscal year that has just ended.
In Q4 as well we grew by 6.4% constant currency YoY and delivered 21.1% operating margins with $1.6 bn in large deals, some of which were in the last two weeks of March. We closed the year with a very strong cash position of $3.6 bn with no debt on our balance sheet. As the last two to three weeks of March saw the impact of COVID, we had activated our business continuity plans with an intense focus on employee safety and client service delivery. We today have 93% of our employees working remotely. We believe this transition was handled exceptionally well and several of our clients have shared this feedback with us.
I am proud of our team that has worked literally around the clock to make all of this happen and ensure that our client’s service delivery was going on while we maintain absolute employee safety. We anticipate in the near term there will be challenges in the business environment across a wide set of industries. However, we see an increased interest from our clients in the area of cloud, virtualization, cost reduction programs and workforce transformation. Our discussions with clients already indicate to us that they want to consolidate their work with a strong player like us who has exceptional delivery, 93% remote working and a strong financial balance sheet.
Let me now talk a little bit about our efforts to help broadly the communities that we live in and work in. Via our foundation, we have already dedicated Rs. 100 crores towards relief efforts including half to the Prime Minister’s CARES Fund in India to help enhance hospital capacity, provide treatment, ventilators, testing kits, PPE for frontline health workers and everyone within the hospital environment. In US, we have opened Pathfinders online, an online learning platform for teachers, school children and their families, so they can access high quality computer education from home for free.
Coming back to the business, given the uncertain environment with the global pandemic and the client businesses marred by volatility we do not feel it will be appropriate for us to provide an annual guidance at this stage. As a result, we are currently suspending providing guidance for revenue growth and operating margins for FY21. Given our strong performance in the just concluded financial year and our strong cash position, we are pleased to announce a final dividend for the financial year at Rs.9.50 per share bringing the total dividend for the financial year to Rs.17.50 per share. I am extremely grateful to all our employees for their diligence through this stressful period and proud of the work that they have delivered for our clients.
While we are unsure about what lies immediately ahead, we have enormous strengths that will help us navigate this period and emerge stronger from it. With a sustained focus on client relevance, we are realigned to what our clients are looking for this in this new phase. Our ability to work with clients across the entire spectrum of their needs including accelerating their digital journey and extreme automation for cost efficiencies. A highly skilled employee base of 240,000+ employee worldwide passionately working to make our clients successful, unparalleled delivery capabilities, and our $3.6 bn in cash on our debt free balance sheet which gives us ample liquidity.
With that I close my opening comments. Back to you Mehak, and we are open for questions, Pravin, Nilanjan and I are happy to take those.
Mehak Chawla
Thank you Salil. We will be opening the floor for Q&A. We also have Mr. Pravin Rao, COO, Infosys and Mr. Nilanjan Roy, CFO Infosys joining Salil for the Q&A session.
Our first question today is from Agam from Bloomberg Quint.
Agam Vakil
My questions to you all are, Salil to you is how have things changed already when it comes to the last couple of weeks from March and April, when it comes to demand for services and products? What is the client sentiment like in terms of tech spends and is this towards keeping businesses running or has the pandemic accelerated adoption of Digital Services?
Pravin, my question to you is can you shed some light on the supply side of things? How has March and April been in terms of Infosys’ ability to service clients? How is the workforce in tech being adapted to new environment and what are the challenges that still remain?
Nilanjan my question for you is are you seeing or expecting pressure on pricing, request for higher discounts or extension in payment periods, how does that impact financials in the near term or perhaps some pressure on margin if you could elaborate on that?
Salil Parekh
First part of the question that you talked about in terms of demand, many of us including me have been on several discussions with clients, CEOs and CIOs. Some of those discussions are focused on how we can help them in this situation for increased virtualization, part of the Digital journey to Cloud. We have discussions ongoing with manufacturing client which look at how do you make all of this faster given everyone’s working remotely and there are also discussions on how will you consolidate some of the smaller players that are in the mix so that they can have someone that they can really depend upon and trust in this really complex delivery environment of remote working, high security so that there are no security lapses. So those are sorts of conversations that we have been having. I am also encouraged that means in the medium term, of course we do see that, in the short term, there will be some slowdown in the way business evolves.
Pravin Rao
In terms of enablement, globally we have 93% of our employees today working out of home. The percentage is higher on IT side and slightly lower on the BPM side. We have been able to achieve all this in a span of three weeks’ time and it is very remarkable. The feedback that we have received from our clients on the speed and agility in which we have demonstrated resilience have been encouraging. Our people are now getting used to the new normal. It took a few days for them to adjust to this. We had to do multiple things to enable us. We had to upgrade our networks to handle this high-level percentage of people working from home. We had to provide dongles and other equipment to some of our employees who had problems with the last mile connectivity; we supplied UPSs as well where people have problems with power and so on. We also had to enhance our security controls as well so that we do it in a very secure manner. So far, the feedback from the employees has been positive. We have not seen any loss in productivity since people have got used to it. So I think people are getting adjusted and in some sense our belief is once things come back, I do not know whether it will come back to the same normal, it may be a new normal and there will always be some element of work from home.
Nilanjan Roy
Regarding your question on time credits, yes, we have seen some request for extension of periods but nothing overtly concerning. In fact, during the month of March we had a record collection as well, so we have a lot of our quality clients continuing to pay us on time and as we look ahead of course we have to watch the space carefully. From a near term perspective as Salil mentioned, there could be margin pressure coming in from the topline and on the cost side but we have already started taking some no regret moves towards this space. For instance, we have stopped hiring temporarily, we have also frozen any salary hikes, we have temporarily suspended all promotions so these we believe are no regret moves. We have tremendous other cost levers which we will see in due course. Our strategic cost levers such as automation, pyramid, and on-site offshore continue unabated, which have helped us in the long run and continue to support our margin structure as well.
Mehak Chawla
Our next question is from Chandra from ET Now.
Chandra
Thank you so much for taking my questions. Salil, the first one to you, all the IT CEOs we spoke to in the last week said that they are already seeing cuts on discretionary budgets. Now considering Infosys derives I think 30% of its revenues from Consulting and Package implementation, are you at a higher risk, one US analyst we spoke to a while back said, 30% of Infosys’ business could disappear. Now while that sounds very alarming can you give us some sense of what you are seeing here and do you expect a recovery say two, three quarters from now, maybe by Q3 of the current fiscal?
Nilanjan a question to you, in the opening remarks Salil said that cost control will be done with rigor. Can you elaborate on what you have done with respect to freezing salaries, freezing hiring, what happens to freshers, will you honor all the offers, will there be retrenchments?
Pravin a question for you, can you tell us specifically the sectors and the industries and geographies where you are seeing maximum pressure now or perhaps where the epicenter of the COVID is currently happening. If you can take us through the specific stress points? Thank you everyone.
Salil Parekh
Let me start off and on the offers on people side, Pravin may share some views and then Nilanjan given the questions that you asked. In terms of discretionary, I do not have a sense of how we are relative to others the point that you asked, what I can say is clearly there is a concern from all the industries across the world in every geography, however, we first see an impact in a few of the industries. Pravin will share a couple of those with you. We see some of those discretionary work areas coming under pressure. We definitely see that showing up in Q1. However, it is not that everything has stopped, some examples I shared a little bit earlier at the opening about virtualization or some of those cloud related workforce transformation type of discretionary projects we do see that. We had some large deal signings in the last two weeks in March. We have already had some signings in these first few days of April, which we will talk about obviously at the end of the quarter. So in that sense there is definitely some slowing, but there are also some areas where we see some move. In terms of the timing, we do not have a sense today whether this is a couple of quarters or more, we will see how that goes. We are absolutely clear that what we have is enormous strength in how to leverage this as we go through this and that with our strong balance sheet and clients looking to really consolidate with players like us who are amazingly strong on delivery 93% remote working with high security, we feel that we will be even more successful as we come out of this.
Pravin Rao
In terms of hiring we will honor all the commitments we have made both at the campus side as well as laterals. Now coming back to the segments, in the near term all these segments will be impacted one way or the other, some segments are more impacted than the other. For instance retail, travel and hospitality energy, oil, those are probably much more impacted, but even in some other sectors also in the short term you will see some impacts for instance in the financial services we will see an impact of lower interest rates, in the banking sector they will have to deal with deferred loan payments, in the insurance sector they will have to probably deal with new clients, they will also have to live with lower premiums. In cards and the payment space, they will struggle because there is less activity in retail, in leisure and other activities. Similarly when you look at manufacturing, manufacturing in the last few quarters have anyway had some impact because of the trade wars and other things and now their impact is huge, they are having challenges both on the demand side as well as on the supply side and with all the factories closed, supply chain broken they are struggling. The same impact with all the factories closed the industrial manufacturers are also having a similar impact. Similarly, in the Aerospace industry with reduced travel, some of their clients are deferring some of the purchases of claims. So, manufacturers across all sectors are impacted in a big way. Communication: if you look at communication, they are doing reasonably well I think telecom will grow well, but media and entertainment will have challenges because of reduced outdoor activities and reduced ad spend. Similarly, if you look at 5G rollout, you will feel that there may be some delay in the rollout and also some of the use cases of 5G applications in B2B also may get delayed because corporates will now start relooking at capital allocation. So, net-net I can go on sector and sector, but I think in the short term we will see some impact and this is true geographically as well. I do not think any geography is spared of this pandemic.
Mehak Chawla
Our next question is from Mugdha Variyar from CNBC TV18.
Mugdha Variyar
Hi Salil, Pravin and Nilanjan good to see you all.
Salil this question has already been asked, you said that you are not sure if you can expect to see recovery in the next few quarters, but as mentioned management at other companies are expecting the peak of the impact in Q1 and it likely to also play out in Q2 and recovery only by Q3. So is that the timeline you are seeing or are you not really confident to call it out yet saying you are going to see recovery in Q3. And on a different note last month while Infosys said that you do not expect any further action on the whistleblower case from the SEC, we understand that SEBI is still investigating the issue so is that the investigation is still going on and what timeline are you working with. On deals you said that you have signed a few large deals in the last few weeks of March, you also have a few this month, so are you confident of deal wins, are you expecting any slowdown in deal wins going forward?
Nilanjan my question to you is if you can highlight what the impact of the COVID-19 crisis and the lockdown was on revenues in Q4 in terms of BPS and what are you estimating for Q1 of FY2021.
Pravin some employee related questions to you. Of course you did talk about honoring offers, etc., but will there be any furloughs and layoffs, etc., in the offing and you said that about 93% of your staff is now working from home and given that the lockdown will continue till May 3, 2020 and states which were ready to open to IT companies for 50% capacity are also not really going to do that, so are you factoring that in till May 3, 2020. Lastly, in your release today you have said that several employees of Infosys have been tested positive and that your contact tracing among employees, etc., can you give us any numbers or any more details on that?
Salil Parekh
I think the first point you probably talked about was the timing. As I had shared earlier, our sense is in the near-term we see an impact on our business. We do not have today a clear view of when the recovery comes back. There are many different perspectives that people have. We have obviously been interacting with our clients and looking also in the main geographies that we operate in. It is also a function of how from a medical perspective the situation will evolve. In terms of the demand, we shared again a little bit before, we see some near term impact, but we feel extremely well positioned as we come out of this for a lot more on the consolidation and a lot more of this Cloud virtualization digital play plus all the automation activities, which relate to cost efficiencies. I think those are the ones you would ask me.
Pravin Rao
You asked several questions let me think one is on the employee side. As we said, we will honor all the commitments that we have made both for freshers as well as laterals. We are not really looking at any COVID related layoffs at this stage. However, some of the involuntary actions we have been taking in the recent past will continue, these are all performance-based exits. For now we have suspended any promotions or increments for the year as the situation evolves and obviously we are not looking at furloughs, but we are also looking at many other initiatives to bring cost under control. Nilanjan had already elaborated on those. From getting back to work perspective, obviously the lockdown has been extended. In some places there is a gradual relaxation plan. We operate from multiple locations. Our plan is to come back in a gradual manner. We are not in a hurry to come back to work aggressively. In phase one we expect maybe less than 5% to come back to work in offices. This will probably last three to four weeks. In the next four to six weeks or eight weeks we will probably pickup from by 5% to 10% or may be 15% to 20% or so. So we want to do it in a very gradual manner and even for people coming to work in offices, we will have very high standards of safety, we will practice social distancing, we will do temperature check, we will have high standards of hygiene and sanitation. Social distance is not only in workplace but also during commute and common areas and we will also explore whether we can set up some testing facilities in the office as well, subject to availability of test kits. So, we have already started thinking about getting people back to work but we will do it in a slow and calibrated manner, keeping the safety of employees at the highest priority.
Mehak Chawla
Salil, Mugdha has requested me to ask you about the SEBI question again.
Salil Parekh
I think first on the SEC, I am extremely happy with the outcome. From the company perspective and a personal perspective, it was a very clear sort of statement that we made I think a few weeks ago. On the SEBI, we have provided all the information that SEBI has requested and that is the comment from that perspective. There is nothing else that we need to provide at this stage to SEBI.
Mehak Chawla
Thank you so much Salil and thank you Pravin. Our next question is from Megha from The Economic Times.
Megha Mandavia
So, the first question I wanted to ask was, is this the first time Infosys has suspended guidance and can we expect to get some guidance in the second half of the year? I also wanted to understand how does Infosys plan to use the cash in place as mentioned in the press release, do you expect the global recession throwing some opportunities, change in the guidance, and which segments have been affected most?
And Pravin you said that you will be honoring the offers, is there a timeline on that, can you expect some months or quarters of delay? and sorry my last question is do you see vendor consolidation and how do you see benefiting from that?
Salil Parekh
I remember a few of those, the vendor consolidation we absolutely see that. Already in the discussions I have had with a couple of clients, CEOs, one of the CIOs we have started to hear this. To me it is going to be an incredible opportunity for us because we have the strength both from delivery and a financial perspective, so in the medium term we think this is an extreme positive for Infosys.
You asked about whether we see any change with the guidance. I think that was the question. I think the view we have today; we have suspended guidance because we do not have a clear view for the full year. So I do not have a view that we will do it in X quarter or Y quarter, but obviously as and when we start to see that, we will obviously then change that to bring it back. Currently, we are only suspending guidance.
Pravin Rao
In terms of on-boarding timelines, for campuses we have always on boarded in a case manner so that is the practice we will still continue. For laterals we will on board as and when we find there is an opportunity, we have already on boarded quite a few remotely during this lockdown period as well, that is something we will continuously plan and see how best we can expedite on boarding of laterals.
Mehak Chawla
Thank you Salil, thank Pravin and thank you Megha. The next question is from Nikita from Cogensis.
Nikita Periwal
Salil if you could just throw some more light on the project deferrals that you have mentioned and the kind of impact that it will have on margins and will there be any change in the hedging policy considering the sharp depreciation that the rupee has recently seen ?
Salil Parekh
On the hedging, Nilanjan will answer that in a few seconds. On the deferrals, we see that as I shared a little bit earlier, but we have not at this stage provided at least externally a view of what the quantum of that is. We are working our way through it and making sure that all of the work we are doing for our clients fits in with their current needs and we remain fully relevant to them. We will obviously have some impact on margin, but we are not externally quantifying that at this stage.
Nilanjan Roy
As regards the hedging policy, I think we have a very robust treasury policy, which defines limits under which we hedge so we will continue to monitor the situation and take appropriate action. It will be premature to tell you whether we will change the policy or not or the amount of the hedges we take.
Mehak Chawla
Thank you Salil, thank you Nilfanjan and thank you Nikita. Our next question is from Business Today Rukmini Rao.
Rukmini Rao
One, I want to understand in terms of the playbook, how different is it going to be in terms of how the companies are dealing with this crisis compared to the global financial crisis and also in terms of the newer opportunities that are arising out of this pandemic, where exactly are the best right now?
Salil Parekh
In terms of the playbook, my sense is what we have really focused on is there will be some sort of a recessionary environment, it’s unclear for the duration, so that is the playbook that we will deploy. We will be extremely careful with the way we look at our cost, we will be extremely rigorous on our operational stability and especially given the specific objective of the safety and health of our employees. We will be extremely careful on how we do remote work with security and in terms of really what our clients are looking for, is what I was sharing earlier there is a lot of thinking around cloud, virtualization, workforce transformation. These are things that help companies to become more digital in this remote working manner and there is also focus on automation, on cost efficiencies, on consolidation, on looking at whether companies want to keep the captives or want to have someone else to look at it, so those will be the sorts of opportunities we think will be more in the market. Again, given a strong delivery and financial position, the near term is going to be quite difficult. In the medium term we will be more successful and come out of it stronger.
Rukmini Rao
Sir I just wanted some understanding on in which business segment is this automation and the traction that Salil is talking about coming from, a little bit of clarity on that?
Salil Parekh
Rukmini that is coming across all industries because you can imagine we have had such a successful approach to automation over the past several years within Infosys with our clients and we feel that will be even more relevant in this new environment for the new playbook.
Mehak Chawla
Thank you Salil, thank you Rukmini. Our next question is from Ayushman from Mint.
Ayushman
My question is for Salil essentially. Do you see any opportunities amid the crisis in verticals such as healthcare, life sciences, consumer goods, which relatively could be growing and what is your strategy to sail through the crisis in terms of customer retention?
Salil Parekh
The segments you mentioned, there are within those segments several companies where we see opportunities, we have some presence in those segments and within those areas we are absolutely looking to make sure we expand. We see for example some work in pharmaceuticals, we see some work in what I call consumer staple companies, we also see some work as Pravin shared earlier on Telco, even some on Hitech, so we do see there are some of those segments which have some positive interest even in this environment.
In terms of sailing through, our focus is really being extremely close to our clients as their needs are changing in this environment, making sure we have complete client relevance and then driving through this operational focus to make sure with the safety of our employees that we are driving on our remote work as efficiently as we can. This is a time where we are spending even more time with our clients, with me doing more sessions, all our senior leaders doing lots of discussions on a daily, weekly basis with our clients to make sure we understand what it is that they are driving through, the challenges that they are facing and be a partner through these times with them.
Mehak Chawla
Thank you Salil and thank you Ayushman. Our next question is from Ayan from ET Prime. Ayan, I will ask the question on your behalf. So Ayan’s question is, Salil have you made any changes to your delivery model as a result of the shift, if yes would you elaborate and are any of those changes likely to be long term?
Salil Parekh
I will start off and Pravin may add a little bit to it after that. In terms of delivery model as all of us have shared we have exceedingly fast moved to the remote working model. As Pravin was sharing a bit earlier, we are now looking at how some of these aspects can be part of our medium and long term, both keeping in mind safety but also the efficiency of this model. The thing that we will be more watchful about is security. We want to be absolutely clear that whatever we do also takes into account cyber security and we do not fall into any lapse there.
Pravin Rao
I think from a delivery model perspective there are not too many changes other than getting adjusted to the remote ways of working, so there will be lot more investment and usage of collaborative tools. There will be frequent interactions between managers and people. There will be lot more adoption of agile practices and so on. Many of those things are probably practices which we have always done in a regular environment, now we have to start using tools much better and do things in a more mature manner and from an individual perspective you need to be disciplined because you are working from home, you need to clearly carve out what is working time and what is personal time and those kind of adjustments. Again as I said earlier after a few days we have seen people get adjusted to this, a new normal in a seamless way. So we will continue to invest in tools which will make things easier for people, but I do not see any far reaching change from an overall delivery model perspective.
Mehak Chawla
Thank you Salil and Pravin. Our next question is from Sharon from IANS.
Sharon
I want to know how much is Infosys benefiting from a weakening rupee on export realization and are you reading the volatility in the forex market and its impact on your billing and realizations?
Nilanjan Roy
For the quarter just gone by, we gained about 2% on the rupee depreciation and that flew into margins, so we got a 50 basis points margin benefit. Of course, the rupee after the quarter has also continued to depreciate; we will see how the impact flows out for the quarter as well. As you know most of our billing is in foreign currency, 97% of our billings is in foreign currency between Euro, Pound, Australian Dollar and the US Dollar and we will see those realizations, but all are reporting is in dollar. We hold ourselves to a dollar reporting regime, so from that perspective we continue to monitor the dollar movement.
Mehak Chawla
Thank you Nilanjan and thank you Sharon. The next few questions that we have are from Mini I am going to read them out. The IT Industry in general seems not in a hurry to return to offices and campuses, what percentage of Infoscions are working from home right now and are you and your clients happy with the current business continuity and employee productivity? The second question is has there been any security compromise, threat issues reported around work from home and the last question is do you think work from home can be continued as a regular HR practice even after the pandemic, if so what portion of the workforce can ideally work remotely?
Salil Parekh
The statistics we have shared, 93% of our employees are remotely working today and it is a model that we move to with extreme speed but also with extreme care keeping the employees’ safety and security in line. Pravin if you want to add other points from the question please
Pravin Rao
As I said we have proven technically that work from home is possible from that perspective, what percentage we will eventually settle really is academic. My own sense is from a business continuity perspective over a period of time we will always have some percentage of people working from home, so that in the event of dealing with such situations in the future you will be able to seamlessly switch between work from office and work from home. From a security perspective, we have to invest more in security controls when you are working from home. So that is an area where all of us in the industry must invest a lot, but apart from that I do not think there is any negativity. It has been a few weeks since we have seen work from home and from a productivity perspective, we are not currently seeing anything positive or negative, productivity has been usual. In the initial phase people had to work longer, but then many of us saved on commute times because in many cities people spend a lot of time in commuting. Now they do not have to spend that time. Again the question of getting used to, getting into the rhythm. Once you get into the rhythm and become comfortable in using tools and technologies, I do not expect any impact on productivity. The only thing is we have to watch out on the security aspect of it, there will be a lot more phishing attacks and other things. People have to be disciplined in terms of dealing with that.
Mehak Chawla
Thank you Pravin and thank you Salil. Our next question is from Shilpa from Times of India.
Shilpa Phadnis
Can you help us understand what are some of the levers that you have to optimize your cost structure to align to the new reality and your headcount has dropped by 1000 odd can you explain what are these employee related actions and third, cognizant malware attack has really got the industry together to address some of the security challenges, has some of the work in areas especially related to BFSI moved to Infosys?
Salil Parekh
There are different questions so maybe Pravin will answer some of the ones, which are related to security and what we are driving from there. Nilanjan will answer some of the points on our cost approach at the high level, please go ahead Nilanjan.
Nilanjan Roy
In the near term, you will have a supply and demand mismatch because you already have geared up for the volumes for the first quarter and that is pretty much across the industry. There is a sudden stop in the world economy, or the short term will have an impact as you will see, an impact on the topline. Like Pravin has said, we have already enabled 93% and over the period that part will go up as well but having said that, we will see some of the demand side drops coming in which will impact the near term. Now from a margin perspective people being our biggest cost, we have to see our utilization going up because that will see a drop in the near term. So the moves I have already mentioned what we call no regret, which was moving out the offer dates for new joinees, freezing promotions, and salary hikes. We will see other levers which we have for discretionary cut in expenditure, travel by nature has come down. It is a big part of our cost. We will also look at other discretionary expenditure as the situation evolves. For instance on capex, last year we spent close to $465 mn, that will also come down. So we will make all these moves and some of them have already been in place and as the situation evolves in Q1, we will see what more we will have to do in the future.
Pravin Rao
In terms of headcount, I do not think we should read too much into it, it is not a secular trend, because of the COVID situation, we have lower utilization and we also deferred some onboarding that resulted in a lower headcount in Q4 as compared to Q3. So, I don’t think you should read too much into that. In terms of security, yes we are aware of the incident, ransomware attack. We have put our own networks and we have found out that our networks are secure. We have invested in advanced threat protection software which are deployed at all end points as well as in the network. We have also continuously engaged with advanced threat protection agents as well as threat detection advisories. We have monitored our networks closely. We have not really found any evidence of any breach in our networks. Having said that, this is an area where all of us need to continue to watch out for, we have to continue to be prepared, invest in technologies and ensure that we are able to detect and defer any breaches to our network and that is an ongoing effort.
Swathi
This is Swathi from Moneycontrol. A couple of questions, one is regarding hiring, how many offers have we made in FY2021 and in last year, and since you mentioned you would be honoring all the offers, could you give a quantitative number on how many offers were made and can you also give us a split of voluntary and involuntary attrition, your attrition I see has gone up compared to last quarter when it was 19.6%, it has now gone up to 20.7%, it will be great if you can give some sense on that. One last question about the fresher on-boarding, with the Mysore DC closed, so how will the on-boarding take place, will it be virtual like it is now. I understand Infosys has a custom of offering internship in the final year in the colleges, so if you can give some sense on that, that would be also great.
And Nilanjan, you mentioned about the travel cost, which is a large part of your cost that has come down, is that something that will be more permanent, bringing down the travel cost now that you have technology to bridge the gap, would that be more permanent in bringing down the travel cost overall? That is all from my side.
Pravin Rao
I will probably start from the employee side. In terms of on-boarding, it is only a small percentage of people we are yet to onboard from the campuses that we have done last year and a few laterals, so it is not a significant number. For the coming year FY2021, we are planning to make about 35,000 plus offers and as I said earlier, we typically onboard these people over a period of time and that practice will still continue. Now at the time of COVID and around the lockdown period, we had about 10,000 people undergoing training in our Mysore campus, out of which 3000 were interns, these are the people who are sitting in the final year. For those interns, we made sure that they were able to complete their assessment before we released them back to their homes and colleges so that they did not have any issues in completing their degree from this perspective. The remaining 5,500 to 6,000 trainees we sent them back home, and now they are continuing the training remotely. As you are aware, we have invested in our Lex platform, which provides us the ability for anyone to learn, anytime, anywhere 24*7. So that platform is now extremely useful and using that platform people can access learning content, they can interact with instructors, there are regular assignments, there are assessments, certifications and so on. So, we have enabled remote continuation of education and that will continue so we should be able to complete the remaining part of training for these 5,500 plus people.
Sankalp
Salil, I have two very quick questions, they are just related, one is when you came in, in 2018, you laid out a three year roadmap and this was supposed to be the year when you started gaining momentum, so my question is that this pandemic, how behind is this going to push Infosys in terms of gaining momentum and when I talk about momentum, it also means that you said short term is going to be difficult, so are you going to offer any discounts to clients or flexible pricing this year to maintain that, that is my first question? The second one is in terms of BFSI- US banks, are we cutting spends or freezing budgets, this is specific to BFSI and probably you can take that also Salil?
Salil Parekh
We had a three year plan and fortunately we saw good acceleration already last year. If you see the numbers, the fiscal 18, we were around 5.8% growth, then 9.0% and 9.8%, that is a real significant acceleration, digital growth over 38% for the year and now 42% of the business in Q4. So, in my way of looking at things, we have achieved many of the objectives being set out to achieve a very good strong cohesive stable, and all of the business benefits that we have. In fact, that is what is going to help us in this next phase. While I have no view today of how long this phase will be, we are clear that we have all the tools within Infosys to make sure that we become even more successful as we come out of it because we already have a very nice growing business, very strong digital footprint, good leadership team working well together and now an extreme efficient way that we worked in this transition to get us to 93% remote working. We believe that as things start to come back, we are in the best position as we consolidate to the strong player, again with a strong financial balance sheet. So, my own sense is yes, the near term will have its challenges and those challenges are something which all of us see every day when the global economy is almost at a standstill and as that starts to ease whatever time frame that takes, we start to see more strength for Infosys.
Pravin Rao
On the BFSI side, as I have said earlier, every sector in the near term will have some impact or the other. However, it is too early to say specifically or quantify the kind of impact. For instance, in the BFSI space, if we look at the insurance companies, obviously they will be looking at lower premium collections and there will be also steering at higher clients, so they will be impacted in some sense. If you look at the banking sector itself, they will be impacted with lower interest rate and probably some loan defaults or a delayed repayment of loan or if you look at cards and payments industry, they will be impacted because people are spending less time on travel, leisure, and entertainment. Similarly, the mortgage industry will also get impacted, we are already seeing a lower percentage of new mortgages and refinancing of existing mortgages. So net, net in short term they will be impacted but it is difficult to say how it will translate into in terms of IT spend at this stage.
Mehak Chawla
Pravin, Sankalp had an additional question on flexible pricing, if you could address that.
Pravin Rao
We have to deal with everything on a case by case basis, there are many levers. At the end of the day, the client has an objective, and in these times, we will have to help the client in meeting objectives. Pricing is just only one lever, but there are lots of levers. There are tons of ideas in terms of taking cost out and providing benefits to the clients. So, I think we should be able to help our clients meet their objective without compromising on our side.
Sarita
I have two very short questions. My first question is to Salil, you earlier talked about clients looking to move contracts and consolidating with bigger players, especially because security, but we have seen bigger players also been hit by security concerns, so are there any specific things that you are doing Salil to make sure that your security is top notch? My second question to Pravin, you said the new normal is a certain level of employees continuing to work from home. Pravin I wanted to ask you, there is going to be a lot of staffing challenges with the international borders being closed, suspension of H1B visas, travel restrictions, how do you see all of this play into your operations including work from home because the work from home situation as you explained seems quite a sort of a hack situation with employees carrying dongles and UPSs home, so how is all that effecting your operations?
Salil Parekh
I think my sense is that clients are really looking to work with partners that they can trust. My sense already with some discussions is they will consolidate some of the smaller vendors out and go with players who they can trust with delivery, not only security which Pravin will address as well as to how we are looking at it, but also financial stability, a very strong cohesive management team and really someone who to buy from for everything. So, these are sort of the conversations that I am already starting to see and that where I feel some of that consolidation will start to happen and there I feel that Infosys will be a beneficiary. As I said Pravin will share a little bit on the security but just one point that you mentioned in your second question before Pravin answers that as well, what will happen in this new model? One of the things that we have done over the past several years is starting to build out these new digital centers in the US and Europe and in Asia-Pacific. I think those centers are also going to play a very positive role in how this is starting to come together. Even as we do remote working, some of the work will naturally be done at these digital centers in addition to the work that of course we do from our centers in India. So that investment that we made at least in the way we are seeing it, we will be able to better leverage it in this sort of an environment.
Pravin Rao
In terms of security, first thing I want to clarify is whatever had happened with the Ransomware threat it has nothing to do with work from home. If I look at the vulnerability it could have happened anywhere irrespective of work from home, because it exploited the lacuna in one of the versions of a particular product, so it has nothing to do with work from home. Having said that, we have to invest a lot more in security controls, we have to ensure that we invest in advanced threat protection software, all our end points are protected, networks are protected, email gateways are protected. We have to also invest in threat detection capabilities. These are both tools and technologies, as well as there is a lot of intelligence which we can gather by investing in this threat detection. We will have to continuously monitor it because every time you come up with new tools to secure your network, there will always be players trying to beat that as well. So, it is not a one-step thing, this is a thin area where we have to continue to invest and continue to monitor. Again as I said earlier, this has nothing to do with work from home, probably work from home may have a higher impact less from a security perspective, but more from phishing attacks or even more from data leakage other than security thing. Security breaches can happen even when you are working in office, if there are some vulnerabilities.
On the new normal of working, there are many possibilities. If the remote way of working is established, that means in some sense it delves with border between onsite and offshore. If we can work remote, we can work from India, we can work from anywhere else, so to that extent I think it can even promote truly a borderless way of developing software and so on. We could also see work turning to wherever talent is available because at the end of the day people are working in a remote fashion. Second one is when clients get used to it, and if you are able to do that, we are able to work from home without compromising on the integrity, productivity or security, then obviously the earlier version of ODCs and other things will start going away and we may slowly start seeing more of virtual ODCs kind of concepts.
So there are many possibilities that are possible in this new way of working, but again, as I said, earlier technically it is possible but there are lot of adjustments you need to make, but you are absolutely right I mean we have to invest in the infrastructure in the last mile as well. Without that investment it cannot be productive, but this is the new normal I am sure everyone will invest and the last mile will become better, people will invest in better UPSs at home and things like that, so it is only a question of getting used to the new normal.
Mehak Chawla
Thank you Pravin. Our next question is from Srinath from Financial Express and I am going to read it out. Nilanjan this is for you. Nilanjan, in the beginning mentioned about payment extensions by a few clients, who are they, how big are they, which sectors and geographies are they from and how will it impact the Q1 FY2021 quarter numbers?
Nilanjan Roy
Like I mentioned, in the initial conversations some of them are from retail sectors, so these are just in initial discussion phases, and in Q1 itself in the month of March, we had record collections as well, so we will take this case by case. It may be a temporary increase, but like I said, it is nothing overtly we need to be concerned about. We have in fact bought down our DSOs in the last quarter by four days by the end of March when COVID was at its peak in the month of March, so we would watch the situation carefully and handle it case by case. We have a very strong balance sheet like I said, $3.6 bn cash and equivalents, so not too concerned.
Mehak Chawla
Thank you Nilanjan. For the last question I am going to accommodate one of Swathi’s questions Pravin. Swathi has a question about involuntary attritions split up. What percentage is voluntary and involuntary in FY20?
Pravin Rao
I have data for Q4, I do not have data for FY20, in Q4 on a standalone basis our overall attrition was 18.2%, it normally increased as compared to Q3 but voluntary was much lower, it was about 50-basis points lower than Q3.
Mehak Chawla
Thank you so much everybody. With that we are going to conclude this press conference. As we sign off, I wanted to inform everybody that the archive webcast of this conference will be available on Infosys website from 8 o’clock today. Thank you once again for joining us. Thank you Salil, Pravin and Nilanjan for your time. Thanks everybody and stay safe. Take care. This is us signing off.
Exhibit 99.4
Fact Sheet
Exhibit 99.5
Earnings Call
Infosys Earnings Call
Q4 FY2020
April 20, 2020
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer and Whole-time Director
Nilanjan Roy
Chief Financial Officer
Mohit Joshi
President, Head, Banking, Financial Services & Insurance (BFSI), Healthcare and Life Sciences Head, Infosys Brazil and Infosys Mexico
Sandeep Mahindroo
Financial Controller & Head Investor Relations
ANALYSTS
Ankur Rudra
JP Morgan
Keith Bachman
Bank of Montreal
Diviya Nagarajan
UBS
Edward Caso
Wells Fargo
Sudheer Guntupalli
Motilal Oswal Financial Services
Moshe Katri
Wedbush Securities
Nitin Padmanabhan
Investec
Bryan Bergin
Cowen
Moderator
Ladies and gentlemen good day and welcome to the Infosys earnings conference call. As a reminder all participant lines will be in the listen-only mode and there will an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” and “0” on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you and over to you Sir!
Sandeep Mahindroo
Hello everyone and welcome to Infosys earnings call to discuss Q4 FY2020 earnings release. This is Sandeep from the Investor Relations Team in Bengaluru. Joining us today on this call is CEO & MD, Mr. Salil Parekh; COO, Mr. Pravin Rao; CFO, Mr. Nilanjan Roy along with other members of senior management team. We will start the call with some remarks on the performance of the company by Salil, Pravin and Nilanjan before opening up the call for questions. Kindly note that anything which we say which refer to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Salil.
Salil Parekh
Thank you Sandeep. First, apologies from us for starting this off late. Good evening and good morning to everyone on the call. I trust each one of you and your loved ones are safe in these extremely different times.
The financial year that just ended, ended very well for us. It was an exceptional year. We grew at 9.8% in constant currency, delivered 21.3% operating margin, grew our digital revenue by 38%, and the digital revenue in Q4 has become 42% of our overall business. We did this with $9 bn of large deals for the full year.
Our earnings per share grew at 8.3% in dollar terms. We had in fact the highest cash collection for the quarter and for the full year in our history.
In Q4 we grew our business 6.4% YoY in constant currency and delivered 21.1% operating margin with $1.6 bn of large deals, some of which in the last two weeks of the quarter. We closed the year with an extremely strong cash position of $3.6 bn and no debt on our balance sheet.
In the last two to three weeks of March, the impact of COVID was significant. We had already activated our business continuity plans with an intense focus on employee safety and client service delivery. Today we have 93% of our employees working remotely, a task that was performed with incredible efficiency and tremendous hard work by all of our teams. Pravin will share more color on this later in the call.
In addition to that, we have added financial security of the company an absolute focus on liquidity and cash. We have now activated a comprehensive program for cost control and reduction. Nilanjan will share some preliminary highlights of this later in the call.
We of course anticipate near-term challenges in the business environment across a whole set of industries. However, we see increased interest from our clients in Cloud, virtualization, workforce transformation and cost reduction programs. Our discussions with clients indicate they would like to consolidate their work with a strong player like us with exceptional service delivery, agility to reach 93% remote working and an extremely strong balance sheet. I think those trends will hold us in good stead in the medium term.
Let me spend a few minutes to share with you what we are doing outside of work, supporting our communities that we live and work in. Via our foundation, we have dedicated Rs.100 crores towards relief efforts, including half of it to the Prime Minister CARES Fund in India to help enhance hospital capacity, provide treatment, ventilators, testing kits, PPEs for frontline health workers. In the US we have opened Pathfinders Online Institute, an online learning platform for teachers, school children and their families, so they can access high quality computer science education from home for free.
Coming back to business, given the uncertain environment with the global pandemic and client business being marred by volatility, we do not feel it will be appropriate for us to provide guidance for this financial year. As a result, we are suspending providing guidance on revenue growth and operating margin for FY2021.
Given our strong performance in the just concluded financial year and our strong cash position, we are pleased to announce a final dividend for the financial year at Rs.9.50 per share, bringing the total dividend for the financial year to Rs.17.50 per share.
I am extremely grateful to our employees for their diligence through this stressful period and proud of the work they have delivered for our clients. While we are unsure about what lies immediately ahead, we have enormous strengths that we believe will help us navigate this period and emerge stronger from it:
· | Sustained focus on client relevance and we are now re-pivoting our efforts in terms of what clients are looking for and we see good traction in that. |
· | Our ability to work with clients across the entire spectrum of their needs including accelerating their digital journey and extreme automation for cost efficiencies. |
· | A highly skilled workforce of 240,000 people passionately working towards making our clients successful, |
· | Unparalleled delivery capabilities, |
· | $3.6 bn in cash on our debt free balance sheet, which gives us ample liquidity. |
With that I will pause my comments and hand it over to Pravin.
Pravin Rao
Thank you Salil. Hello everyone.
Let me start by summarizing key aspects of Q4 performance.
Our operating parameters were steady during Q4, onsite and offshore effort mix remained stable sequentially, but improved by 110 bps over Q4 FY2019. Utilization during the quarter sequentially dropped to 83.5%, partly due to COVID-19 related supply constraints.
Large deal wins were healthy at $1.65 bn for Q4, with the share of new deals increasing to 56%. We won 12 large deals in Q4, out of which four deals were in Retail and Energy Utilities, Resources and Services and one deal each in Financial Services, Communication, Manufacturing and Hi-tech. Region wise, 7 were from America and 5 were from Europe. Encouragingly many of the large deal closures happened in the last two weeks of the quarter despite the COVID-19 situation.
Attrition on a standalone basis was slightly higher at 18.2%; however, voluntary attrition reduced further to 15.1% from 15.6% last quarter. Higher involuntary attrition during Q4 was mainly on account of separations that occur as a result of yearly performance reviews, which close in December. This is part of our focus on ensuring a high performance culture.
Moving into FY2020, we finished the year with a strong 9.8% constant currency growth in revenues despite the impact of COVID-19 slowdown in March. Volume growth for the year was 8%. Five of our business segments Communication, Energy, Utility, Resources and Services, Manufacturing, High-Tech and Life Sciences recorded double-digit growth in FY2020. Similarly, both of our largest regions, North America and Europe clocked double-digit growth in constant currency. We had large deal TCV of more than $9 bn in FY2020, which is 44% higher than in the previous year.
Moving to the business segments. We see near term weakness across the board especially in the area of discretionary spending. Clients are focused on ensuring safety of their employees and maintaining business continuity while at the same time conserving cash. This is bound to impact near term performance as they reprioritize and delay some projects and reduce volumes. However, we see long-term opportunity as the focus on digital and core transformation gets accelerated.
Financial Services segment is seeing the impact from interest rate decline across the world, which have severely compressed the net interest margin. The banking sector is also expected to experience an increase in loan losses in the near future, which will have an impact on their profits. Insurance may also see an increase pressure due to higher claims. Post COVID-19 we expect a strong opportunity for Cloud, Data Services and creating new digital bank capabilities.
Retail segment has been hit hard especially non-grocery, apparel, lifestyle and fashion, logistics etc. While on a sequential basis we have seen positive performance in the last quarter and there was a healthy level of large deal wins from this segment, we expect a significant pressure on spend for the segment in the coming quarters. The deal pipeline is strong, but the conversion rate is expected to slow down.
Large deal wins in communication segment has led to stellar performance in the last fiscal. While we expect a relatively stable performance from the telecom players, the media and entertainment industry is seeing pressure due to stoppage of outdoor events and general squeeze in advertising spend. Spend on 5G rollout and B2B use cases of 5G may also get delayed as the industry players reassess capital allocation priorities.
Energy, Utility, Resources and Services vertical reported strong growth in the last year with many large deals win across geographies. However, with low energy prices and demand and supply chain issues in other sub-segments, the performance is expected to be weak in the near term.
Manufacturing segment recorded double-digit growth in the last year despite weaknesses in the automotive segment and supply chain pressure due to trade wars. However, COVID-19 spread exacerbated by supply chain disruptions has resulted in a widespread closure of production facilities across the globe. Stoppage and probably reduced travel in the near future will also affect the aerospace industry in terms of order book and deliveries.
Digital is growing strong with a share of revenue reaching 41.9% at the end of Q4 FY2020 from 33.8% in Q4 FY2019. Growth in digital revenue in the last fiscal was 37.8% on constant currency.
While the global pandemic is having widely varied impacts on different industries, the demand for business reinvention around digital is universal and increasingly urgent. From building more flexible supply chain to supporting new models of employee experience, to urgently enhancing e-commerce offering, brands are being forced to accelerate their pace of change. Technology is essential to support that change, automation and efficiency is essential to fund that change and design and experience are essential to unlocking value from those changes. Clients continue to see the need for investment around digital transformation and need partners who can help them navigate the strategic and technological complexity they face. Infosys remains that critical and trusted partner now more than ever.
In the last year we have been rated as a leader in 26 services related to capabilities around Digital Pentagon by industry analysts, which is a testimony to our digital capabilities.
Our BPM services had a standout year and crossed $1 bn revenues at industry leading margins. Additionally, revenue per employee improved, thanks to automation, and we featured in multiple external awards.
With that I will hand over to Nilanjan.
Nilanjan Roy
Welcome everybody to the FY2020 earnings call. I will start with a quick overview of Q4 and a recap of FY2020 before moving to how we are preparing to secure our future in these challenging times.
Q4 operating margins were at 21.1% compared to 21.9% in Q3, a drop of 80 basis points. These included a 90 basis points margin headwinds due to COVID led utilization and RPP decline. There was an additional headwind of 40 basis points this quarter for H1 visas in the US for the financial year 2021 due to the change in the USCIS lottery approval process where the lottery was declared in March quarter. In addition, we took a hit of receivables provision account of ECL (expected credit loss) and higher CSR for the quarter of 50 basis points. This was offset by the rupee depreciation of 2.1% against the dollar during the quarter, which helped margins by 50 basis points and another 50 basis points of lower travel cost and other cost optimization measures.
Our DSO dropped by 4 days to 69. Our sustained focus on collections was demonstrated in OCF of $684 mn for the quarter which is a YoY increase of 17.3%. Free cash flow grew 27% YoY to $593 mn.
Let me talk about the full year FY2020. Our operating margins were at 21.3% for FY2020, within our guidance band of 21% to 23%. The 1.5% drop in operating margins over FY2019 was largely due to compensation increases, higher visa costs and lower realization, partly offset by our cost optimization measures where we exceeded $150 mn target for the year.
For FY2020, operating cash flow grew 15.4% to $2.611 bn. Free cash grew 12.1% and crossed $2 bn for the first time. Driven by a robust cash generation and a healthy cash balance of $3.6 bn, the Board has recommended a final dividend of Rs.9.50 per share, which will result in a total dividend of Rs.17.50 for FY2020, which is the same as FY2019.
Yield on cash balance was 7.06% in Q4 compared to 7.77% in Q3. Looking ahead, our yield in FY2021 will be impacted further due to the declining interest rate regime in India.
These are unprecedented times and we are taking multiple measures to ensure execution excellence of our operations.
First, liquidity and cash management is a top priority. This includes a rigorous focus on working capital cycles, including collections, receivables and any other blocked cash. Secondly, reduction in capex barring any committed or non-discretionary spends. A debt free balance sheet and a superior local currency credit rating of A3 from Moody’s gives us an enormous advantage during these times.
The second area of focus will be agility in operations. We will need to be extremely nimble, yet measured in our decision making process to counter the uncertainty which the current situation presents. We will balance short term margin pressures with long term sustainability by making ‘no regret moves’.
Our third big focus will be accelerated cost take-outs. While we have made enormous progress on this during the last few years, this is even more critical for FY2021. We have embarked on a series of steps to address near term margin pressures emanating from lower utilization due to supply and demand mismatches. These steps include deferring salary increases and promotions, delaying the hiring process and timelines and complete freeze on discretionary spending. We will also continue to look at the entire gamut of other cost levers we have as the situation evolves.
Our ongoing strategic cost optimization levers around automation, pyramid rationalization, onsite-offshore, subcontractors will of course continue as in the earlier years. We are confident that our proximity to our clients and our superior talent engine will enable us to weather this storm.
With that we can open up the call for questions.
Moderator
Thank you very much. Ladies and gentleman we will now begin the question and answer session. The first question is from the line of Ankur Rudra from JP Morgan. Please go ahead.
Ankur Rudra
The first question is, we understand the need to drop guidance this time, I know it is an exceptional year; but based on your current visibility on demand and the order book and the conversations you have had, how should we think about when you get back to normalcy – sort of the rhythm you were in before, either in terms of the revenue or profitability levels last seen in December or March or how would the shape of seasonality in revenues may turn out this year?
Salil Parekh
What we are seeing today is that overall there is no real clarity on when trends are going to be back into a situation where we have a clear view to give you a guidance. Today we definitely see in the short term some concerns where the business environment is extremely difficult. However, when we start to see this business environment starting to stabilize and we have visibility, we will be back with what we say in terms of guidance.
We do not have a clear answer today, whether this is for X quarters or Y quarters. Our sense is, the first order effect is visible all around in the sectors and Pravin shared specific details on them. There will probably be some second order effect and it also depends overall on how the medical situation evolves. So we are not commenting on the timelines here. What we are very clear is, and these are already discussions that many of us within the leadership have had with clients. there is a strong interest in consolidation with strong partners like us. There is a strong interest in looking at cloud movements and making changes in virtualization. There is a strong interest in looking at – could there be some captives that may be available; and all of those areas we are exploring. So in the medium term, given our strength in terms of delivery, our financial strength and the overall interest that clients have in consolidation, I feel positive. But in the near term we see some weakness going ahead.
Ankur Rudra
Thanks for that Salil. In the near term, do you think there will be any changes to your capital return policy just to keep the powder dry for acquisitions or the movements you may have to make?
Nilanjan Roy
Our capital allocation is quite clear – linked to our free cash flows. Like I said, we have enough of headroom and we will have to see if any assets which come up which interests us during the period but we are open to everything at this stage.
Ankur Rudra
Alright. Thank you and best of luck.
Moderator
Thank you. The next question is from the line of Keith Bachman from Bank of Montreal. Please go ahead.
Keith Bachman
I wanted to ask about any boundaries or any signs you could give us on your margins. So even if we stay away from revenue comments, is there are any kind of minimums or floors you think the business could sustain even in the phase of what is obviously incremental revenue pressure and/or you mentioned that there was 90-basis points of COVID impact in the current quarter, is there are any incremental COVID impact that we should be thinking about in the June quarter. Just some broader comments on margin trends or boundaries or things to consider as we are looking at our models?
Nilanjan Roy
So, the impact of COVID was about $32 million. Two-third of that was supply led – as we were ramping up our enablement of work from home. About a third of that was demand led – partly from clients who have now started giving us approvals to work from home and partly because of some ramp down. So that was the equation for the last quarter and that pretty much affected the quarter margins as well, which I mentioned 90-odd basis points. As we are looking into this quarter, initially we are trying to improve the work enablement. The figure of work from home for the onsite is much higher than 93% and slightly lower in the offshore. So our first priority is to continue to improve our supply side of the equation, so we don't leave any money on the table.
In terms of the Q1 near-term outlook, without getting into how much of revenues etc. are going to happen, we have already started making the margin moves. We have talked about moving out of the hiring season, the freeze on promotions and salary hikes. So those are the things we have already started with.
There will be pressure. As you know that the entire industry around the world did not gear up for a sudden stop, so there were people hired etc. As we close the quarter, there will be natural attrition during the quarter as well, which will help us. But the first, near-term impact is going to be on utilization because of the supply demand mismatch but that will iron itself out as the quarters progress and we will continue. Other factors are our margin optimization strategically in terms of automation, in terms of the pyramid, including onsite pyramid – where we are the only ones who are capable of doing that because of our full stack DCs in the U.S., our sub-con costand how do we rotate them etc. Discretionary expenditure is completely stopped now, discretionary capex is stopped
So a number of levers both from margin, preservation of cash, making sure that our liquidity cycles continue to roll; early warnings in terms of stress on any client in terms of default etc. But like I said, if quarter four is anything to go by, we had very strong collections.
Keith Bachman
Okay my follow up question is, I wanted to ask something that TCS mentioned last week. The comment was that the financial crisis was, at least from a growth perspective, of relevant benchmark. In other words, the first quarter of the financial crisis revenues dropped plus or minus 10% and I just wanted to know is that an industry perspective that you would endorse? What I mean by that is just a sequential drop for industry related revenues as investors think about the June quarter is the financial crisis when that first struck, is that a relevant benchmark or do you think this is different from the financial crisis?
Salil Parekh
Our sense is this situation is somewhat different from what transpired in the financial crisis a few years ago. This is across all sectors and all geographies equally. There is an incredible financial stimulus that at least the US has put together and there is a strong indication that the several European countries will join in. So those are some distinctions that we see between the actual crisis from an economic perspective.
With respect to how that impacts Q1, it is therefore not a straightforward comparison. What is clear is there will obviously be some impact in Q1 and then we will have to see how this plays out because there are counterbalancing forces. If the fiscal stimulus force becomes more dominant versus anything on the medical side, there is one set of outcomes. If the medical side has a second wave, there is another set of outcomes. And that is part of the reason why we do not have a sense of what is the quarterly progression here. We are focused on ensuring a very aggressive cost plan as Nilanjan shared. As Pravin shared, we have real operational capabilities to do it delivery wise; and we have extreme strength and we think we will emerge with all the consolidation in the medium term.
Keith Bachman
Okay, thanks very much. That is it from me.
Moderator
Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.
Diviya Nagarajan
Just a follow-up to the previous couple of questions. If you were to look at the 2008-2010 timeframe and I do get your point that it is not really apples to apples here, typically in downturns, we do see a fair amount of pricing pressure. Could you give us your sense on how this could be the same or different to last time, because they are clearly in a strong technology cycle. What I am trying to understand is that could that offset some of the typical pricing pressures that we see in spending environments that are stressed?
Salil Parekh
Let me start with that and Nilanjan might have other points to add to it as well. On pricing, there is obviously depending on the industry of our clients, their segments, there will be different levels of cost stress among them. Equally as you mentioned and Pravin shared earlier, we have some real strengths that we see, for example, in Telco, in Hi-tech we see some strength in Life Sciences, in Consumer staples, Groceries. So there are pockets of strength and we see some positive activity there as well.
Some of the service offerings where we see a real shift from a client buying perspective, we see strength there as well and we believe we have got a good set of investments there, whether it is in cloud or virtualization or workflow transformation and we think those will be a positive. So it is a bit of a mix in terms of the overall view therefore on pricing.
Diviya Nagarajan
It is impressive that you and the entire industry has kind of got into this work from home situation in a very short period of time. How do you see this model evolving for you in the medium to long-term and how does that kind of tie into some of the longer-term cost savings that you could get from a model like this?
Salil Parekh
I will start off and Pravin will provide more color. What we are extremely proud of is this rapid transition that we have made. We believe with 93%, that is a really strong number and as Nilanjan was sharing earlier, that is moving north every day. There is a tremendous amount of infrastructure, security, bandwidth capability that we had already put in place and that will be further enhanced to make all of this happen. In terms of how we see the future evolving, let me pass it on to Pravin, he can share more color on what we see in the coming weeks and months.
Pravin Rao
As Salil mentioned, in a very short span of time, we were able to get about 93% of our people globally work from home in a remote fashion. From that perspective, we have demonstrated resilience and agility in doing it and the feedback from the clients has been extremely positive. From a technology perspective, now it's proven that we can do this. Obviously, we have to make sure that we invest in infrastructure, we invest in security, controls, productivity tools, collaboration tools and other things. One of the positive thing is, if you are able to demonstrate good security and good productivity, I'm sure many clients will be much more open to doing this. That means that in the future, some of the things around ODC and constraints around that could potentially disappear at least. It may take some time, but somehow those things could disappear. So it will result in probably having much more virtual ODCs rather than any physical ODCs.
The ability to work remotely also means that, it doesn't matter whether you are in India, whether you are in different part of the world. It is possible to leverage people, capability wherever it exists and it is also probably possible to start looking at gig workers and things like that in a way. The ideas I am talking about is nothing new but this crisis has really enabled some of the acceleration or increase in adoption of some of the thoughts.
From that perspective, obviously there are opportunities for cost take-outs. You don't have to invest as much in real estate, travel costs may come down but you have to invest a lot more in technology, in security and other things. So net-net, it is a positive thing that has happened, but eventually whether that new normal means 20% office, 80% go home or whatever, I think only time will tell. Again it can vary from risk perceptions of different industries, but it will probably be much different than what we see today.
Diviya Nagarajan
Just as a follow-up, could you quantify the cost savings that you will get at least in the immediate next quarter from savings and travel facilities, subcontracting and other savings you might get because of the reduced activity and contrast that with what you might lose in terms of the utilization and pricing?
Nilanjan Roy
Diviya it is a bit premature. I think many of these will be cost avoidance as well. There will be some cost optimization, which is about automation, pyramid, etc. So it will be difficult to give a number where we will end up on utilization, as that will also depend on how the demand works out. We are continuing to make sure that we are taking decisions early, making no-regret decisions and monitoring the overall demand situation and then taking appropriate action.
Moderator
Thank you. The next question is from the line of Edward Caso from Wells Fargo. Please go ahead.
Edward Caso
I was curious if you could differentiate your clients discretionary spending, how much of it is work that you would have been doing say a month or so ago and then how much of has shifted over to business continuity to help move their workforce remote, etc. So has there been a change in that and is that coming to an end?
Salil Parekh
I am not sure I fully followed the question. The question was what was the discretionary a month ago and how is it today? We do not normally split up our discretionary project work from our overall revenue. However, of course, some of the discretionary work is where we will see some slowing in the near-term if that is what you are asking about.
Edward Caso
I was trying to understand that the makeup of discretionary spend has shifted to more of survival work by your clients and therefore as they settle into this new normal whether they will have sort of a drop-off after that. So will you get sort of a continuum of discretionary spending in the short run and then have it fall-off after that?
Salil Parekh
Okay, for us we have not quantified how that might play out. We certainly see there is some amount of work of that type. I would not say survival; it is much more focused on what could be benefits that can be achieved as they want to do more virtualizations or move more to the Cloud. I do not know if it is discretionary but it certainly seems - in this new environment - would be much more strategic for those clients. I do not have a sense whether that is going to stay or fall-off. At this stage, we do see there is more of a discussion on recession playbook and different sets of discussions that I shared earlier that we have in the frontlines and some of that gives us confidence again in the medium term.
Edward Caso
My other question is around H1B and L1 visas. It appears the Trump administration is taking advantage of the current environment and further tightening the ability to get visas and move people around. So are you seeing that both from an impact on your operations but also maybe positive in the sense that as people other H1B's and other firms lose their jobs in the U.S., can you pick those people up to help you meet onshore demand?
Pravin Rao
We have not seen any changes post COVID. So, whatever changes we have seen in H1, L1, the new lottery system, all those things happened much earlier. I do not see any changes in this regime. Even today as we speak, even for some of our own employees, given that all travel is cut off, some people have been out of status and we are talking to the U.S. administration to make sure that they get some relief and so on. But in the long run, if a lot of people are let go then there will probably be lot more availability of talent. Whether we will be able to take advantage of it really depends on the nature of demand. So it will be a function of demand. But from our own perspective, in the last couple of years, our approach has been to de-risk ourselves from H1, L1 and so we have invested a lot in our U.S. talent strategy. In the last couple of years, we have recruited more than 10,000 U.S. nationals, we have created six hubs. These are in different parts of U.S. - they are not only delivery hubs but they also serve as innovation hubs.
So we have invested a lot and today lot of our people working in U.S. are local nationals. So from that perspective, we are less dependent on what happens on the H1, L1 thing, but obviously if there is a demand and there is availability of talent, we will be always open to pick them up.
Moderator
Thank you. The next question is from the line of Sudheer Guntupalli from Motilal Oswal Financial Services. Please go ahead.
Sudheer Guntupalli
Good evening, gentlemen. Thanks for taking my questions. You highlighted in the press briefing that you were winning deals as late as in the last two weeks of March and even in the first two weeks of April. Probably this will be a closer proxy to the expected deal activity over the near term. In that context, it will be helpful for us if you can give us some more characteristics of these deals which were won over the last 30 days. Which geographies are these, which verticals, which service areas, is there also any discretionary spending in this?
Pravin Rao
As I mentioned earlier, we won 12 large deals, four of them in Retail, four in Energy, Utility, Resources and Services, and one deal each in Financial Services, Communications, Manufacturing and Hi-tech. Total TCV was $1.65 billion and 56% of it was net new. Again from a geographic perspective, seven wins from Americas and five were from Europe. So as you can see these deals have been across several industries and geographies as well and the fact is, as we mentioned, in the last two, three weeks of the quarter, even after COVID had started, we were able to close many of these deals. From that perspective it was very encouraging for us that we are not seeing postponement of at least some of the deals that were in the pipeline. So if Mohit is on the call, he can probably provide some color.
Mohit Joshi
I think Pravin has covered it in fairly great detail. The only thing I will add is that we were obviously concerned that the signatures on these deals may get delayed because of the infection but thankfully given the relationships and given that we were fairly advance into deal, we have been able to push ahead and close. It is a mix of deals across segments and across geographies and maybe across service lines as well. So there are cloud deals in this, there are traditional application maintenance and application development deals, infra services deals for the work space. Moving ahead as well, we have an existing pipeline for large deals and we will continue to push ahead in this. The dialogue with the clients are continuing and we are working to make sure that we do not lose momentum.
Sudheer Guntupalli
Sure Sir, so you mean to say that even in the last two weeks whatever deal activity happened or even in the first two weeks of April, it is more of a broad-based kind of a deal activity and not characterized towards any one particular segment.
Mohit Joshi
That is correct it is not one single deal, multiple deals.
Sudheer Guntupalli
Secondly our exposure to time-and-material contracts has been comparatively higher at roughly around 47% of our revenue as per our last reporting. Assuming the feasibility that clients have to ramp down the workloads in these contracts, are we seeing a higher trend or impact in the T&M portion of our portfolio than otherwise?
Pravin Rao
It is early days; I do not see any distinction between T&M or fixed price. Initially clients were worried about ensuring business continuity, safety of their own employees. But in these situations, conserving cash is a very critical element and they will start looking at projects. They will start looking at each project, the business case or the projects whether in the current situation it is a priority or not, the decision will be taken on that basis. Every project will be evaluated for a business case and in the new context and that is a decision they will probably take. T&M or a fixed price, or a managed service is more a commercial term.
Sudheer Guntupalli
My last question is regarding the onsite pyramid. As you said, we currently have around 10,000 local employees in U.S. Even before COVID-19 we were seeing some utilization/productivity challenges over there given that we have recently hired these guys, and they were going through the ramp up curve. Now with the demand expected to take a sharp hit, what is our thought process around managing the utilization of these employees? Some damage control measures which we could have possibly taken in the case of H1B's may not be very realistic right now. So what are your thoughts on how this could be impacting our margins?
Pravin Rao
So far our utilization onsite has been fairly good. It is in line with what we had planned and we had also factored a slightly lower utilization with building a pyramid there and that had worked out well for us. But in the new context, in the light of demand and other things, we will go slow on hiring in this coming year in all geographies. We will hire only on a need basis and any incremental hiring will be only from a skill perspective. We also have opportunities to rotate our subcon and replace them with our own people. So there are a few levers that are still available where we can try to improve utilization. Again, we have to evaluate all options to make sure that our costs are under control. We have to wait on how this situation will unfold and we will have to take a view, particularly if the utilization drops dramatically. But we have enough levers as I said, subcon replacement and a lot of things is possible to keep the utilization up.
Sudheer Guntupalli
Sure, thanks gentlemen, all the best and take care.
Moderator
Thank you. The next question is from the line of Moshe Katri from Wedbush. Please go ahead.
Moshe Katri
Thanks for taking my question. Is there any way to differentiate in terms of the services that are getting impacted here? And obviously, there is a lot of talk about discretionary that is impacted and non-discretionary that is not impacted. Can you give us some color in terms of what is included and what you call discretionary and is that also including what we call digital in terms of the impact and the slowdown? That is my first question, thanks.
Salil Parekh
I think in terms of services, we discussed some of the points earlier, I will elaborate on those. We definitely see some of our services which relate to areas around cloud and virtualization actually gaining traction. We see some other services, which relate to some more project level work, which is discretionary, which will probably be slower.
Overall, we are now getting into looking at how that plays out, given the speed at which this has moved and we have started to develop a sense from all of that into what becomes the focus with Q1 going ahead. But my sense is, we definitely see the conversations many of us are having with our clients that relates to some benefits accruing to us from consolidations, some benefits accruing to us from Cloud, some benefits accruing to us from workspace transformation. Those are the services that will be positive. Those areas, virtualization, cloud, workspace transformation all form part of digital. That is one of the elements of digital where we will see some traction, anything that helps clients to move more and more of their work into the remote working approach. There are other elements of digital, which potentially are more project related, which we think will become slower in the coming quarters.
Moshe Katri
That is helpful. Then my follow up here, there were some questions on pricing. So to frame it the right way, are you seeing any efforts on behalf of clients to try to restructure contracts at this point? Maybe it is too early for us to get there but is there any concern that this is where we are going to get to? And then are you seeing any potential competitors employing any sort of disruptive pricing out there that could impact the industry competitively? Thanks.
Salil Parekh
On the competitors, at this stage we do not see any moves. In fact, where we do see some activity is what I shared earlier around vendor consolidation which is even for some larger competitors of ours which are not potentially as efficient in their delivery model as we are, we see some advantages accruing to us there.
In terms of pricing, depending on the sectors where clients are or the sectors that will be most impacted, I am sure we will hear about some of these discussions. We anticipate some of that to happen but usually those discussions are also coupled with different delivery models that Pravin was sharing earlier and also consequent consolidation discussions that come about. At this stage, we don't have a quantified view on that but my sense is we will see some of those discussions start to come up.
Moshe Katri
Thanks for the comment.
Moderator
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Post GFC we actually saw a lot of spends during the recovery phase come in terms of merger and integration spends of those banks and risk and compliance related spends. So when you visualize a recovery this time around, which areas do you see spends really coming out in a big way?
Salil Parekh
My sense is even through this period especially as things come back to a different new normal, the spend on Digital will continue to accelerate. There are different components of it which are active. We see some of that already go into this and essentially the focus around the broader cloud discussion. I think bigger moves on digital will absolutely come back as that way. In addition, there will be transformation initiatives which we will see more as and when we see that sort of recovery starting to come back in.
Nitin Padmanabhan
So, if you saw the recovery phase last time, we saw a lot of these services that were built over the previous 10 years, go through a commoditization. This time around, if we look at digitalizing, it is now a reasonable part of portfolios of most vendors, do you envision some sort of commoditization there in some form or do you think that because there will be far more transformation projects and so on and so forth, you'll actually see a shift to larger vendors from smaller vendors. How would you visualize the changes this time around?
Salil Parekh
The commoditization is more difficult for me to comment today. We have to wait and see how the demand/supply looks. In terms of movement, it is very clear already to us that there is a movement from the smaller or the less capable vendors to larger or the more capable vendors and we definitely see, with our strengths, we believe we will benefit from that.
Nitin Padmanabhan
Sure, thank you so much and all the best.
Moderator
Thank you. The next question is from the line of Bryan Bergin from Cowen. Please go ahead.
Bryan Bergin
I wanted to clarify on the remote capability for the first quarter. Do you still have supply constraints that will limit your 1Q revenue potential or is it all demand driven going forward?
Salil Parekh
We still have some supply constraints which we are working through. We internally have the target to get to essentially what we call 100% capability there. Pravin, if you can add something please.
Pravin Rao
Yes, if you look at the remaining 7%, there is a very small percentage or areas where clients have not given us permission to operate from home, it is a very small percentage. So in the context of a lockdown or an extended lockdown, we will continue to be challenged from a supply perspective because we will not be able to get people to come to office and work. That is one part. Then we also have in a lockdown situation some percentage of people who have gone home who are not in our locations and they do not have any personal assets or company assets with them. So they are also stranded. So only during the period of lockdown we would anticipate some kind of supply issues but once the lockdown gets relaxed, we should be able to get people back to office and equip them either with assets, or wherever clients have not given permission, they should be able to come and work in offices.
Nilanjan Roy
Yes, I just want to add that we are looking at 93% overall. If you go on-site, most of it is nearly 100%. So onsite our billing rates etc., are much higher. So 93% does not mean that we are losing 7% of revenue due to supply.
Bryan Bergin
Okay, that is helpful. The large deal signings you have had in late March and early April, for the new deals that you closed, are those projects ramping up and starting on a normal timeframe or are any of those delayed?
Salil Parekh
I will make a comment on that and then firstly and then Mohit can also add to it. We had one of the largest projects ramping up in literally the middle of all of these activities late March, early April, a European project and we saw how through all of this remote working, we could manage to ramp that up extremely successfully and on schedule. So, that is one of the positives that we have seen but for more color on the specific deals there, Pravin if you want to add something and then Mohit?
Pravin Rao
So the challenges initially would have been only around transition and ramp up. But in the deal which Salil mentioned, we had rebadging and we were able to get a significant number of their people on to Infosys rolls. So we were able to do onboarding on a remote manner. Similarly, with another client in U.S., we were just about to start the project when this COVID situation and lockdown happened. But we were able to use tools and other things and start working on a remote transition plan.
We had a few days where we had to rework our plan on things. So there are few examples like this, which has given us confidence and comfort that even in situations like this, using technology and collaboration tools, we should be able to do the transition.
From that perspective going forward, I don't see too much of a challenge in terms of ramp up unless clients want to slow down on some of the ramp ups given the current situation.
Mohit Joshi
I think as we are trying to ramp up as we can. In many cases we have seen even remote ramps happen, remote transition, remote KT happens. So that is obviously a positive thing for us. Now there will be instances where remote transition is not possible in the situation of a complete lockdown and we might need some percentage of people to be able to be at the client's location, those might slightly get delayed. But on the whole, we are not seeing any of these programs structurally being delayed because clients are now not working from their premises.
Bryan Bergin
You mentioned vendor consolidation conversations that you are having with clients, in what industries is that occurring?
Salil Parekh
Many of our leaderships have had that sort of discussion. At least I have had those discussions across multiple sectors, so it is not specific at this stage towards any sector. There have been areas where it is related more to where clients see some small vendors potentially having challenges as they went to remote working, challenges on financial stability in the medium to long-term. In other cases, we have seen with large clients where we want to make sure that the benefits of automation are more streamlined into their work. So it is not specific to any industry, in the discussions I have had.
Bryan Bergin
Okay thank you.
Moderator
Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you Sir.
Sandeep Mahindroo
We would like to thank everyone for joining us on this call. We look forward to continuing our conversation over the course of the quarter. Thanks and have a good day.
Moderator
Thank you very much members of the management. Ladies and gentlemen, on behalf of Infosys that concludes this conference call. Thank you for joining us. You may now disconnect your lines.
Exhibit 99.6
Form of Release to Stock Exchanges
INDEPENDENT Auditor’s Report ON AUDIT OF STANDALONE FINANCIAL RESULTS
To The Board of Directors of INFOSYS LIMITED
Opinion
We have audited the accompanying Statement of Standalone Financial Results of INFOSYS LIMITED (the “Company”), for the three months and year ended March 31, 2020 (the “Statement”), being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the “Listing Regulations”).
In our opinion and to the best of our information and according to the explanations given to us, the statement:
a. | is presented in accordance with the requirements of Regulation 33 of the Listing Regulations; and |
b. | gives 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”) read with relevant rules issued thereunder and other accounting principles generally accepted in India of the net profit and total comprehensive income and other financial information of the Company for the three months and year ended March 31, 2020. |
Basis for Opinion
We conducted our audit of the Statement in accordance with the Standards on Auditing (“SA”s) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Financial Results section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the Standalone Financial Results under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As more fully described in Note 2 (b) to the Statement, the Company is responding to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain. Our opinion is not modified in respect of this matter.
Management’s Responsibilities for the Standalone Financial Results
This Statement, is the responsibility of the Company’s Management and approved by the Board of Directors, has been compiled from the related audited Interim condensed standalone financial statements for the year ended March 31, 2020. The Company’s Board of Directors are responsible for the preparation and presentation of the Standalone Financial Results that give a true and fair view of the net profit and other comprehensive income and other financial information in accordance with the recognition and measurement principles laid down in Ind AS 34, prescribed under Section 133 of the Act, read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Results that give a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the Standalone Financial Results, the Board of Directors are responsible for assessing the Company’s ability, to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the financial reporting process of the Company.
Auditor’s Responsibilities for the Audit of the Standalone Financial Results
Our objectives are to obtain reasonable assurance about whether the Standalone Financial Results as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Standalone Financial Results.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the Standalone Financial Results, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal 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 the effectiveness of such controls. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors. |
• | Evaluate the appropriateness and reasonableness of disclosures made by the Board of Directors in terms of the requirements specified under Regulation 33 of the Listing Regulations. |
• | Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the Standalone Financial Results, including the disclosures, and whether the Standalone Financial Results represent the underlying transactions and events in a manner that achieves fair presentation. |
• | Obtain sufficient appropriate audit evidence regarding the Standalone Financial Results of the Company to express an opinion on the Standalone Financial Results. |
Materiality is the magnitude of misstatements in the Standalone Financial Results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Results may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Results.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) UDIN: 20039826AAAABU7915 |
INDEPENDENT Auditor’s ReportON AUDIT OF CONSOLIDATED FINANCIAL RESULTS
To The Board of Directors of INFOSYS Limited
Opinion
We have audited the accompanying Statement of Consolidated Financial Results of INFOSYS Limited (the “Company”) and its subsidiaries (the Company and its subsidiaries together referred to as the “Group”), for the three months and year ended March 31, 2020 (the “Statement”), being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the “Listing Regulations”).
In our opinion and to the best of our information and according to the explanations given to us, the Statement:
(i) | includes the results of the subsidiaries as given in the Annexure to this report; |
(ii) | is presented in accordance with the requirements of Regulation 33 of the Listing Regulations; and |
(iii) | gives a true and fair view in conformity with Indian Accounting Standard 34 “Interim Financial Reporting” (“Ind AS 34”) prescribed under Section 133 of the Companies Act 2013 (the “Act”) read with relevant rules issued thereunder and other accounting principles generally accepted in India of the consolidated net profit and consolidated total comprehensive income and other financial information of the Group for the three months and year ended March 31, 2020. |
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (“SA”s) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Results section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (the “ICAI”) together with the ethical requirements that are relevant to our audit of the Interim Consolidated Financial Results under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As more fully described in Note 2 (d) to the Statement, the Group is subject to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Management’s Responsibilities for the Consolidated Financial Results
This Statement, which is the responsibility of the Company’s Management and approved by the Company’s Board of Directors, has been compiled from the audited interim consolidated financial statements. The Company’s Board of Directors are responsible for the preparation and presentation of the Consolidated Financial Results that give a true and fair view of the consolidated net profit and consolidated other comprehensive income and other financial information of the Group in accordance with the recognition and measurement principles laid down in Ind AS 34, prescribed under Section 133 of the Act, read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations.
The respective Boards of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the respective financial results that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of this Consolidated Financial Results by the Directors of the Company, as aforesaid.
In preparing the Consolidated Financial Results, 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 Boards of Directors either intend to liquidate their respective entities or to cease operations, or have no realistic alternative but to do so.
The respective Boards of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Results
Our objectives are to obtain reasonable assurance about whether the Consolidated Financial Results as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Consolidated Financial Results.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the Consolidated Financial Results, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal 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 the effectiveness of such controls. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors. |
• | Evaluate the appropriateness and reasonableness of disclosures made by the Board of Directors in terms of the requirements specified under Regulation 33 of the Listing Regulations. |
• | Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated Financial Results or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the Consolidated Financial Results, including the disclosures, and whether the Consolidated Financial Results represent the underlying transactions and events in a manner that achieves fair presentation. |
• | Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the Consolidated Financial Results. We are responsible for the direction, supervision and performance of the audit of financial information of such entities included in the Consolidated Financial Results of which we are the independent auditors. |
Materiality is the magnitude of misstatements in the Consolidated Financial Results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Consolidated Financial Results may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Consolidated Financial Results.
We communicate with those charged with governance of the Company and such other entities included in the Consolidated Financial Results of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai | Partner |
Annexure to Auditors’ Report
List of Subsidiaries:
1. | Infosys Technologies (China) Co. Limited |
2. | Infosys Technologies S. de R. L. de C. V. |
3. | Infosys Technologies (Sweden) AB. |
4. | Infosys Technologies (Shanghai) Company Limited |
5. | Infosys Tecnologia DO Brasil LTDA. (effective October 01, 2019, merged into Infosys Consulting Ltda.) |
6. | Infosys Nova Holdings LLC. |
7. | EdgeVerve Systems Limited |
8. | Infosys Austria GmbH |
9. | Skava Systems Pvt. Ltd. |
10. | Kallidus Inc. |
11. | Infosys Chile SpA |
12. | Infosys Arabia Limited |
13. | Infosys Consulting Ltda. |
14. | Infosys CIS LLC |
15. | Infosys Luxembourg SARL |
16. | Infosys Americas Inc. |
17. | Infosys Technologies (Australia) Pty. Limited (liquidated effective November 17, 2019) |
18. | Infosys Public Services, Inc. |
19. | Infosys Canada Public Services Inc. |
20. | Infosys BPM Limited |
21. | Infosys (Czech Republic) Limited s.r.o. |
22. | Infosys Poland Sp Z.o.o |
23. | Infosys McCamish Systems LLC |
24. | Portland Group Pty Ltd |
25. | Infosys BPO Americas LLC. |
26. | Infosys Consulting Holding AG |
27. | Infosys Management Consulting Pty Limited |
28. | Infosys Consulting AG |
29. | Infosys Consulting GmbH |
30. | Infosys Consulting S.R.L, Romania |
31. | Infosys Consulting SAS |
32. | Infosys Consulting s.r.o. |
33. | Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd) |
34. | Infy Consulting Company Limited |
35. | Infy Consulting B.V. |
36. | Infosys Consulting Sp. Z.o.o |
37. | Lodestone Management Consultants Portugal, Unipessoal, Lda. |
38. | Infosys Consulting S.R.L, Argentina |
39. | Infosys Consulting (Belgium) NV |
40. | Panaya Inc. |
41. | Panaya Limited. |
42. | Panaya GmbH |
43. | Panaya Japan Co. Ltd (liquidated effective October 31, 2019) |
44. | Brilliant Basics Holdings Limited |
45. | Brilliant Basics Limited |
46. | Brilliant Basics (MENA) DMCC |
Annexure to Auditors’ Report
List of Subsidiaries:
47. | Infosys Consulting Pte Ltd. |
48. | Infosys Middle East FZ LLC |
49. | Fluido Oy |
50. | Fluido Sweden AB (Extero) |
51. | Fluido Norway A/S |
52. | Fluido Denmark A/S |
53. | Fluido Slovakia s.r.o |
54. | Fluido Newco AB |
55. | Infosys Compaz PTE. Ltd |
56. | Infosys South Africa (Pty) Ltd |
57. | Wong Doody Holding Company Inc. |
58. | WDW Communications, Inc. |
59. | WongDoody, Inc |
60. | HIPUS (Acquired on April 01, 2019) |
61. | Stater N.V. (Acquired on May 23, 2019) |
62. | Stater Nederland B.V. (acquired on May 23, 2019) |
63. | Stater Duitsland B.V. (acquired on May 23, 2019) |
64. | Stater XXL B.V. (acquired on May 23, 2019) |
65. | HypoCasso B.V. (acquired on May 23, 2019) |
66. | Stater Participations B.V. (acquired on May 23, 2019) |
67. | Stater Deutschland Verwaltungs-GmbH (acquired on May 23, 2019) |
68. | Stater Deutschland GmbH & Co. KG (acquired on May 23, 2019) |
69. | Stater Belgium N.V./S.A. (Acquired on May 23, 2019) |
70. | Outbox systems Inc. dba Simplus (US) (acquired on March 13, 2020) |
71. | Simplus North America Inc. (acquired on March 13, 2020) |
72. | Simplus ANZ Pty Ltd. (acquired on March 13, 2020) |
73. | Simplus Australia Pty Ltd (acquired on March 13, 2020) |
74. | Sqware Peg Digital Pty Ltd (acquired on March 13, 2020) |
75. | Simplus Philippines, Inc. (acquired on March 13, 2020) |
76. | Simplus Europe, Ltd. (acquired on March 13, 2020) |
77. | Simplus U.K., Ltd. (acquired on March 13, 2020) |
78. | Simplus Ireland, Ltd. (acquired on March 13, 2020) |
79. | Infosys Employees Welfare Trust |
80. | Infosys Employee Benefits Trust |
81. | Infosys Science Foundation |
82. | Infosys Expanded Stock Ownership Trust |
Infosys Limited Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Statement of Consolidated Audited Results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 23,267 | 23,092 | 21,539 | 90,791 | 82,675 |
Other income, net (Refer Note 2(e)) | 614 | 827 | 665 | 2,803 | 2,882 |
Total Income | 23,881 | 23,919 | 22,204 | 93,594 | 85,557 |
Expenses | |||||
Employee benefit expenses | 12,916 | 12,994 | 12,074 | 50,887 | 45,315 |
Cost of technical sub-contractors | 1,704 | 1,721 | 1,601 | 6,714 | 6,033 |
Travel expenses | 667 | 617 | 603 | 2,710 | 2,433 |
Cost of software packages and others | 755 | 651 | 689 | 2,703 | 2,553 |
Communication expenses | 139 | 132 | 115 | 528 | 471 |
Consultancy and professional charges | 339 | 362 | 376 | 1,326 | 1,324 |
Depreciation and amortisation expenses## | 749 | 737 | 531 | 2,893 | 2,011 |
Finance cost | 45 | 42 | – | 170 | – |
Other expenses | 1,071 | 814 | 932 | 3,656 | 3,655 |
Reduction in the fair value of Disposal Group Held for Sale (Refer Note 1(a)) | – | – | – | – | 270 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" (Refer Note 1(a)) | – | – | – | – | 451 |
Total expenses | 18,385 | 18,070 | 16,921 | 71,587 | 64,516 |
Profit before tax | 5,496 | 5,849 | 5,283 | 22,007 | 21,041 |
Tax expense: (Refer Note 1(b)) | |||||
Current tax | 1,335 | 1,492 | 1,193 | 5,775 | 5,727 |
Deferred tax | (174) | (109) | 12 | (407) | (96) |
Profit for the period | 4,335 | 4,466 | 4,078 | 16,639 | 15,410 |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net*** | (21) | (120) | (3) | (180) | (22) |
Equity instruments through other comprehensive income, net | (2) | (36) | 1 | (33) | 70 |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedges, net | – | (29) | (15) | (36) | 21 |
Exchange differences on translation of foreign operations | 237 | 151 | (70) | 378 | 63 |
Fair value changes on investments, net | 15 | (11) | 25 | 22 | 2 |
Total other comprehensive income/(loss), net of tax | 229 | (45) | (62) | 151 | 134 |
Total comprehensive income for the period | 4,564 | 4,421 | 4,016 | 16,790 | 15,544 |
Profit attributable to: | |||||
Owners of the company | 4,321 | 4,457 | 4,074 | 16,594 | 15,404 |
Non-controlling interest | 14 | 9 | 4 | 45 | 6 |
4,335 | 4,466 | 4,078 | 16,639 | 15,410 | |
Total comprehensive income attributable to: | |||||
Owners of the company | 4,545 | 4,406 | 4,012 | 16,732 | 15,538 |
Non-controlling interest | 19 | 15 | 4 | 58 | 6 |
4,564 | 4,421 | 4,016 | 16,790 | 15,544 | |
Paid up share capital (par value 5/- each, fully paid) | 2,122 | 2,122 | 2,170 | 2,122 | 2,170 |
Other equity *# | 63,328 | 62,778 | 62,778 | 63,328 | 62,778 |
Earnings per equity share (par value 5/- each)** | |||||
Basic () | 10.19 | 10.51 | 9.37 | 38.97 | 35.44 |
Diluted () | 10.18 | 10.50 | 9.36 | 38.91 | 35.38 |
* | Balances for the quarter ended December 31,2019 represents balances as per the audited Balance Sheet for the year ended March 31, 2019 as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter ended March 31, 2020, December 31, 2019 and March 31, 2019 |
*** | Includes unrealised losses on certain investments carried in the PF trust for the quarter and year ended March 31, 2020 and quarter ended December 31, 2019 |
# | Excludes non-controlling interest |
## | Effective April 1, 2019, the Group adopted Ind AS 116 "Leases", applied 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. |
1. Notes pertaining to the previous quarters / periods
a) | The subsidiaries Kallidus and Skava (together referred to as "Skava”) and Panaya, are collectively referred to as the “Disposal Group”. During the year ended March 31, 2019, the Company had recorded a reduction in the fair value by 270 crore in respect of its subsidiary Panaya. Further, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded that the Disposal Group did not meet the criteria for "Held for Sale" classification and accordingly, on such reclassification, the Company recorded an adjustment in respect of excess of carrying amount over recoverable amount of 451 crore in respect of Skava in the consolidated statement of Profit and Loss during the year ended March 31, 2019. | |
b) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of 94 crore which pertains to previous period. |
2. Notes pertaining to the current quarter
a) | The audited interim consolidated financial statements for the quarter and year ended March 31, 2020 have been taken on record by the Board of Directors at its meeting held on April 20, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim consolidated financial statements. These interim consolidated financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter. |
b) | Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19): | |
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group. The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these consolidated financial statements. | ||
c) | Changes to the Board | |
i) | The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Uri Levine as an additional and Independent Director of the Company effective April 20, 2020 for a period of 3 years,subject to the approval of the shareholders. | |
ii) | D N Prahlad, Independent Director, has resigned from the company to devote more time for his other business commitments with effect from April 20, 2020. The Board placed on record its appreciation for the services rendered by him during his tenure. |
d) | Update on the whistleblower matter |
i) | 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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020, the outcome of the investigation has not resulted in restatement of previously issued financial statements. | |
ii) | The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal securities laws. The Company is presently unable to predict the scope, duration or the outcome of these matters. |
e) | Other income includes interest on income tax refund of 8 crore and Nil for the quarter ended March 31, 2020 and March 31, 2019 respectively, 259 crore and 51 crore for the year ended March 31, 2020 and March 31, 2019 respectively, and 242 crore for the quarter ended December 31, 2019. |
f) | Acquisition |
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys
Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus, a US based Salesforce advisor and consulting
partner in cloud consulting, implementation and training services for a total consideration of up to $250 million
(approximately 1,892 crore), comprising cash consideration of $180 million (approximately 1,362 crore),
contingent consideration of up to $20 million (approximately 151 crore), additional performance bonus and retention
payouts of upto $50 million (approximately 378 crore) payable to the employees of Simplus over the next three years,
subject to their continuous employment with the group and meeting certain targets. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill; Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. |
g) | Update on employee stock grants |
i) | The Board, on April 20, 2020, 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 2021 under the 2015 Stock Incentive Compensation Plan (2015 plan) to Salil Parekh, CEO and MD. This was pursuant to the approval from the shareholders through postal ballot concluded on February 20, 2018 and as per the shareholders’ approval in the Annual General meeting held on June 22, 2019. These RSUs will vest in line with the current employment agreement.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. | |
ii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to Salil Parekh, CEO & MD covering Company’s equity shares having a market value of 10 crore as on the date of the grant under the Infosys Expanded Stock Ownership Program-2019 (2019 Plan), which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan.This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. | |
iii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to U.B. Pravin Rao, COO & Whole Time Director covering Company’s equity shares having a market value of 4 crore as on the date of the grant under the 2019 Plan, which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan. This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. | |
iv) | Based on the recommendations of the Nominations and Remuneration Committee, the Board, on April 20, 2020, under the 2015 plan, approved an annual performance based RSU having market value of 0.75 crore to a KMP. These RSU's will vest in line with the employment agreement based on the achievement of certain performance targets. The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. | |
v) | On recommendation of the Nomination and Remuneration Committee, the Board in its meeting held on April 20, 2020, approved the grant of 24,600 RSUs to an eligible employee under the 2015 Plan. The grant date for these RSUs is May 2, 2020. The RSUs would vest over a period of four years and the exercise price of RSUs will be equal to the par value of the share. |
3. | Information on dividends for the quarter and year ended March 31, 2020 |
For financial year 2020, the Board recommended a final dividend of 9.50/-
(par value of 5/-
each) per equity share. This payment is subject to the approval of shareholders in the Annual General
Meeting (AGM) of the Company.The dividend will be paid on the 5th working day from the date of declaration of the final
dividend by the shareholders. In view of COVID-19 the Company is working on an AGM date.The book closure date for the
purpose of the payment of final dividend and AGM
date will be announced in due course.For the financial year ended 2019, the Company
declared a special dividend of 4/- per share and a final dividend of 10.50/-
per share. An interim dividend of 8/- per equity share was declared on October 11, 2019 and the same was paid on October 30, 2019. The interim dividend declared in the previous year was 7/- per equity share. |
(in )
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Dividend per share (par value 5/- each) | |||||
Interim dividend | – | – | – | 8.00 | 7.00 |
Final dividend | 9.50 | – | 10.50 | 9.50 | 10.50 |
Special dividend | – | – | – | – | 4.00 |
4. Audited Consolidated Balance Sheet
(in crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 12,435 | 11,479 |
Right of use assets | 4,168 | – |
Capital work-in-progress | 954 | 1,388 |
Goodwill | 5,286 | 3,540 |
Other Intangible assets | 1,900 | 691 |
Financial assets: | ||
Investments | 4,137 | 4,634 |
Loans | 21 | 19 |
Other financial assets | 737 | 312 |
Deferred tax assets (net) | 1,744 | 1,372 |
Income tax assets (net) | 5,384 | 6,320 |
Other non-current assets | 1,426 | 2,105 |
Total non-current assets | 38,192 | 31,860 |
Current assets | ||
Financial assets | ||
Investments | 4,655 | 6,627 |
Trade receivables | 18,487 | 14,827 |
Cash and cash equivalents | 18,649 | 19,568 |
Loans | 239 | 241 |
Other financial assets | 5,457 | 5,505 |
Income tax assets (net) | 7 | 423 |
Other current assets | 7,082 | 5,687 |
Total current assets | 54,576 | 52,878 |
Total Assets | 92,768 | 84,738 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,122 | 2,170 |
Other equity | 63,328 | 62,778 |
Total equity attributable to equity holders of the Company | 65,450 | 64,948 |
Non-controlling interests | 394 | 58 |
Total equity | 65,844 | 65,006 |
Liabilities | ||
Non-current liabilities | ||
Financial liabilities | ||
Lease liabilities | 4,014 | – |
Other financial liabilities | 807 | 147 |
Deferred tax liabilities (net) | 968 | 672 |
Other non-current liabilities | 279 | 275 |
Total non-current liabilities | 6,068 | 1,094 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | 2,852 | 1,655 |
Lease liabilities | 619 | – |
Other financial liabilities | 10,481 | 10,452 |
Other Current Liabilities | 4,842 | 4,388 |
Provisions | 572 | 576 |
Income tax liabilities (net) | 1,490 | 1,567 |
Total current liabilities | 20,856 | 18,638 |
Total equity and liabilities | 92,768 | 84,738 |
The disclosure is an extract of the audited Consolidated Balance Sheet as at March 31, 2020 and March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Audited Consolidated Statement of Cash Flows
(in crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Cash flow from operating activities | ||
Profit for the period | 16,639 | 15,410 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Income tax expense | 5,368 | 5,631 |
Depreciation and amortization | 2,893 | 2,011 |
Interest and dividend income | (1,613) | (2,052) |
Finance cost | 170 | – |
Impairment loss recognized / (reversed) under expected credit loss model | 161 | 239 |
Exchange differences on translation of assets and liabilities | 184 | 66 |
Reduction in the fair value of Disposal Group held for sale | – | 270 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | – | 451 |
Stock compensation expense | 249 | 202 |
Other adjustments | (131) | (102) |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (3,861) | (2,881) |
Loans, other financial assets and other assets | 76 | (700) |
Trade payables | (373) | 916 |
Other financial liabilities, other liabilities and provisions | 1,791 | 2,212 |
Cash generated from operations | 21,553 | 21,673 |
Income taxes paid | (4,550) | (6,832) |
Net cash generated by operating activities | 17,003 | 14,841 |
Cash flows from investing activities | ||
Expenditure on property, plant and equipment | (3,307) | (2,445) |
Loans to employees | – | 14 |
Deposits placed with corporation | (108) | (24) |
Interest and dividend received | 1,929 | 1,557 |
Payment towards acquisition of business, net of cash acquired | (1,860) | (550) |
Payment of contingent consideration pertaining to acquisition of business | (6) | (18) |
Advance payment towards acquisition of business | – | (206) |
Redemption of escrow pertaining to Buyback | 257 | (257) |
Other receipts | 46 | – |
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 | (34,839) | (78,355) |
Non convertible debentures | (993) | (160) |
Certificates of deposit | (1,114) | (2,393) |
Government securities | (1,561) | (838) |
Commercial paper | – | (491) |
Others | (29) | (19) |
Proceeds on sale of financial assets | ||
Tax free bonds and government bonds | 87 | 1 |
Non-convertible debentures | 1,888 | 738 |
Government securities | 1,674 | 123 |
Commercial paper | 500 | 300 |
Certificates of deposit | 2,545 | 5,540 |
Liquid mutual funds and fixed maturity plan securities | 34,685 | 76,821 |
Preference and equity securities | 27 | 115 |
Others | – | 10 |
Net cash (used in) / from investing activities | (239) | (575) |
Cash flows from financing activities: | ||
Payment of lease liabilities | (571) | – |
Payment of dividends (including dividend distribution tax) | (9,515) | (13,705) |
Payment of dividend to non-controlling interest of subsidiary | (33) | – |
Shares issued on exercise of employee stock options | 6 | 6 |
Buyback of equity shares including transaction cost | (7,478) | (813) |
Net cash used in financing activities | (17,591) | (14,512) |
Net increase / (decrease) in cash and cash equivalents | (827) | (246) |
Cash and cash equivalents at the beginning of the period | 19,568 | 19,871 |
Effect of exchange rate changes on cash and cash equivalents | (92) | (57) |
Cash and cash equivalents at the end of the period | 18,649 | 19,568 |
Supplementary information: | ||
Restricted cash balance | 396 | 358 |
The disclosure is an extract of the audited Consolidated Statement of Cash flows for the year ended March 31, 2020 and March 31, 2019 prepared in compliance with Indian Accounting Standard (Ind AS) 34 Interim Financial Reporting.
6. Segment reporting (Consolidated - Audited)
(in crore)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Revenue by business segment | – | ||||
Financial Services (1) | 7,282 | 7,274 | 6,805 | 28,625 | 26,477 |
Retail (2) | 3,622 | 3,530 | 3,416 | 14,035 | 13,556 |
Communication (3) | 3,017 | 3,002 | 2,921 | 11,984 | 10,426 |
Energy, Utilities, Resources and Services | 2,992 | 2,948 | 2,747 | 11,736 | 10,390 |
Manufacturing | 2,363 | 2,378 | 2,161 | 9,131 | 8,152 |
Hi-Tech | 1,831 | 1,749 | 1,650 | 6,972 | 6,177 |
Life Sciences (4) | 1,484 | 1,559 | 1,287 | 5,837 | 5,203 |
All other segments (5) | 676 | 652 | 552 | 2,471 | 2,294 |
Total | 23,267 | 23,092 | 21,539 | 90,791 | 82,675 |
Less: Inter-segment revenue | – | – | – | – | – |
Net revenue from operations | 23,267 | 23,092 | 21,539 | 90,791 | 82,675 |
Segment profit before tax, depreciation and non-controlling interests: | |||||
Financial Services (1) | 1,863 | 1,863 | 1,721 | 7,306 | 6,878 |
Retail (2) | 1,058 | 1,084 | 1,017 | 4,212 | 4,034 |
Communication (3) | 560 | 618 | 578 | 2,424 | 2,517 |
Energy, Utilities , Resources and Services | 856 | 818 | 634 | 3,216 | 2,542 |
Manufacturing | 557 | 581 | 471 | 2,059 | 1,853 |
Hi-Tech | 431 | 411 | 376 | 1,604 | 1,548 |
Life Sciences (4) | 344 | 417 | 323 | 1,431 | 1,419 |
All other segments (5) | 37 | 15 | 37 | 64 | 116 |
Total | 5,706 | 5,807 | 5,157 | 22,316 | 20,907 |
Less: Other unallocable expenditure | 779 | 743 | 539 | 2,942 | 2,027 |
Add: Unallocable other income | 614 | 827 | 665 | 2,803 | 2,882 |
Less: Finance cost | 45 | 42 | – | 170 | – |
Less: Reduction in the fair value of Disposal Group Held for Sale | – | – | – | – | 270 |
Less: Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" | – | – | – | – | 451 |
Profit before tax and non-controlling interests | 5,496 | 5,849 | 5,283 | 22,007 | 21,041 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | All other segments include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Notes on segment information
Business segments
Based on the "management approach" as defined in Ind-AS 108 - Operating Segments, the Chief Operating Decision Maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along these business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments.
Segmental capital employed
Assets and liabilities used in the Group's business are not identified to any of the reportable segments, as these are used interchangeably between segments. The Management believes that it is not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.
7. Audited financial results of Infosys Limited (Standalone Information)
(in crore)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Revenue from operations | 20,187 | 20,064 | 18,935 | 79,047 | 73,107 |
Profit before tax (Refer notes below) | 5,128 | 5,405 | 4,953 | 20,477 | 19,927 |
Profit for the period (Refer notes below) | 4,069 | 4,076 | 3,820 | 15,543 | 14,702 |
The audited results of Infosys Limited for the above mentioned periods are available on our website, www.infosys.com and on the Stock Exchange website www.nseindia.com and www.bseindia.com. The information above has been extracted from the audited interim standalone condensed financial statements as stated.
Note:
1) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of 94 crore which pertains to previous period. |
2) | During the year ended March 31, 2019, the Company had recorded a reduction in the fair value of its investments in Panaya, by 265 crore in the interim condensed standalone Statement of Profit and Loss of Infosys. Further, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company reclassified the investment in subsidiaries Panaya and Skava from“Held for Sale” and recorded an adjustment in respect of excess of carrying amount over recoverable amount amounting to 469 crore in respect of Skava in the interim condensed standalone Statement of Profit and Loss for the year ended March 31, 2019. |
3) | Other income includes interest on income tax refund of 8 crore and Nil for the quarter ended March 31, 2020 and March 31, 2019 respectively, 250 crore and 50 crore for the year ended March 31, 2020 and March 31, 2019 respectively, and 242 crore for the quarter ended December 31, 2019. |
By order of the Board for Infosys Limited | |
Bengaluru, India April 20, 2020 |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
The Board has also taken on record the condensed consolidated results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2020, prepared as per International Financial Reporting Standards (IFRS) and reported in US dollars. A summary of the financial statements is as follows:
(in US$ million, except per equity share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Unaudited | Audited | Unaudited | Audited | Audited | |
Revenues | 3,197 | 3,243 | 3,060 | 12,780 | 11,799 |
Cost of sales | 2,133 | 2,159 | 2,028 | 8,552 | 7,687 |
Gross profit | 1,064 | 1,084 | 1,032 | 4,228 | 4,112 |
Operating expenses | 390 | 373 | 374 | 1,504 | 1,416 |
Operating profit | 674 | 711 | 658 | 2,724 | 2,696 |
Other income, net (Refer Note 3) | 84 | 116 | 94 | 395 | 411 |
Finance cost | (6) | (6) | – | (24) | – |
Reduction in the fair value of Disposal Group held for sale (Refer Note 1) | – | – | – | – | (39) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 1) | – | – | – | – | (65) |
Profit before income taxes | 752 | 821 | 752 | 3,095 | 3,003 |
Income tax expense (Refer Note 2) | 160 | 194 | 171 | 757 | 803 |
Net profit | 592 | 627 | 581 | 2,338 | 2,200 |
Earnings per equity share * | |||||
Basic | 0.14 | 0.15 | 0.13 | 0.55 | 0.51 |
Diluted | 0.14 | 0.15 | 0.13 | 0.55 | 0.51 |
Total assets | 12,260 | 12,110 | 12,252 | 12,260 | 12,252 |
Cash and cash equivalents and current investments | 3,080 | 2,853 | 3,787 | 3,080 | 3,787 |
* EPS is not annualized for the quarter ended March 31, 2020, December 31, 2019 and March 31, 2019.
Note-
1) | The subsidiaries Kallidus and Skava (together referred to as "Skava”) and Panaya, are collectively referred to as the “Disposal Group”. During the year ended March 31, 2019, the Company had recorded a reduction in the fair value by $39 million in respect of its subsidiary Panaya. Further, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded that the Disposal Group did not meet the criteria for "Held for Sale" classification and accordingly, on such reclassification, the Company recorded an adjustment in respect of excess of carrying amount over recoverable amount of $65 million in respect of Skava in the consolidated statement of Profit and Loss during the year ended March 31, 2019. |
2) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of $14 million which pertains to previous period. |
3) | Other income includes interest on income tax refund of $2 million and Nil for the quarter ended March 31, 2020 and March 31, 2019 respectively, $37 million and $7 million for the year ended March 31, 2020 and March 31, 2019 respectively and $34 million for the quarter ended December 31, 2019. |
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
Infosys Limited Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Extract of Consolidated Audited Financial Results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)
( in crore except per equity share data)
Particulars | Quarter ended March 31, |
Year ended March 31, |
Quarter ended March 31, |
2020 | 2020 | 2019 | |
Revenue from operations | 23,267 | 90,791 | 21,539 |
Profit before tax (Refer Note 2(e))## | 5,496 | 22,007 | 5,283 |
Profit for the period (Refer Note 1(a) and Note 1(b)) | 4,335 | 16,639 | 4,078 |
Total comprehensive income for the period (comprising profit for the period after tax and other comprehensive income after tax)** | 4,564 | 16,790 | 4,016 |
Profit attributable to: | |||
Owners of the company | 4,321 | 16,594 | 4,074 |
Non-controlling interest | 14 | 45 | 4 |
4,335 | 16,639 | 4,078 | |
Total comprehensive income attributable to: | |||
Owners of the company | 4,545 | 16,732 | 4,012 |
Non-controlling interest | 19 | 58 | 4 |
4,564 | 16,790 | 4,016 | |
Paid-up share capital (par value 5/- each fully paid) | 2,122 | 2,122 | 2,170 |
Other equity # | 63,328 | 63,328 | 62,778 |
Earnings per share (par value 5/- each)* | |||
Basic () | 10.19 | 38.97 | 9.37 |
Diluted () | 10.18 | 38.91 | 9.36 |
* | EPS is not annualized for the quarter ended March 31, 2020 and March 31, 2019 |
** |
Includes unrealised losses on certain investments carried in the PF trust for the quarter and year ended March 31, 2020 |
# | Excludes non-controlling interest |
## | Effective April 1, 2019, the Group adopted Ind AS 116 "Leases", applied 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. |
1. Notes pertaining to the previous quarters / periods
a) | The subsidiaries Kallidus and Skava (together referred to as "Skava”) and Panaya, are collectively referred to as the “Disposal Group”. During the year ended March 31, 2019, the Company had recorded a reduction in the fair value by 270 crore in respect of its subsidiary Panaya. Further, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded that the Disposal Group did not meet the criteria for "Held for Sale" classification and accordingly, on such reclassification, the Company recorded an adjustment in respect of excess of carrying amount over recoverable amount of 451 crore in respect of Skava in the consolidated statement of Profit and Loss during the year ended March 31, 2019. |
b) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of 94 crore which pertains to previous period. |
2. Notes pertaining to the current quarter
a) | The audited interim consolidated financial statements for the quarter and year ended March 31, 2020 have been taken on record by the Board of Directors at its meeting held on April 20, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim consolidated financial statements. These interim consolidated financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter. |
b) Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19):
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group. The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these consolidated financial statements. |
c) Changes to the Board
i) | The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Uri Levine as an additional and Independent Director of the Company effective April 20, 2020 for a period of 3 years,subject to the approval of the shareholders. |
ii) | D N Prahlad, Independent Director, has resigned from the company effective April 20,2020 citing personal reasons. The Board placed on record its appreciation for the services rendered by him during his tenure. |
c) | Update on the whistleblower matter |
i) | 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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on
January 10, 2020, the outcome of the investigation has not resulted in restatement of previously issued financial statements.
|
|
ii) | The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal securities laws. The Company is presently unable to predict the scope, duration or the outcome of these matters. |
e) | Other income includes interest on income tax refund of 8 crore and Nil for the quarter ended March 31, 2020 and March 31, 2019 respectively, and 259 crore for the year ended March 31, 2020. |
f) Acquisition
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys
Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus , a US based Salesforce advisor and consulting
partner in cloud consulting, implementation and training services for a total consideration of up to $250 million
(approximately 1,892 crore), comprising cash consideration of $180 million (approximately 1,362 crore),
contingent consideration of up to $20 million (approximately 151 crore), additional performance bonus and retention
payouts of upto $50 million (approximately 378 crore) payable to the employees of Simplus over the next three years,
subject to their continuous employment with the group and meeting certain targets. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill; Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. |
g) Update on employee stock grants
i) | The Board, on April 20, 2020, 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 2021 under the 2015 Stock Incentive Compensation Plan (2015 plan) to Salil Parekh, CEO and MD. This was pursuant to the approval from the shareholders through postal ballot concluded on February 20, 2018 and as per the shareholders’ approval in the Annual General meeting held on June 22, 2019. These RSUs will vest in line with the current employment agreement.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
ii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to Salil Parekh, CEO & MD covering Company’s equity shares having a market value of 10 crore as on the date of the grant under the Infosys Expanded Stock Ownership Program-2019 (2019 Plan), which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan.This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
iii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to U.B. Pravin Rao, COO & Whole Time Director covering Company’s equity shares having a market value of 4 crore as on the date of the grant under the 2019 Plan, which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan. This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
iv) | Based on the recommendations of the Nominations and Remuneration Committee, the Board, on April 20, 2020, under the 2015 plan, approved an annual performance based RSU having market value of 0.75 crore to a KMP. These RSU's will vest in line with the employment agreement based on the achievement of certain performance targets. The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
v) | On recommendation of the Nomination and Remuneration Committee, the Board in its meeting held on April 20, 2020, approved the grant of 24,600 RSUs to an eligible employee under the 2015 Plan. The grant date for these RSUs is May 2, 2020. The RSUs would vest over a period of four years and the exercise price of RSUs will be equal to the par value of the share. |
3. Information on dividends for the quarter and year ended March 31, 2020
For financial year 2020, the Board recommended a final dividend of 9.50/- (par value of 5/- each) per equity share. This payment is subject to the approval of shareholders in the Annual General Meeting (AGM) of the Company.The dividend will be paid on the 5th working day from the date of declaration of the final dividend by the shareholders. In view of COVID 2019 the Company is working on an AGM date.The book closure date for the purpose of the payment of final dividend and AGM date will be announced in due course.For the financial year ended 2019, the Company declared a special dividend of 4/- per share and a final dividend of 10.50/- per share.An interim dividend of 8/- per equity share was declared on October 11, 2019 and the same was paid on October 30, 2019.The interim dividend declared in the previous year was 7/- per equity share.
(in )
Particulars | Quarter ended March 31, | Year ended March 31, | Quarter ended March 31, |
2020 | 2020 | 2019 | |
Dividend per share (par value 5/- each) | |||
Interim dividend | – | 8.00 | – |
Final dividend | 9.50 | 9.50 | 10.50 |
Special dividend | – | – | – |
4. Audited financial results of Infosys Limited (Standalone information)
(in crore)
Particulars | Quarter ended March 31, |
Year ended March 31, |
Quarter ended March 31, |
2020 | 2020 | 2019 | |
Revenue from operations | 20,187 | 79,047 | 18,935 |
Profit before tax (Refer notes below) | 5,128 | 20,477 | 4,953 |
Profit for the period (Refer notes below) | 4,069 | 15,543 | 3,820 |
The above is an extract of the detailed format of Quarterly audited financial results filed with Stock Exchanges under Regulation 33 of the SEBI (Listing and Other Disclosure Requirements) Regulations, 2015. The full format of the Quarterly Audited Financial Results are available on the Stock Exchange websites, www.nseindia.com and www.bseindia.com, and on the Company's website, www.infosys.com.
Note:
1) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of 94 crore which pertains to previous period. |
2) | During the year ended March 31, 2019, the Company had recorded a reduction in the fair value of its investments in Panaya, by 265 crore in the interim condensed standalone Statement of Profit and Loss of Infosys. Further, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company reclassified the investment in subsidiaries Panaya and Skava from“Held for Sale” and recorded an adjustment in respect of excess of carrying amount over recoverable amount amounting to 469 crore in respect of Skava in the interim condensed standalone Statement of Profit and Loss for the year ended March 31, 2019. |
3) | Other income includes interest on income tax refund of 8 crore and Nil crore for the quarter ended March 31, 2020 and March 31, 2019 respectively, and 250 crore for the year ended March 31, 2020. |
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
By order of the Board for Infosys Limited | |
Bengaluru, India April 20, 2020 |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Infosys Limited Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Statement of Audited results of Infosys Limited for the quarter and year ended March 31, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, | Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 20,187 | 20,064 | 18,935 | 79,047 | 73,107 |
Other income, net (Refer Note 2(e)) | 585 | 798 | 639 | 2,700 | 2,852 |
Total income | 20,772 | 20,862 | 19,574 | 81,747 | 75,959 |
Expenses | |||||
Employee benefit expenses | 10,666 | 10,783 | 10,198 | 42,434 | 38,296 |
Cost of technical sub-contractors | 2,168 | 2,189 | 2,040 | 8,447 | 7,646 |
Travel expenses | 564 | 494 | 486 | 2,241 | 1,906 |
Cost of software packages and others | 457 | 427 | 392 | 1,656 | 1,646 |
Communication expenses | 100 | 95 | 87 | 381 | 339 |
Consultancy and professional charges | 284 | 296 | 312 | 1,066 | 1,096 |
Depreciation and amortisation expense## | 548 | 544 | 429 | 2,144 | 1,599 |
Finance cost | 31 | 28 | – | 114 | – |
Other expenses | 826 | 601 | 677 | 2,787 | 2,770 |
Reduction in the fair value of assets held for sale (Refer Note 1(a)) | – | – | – | – | 265 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 1(a)) | – | – | – | – | 469 |
Total expenses | 15,644 | 15,457 | 14,621 | 61,270 | 56,032 |
Profit before tax | 5,128 | 5,405 | 4,953 | 20,477 | 19,927 |
Tax expense: (Refer Note 1(b)) | |||||
Current tax | 1,194 | 1,408 | 1,053 | 5,235 | 5,189 |
Deferred tax | (135) | (79) | 80 | (301) | 36 |
Profit for the period | 4,069 | 4,076 | 3,820 | 15,543 | 14,702 |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability / asset, net*** | (25) | (124) | (3) | (184) | (21) |
Equity instruments through other comprehensive income, net | (3) | (30) | 9 | (31) | 78 |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedges, net | – | (29) | (15) | (36) | 21 |
Fair value changes on investments, net | 13 | (12) | 22 | 17 | 1 |
Total other comprehensive income/ (loss), net of tax | (15) | (195) | 13 | (234) | 79 |
Total comprehensive income for the period | 4,054 | 3,881 | 3,833 | 15,309 | 14,781 |
Paid-up share capital (par value 5/- each fully paid) | 2,129 | 2,129 | 2,178 | 2,129 | 2,178 |
Other Equity* | 60,105 | 60,533 | 60,533 | 60,105 | 60,533 |
Earnings per equity share ( par value 5 /- each)** | |||||
Basic () | 9.55 | 9.57 | 8.75 | 36.34 | 33.66 |
Diluted () | 9.55 | 9.57 | 8.74 | 36.32 | 33.64 |
* | Balances for the quarter ended December 31,2019 represents balances as per the audited Balance Sheet for the year ended March 31, 2019 as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter ended March 31, 2020, December 31, 2019 and March 31, 2019 |
*** | Includes unrealised losses on certain investments carried in the PF trust for the quarter and year ended March 31, 2020 and quarter ended December 31,2019 |
## | Effective April 1, 2019, the Company adopted Ind AS 116 "Leases", applied 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. |
1. Notes pertaining to the previous quarters / periods
a) | During the year ended March 31, 2019, the Company had recorded a reduction in the fair value of its investments in Panaya, by 265 crore in the interim condensed standalone Statement of Profit and Loss of Infosys. Further, in accordance with Ind AS 105 - "Non current Assets held for Sale and Discontinued Operations", the Company reclassified the investment in subsidiaries Panaya and Skava from“Held for Sale” and recorded an adjustment in respect of excess of carrying amount over recoverable amount amounting to 469 crore in respect of Skava in the interim condensed standalone Statement of Profit and Loss for the year ended March 31, 2019. |
b) | During the year ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of 94 crore which pertains to previous period. |
2. Notes pertaining to the current quarter
a) | The audited interim condensed standalone financial statements for the quarter and year ended March 31, 2020 have been taken on record by the Board of Directors at its meeting held on April 20, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim condensed standalone financial statements. These interim condensed standalone financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter. |
b) Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19):
The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues and investments in subsidiaries. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information and economic forecasts. The Company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Company's financial statements may differ from that estimated as at the date of approval of these financial statements. |
c) Changes to the Board
i) | The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Uri Levine as an additional and Independent Director of the Company effective April 20, 2020 for a period of 3 years,subject to the approval of the shareholders. |
ii) | D.N Prahlad, Independent Director, has resigned from the company to devote more time for his other business commitments with effect from April 20, 2020. The Board placed on record its appreciation for the services rendered by him during his tenure. |
d) Update on the whistleblower matter
i) | 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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020, the outcome of the investigation has not resulted in restatement of previously issued financial statements. | |
ii) | The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal securities laws. The Company is presently unable to predict the scope, duration or the outcome of these matters. |
e) | Other income includes interest on income tax refund of 8 crore and Nil for the quarter ended March 31, 2020 and March 31, 2019 respectively, 250 crore and 50 crore for the year ended March 31, 2020 and March 31, 2019 respectively, and 242 crore for the quarter ended December 31, 2019. |
f) Update on employee stock grants
i) | The Board, on April 20, 2020, 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 2021 under the 2015 Stock Incentive Compensation Plan (2015 plan) to Salil Parekh, CEO and MD. This was pursuant to the approval from the shareholders through postal ballot concluded on February 20, 2018 and as per the shareholders’ approval in the Annual General meeting held on June 22, 2019. These RSUs will vest in line with the current employment agreement. The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
ii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to Salil Parekh, CEO & MD covering Company’s equity shares having a market value of 10 crore as on the date of the grant under the Infosys Expanded Stock Ownership Program-2019 (2019 Plan), which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan. This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
iii) | The Board, on April 20, 2020, based on the recommendation of the Board of Directors of the Company, had approved the grant of annual performance-based stock incentives in the form of Restricted Stock Units (RSU's) to U.B. Pravin Rao, COO & Whole Time Director covering Company’s equity shares having a market value of 4 crore as on the date of the grant under the 2019 Plan, which shall vest 12 months from the date of the grant subject to the Company’s achievement of certain performance criteria as laid out in the 2019 Plan. This was pursuant to the approval from the shareholders in the Annual General meeting held on June 22, 2019.The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
iv) | Based on the recommendations of the Nominations and Remuneration Committee, the Board, on April 20, 2020, under the 2015 plan, approved an annual performance based RSU having market value of 0.75 crore to a KMP. These RSU's will vest in line with the employment agreement based on the achievement of certain performance targets. The RSUs will be granted w.e.f May 2, 2020 and the number of RSU's will be calculated based on the market price at the close of trading on May 2, 2020. |
v) | On recommendation of the Nomination and Remuneration Committee, the Board in its meeting held on April 20, 2020, approved the grant of 24,600 RSUs to an eligible employee under the 2015 Plan. The grant date for these RSUs is May 2, 2020. The RSUs would vest over a period of four years and the exercise price of RSUs will be equal to the par value of the share. |
3. Information on dividends for the quarter and year ended March 31, 2020
For financial year 2020, the Board recommended a final dividend of 9.50/- (par value of 5/- each) per equity share. This payment is subject to the approval of shareholders in the Annual General Meeting (AGM) of the Company. The dividend will be paid on the 5th working day from the date of declaration of the final dividend by the shareholders. In view of COVID 2019 the Company is working on an AGM date. The book closure date for the purpose of the payment of final dividend and AGM date will be announced in due course. For the financial year ended 2019, the Company declared a special dividend of 4/- per share and a final dividend of 10.50/- per share.An interim dividend of 8/- per equity share was declared on October 11, 2019 and the same was paid on October 30, 2019.The interim dividend declared in the previous year was 7/- per equity share.
(in )
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2020 | 2019 | 2019 | 2020 | 2019 | |
Dividend per share (par value 5/- each) | |||||
Interim dividend | – | – | – | 8.00 | 7.00 |
Final dividend | 9.50 | – | 10.50 | 9.50 | 10.50 |
Special dividend | – | – | – | – | 4.00 |
4. Audited Standalone Balance Sheet
(in crore)
As at | ||
March 31, 2020 | March 31, 2019 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 11,092 | 10,394 |
Right of use assets | 2,805 | – |
Capital work-in-progress | 945 | 1,212 |
Goodwill | 29 | 29 |
Other Intangible assets | 48 | 74 |
Financial assets | ||
Investments | 13,916 | 12,062 |
Loans | 298 | 16 |
Other financial assets | 613 | 196 |
Deferred tax assets (net) | 1,429 | 1,114 |
Income tax assets (net) | 4,773 | 5,870 |
Other non-current assets | 1,273 | 1,740 |
Total non-current assets | 37,221 | 32,707 |
Current assets | ||
Financial assets | ||
Investments | 4,006 | 6,077 |
Trade receivables | 15,459 | 13,370 |
Cash and cash equivalents | 13,562 | 15,551 |
Loans | 307 | 1,048 |
Other financial assets | 4,398 | 4,834 |
Income tax assets (net) | – | 423 |
Other current assets | 6,088 | 4,920 |
Total current assets | 43,820 | 46,223 |
Total assets | 81,041 | 78,930 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,129 | 2,178 |
Other equity | 60,105 | 60,533 |
Total equity | 62,234 | 62,711 |
LIABILITIES | ||
Non-current liabilities | ||
Financial liabilities | ||
Lease liabilities | 2,775 | – |
Other financial liabilities | 49 | 79 |
Deferred tax liabilities (net) | 556 | 541 |
Other non-current liabilities | 207 | 169 |
Total non - current liabilities | 3,587 | 789 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | ||
Total outstanding dues of micro enterprises and small enterprises | – | – |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,529 | 1,604 |
Lease liabilities | 390 | – |
Other financial liabilities | 7,936 | 8,528 |
Other current liabilities | 3,557 | 3,335 |
Provisions | 506 | 505 |
Income tax liabilities (net) | 1,302 | 1,458 |
Total current liabilities | 15,220 | 15,430 |
Total equity and liabilities | 81,041 | 78,930 |
The disclosure is an extract of the audited Balance Sheet as at March 31, 2020 and March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Audited Standalone Statement of Cash flows
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Cash flow from operating activities: | ||
Profit for the period | 15,543 | 14,702 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Depreciation and amortization | 2,144 | 1,599 |
Income tax expense | 4,934 | 5,225 |
Impairment loss recognized / (reversed) under expected credit loss model | 127 | 176 |
Finance cost | 114 | – |
Interest and dividend income | (1,502) | (1,996) |
Stock compensation expense | 226 | – |
Other adjustments | (248) | 57 |
Reduction in the fair value of assets held for sale | – | 265 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | – | 469 |
Exchange differences on translation of assets and liabilities | 17 | 80 |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (3,621) | (2,268) |
Other financial assets and other assets | 319 | (581) |
Trade payables | (75) | 866 |
Other financial liabilities, other liabilities and provisions | 1,475 | 1,666 |
Cash generated from operations | 19,453 | 20,260 |
Income taxes paid | (3,881) | (6,271) |
Net cash generated by operating activities | 15,572 | 13,989 |
Cash flow from investing activities: | ||
Expenditure on property, plant and equipment | (3,063) | (2,306) |
Deposits placed with corporations | (112) | (116) |
Loans to employees | (2) | 4 |
Loan given to subsidiary | (1,210) | (678) |
Loan repaid by subsidiary | 444 | 20 |
Proceeds from redemption of debentures | 286 | 335 |
Investment in subsidiaries | (1,338) | (228) |
Proceeds from return of investment | – | 33 |
Payment towards acquisition of business | – | (261) |
Payment of contingent consideration pertaining to acquisition | (6) | (6) |
Redemption of escrow pertaining to buyback | 257 | (257) |
Other receipts | 46 | – |
Payments to acquire investments | ||
Preference, equity securities and others | (41) | (18) |
Liquid mutual fund units and fixed maturity plan securities | (30,500) | (72,889) |
Tax free bonds and Government bonds | (11) | (11) |
Certificates of deposit | (876) | (2,052) |
Commercial paper | – | (491) |
Non Convertible debentures | (733) | (100) |
Government Securities | (1,561) | (838) |
Others | (2) | – |
Proceeds on sale of investments | ||
Preference and equity securities | – | 115 |
Liquid mutual fund units and fixed maturity plan securities | 30,332 | 71,337 |
Tax free bonds and Government bonds | 12 | 1 |
Non-convertible debentures | 1,788 | 602 |
Certificates of deposit | 2,175 | 5,150 |
Commercial paper | 500 | 300 |
Government Securities | 1,673 | 123 |
Others | 9 | – |
Interest and dividend received | 1,817 | 1,644 |
Net cash used in investing activities | (116) | (587) |
Cash flow from financing activities: | ||
Payment of lease liabilities | (364) | – |
Buyback of equity shares including transaction cost | (7,478) | (813) |
Payment of dividends (including dividend distribution tax) | (9,551) | (13,761) |
Shares issued on exercise of employee stock options | 2 | 3 |
Net cash used in financing activities | (17,391) | (14,571) |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (54) | (50) |
Net increase / (decrease) in cash and cash equivalents | (1,935) | (1,169) |
Cash and cash equivalents at the beginning of the period | 15,551 | 16,770 |
Cash and cash equivalents at the end of the period | 13,562 | 15,551 |
Supplementary information: | ||
Restricted cash balance | 101 | 143 |
The disclosure is an extract of the audited Statement of Cash flows for the year ended March 31, 2020 and March 31, 2019 prepared in compliance with Indian Accounting Standard (Ind AS) 34 Interim Financial Reporting.
6. Segment Reporting
The Company publishes standalone financial statements along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the company has disclosed the segment information in the audited consolidated financial statements. Accordingly, the segment information is given in the audited consolidated financial results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2020.
By order of the Board for Infosys Limited | |
Bengaluru, India April 20, 2020 |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
Exhibit 99.7
IFRS USD Earning Release
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Condensed Consolidated Financial Statements
Opinion
We have audited the accompanying condensed consolidated financial statements of INFOSYS LIMITED (the “Company”) and its subsidiaries (the Company and its subsidiaries together referred to as the “Group”), which comprise the Condensed Consolidated Balance Sheet as at March 31, 2020, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the “condensed consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid condensed consolidated financial statements give a true and fair view in conformity with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), of the consolidated state of affairs of the Group as at March 31, 2020, the consolidated profit and consolidated total comprehensive income, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the condensed consolidated financial statements in accordance with the Standards on Auditing (“SA”s) issued by the Institute of Chartered Accountants of India (“ICAI”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the condensed Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the condensed consolidated financial statements.
Emphasis of Matter
As more fully described in Note 2.6 to the condensed consolidated financial statements, the Company is responding to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Management’s Responsibility for the Condensed Consolidated Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these condensed consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with IAS 34 as issued by the IASB. The respective Boards of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records for safeguarding assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the condensed consolidated 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 consolidated financial statements by the Directors of the Company, as aforesaid.
In preparing the condensed consolidated financial statements, the respective Boards of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Boards of Directors either intend to liquidate their respective entities or to cease operations, or has no realistic alternative but to do so.
The respective Boards of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Condensed Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the condensed consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these condensed consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the condensed consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of 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 condensed consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the condensed consolidated financial statements, including the disclosures, and whether the condensed consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the condensed consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the condensed consolidated financial statements of which we are independent auditors. |
Materiality is the magnitude of misstatements in the condensed consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the condensed consolidated financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the condensed consolidated financial statements.
We communicate with those charged with governance of the Company and such other entities included in the condensed consolidated financial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
Sanji V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) |
INFOSYS LIMITED AND SUBSIDIARIES
Condensed Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in US Dollars for the year ended March 31, 2020
Index | Page No | |
Condensed Consolidated Balance Sheet | 1 | |
Condensed Consolidated Statements of Comprehensive Income | 2 | |
Condensed Consolidated Statements of Changes in Equity | 3 | |
Condensed Consolidated Statements of Cash Flows | 5 | |
Overview and notes to the financial statements | ||
1. Overview | ||
1.1 Company Overview | 6 | |
1.2 Basis of preparation of financial statements | 6 | |
1.3 Basis of consolidation | 6 | |
1.4 Use of estimates and judgments | 6 | |
1.5 Critical accounting estimates and judgements | 6 | |
1.6 Recent Accounting pronouncements | 8 | |
2. Notes to the Condensed Consolidated Financial Statements | ||
2.1 Cash and cash equivalents | 9 | |
2.2 Investments | 9 | |
2.3 Financial instruments | 11 | |
2.4 Prepayments and other assets | 15 | |
2.5 Other liabilities | 16 | |
2.6 Provisions and other contingent liabilities | 17 | |
2.7 Property, plant and equipment | 19 | |
2.8 Leases | 22 | |
2.9 Goodwill | 25 | |
2.10 Business combination and Disposal group held for sale | 27 | |
2.11 Employees' Stock Option Plans (ESOP) | 31 | |
2.12 Income taxes | 33 | |
2.13 Reconciliation of basic and diluted shares used in computing earnings per share | 34 | |
2.14 Related party transactions | 35 | |
2.15 Segment Reporting | 35 | |
2.16 Revenue from Operations | 37 | |
2.17 Unbilled revenue | 39 | |
2.18 Break-up of expenses and other income, net | 40 | |
2.19 Equity | 43 |
Infosys Limited and Subsidiaries
(Dollars in millions except equity share data)
Condensed Consolidated Balance Sheet as at | Note | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 2,465 | 2,829 |
Current investments | 2.2 | 615 | 958 |
Trade receivables | 2,443 | 2,144 | |
Unbilled revenue | 2.17 | 941 | 777 |
Prepayments and other current assets | 2.4 | 739 | 827 |
Income tax assets | 2.12 | 1 | 61 |
Derivative financial instruments | 2.3 | 8 | 48 |
Total current assets | 7,212 | 7,644 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 1,810 | 1,931 |
Right-of-use assets | 2.8 | 551 | – |
Goodwill | 2.9 | 699 | 512 |
Intangible assets | 251 | 100 | |
Non-current investments | 2.2 | 547 | 670 |
Deferred income tax assets | 2.12 | 231 | 199 |
Income tax assets | 2.12 | 711 | 914 |
Other non-current assets | 2.4 | 248 | 282 |
Total Non-current assets | 5,048 | 4,608 | |
Total assets | 12,260 | 12,252 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 377 | 239 | |
Lease liabilities | 2.8 | 82 | – |
Derivative financial instruments | 2.3 | 65 | 2 |
Current income tax liabilities | 2.12 | 197 | 227 |
Client deposits | 2 | 4 | |
Unearned revenue | 395 | 406 | |
Employee benefit obligations | 242 | 234 | |
Provisions | 2.6 | 76 | 83 |
Other current liabilities | 2.5 | 1,321 | 1,498 |
Total current liabilities | 2,757 | 2,693 | |
Non-current liabilities | |||
Lease liabilities | 2.8 | 530 | – |
Deferred income tax liabilities | 2.12 | 128 | 98 |
Employee benefit obligations | 5 | 6 | |
Other non-current liabilities | 2.5 | 139 | 55 |
Total liabilities | 3,559 | 2,852 | |
Equity | |||
Share capital - 5 ($0.16) par value 4,800,000,000 (4,800,000,000) equity shares authorized, issued and outstanding 4,240,753,210 (4,335,954,462) equity shares fully paid up, net of 18,239,356 (20,324,982) treasury shares as at March 31, 2020 and (March 31, 2019). | 332 | 339 | |
2.19 | |||
Share premium | 305 | 277 | |
Retained earnings | 11,014 | 11,248 | |
Cash flow hedge reserve | (2) | 3 | |
Other reserves | 594 | 384 | |
Capital redemption reserve | 17 | 10 | |
Other components of equity | (3,614) | (2,870) | |
Total equity attributable to equity holders of the company | 8,646 | 9,391 | |
Non-controlling interests | 55 | 9 | |
Total equity | 8,701 | 9,400 | |
Total liabilities and equity | 12,260 | 12,252 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No :
117366W/ W-100018
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
(Dollars in millions except equity share and per equity share data)
Condensed Consolidated Statements of Comprehensive Income | Note | Year ended March 31, | |
2020 | 2019 | ||
Revenues | 2.16 | 12,780 | 11,799 |
Cost of sales | 2.18.6 | 8,552 | 7,687 |
Gross profit | 4,228 | 4,112 | |
Operating expenses: | |||
Selling and marketing expenses | 2.18.6 | 664 | 638 |
Administrative expenses | 2.18.6 | 840 | 778 |
Total operating expenses | 1,504 | 1,416 | |
Operating profit | 2,724 | 2,696 | |
Other income, net | 2.18.6 | 395 | 411 |
Finance cost | 2.8 | (24) | – |
Reduction in the fair value of Disposal Group held for sale | 2.10.1 | – | (39) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.10.1 | – | (65) |
Profit before income taxes | 3,095 | 3,003 | |
Income tax expense | 2.12 | 757 | 803 |
Net profit | 2,338 | 2,200 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss: | |||
Re-measurements of the net defined benefit liability/asset, net | (24) | (3) | |
Equity instrument through other comprehensive income, net | (5) | 10 | |
(29) | 7 | ||
Items that will be reclassified subsequently to profit or loss: | |||
Fair valuation of investments, net | 3 | – | |
Fair value changes on derivatives designated as cash flow hedge, net | (5) | 3 | |
Foreign currency translation | (720) | (560) | |
(722) | (557) | ||
Total other comprehensive income/(loss), net of tax | (751) | (550) | |
Total comprehensive income | 1,587 | 1,650 | |
Profit attributable to: | |||
Owners of the company | 2,331 | 2,199 | |
Non-controlling interests | 7 | 1 | |
2,338 | 2,200 | ||
Total comprehensive income attributable to: | |||
Owners of the company | 1,582 | 1,649 | |
Non-controlling interests | 5 | 1 | |
1,587 | 1,650 | ||
Earnings per equity share | |||
Basic ($) | 0.55 | 0.51 | |
Diluted ($) | 0.55 | 0.51 | |
Weighted average equity shares used in computing earnings per equity share | 2.13 | ||
Basic | 4,257,754,522 | 4,347,130,157 | |
Diluted | 4,265,144,228 | 4,353,420,772 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No :
117366W/ W-100018
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(Dollars in millions except equity share data)
Particulars | Shares(1) | Share capital | Share premium | Retained earnings | Other reserves (2) | Capital redemption reserve | Cash flow hedge reserve | Other components of equity |
Total equity attributable to equity holders of the company | Non-controlling interest | Total equity |
Balance as at April 1, 2018 | 2,173,312,301 | 190 | 247 | 11,587 | 244 | 9 | – | (2,317) | 9,960 | – | 9,960 |
Changes in equity for the year ended March 31, 2019 | |||||||||||
Net profit | – | – | – | 2,199 | – | – | – | – | 2,199 | 1 | 2,200 |
Fair value changes on investments, net* | – | – | – | – | – | – | – | – | – | – | – |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | 3 | – | 3 | – | 3 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | (3) | (3) | – | (3) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | 10 | 10 | – | 10 |
Foreign currency translation | – | – | – | – | – | – | – | (560) | (560) | – | (560) |
Total comprehensive income for the period | – | – | – | 2,199 | – | – | 3 | (553) | 1,649 | 1 | 1,650 |
Shares issued on exercise of employee stock options - before Bonus issue (Refer to note 2.11) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issues (Refer to note 2.19) | 2,173,704,829 | 150 | – | – | – | – | – | – | 150 | – | 150 |
Amounts utilized for Bonus issue (Refer to note 2.19) | – | – | – | (150) | – | – | – | – | (150) | – | (150) |
Shares issued on exercise of employee stock options - after Bonus issue (Refer to note 2.11) | 1,196,804 | – | 1 | – | – | – | – | – | 1 | – | 1 |
Buyback of equity shares (Refer to note 2.5 and 2.19.1) | (12,652,000) | (1) | – | (288) | – | – | – | – | (289) | – | (289) |
Transaction cost relating to buyback * (Refer to note 2.19) | – | – | – | (2) | – | – | – | – | (2) | – | (2) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.19) | – | – | – | (1) | – | 1 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.10) | – | – | – | – | – | – | – | – | – | 8 | 8 |
Transfer to other reserves | – | – | – | (346) | 346 | – | – | – | – | – | – |
Transfer from other reserves on utilization | – | – | – | 206 | (206) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.11) | – | – | 28 | – | – | – | – | – | 28 | – | 28 |
Income tax benefit arising on exercise of stock options | – | – | 1 | – | – | – | – | – | 1 | – | 1 |
Dividends (including dividend distribution tax) | – | – | – | (1,957) | – | – | – | – | (1,957) | – | (1,957) |
Balance as at March 31, 2019 | 4,335,954,462 | 339 | 277 | 11,248 | 384 | 10 | 3 | (2,870) | 9,391 | 9 | 9,400 |
Balance as at April 1, 2019 | 4,335,954,462 | 339 | 277 | 11,248 | 384 | 10 | 3 | (2,870) | 9,391 | 9 | 9,400 |
Impact on account of adoption of IFRS 16 ( refer to note 2.8)* | – | – | – | (6) | – | – | – | – | (6) | – | (6) |
4,335,954,462 | 339 | 277 | 11,242 | 384 | 10 | 3 | (2,870) | 9,385 | 9 | 9,394 | |
Changes in equity for the year ended March 31, 2020 | |||||||||||
Net profit | – | – | – | 2,331 | – | – | – | – | 2,331 | 7 | 2,338 |
Remeasurement of the net defined benefit liability/asset* (refer to note 2.18) | – | – | – | – | – | – | – | (24) | (24) | – | (24) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | (5) | (5) | – | (5) |
Fair value changes on investments, net* | – | – | – | – | – | – | – | 3 | 3 | – | 3 |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | (5) | – | (5) | – | (5) |
Foreign currency translation | – | – | – | – | – | – | – | (718) | (718) | (2) | (720) |
Total comprehensive income for the period | – | – | – | 2,331 | – | – | (5) | (744) | 1,582 | 5 | 1,587 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 2,666,014 | – | 1 | – | – | – | – | – | 1 | – | 1 |
Buyback of equity shares (Refer to note 2.5 and 2.19.1) | (97,867,266) | (7) | – | (895) | – | – | – | – | (902) | – | (902) |
Transaction cost relating to buyback * (Refer to note 2.19) | – | – | – | (1) | – | – | – | – | (1) | – | (1) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.19) | – | – | – | (7) | – | 7 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.10) | – | – | – | – | – | – | – | – | – | 46 | 46 |
Transfer to other reserves | – | – | – | (361) | 361 | – | – | – | – | – | |
Transfer from other reserves on utilization | – | – | – | 151 | (151) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.11) | – | – | 33 | – | – | – | – | – | 33 | – | 33 |
Income tax benefit arising on exercise of stock options | – | – | 1 | – | – | – | – | – | 1 | – | 1 |
Effect of modification of equity settled share based payment awards to cash settled awards (Refer to note 2.11) | – | – | (7) | (1) | – | – | – | – | (8) | – | (8) |
Financial liability under option arrangements (Refer to note 2.10) | – | – | – | (86) | – | – | – | – | (86) | – | (86) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | (5) | (5) |
Dividends (including dividend distribution tax) | – | – | – | (1,359) | – | – | – | – | (1,359) | – | (1,359) |
Balance as at March 31, 2020 | 4,240,753,210 | 332 | 305 | 11,014 | 594 | 17 | (2) | (3,614) | 8,646 | 55 | 8,701 |
* net of tax
(1) | excludes treasury shares of 18,239,356 as at March 31, 2020, 20,324,982 as at April 1, 2019 and 10,801,956 as at April 1, 2018, held by consolidated trust. The treasury shares as at April 1, 2018 have not been adjusted for the September 2018 Bonus issue. |
(2) | Represents the Special Economic Zone Re-investment reserve created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Group for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961. |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No :
117366W/ W-100018
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Accounting Policy
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(Dollars in millions)
Particulars | Note | Year ended March 31, | |
2020 | 2019 | ||
Operating activities: | |||
Net Profit | 2,338 | 2,200 | |
Adjustments to reconcile net profit to net cash provided by operating activities : | |||
Depreciation and amortization | 2.18.6 | 407 | 287 |
Interest and dividend income | (68) | (130) | |
Finance cost | 2.8 | 24 | – |
Income tax expense | 2.12 | 757 | 803 |
Effect of exchange rate changes on assets and liabilities | 27 | 10 | |
Impairment loss under expected credit loss model | 23 | 34 | |
Reduction in the fair value of Disposal Group held for sale | – | 39 | |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.10.1 | – | 65 |
Stock compensation expense | 2.11 | 34 | 29 |
Other adjustments | (20) | (15) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (542) | (411) | |
Prepayments and other assets | 70 | (120) | |
Trade payables | (52) | 131 | |
Client deposits | (2) | (2) | |
Unearned revenue | 21 | 48 | |
Other liabilities and provisions | 233 | 269 | |
Cash generated from operations | 3,250 | 3,237 | |
Income taxes paid | (639) | (975) | |
Net cash provided by operating activities | 2,611 | 2,262 | |
Investing activities: | |||
Expenditure on property, plant and equipment | (465) | (349) | |
Loans to employees | – | 2 | |
Deposits placed with corporation | (15) | (3) | |
Interest and dividend received | 52 | 79 | |
Payment towards acquisition of business, net of cash acquired | 2.10 | (252) | (77) |
Payment of contingent consideration pertaining to acquisition of business | (1) | (3) | |
Advance payment towards acquisition of business | – | (30) | |
Investment in equity and preference securities | (6) | (3) | |
Proceeds from sale of equity and preference securities | 4 | 16 | |
Investment in other investments | (4) | (3) | |
Redemption of other investments | – | 2 | |
Investment in quoted debt securities | (363) | (145) | |
Redemption of quoted debt securities | 512 | 123 | |
Investment in certificate of deposits | (156) | (342) | |
Redemption of certificate of deposits | 360 | 791 | |
Investment in commercial papers | – | (70) | |
Redemption of commercial papers | 72 | 43 | |
Redemption of escrow pertaining to Buyback | 2.4 | 37 | (37) |
Other receipts | 7 | – | |
Investment in liquid mutual fund units and fixed maturity plan securities | (4,897) | (11,184) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 4,873 | 10,965 | |
Net cash (used)/generated in investing activities | (242) | (225) | |
Financing activities: | |||
Payment of lease liabilities | 2.8 | (80) | – |
Payment of dividends including corporate dividend tax | (1,359) | (1,956) | |
Payment of dividends to non-controlling interests of subsidiary | (5) | – | |
Share issued on exercise of employee stock options | 1 | 1 | |
Buy back of equity shares including transaction costs | 2.19.1 | (1,070) | (118) |
Net cash used in financing activities | (2,513) | (2,073) | |
Effect of exchange rate changes on cash and cash equivalents | (220) | (184) | |
Net increase / (decrease) in cash and cash equivalents | (144) | (36) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 2,829 | 3,049 |
Cash and cash equivalents at the end of the period | 2.1 | 2,465 | 2,829 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 52 | 52 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No :
117366W/ W-100018
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Notes to the condensed 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 herein after referred to as the "Group".
The company is a public limited company incorporated and domiciled in India and has its registered office at Bengaluru, Karnataka, India. The company has its primary listings on the BSE 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 condensed consolidated financial statements are authorized for issue by the company's Board of Directors on April 20, 2020.
1.2 Basis of preparation of financial statements
The condensed consolidated financial statements have been prepared in compliance with IAS 34, Interim Financial Reporting as issued by International Accounting Standards Board, under the historical cost convention on the accrual basis except for certain financial instruments which have been measured at fair values. Accordingly, these condensed consolidated financial statements do not include all the information required for a complete set of financial statements. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s Annual Report on Form 20-F for the year ended March 31, 2019. 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 year figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year-end figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The condensed consolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.
The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. The financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company, are excluded.
1.4 Use of estimates and judgments
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in the financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the condensed consolidated financial statements.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19):
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group. The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these condensed consolidated financial statements.
1.5 Critical accounting estimates and judgements
a. Revenue recognition
The Group’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Group uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The company's two major tax jurisdictions are India and the U.S., though the company also files tax returns in other overseas jurisdictions.
Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.
In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the group will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced (also refer to note 2.12).
c. Business combinations and intangible assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires us to fair value identifiable intangible assets and contingent consideration to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Estimates are required to be made in determining the value of contingent consideration, value of option arrangements and intangible assets. These valuations are conducted by independent valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management (Refer to note 2.10).
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 2.7).
e. Impairment of Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGUs) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which represent the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell. Key assumptions in the cash flow projections are prepared based on current economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins. (Refer to Note no 2.9)
f. Leases
IFRS 16 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Group has concluded that no changes are required to lease period relating to the existing lease contracts. (Refer to Note no 2.8)
g. Non-current assets and Disposal groups 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.
h. Loss allowance for receivables and unbilled revenue
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
1.6 Recent accounting pronouncements
New and revised IFRS Standards in issue but not yet effective:
Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to IFRS 3 Definition of a Business
Amendments to IAS 1 and IAS 8 Definition of Material
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
Amendments to References to the Conceptual Framework in IFRS Standards
In March 2018, International Accounting Standards Board (IASB) issued Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.
Not all amendments, however, update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate that definitions in the Standard have not been updated with the new definitions developed in the revised Conceptual Framework.
The amendments, where they actually are updates, are effective for annual periods beginning on or after 1 January 2020, with early application permitted.
The Group does not expect that the amendment to have any impact on its consolidated financial statements.
Amendments to IFRS 3 Definition of a business
On October 22, 2018, the International Accounting Standard Board has issued amendments to IFRS 3, ‘Business Combinations’, in connection with clarification of definition of business, to determine whether an acquisition is a business or a group of assets. The amendment added a concept called “Optional Concentration Test” that makes it easier to conclude that a company has acquired a group of assets rather than a business, if the value of the assets acquired is substantially concentrated in a single asset or group of similar assets. An entity may elect to apply or not to apply this optional concentration test on a transaction by transaction basis.
The amendment will apply to the Company effective April 1, 2020 and has to be applied prospectively. Hence there is no impact on the consolidated financial statement.
Amendments to IAS 1 and IAS 8 Definition of Material
In October 2018, the IASB issued Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to make the definition of material in IAS 1 easier to understand. The amendments are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency.
The amendments are required to be applied prospectively for annual periods beginning on or after 1 January 2020, with earlier application permitted.
The Group does not expect the amendment to have any material impact on its evaluation of materiality in relation to its financial statements.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform
In September 2019, IASB introduced amendments, which modified specific hedge accounting requirements, so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark is not altered as a result of the interest rate benchmark reform.
The changes will mandatorily apply to all hedging relationships that are directly affected by the interest rate benchmark reform.
The Group does not expect the amendment to have any significant impact.
The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2020, although early adoption is permitted.
2. Notes to the Condensed Consolidated Financial Statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Cash and bank deposits | 1,624 | 2,052 |
Deposits with financial institutions | 841 | 777 |
Total Cash and cash equivalents | 2,465 | 2,829 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of $52 million and $52 million, respectively. The restrictions are primarily on account of bank balances held by irrevocable trusts controlled by the company and bank balances held as margin money deposits against guarantees.
The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
2.2 Investments
The carrying value of investments are as follows:
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
(i) Current | ||
Amortized cost | ||
Quoted debt securities: | ||
Cost | – | 3 |
Fair value through profit and loss | ||
Liquid Mutual fund units | ||
Fair value | 278 | 258 |
Fixed Maturity Plan Securities | ||
Fair value | 65 | – |
Fair Value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 123 | 267 |
Commercial Paper | ||
Fair value | – | 72 |
Certificate of deposits | ||
Fair value | 149 | 358 |
Total current investments | 615 | 958 |
(ii) Non-current | ||
Amortized cost | ||
Quoted debt securities | ||
Cost | 244 | 274 |
Fair value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 281 | 310 |
Unquoted equity and preference securities | ||
Fair value | 14 | 15 |
Fair value through profit and loss | ||
Unquoted Preference securities | ||
Fair value | 1 | 3 |
Fixed maturity plan securities | ||
Fair Value | – | 66 |
Others | ||
Fair value(1) | 7 | 2 |
Total Non-current investments | 547 | 670 |
Total investments | 1,162 | 1,628 |
Investment carried at amortized cost | 244 | 277 |
Investments carried at fair value through other comprehensive income | 567 | 1,022 |
Investments carried at fair value through profit and loss | 351 | 329 |
(1) | Uncalled capital commitments outstanding as of March 31, 2020 and March 31, 2019 was $8 million and $12 million, respectively. |
Refer note 2.3 for accounting policies on financial instruments.
Method of fair valuation:
(Dollars in millions)
Class of investment | Method | Fair value | |
As at March 31, 2020 |
As at March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 278 | 258 |
Fixed maturity plan securities | Market observable inputs | 65 | 66 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 284 | 307 |
Quoted debt securities- carried at Fair value through other comprehensive income | Quoted price and market observable inputs | 404 | 577 |
Commercial Paper | Market observable inputs | – | 72 |
Certificate of deposits | Market observable inputs | 149 | 358 |
Unquoted equity and preference securities at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 14 | 15 |
Unquoted equity and preference securities - carried at fair value through profit or loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 1 | 3 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 7 | 2 |
1,202 | 1,658 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.3 Financial instruments
Accounting Policy
2.3.1 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.
2.3.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income (FVOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
(iii) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration and financial liability under option arrangements recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments
The group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
(i) Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under IFRS 9, Financial Instruments. Any derivative that is either not designated as hedge, or is so designated but is ineffective as per IFRS 9, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of comprehensive income when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
(ii) Cash flow hedge
The group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the statement of comprehensive income. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the statement of comprehensive income upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the statement of comprehensive income.
2.3.3 Derecognition of financial instruments
The group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IFRS 9. A financial liability (or a part of a financial liability) is derecognized from the group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
2.3.4 Fair value of financial instruments
In determining the fair value of its financial instruments, the group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
Refer to table ‘Financial instruments by category’ below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of those instruments.
2.3.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in statement of comprehensive income.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2020 were as follows:
(Dollars in millions)
Particulars | Amortized cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | ||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer to Note 2.1) | 2,465 | – | – | – | – | 2,465 | 2,465 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 278 | – | – | 278 | 278 |
Fixed maturity plan securities | – | – | 65 | – | – | 65 | 65 |
Quoted debt securities | 244 | – | – | – | 404 | 648 | 688(1) |
Certificate of deposits | – | – | – | – | 149 | 149 | 149 |
Unquoted equity and preference securities: | – | – | 1 | 14 | – | 15 | 15 |
Unquoted investment others | – | – | 7 | – | – | 7 | 7 |
Trade receivables | 2,443 | – | – | – | – | 2,443 | 2,443 |
Unbilled revenues (3) (Refer to Note 2.17) | 369 | – | – | – | – | 369 | 369 |
Prepayments and other assets (Refer to Note 2.4) | 476 | – | – | – | – | 476 | 465(2) |
Derivative financial instruments | – | – | 7 | – | 1 | 8 | 8 |
Total | 5,997 | – | 358 | 14 | 554 | 6,923 | 6,952 |
Liabilities: | |||||||
Trade payables | 377 | – | – | – | – | 377 | 377 |
Lease liabilities | 612 | – | – | – | – | 612 | 612 |
Derivative financial instruments | – | – | 62 | – | 3 | 65 | 65 |
Financial liability under option arrangements (Refer to note 2.10) | – | – | 82 | – | – | 82 | 82 |
Other liabilities including contingent consideration (Refer to note 2.5) | 1,054 | – | 45 | – | – | 1,099 | 1,099 |
Total | 2,043 | – | 189 | – | 3 | 2,235 | 2,235 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost of $11 million.
(3) | Excludes unbilled revenue for contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 2019 were as follows:
(Dollars in millions)
Particulars | Amortized cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | ||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer to Note 2.1) | 2,829 | – | – | – | – | 2,829 | 2,829 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 258 | – | – | 258 | 258 |
Fixed maturity plan securities | – | – | 66 | – | – | 66 | 66 |
Quoted debt securities | 277 | – | – | – | 577 | 854 | 884(1) |
Certificate of deposits | – | – | – | – | 358 | 358 | 358 |
Commercial papers | – | – | – | – | 72 | 72 | 72 |
Unquoted equity and preference securities | – | – | 3 | 15 | – | 18 | 18 |
Unquoted investment others | – | – | 2 | – | – | 2 | 2 |
Trade receivables | 2,144 | – | – | – | – | 2,144 | 2,144 |
Unbilled revenues(3) (Refer to Note 2.17) | 303 | – | – | – | – | 303 | 303 |
Prepayments and other assets (Refer to Note 2.4) | 529 | – | – | – | – | 529 | 517(2) |
Derivative financial instruments | – | – | 43 | – | 5 | 48 | 48 |
Total | 6,082 | – | 372 | 15 | 1,012 | 7,481 | 7,499 |
Liabilities: | |||||||
Trade payables | 239 | – | – | – | – | 239 | 239 |
Derivative financial instruments | – | – | 2 | – | – | 2 | 2 |
Other liabilities including contingent consideration (Refer to note 2.5) | 1,263 | – | 27 | – | – | 1,290 | 1,290 |
Total | 1,502 | – | 29 | – | – | 1,531 | 1,531 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost of $12 million.
(3) | Excludes unbilled revenue for contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities as at March 31, 2020:
(Dollars in millions)
Particulars | As at March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 278 | 278 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 65 | – | 65 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 688 | 618 | 70 | – |
Investments in certificate of deposit (Refer to Note 2.2) | 149 | – | 149 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 15 | – | – | 15 |
Investments in unquoted investments others (Refer to Note 2.2) | 7 | – | – | 7 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 8 | – | 8 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 65 | – | 65 | – |
Financial liability under option arrangements (Refer to note 2.10) | 82 | – | – | 82 |
Liability towards contingent consideration (Refer to note 2.5)* | 45 | – | – | 45 |
*Discount rate pertaining to contingent consideration ranges from 8% to 14%
During the year ended March 31, 2020, quoted debt securities of $87 million were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and quoted debt securities of $7 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
The following table presents fair value hierarchy of assets and liabilities as at March 31, 2019:
(Dollars in millions)
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 fund units (Refer to Note 2.2) | 258 | 258 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 66 | – | 66 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 884 | 630 | 254 | – |
Investments in certificate of deposit (Refer to Note 2.2) | 358 | – | 358 | – |
Investments in commercial paper (Refer to Note 2.2) | 72 | – | 72 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 18 | – | – | 18 |
Investments in unquoted investments others (Refer to Note 2.2) | 2 | – | – | 2 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 48 | – | 48 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 2 | – | 2 | – |
Liability towards contingent consideration (Refer to Note 2.5)* | 27 | – | – | 27 |
*Discount rate pertaining to contingent consideration ranges from 9% to 16%
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.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Rental deposits | 4 | 2 |
Security deposits | 1 | 1 |
Loans to employees | 32 | 35 |
Prepaid expenses (1) | 128 | 108 |
Interest accrued and not due | 62 | 131 |
Withholding taxes and others(1) | 209 | 215 |
Advance payments to vendors for supply of goods (1) | 19 | 16 |
Deposit with corporations* | 237 | 242 |
Escrow and other deposits pertaining to buyback (Refer to Note No 2.19.1) | – | 37 |
Deferred contract cost(1) | 4 | 8 |
Net investment in sublease of right of use asset (Refer to note 2.8) | 5 | – |
Other assets non financial (1) | 4 | – |
Other assets financial | 34 | 32 |
Total Current prepayment and other assets | 739 | 827 |
Non-current | ||
Loans to employees | 3 | 3 |
Security deposits | 7 | 8 |
Deposit with corporations* | 7 | 10 |
Prepaid gratuity (1) | 20 | 6 |
Prepaid expenses (1) | 11 | 23 |
Deferred contract cost (1) | 13 | 40 |
Advance towards business acquisition(1) | – | 30 |
Withholding taxes and others(1) | 103 | 134 |
Net investment in sublease of right of use asset (Refer to note 2.8) | 53 | – |
Rental Deposits | 29 | 28 |
Other assets | 2 | – |
Total Non- current prepayment and other assets | 248 | 282 |
Total prepayment and other assets | 987 | 1,109 |
Financial assets in prepayments and other assets | 476 | 529 |
(1) Non financial assets
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes $50 million which are pending adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
* | Deposit with corporation represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business. |
2.5 Other liabilities
Other liabilities comprise the following:
(Dollars in millions) r
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Accrued compensation to employees | 391 | 372 |
Accrued provident fund liability (Refer note 2.18.3) (1) | 9 | – |
Accrued expenses | 518 | 480 |
Withholding taxes and others (1) | 232 | 215 |
Retention money | 10 | 16 |
Liabilities of controlled trusts | 25 | 24 |
Liability towards contingent consideration | 29 | 14 |
Financial liability on account of buyback(2) | – | 174 |
Deferred rent (1) | – | 9 |
Capital creditors | 37 | 98 |
Others non financial liabilities | 1 | – |
Others | 69 | 96 |
Total Current other liabilities | 1,321 | 1,498 |
Non-Current | ||
Liability towards contingent consideration | 16 | 13 |
Accrued compensation to employees | 3 | 3 |
Accrued gratuity(1) | 4 | 4 |
Accrued provident fund liability (Refer note 2.18.3) (1) | 24 | – |
Deferred income - government grant on land use rights (1) | 6 | 6 |
Deferred income (1) | 3 | 4 |
Deferred rent (1) | – | 25 |
Financial liability under option arrangements (Refer to note 2.10) | 82 | – |
Others | 1 | – |
Total Non-current other liabilities | 139 | 55 |
Total other liabilities | 1,460 | 1,553 |
Financial liabilities included in other liabilities | 1,181 | 1,290 |
Financial liability towards contingent consideration on an undiscounted basis | 48 | 34 |
(1) Non financial liabilities
(2) | In accordance with IAS 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 2.19.1). The financial liability is recognized at the present value of the maximum amount that the Company would be required to pay to the registered broker for buy back, 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. |
Accrued expenses primarily relate to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance.
2.6 Provisions
Accounting Policy
Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Post sales client support
The Group provides its clients with a fixed-period post sales support for its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time related revenues are recorded and included in cost of sales. The Group estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.
Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.
Provisions comprise the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Provision for post sales client support and other provisions | 76 | 83 |
76 | 83 |
Provision for post sales client support and other provisions represents costs associated with providing sales support services which are accrued at the time of recognition of revenues and are expected to be utilized over a period of 1 year.
Provision for post sales client support and other provisions is included in cost of sales in the condensed consolidated statement of comprehensive income.
As at March 31, 2020 and March 31, 2019, claims against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.12) amounted to 230 crore ($30 million) and 230 crore ($33 million), respectively.
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged 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 reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’s results of operations or financial condition.
2.7 Property, plant and equipment
Accounting Policy
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22-25 years |
Plant and machinery(1) | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Leasehold improvements | Lower of useful life of the asset or lease term |
(1) includes solar plant with a useful life of 20 years
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the statement of comprehensive income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the consolidated statement of comprehensive income.
Impairment
Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in net profit in the statement of comprehensive income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in net profit in the statement of comprehensive income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2020:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 276 | 1,291 | 572 | 845 | 321 | 5 | 3,310 |
Additions | 2 | 149 | 106 | 131 | 95 | 1 | 484 |
Additions- Business Combinations (Refer note 2.10) | – | – | – | 9 | 2 | – | 11 |
Deletions | – | – | (2) | (25) | (5) | – | (32) |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | (86) | – | – | – | – | – | (86) |
Translation difference | (18) | (116) | (55) | (78) | (32) | – | (299) |
Gross carrying value as at March 31, 2020 | 174 | 1,324 | 621 | 882 | 381 | 6 | 3,388 |
Accumulated depreciation as at April 1, 2019 | (5) | (423) | (390) | (606) | (223) | (3) | (1,650) |
Depreciation | – | (50) | (67) | (121) | (47) | (1) | (286) |
Accumulated depreciation on deletions | – | – | 2 | 25 | 5 | – | 32 |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | 5 | – | – | – | – | – | 5 |
Translation difference | – | 39 | 37 | 56 | 22 | – | 154 |
Accumulated depreciation as at March 31, 2020 | – | (434) | (418) | (646) | (243) | (4) | (1,745) |
Capital work-in progress as at March 31, 2020 | 167 | ||||||
Carrying value as at March 31, 2020 | 174 | 890 | 203 | 236 | 138 | 2 | 1,810 |
Capital work-in progress as at April 1, 2019 | 271 | ||||||
Carrying value as at April 1, 2019 | 271 | 868 | 182 | 239 | 98 | 2 | 1,931 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 292 | 1,247 | 518 | 749 | 285 | 5 | 3,096 |
Additions | 8 | 132 | 98 | 163 | 56 | 1 | 458 |
Additions- Business Combinations (Refer note 2.10) | – | – | 1 | 4 | 2 | – | 7 |
Deletions | (7) | (17) | (15) | (35) | (9) | – | (83) |
Reclassification from assets held for sale (Refer note 2.10.1) | – | – | – | 6 | 4 | – | 10 |
Translation difference | (17) | (71) | (30) | (42) | (17) | (1) | (178) |
Gross carrying value as at March 31, 2019 | 276 | 1,291 | 572 | 845 | 321 | 5 | 3,310 |
Accumulated depreciation as at April 1, 2018 | (5) | (417) | (359) | (557) | (203) | (3) | (1,544) |
Depreciation | (1) | (45) | (62) | (109) | (37) | (1) | (255) |
Accumulated depreciation on deletions | – | 15 | 12 | 33 | 8 | – | 68 |
Reclassification from assets held for sale (Refer note 2.10.1) | – | – | – | (4) | (3) | – | (7) |
Translation difference | 1 | 24 | 19 | 31 | 12 | 1 | 88 |
Accumulated depreciation as at March 31, 2019 | (5) | (423) | (390) | (606) | (223) | (3) | (1,650) |
Capital work-in progress as at March 31, 2019 | 271 | ||||||
Carrying value as at March 31, 2019 | 271 | 868 | 182 | 239 | 98 | 2 | 1,931 |
Capital work-in progress as at April 1, 2018 | 311 | ||||||
Carrying value as at April 1, 2018 | 287 | 830 | 159 | 192 | 82 | 2 | 1,863 |
The aggregate depreciation expense is included in cost of sales in the statement of comprehensive income.
The contractual commitments for capital expenditure primarily comprises of commitments for infrastructure facilities and computer equipment’s aggregating to $180 million and $249 million as at March 31, 2020 and March 31, 2019, respectively.
2.8 Leases
Accounting Policy
The Group as a lessee
The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Group as a lessor
Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1, 2019, the Group adopted IFRS 16 “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 on Form 20F for year ended March 31, 2019.
On transition, the adoption of the new standard resulted in recognition of 'Right of Use' asset of $420 million, 'Net investment in sublease of ROU asset' of $62 million and a lease liabilities of $520 million. The cumulative effect of applying the standard, amounting to $6 million was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the operating profit, net profit for the period and earnings per share. IFRS 16 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, IFRS 16 is applied only to contracts that were previously identified as leases under IAS 17. |
The difference between the lease obligation recorded as of March 31, 2019 under IAS 17 disclosed under Note 2.15 of the 2019 Annual Report on Form 20F and the value of the lease liabilities 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 IFRS 16 and discounting the lease liabilities to the present value under IFRS 16.
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 year ended March 31, 2020:
(Dollars in millions)
Particulars | Category of ROU asset | ||||
Land | Buildings | Vehicles | Computers | Total | |
Balance as of April 1, 2019 | – | 419 | 1 | – | 420 |
Reclassified on account of adoption of IFRS 16 | 92 | – | – | – | 92 |
Additions* | – | 148 | – | 7 | 155 |
Additions through business combination (Refer to Note 2.10) | – | 26 | 2 | – | 28 |
Deletions | – | (18) | – | – | (18) |
Depreciation | (1) | (75) | (1) | (1) | (78) |
Translation difference | (8) | (39) | – | (1) | (48) |
Balance as of March 31, 2020 | 83 | 461 | 2 | 5 | 551 |
* Net of lease incentives of $16 million related to lease of buildings
The aggregate depreciation expense on ROU assets is included in cost of sales in the consolidated statement of comprehensive income.
The following is the break-up of current and non-current lease liabilities as of March 31, 2020:
(Dollars in millions)
Particulars | Amount |
Current lease liabilities | 82 |
Non-current lease liabilities | 530 |
Total | 612 |
The following is the movement in lease liabilities during the year ended March 31, 2020:
(Dollars in millions)
Particulars | Amount |
Balance as of April 1, 2019 | 520 |
Additions | 175 |
Additions through business combination (Refer to note 2.10) | 32 |
Finance cost accrued during the period | 24 |
Deletions | (20) |
Payment of lease liabilities | (90) |
Translation difference | (29) |
Balance as of March 31, 2020 | 612 |
The table below provides details regarding the contractual maturities of lease liabilities as of March 31, 2020 on an undiscounted basis:
(Dollars in millions)
Particulars | Amount |
Less than one year | 105 |
One to five years | 344 |
More than five years | 274 |
Total | 723 |
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 recorded for short-term leases was $13 million for the year ended March 31, 2020.
The following is the movement in the net-investment in sublease of ROU asset during the year ended March 31, 2020:
(Dollars in millions)
Particulars | Amount |
Balance as of April 1, 2019 | 62 |
Interest income accrued during the period | 2 |
Lease receipts | (6) |
Balance as of March 31, 2020 | 58 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as of March 31, 2020 on an undiscounted basis:
(Dollars in millions)
Particulars | Amount |
Less than one year | 7 |
One to five years | 29 |
More than five years | 32 |
Total | 68 |
Leases not yet commenced to which Group is committed amounts to $87 million for a lease term ranging from 2 years to 13 years.
2.9 Goodwill
Accounting Policy
Goodwill represents purchase consideration in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the purchase consideration, the fair value of net assets acquired is reassessed and the bargain purchase excess is recognized immediately in the net profit in the Statement of Comprehensive Income. Goodwill is measured at cost less accumulated impairment losses.
Impairment
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the Statement of comprehensive income and is not reversed in the subsequent period.
Following is a summary of changes in the carrying amount of goodwill:
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Carrying value at the beginning | 512 | 339 |
Goodwill on Wongdoody acquisition | – | 25 |
Goodwill on Fluido acquisition | – | 32 |
Goodwill on HIPUS acquisition (Refer to note 2.10) | 16 | – |
Goodwill on Stater acquisition (Refer to note 2.10) | 57 | – |
Goodwill on Simplus acquisition (Refer to note 2.10) | 130 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount | – | 138 |
Translation differences | (16) | (22) |
Carrying value at the end | 699 | 512 |
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 Group internally reviews the goodwill for impairment at the operating segment level, after allocation of the goodwill to CGU’s or groups of CGUs.
The following table presents the allocation of goodwill to operating segments as at March 31, 2020 and March 31, 2019 respectively:
(Dollars in millions)
Segment | As at | |
March 31, 2020 | March 31, 2019 | |
Financial services | 167 | 108 |
Retail | 66 | 63 |
Communication | 62 | 56 |
Energy, utilities, resources and services | 117 | 54 |
Manufacturing | 50 | 34 |
462 | 315 | |
Operating segments without significant goodwill | 102 | 61 |
Total | 564 | 376 |
Consequent to reclassification from held for sale (refer note 2.10.1), the goodwill pertaining to Panaya, Kallidus and Skava acquisitions are tested for impairment at the respective entity level, which amounts to $135 million and $136 million as at March 31, 2020 and March 31, 2019, respectively.
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. Value-in-use is determined based on discounted future cash flows.
The key assumptions used for the calculations are as follows:
in%
As at | ||
March 31, 2020 | March 31, 2019 | |
Long term growth rate | 7-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 11.9 | 12.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. As at March 31, 2020, the estimated recoverable amount of the CGU exceeded its carrying amount. Reasonable sensitivities in key assumptions consequent to the change in estimated future economic conditions on account of possible effects relating to Covid 19 is unlikely to cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.10 Business combination
Accounting Policy
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised), Business Combinations.
The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the Statement of Comprehensive Income.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value of the assets and liabilities in the Group's consolidated financial statements.
The payments related to options issued by the Group over the non-controlling interests in its subsidiaries are accounted as financial liabilities and initially recognized at the estimated present value of gross obligations. Such options are subsequently measured at fair value in order to reflect the amount payable under the option at the date at which it becomes exercisable. In the event that the option expires unexercised, the liability is derecognised.
Transaction costs that the Group incurs in connection with a business combination such as finders’ fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
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 (HIPUS), a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately $30 million). 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 2.5).
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:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 6 | – | 6 |
Intangible assets - Customer contracts and relationships# | – | 17 | 17 |
Deferred tax liabilities on intangible assets | – | (5) | (5) |
6 | 12 | 18 | |
Goodwill | 16 | ||
Less: Non-controlling interest | (4) | ||
Total purchase price | 30 |
* Includes cash and cash equivalents acquired of $26 million.
# Useful life is in the range of 5 to 15 years
Goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $202 million and the amount has been fully collected. Trade payables as on the acquisition date amounted to $218 million.
The transaction costs of $1 million 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 $171 million). 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 2.5).
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:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 78 | – | 78 |
Intangible assets - Customer contracts and relationships# | – | 79 | 79 |
Intangible assets - Technology# | – | 16 | 16 |
Intangible assets - Brand# | – | 3 | 3 |
Deferred tax liabilities on intangible assets | – | (20) | (20) |
78 | 78 | 156 | |
Goodwill | 57 | ||
Less: Non controlling interest | (42) | ||
Total purchase price | 171 |
* Includes cash and cash equivalents acquired of $73 million
# Useful lives are in the range of 5 to 15 years
Goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $11 million and the amount is substantially collected.
The transaction costs of $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the three months ended June 30, 2019.
Outbox systems Inc. dba Simplus
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus , a US based sales force advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of up to $250 million (approximately 1,892 crore), comprising of cash consideration of $180 million (approximately 1,362 crore), contingent consideration of up to $20 million (approximately 151 crore), additional performance bonus and retention payouts of upto $50 million (approximately 378 crore) payable to the employees of Simplus over the next three years, subject to their continuous employment with the group and meeting certain targets. Performance and retention bonus is recognized in employee benefit expenses in the statement of comprehensive income over the period of service.
Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill. Goodwill includes the value expected from addition of new customers and estimated synergies which does not qualify as an intangible asset.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 3 | – | 3 |
Intangible assets - Customer contracts and relationships# | – | 20 | 20 |
Intangible assets - Salesforce Relationships# | – | 43 | 43 |
Intangible assets - Brand# | – | 15 | 15 |
Deferred tax liabilities on intangible assets | – | (20) | (20) |
3 | 58 | 61 | |
Goodwill | 130 | ||
Total purchase price | 191 |
* Includes cash and cash equivalents acquired of $1 million.
# Useful lives are in the range of 2 to 10 years
Goodwill is not tax deductible.
The fair value of each major class of consideration as of the acquisition date is as follows:
(Dollars in millions)
Component | Purchase price allocated |
Cash consideration | 180 |
Fair value of contingent consideration | 11 |
Total purchase price | 191 |
The gross amount of trade receivables acquired and its fair value is approximately $10 million and the amount is recoverable
The payment of contingent consideration to sellers of Simplus is dependent upon the achievement of certain financial targets by Simplus. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 10.5% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration as of March 31, 2020 was $13 million.
The transaction costs of $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2020.
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.
2.10.1 Disposal Group held for sale
Accounting policy
Non-current assets and disposal groups 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 groups 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.
During the year ended March 2018, the Company 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 year ended March 31, 2019, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company recorded a reduction in the fair value of Disposal Group held for sale amounting to $39 million in respect of Panaya.
Further, 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 was 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 IFRS 5- "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 for the year ended and 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 $65 million (comprising of $52 million towards goodwill and $13 million towards value of customer relationships) in respect of Skava in the consolidated statement of comprehensive income for the year ended March 31, 2019.
2.11 Employees' Stock Option Plans (ESOP)
Accounting Policy
The Group recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with IFRS 2, 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 premium.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan)
On June 22, 2019 pursuant to approval by the shareholders in the Annual General Meeting, the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 50,000,000 equity shares. To implement the 2019 Plan, upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.
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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares 200,000 equity shares each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the year ended March 31, 2020 and March 31, 2019:
Particulars | 2019 Plan | 2015 Plan | ||
Year ended March 31, | Year ended March 31, | |||
2020 | 2019 | 2020 | 2019* | |
Equity settled RSU | ||||
KMPs | 356,793 | – | 507,896 | 675,530 |
Employees other than KMP | 1,734,500 | – | 3,346,280 | 3,665,170 |
2,091,293 | – | 3,854,176 | 4,340,700 | |
Cash settled RSU | ||||
KMPs | – | – | 180,400 | – |
Employees other than KMP | – | – | 475,740 | 74,090 |
– | – | 656,140 | 74,090 | |
Total Grants | 2,091,293 | – | 4,510,316 | 4,414,790 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore (approximately $0.50 million) which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with IFRS 2, Share based payments.
The Board, on April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore (approximately $2 million) 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.
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 (approximately $1.50 million) for financial year 2020 under the 2019 Plan. 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
Under the 2015 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 4 crore (approximately $0.50 million) for financial year 2020 under the 2019 Plan. 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
Under the 2015 plan:
On April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019. The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain performance targets.
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Granted to: | ||
KMP | 8 | 5 |
Employees other than KMP | 26 | 24 |
Total (1) | 34 | 29 |
(1) Cash settled stock compensation expense included in the above | 1 | 1 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 $8 million is recognized as financial liability with a corresponding adjustment to equity.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant using the following assumptions:
Particulars | For options granted in | |||
Fiscal 2020- Equity Shares-RSU |
Fiscal 2020- ADS-RSU |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price () / ($ ADS)(1) | 728 | 10.52 | 696 | 10.77 |
Exercise price () / ($ADS)(1) | 5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-30 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date () / ($ADS)(1) | 607 | 7.84 | 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.
2.12 Income taxes
Accounting policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the consolidated statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered 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. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.
Income tax expense in the consolidated statement of comprehensive income comprises:
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Current taxes | ||
Domestic taxes | 628 | 600 |
Foreign taxes | 186 | 217 |
814 | 817 | |
Deferred taxes | ||
Domestic taxes | (43) | 3 |
Foreign taxes | (14) | (17) |
(57) | (14) | |
Income tax expense | 757 | 803 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of $14 million which pertained to prior periods.
Additionally Income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of $52 million and reversal (net of provisions) of $18 million respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions and on account of changes to tax regulations.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Profit before income taxes | 3,095 | 3,003 |
Enacted tax rates in India | 34.94% | 34.94% |
Computed expected tax expense | 1,083 | 1,049 |
Tax effect due to non-taxable income for Indian tax purposes | (383) | (386) |
Overseas taxes | 103 | 102 |
Tax provision (reversals) | (52) | (25) |
Effect of differential tax rates | (11) | – |
Effect of exempt non operating income | (6) | (8) |
Effect of unrecognized deferred tax assets | 7 | 13 |
Effect of non-deductible expenses | 17 | 50 |
Branch profit tax (net of credits) | (5) | 4 |
Others | 4 | 4 |
Income tax expense | 757 | 803 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2020 and March 31, 2019 is 34.94% each.
Deferred income tax for the year ended March 31, 2020 and March 31, 2019 substantially relates to origination and reversal of temporary differences.
As at March 31, 2020, claims against the Group not acknowledged as debts from the Indian Income tax authorities amounted to 3,353 crore ($443 million). Amount paid to statutory authorities against this amounted to 5,352 crore ($707 million).
As at March 31, 2019, claims against the Group not acknowledged as debts from the Income tax authorities amounted to 2,851 crore ($412 million). Amount paid to statutory authorities against the above tax claims amounted to 5,924 crore ($857 million).
The claims against the group majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes.
These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.
2.13 Reconciliation of basic and diluted shares used in computing earnings per share
Accounting Policy
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
2.14 Related party transactions
Refer Note 2.19 "Related party transactions" in the Company’s 2019 Annual Report on Form 20-F for the full names and other details of the Company's subsidiaries and controlled trusts.
Changes in Subsidiaries
During the year ended March 31, 2020, the following are the changes in the subsidiaries:
- | On April 1, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 81% of voting interest in HIPUS Co Ltd, Japan, a wholly owned subsidiary of Hitachi Ltd, Japan. (Refer to note 2.10) |
- | On May 23, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 75% of voting interest in Stater N.V along with its eight subsidiaries Stater Netherland B.V., Stater Duitsland B.V., Stater XXL B.V., HypoCasso B.V., Stater Participations B.V., Stater Deutschland Verwaltungs-GmbH, Stater Deutschland GmbH & Co.KG, Stater Belgium N.V./S.A. (Refer to note 2.10) |
- | Infosys Technologies (Australia) Pty. Limited (Infosys Australia) has been liquidated effective November 17, 2019 |
- | Infosys Tecnologia Do Brasil Ltda, a wholly owned subsidiary of Infosys Ltd merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd effective October 1, 2019. |
- | On February 20, 2020, Infosys Poland, Sp z.o.o, a wholly owned subsidiary of Infosys BPM acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o, a wholly owned subsidiary of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
- | Panaya Japan Co. Ltd, a wholly owned subsidiary of Panaya Inc. has been liquidated effective October 19, 2019 |
- | On March 13, 2020, Infosys Nova Holdings LLC, a wholly-owned subsidiary of Infosys Limited, acquired 100% of voting interest in Outbox systems Inc. dba Simplus (US) along with its eight subsidiaries Simplus North America Inc., Simplus ANZ Pty Ltd., Simplus Australia Pty Ltd, Sqware Peg Digital Pty Ltd, Simplus Philippines, Inc., Simplus Europe, Ltd., Simplus U.K., Ltd., Simplus Ireland, Ltd. (Refer to note 2.10) |
Changes in Controlled trust
The following were the changes in controlled trusts:-
- On May 15, 2019, the Company registered Infosys Expanded Stock Ownership Trust
Change in key management personnel
The following are the changes in the Key management personnel
Roopa Kudva (retired as member of the Board effective February 3, 2020)
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)(3) | 17 | 14 |
Commission and other benefits to non-executive/ independent directors | 1 | 1 |
Total | 18 | 15 |
(1) | For
the year ended March 31, 2020 and March 31, 2019, includes a charge of $8 million and $5 million respectively, towards employee
stock compensation expense. (Refer note 2.11) |
|
(2) | On December 20, 2018,
the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect
from March 1, 2019. | |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
2.15 Segment Reporting
IFRS 8 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The Group's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. The Chief Operating Decision Maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services.
Revenue and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Revenue for 'all other segments' represents revenue generated by Infosys Public Services and revenue generated from customers located in India, Japan and China and other enterprises in public service. Allocated expenses of segments include expenses incurred for rendering services from the Group's offshore software development centers and on-site expenses, which are categorized in relation to the associated efforts of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying assets are used interchangeably. The management believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and adjusted against the total income of the Group.
Assets and liabilities used in the Group's business are not identified to any of the reportable segments, as these are used interchangeably between segments. Management believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.
Business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
Disclosure of revenue by geographic locations is given in note 2.16 Revenue from operations.
2.15.1 Business Segments
Year ended March 31, 2020 and March 31, 2019
(Dollars in millions)
Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All Other segments | Total | |
Revenues | 4,029 | 1,976 | 1,687 | 1,652 | 1,285 | 981 | 822 | 348 | 12,780 |
3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 | |
Identifiable operating expenses | 2,109 | 984 | 998 | 860 | 703 | 581 | 452 | 209 | 6,896 |
2,021 | 974 | 816 | 808 | 644 | 506 | 394 | 202 | 6,365 | |
Allocated expenses | 893 | 399 | 348 | 340 | 293 | 175 | 168 | 130 | 2,746 |
775 | 385 | 312 | 312 | 255 | 154 | 147 | 109 | 2,449 | |
Segment profit | 1,027 | 593 | 341 | 452 | 289 | 225 | 202 | 9 | 3,138 |
982 | 576 | 360 | 363 | 264 | 222 | 202 | 16 | 2,985 | |
Unallocable expenses* | 414 | ||||||||
289 | |||||||||
Operating profit | 2,724 | ||||||||
2,696 | |||||||||
Other income, net (Refer Note 2.18) | 395 | ||||||||
411 | |||||||||
Finance cost (Refer Note 2.8) | (24) | ||||||||
– | |||||||||
Reduction in the fair value of Disposal Group held for sale | – | ||||||||
(39) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 2.10.1) | – | ||||||||
(65) | |||||||||
Profit before Income taxes | 3,095 | ||||||||
3,003 | |||||||||
Income tax expense | 757 | ||||||||
803 | |||||||||
Net profit | 2,338 | ||||||||
2,200 | |||||||||
Depreciation and amortization | 407 | ||||||||
287 | |||||||||
Non-cash expenses other than depreciation and amortization | 7 | ||||||||
107 |
* | Unallocable expenses for the year ended March 31, 2020 includes amortization on ROU assets consequent to adoption of IFRS 16 - Leases effective April 1, 2019 |
2.15.2 Significant clients
No client individually accounted for more than 10% of the revenues for the year ended March 31, 2020 and March 31, 2019, respectively.
2.16 Revenue from Operations
Accounting Policy:
The Group derives revenues primarily from IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
Effective April 1, 2018, the Group adopted IFRS 15 “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 IFRS 15 was insignificant.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Group’s contracts may include variable consideration including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group 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). When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Group uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Group transfers the related goods or services to the customer.
The Group presents revenues net of indirect taxes in its consolidated statement of comprehensive income.
Revenues for the year ended March 31, 2020 and March 31, 2019 is as follows:
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue from software services | 12,003 | 11,184 |
Revenue from products and platforms | 777 | 615 |
Total revenue from operations | 12,780 | 11,799 |
The Group has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Group has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the pandemic, the Group will continue to monitor developments to identify significant uncertainties relating to revenue in future periods
Disaggregate 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.
Year ended March 31, 2020 and March 31, 2019
(Dollars in millions)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy , Utilities, resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography* | |||||||||
North America | 2,358 | 1,298 | 1,033 | 908 | 722 | 920 | 537 | 79 | 7,855 |
2,290 | 1,255 | 796 | 838 | 619 | 844 | 438 | 61 | 7,141 | |
Europe | 842 | 558 | 271 | 592 | 503 | 27 | 267 | 25 | 3,085 |
698 | 548 | 271 | 507 | 499 | 15 | 287 | 22 | 2,847 | |
India | 184 | 7 | 27 | 2 | 12 | 29 | 6 | 66 | 333 |
172 | 3 | 8 | – | 12 | 20 | 2 | 75 | 292 | |
Rest of the world | 645 | 113 | 356 | 150 | 48 | 5 | 12 | 178 | 1,507 |
618 | 129 | 413 | 138 | 33 | 3 | 16 | 169 | 1,519 | |
Total | 4,029 | 1,976 | 1,687 | 1,652 | 1,285 | 981 | 822 | 348 | 12,780 |
3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 | |
Revenue by offerings | |||||||||
Digital | 1,626 | 867 | 681 | 631 | 489 | 357 | 260 | 97 | 5,008 |
1,180 | 673 | 516 | 437 | 347 | 297 | 185 | 50 | 3,685 | |
Core | 2,403 | 1,109 | 1,006 | 1,021 | 796 | 624 | 562 | 251 | 7,772 |
2,598 | 1,262 | 972 | 1,046 | 816 | 585 | 558 | 277 | 8,114 | |
Total | 4,029 | 1,976 | 1,687 | 1,652 | 1,285 | 981 | 822 | 348 | 12,780 |
3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
* Geographical revenues is based on the domicile of customer.
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning, Stater digital platform and Infosys McCamish- insurance platform
The percentage of revenue from fixed price contracts for each of the three months and year ended March 31, 2020 and March 31, 2019 is approximately 55%.
Trade Receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Group’s Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Group’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.
2.17 Unbilled revenue
(Dollars in millions)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Unbilled financial asset (1) | 369 | 303 |
Unbilled non financial asset (2) | 572 | 474 |
Total | 941 | 777 |
(1) Right to consideration is unconditional and is due only after a upon passage of time.
(2) Right to consideration is dependent on completion of contractual milestones.
2.18 Break-up of expenses and other income, net
Accounting Policy
2.18.1 Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment with the group.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPM and EdgeVerve, contributions are made to the Infosys BPM Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.
The Group recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability / asset are recognized in other comprehensive income and not reclassified to profit or loss in subsequent period. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments are recognized in net profits in the statement of comprehensive income.
2.18.2 Superannuation
Certain employees of Infosys, Infosys BPM (formerly Infosys BPO) and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
2.18.3 Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The company contributes a portion of the contributions to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee's salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund. The companies have no further obligation to the plan beyond its monthly contributions.
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, 2010.
The details of the benefit obligation as at March 31, 2019 is as follows:
(Dollars in millions)
Particulars | As at |
March 31, 2019 | |
Benefit obligation at the period end | 866 |
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 March 31, 2020:
(Dollars in millions)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 866 |
Service cost - employer contribution | 57 |
Employee contribution | 121 |
Interest expense | 79 |
Actuarial (gains) / loss | 30 |
Benefits paid | (94) |
Translation differences | (86) |
Benefit obligations at the end | 973 |
Change in plan assets | |
Fair value of plan assets at the beginning | 866 |
Interest income | 79 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (5) |
Contributions (employer and employee) | 178 |
Benefits paid | (94) |
Translation differences | (84) |
Fair value of plan assets at the end | 940 |
Net liability (refer to note 2.5) | (33) |
(1) Includes unrealized losses on certain investments in bonds
Amount for the year ended March 31, 2020 recognized in the consolidated statement of other comprehensive income:
(Dollars in millions)
Particulars | Year ended March 31, |
2020 | |
Remeasurements of the net defined benefit liability/ (asset) | |
Actuarial (gains) / losses | 30 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 5 |
35 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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. |
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately $10 million and $14 million on account of a 0.25% increase / decrease, respectively in the expected rate of return on plan assets.
The Group contributed $90 million and $77 million to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in net profit in the Consolidated Statement of comprehensive income under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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.
2.18.4 Compensated absences
The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
2.18.5 Other income
Other income is comprised primarily of interest income, dividend income, gain/loss on investment and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.
Effective April 1, 2018, the Group has adopted IFRS interpretation IFRIC 22- 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.
2.18.6 Foreign Currency
Transactions and translations
Foreign-currency denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are recognized in the Consolidated Statement of Comprehensive Income and reported within exchange gains/ (losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
The translation of financial statements of the foreign subsidiaries to the presentation currency is performed for assets and liabilities using the exchange rate in effect at the Balance Sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the statement of comprehensive income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.
2.18.6 Operating Profits
Operating profit of the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
Cost of sales
(Dollars in millions)
Year ended March 31, | ||
2020 | 2019 | |
Employee benefit costs | 6,406 | 5,780 |
Depreciation and amortization | 407 | 287 |
Travelling costs | 288 | 253 |
Cost of technical sub-contractors | 945 | 860 |
Cost of software packages for own use | 142 | 129 |
Third party items bought for service delivery to clients | 234 | 231 |
Short-term leases (Refer to Note 2.8) | 9 | – |
Operating leases | – | 52 |
Consultancy and professional charges | 7 | 6 |
Communication costs | 42 | 34 |
Repairs and maintenance | 71 | 53 |
Provision for post-sales client support | – | – |
Others | 1 | 2 |
Total | 8,552 | 7,687 |
Selling and marketing expenses
(Dollars in millions)
Year ended March 31, | ||
2020 | 2019 | |
Employee benefit costs | 510 | 462 |
Travelling costs | 53 | 59 |
Branding and marketing | 74 | 69 |
Operating leases | – | 11 |
Short-term leases (Refer to Note 2.8) | 1 | – |
Consultancy and professional charges | 17 | 28 |
Communication costs | 2 | 3 |
Others | 7 | 6 |
Total | 664 | 638 |
Administrative expenses
(Dollars in millions)
Year ended March 31, | ||
2020 | 2019 | |
Employee benefit costs | 252 | 226 |
Consultancy and professional charges | 163 | 154 |
Repairs and maintenance | 151 | 134 |
Power and fuel | 32 | 32 |
Communication costs | 30 | 31 |
Travelling costs | 41 | 36 |
Rates and taxes | 27 | 27 |
Operating leases | – | 20 |
Short-term leases (Refer to Note 2.8) | 3 | – |
Insurance charges | 12 | 9 |
Impairment loss recognized/(reversed) under expected credit loss model | 24 | 35 |
Commission to non-whole time directors | 1 | 1 |
Contributions towards Corporate Social Responsibility | 54 | 38 |
Others | 50 | 35 |
Total | 840 | 778 |
Other income, net
(Dollars in millions)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Interest income on financial assets carried at amortized cost | 181 | 201 |
Interest income on financial assets fair valued through other comprehensive income | 46 | 92 |
Gain/(loss) on investments carried at fair value through profit or loss | 26 | 24 |
Gain/(loss) on investments carried at fair value through other comprehensive income | 6 | – |
Interest income on income tax refund | 37 | 7 |
Exchange gains / (losses) on forward and options contracts | (66) | 27 |
Exchange gains / (losses) on translation of other assets and liabilities | 139 | 18 |
Others | 26 | 42 |
Total | 395 | 411 |
2.19 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.
In December 2017, the International Accounting Standard Board issued amendments to IAS 12 – Income Taxes. The amendments clarify 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.
Description of reserves
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Share premium
The amount received in excess of the par value has been classified as share premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of comprehensive income is credited to share 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.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the consolidated statement of Comprehensive Income upon the occurrence of the related forecasted transaction.
2.19.1 Update on buyback of equity shares
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 March 31, 2020, the Company has created ‘Capital Redemption Reserve’ of $8 million equal to the nominal value of the above shares bought back as an appropriation from general reserve.
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 of March 31, 2020, 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
2.19.2 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay/distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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 recognised as distribution to equity shareholders:
Particulars | Year ended March 31, 2020 | Year ended March 31, 2019 | ||
in | in US Dollars | in | in US Dollars | |
Final dividend for fiscal 2019 | 10.50 | 0.15 | – | – |
Interim dividend for fiscal 2020 | 8.00 | 0.11 | – | – |
Final dividend for fiscal 2018* | – | – | 10.25 | 0.16 |
Special dividend for fiscal 2018* | – | – | 5.00 | 0.08 |
Interim dividend for fiscal 2019* | – | – | 7.00 | 0.10 |
Special dividend for fiscal 2019 | – | – | 4.00 | 0.06 |
* Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
During the year ended March 31, 2020 on account of the final dividend for fiscal 2019 and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 9,517 crore (approximately $1,359 million) (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share (approximately $0.13 per equity hare) for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID 19 the Company is working on Annual General Meeting date which will be announced by the company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately $532 million (excluding dividend paid on treasury shares).
2.19.3 Share capital and share premium
The Company has only one class of shares referred to as equity shares having a par value of 5/- each. 1,82,39,356 shares and 2,03,24,982 shares were held by controlled trust, as at March 31, 2020 and March 31, 2019, respectively.
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 April 20, 2020 |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income for the three months ended March 31,
(Dollars in millions except equity share and per equity share data)
2020 | 2019 | |
Revenues | 3,197 | 3,060 |
Cost of sales | 2,133 | 2,028 |
Gross profit | 1,064 | 1,032 |
Operating expenses: | ||
Selling and marketing expenses | 161 | 174 |
Administrative expenses | 229 | 200 |
Total operating expenses | 390 | 374 |
Operating profit | 674 | 658 |
Other income, net | 84 | 94 |
Finance cost | (6) | – |
Reduction in the fair value of Disposal Group held for sale | – | – |
Profit before income taxes | 752 | 752 |
Income tax expense | 160 | 171 |
Net profit | 592 | 581 |
Other comprehensive income | ||
Items that will not be reclassified subsequently to profit or loss: | ||
Re-measurements of the net defined benefit liability/asset, net | (2) | – |
Equity instruments through other comprehensive income, net | – | – |
(2) | – | |
Items that will be reclassified subsequently to profit or loss: | ||
Fair valuation of investments, net | 2 | 3 |
Fair value changes on derivatives designated as cash flow hedge, net | – | (2) |
Foreign currency translation | (473) | 74 |
(471) | 75 | |
Total other comprehensive income/(loss), net of tax | (473) | 75 |
Total comprehensive income | 119 | 656 |
Profit attributable to: | ||
Owners of the company | 590 | 580 |
Non-controlling interests | 2 | 1 |
592 | 581 | |
Total comprehensive income attributable to: | ||
Owners of the company | 117 | 655 |
Non-controlling interests | 2 | 1 |
119 | 656 | |
Earnings per equity share | ||
Basic ($) | 0.14 | 0.13 |
Diluted ($) | 0.14 | 0.13 |
Weighted average equity shares used in computing earnings per equity share | ||
Basic | 4,240,181,854 | 4,347,129,592 |
Diluted | 4,245,981,386 | 4,353,023,863 |
Exhibit 99.8
IFRS INR Earning Release
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 March 31, 2020, the Consolidated Statement of Comprehensive Income for the three months and year ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year 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 International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), of the consolidated state of affairs of the Group as at March 31, 2020, the consolidated profit and consolidated total comprehensive income for the three months and year ended on that date, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the interim consolidated financial statements in accordance with the Standards on Auditing (“SA”s) issued by the Institute of Chartered Accountants of India (“ICAI”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the interim consolidated financial statements.
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 |
Fixed price contracts using the percentage of completion method
|
Principal Audit Procedures |
Fixed price maintenance revenue is recognized either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using percentage of completion method when the pattern of benefits from services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive.
Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time has been recognized using the percentage-of-completion method. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
We identified the estimate of total efforts or efforts to complete fixed price contracts measured using the percentage of completion method as a key audit matter as the estimation of efforts or costs involves significant judgement throughout the period of the contract and is subject to revision as the contract progresses based on the latest available information. This estimate has a high inherent uncertainty and requires consideration of progress of the contract, efforts or costs incurred to-date and estimates of efforts or costs required to complete the remaining contract performance obligations over the lives of the contracts.
Refer Notes 1.5(a) and 2.16 to the interim consolidated financial statements.
|
Our audit procedures related to estimates of total expected costs or efforts to complete for fixed-price contracts included the following, among others:
We tested the effectiveness of controls relating to (1) recording of efforts or costs incurred and estimation of efforts or costs required to complete the remaining contract performance obligations and (2) access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
We selected a sample of fixed price contracts with customers accounted using percentage-of-completion method and performed the following:
· Compared efforts or costs incurred with Group’s estimate of efforts or costs incurred to date to identify significant variations and evaluate whether those variations have been considered appropriately in estimating the remaining costs or efforts to complete the contract.
· Tested the estimate for consistency with the status of delivery of milestones and customer acceptances and sign off from customers to identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligations. | |
2 |
Allowance for credit losses
|
Principal Audit Procedures
|
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
We identified allowance for credit losses as a key audit matter because the Group exercises significant judgment in calculating the expected credit losses.
Refer Notes 1.5(h) and 2.3 to the interim consolidated financial statements.
|
Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following, among others:
We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses.
For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information.
We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Group. |
Emphasis of Matter
As more fully described in Note 2.6 to the interim consolidated financial statements, the Company is responding to inquiries from Indian regulatory. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Management’s Responsibility for the Interim Consolidated Financial Statements
The 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 IAS 34 as issued by the IASB. The respective Board of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records for safeguarding assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the interim financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim consolidated financial statements by the Directors of the Company, as aforesaid.
In preparing the interim consolidated financial statements, the respective Boards of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Boards of Directors either intends to liquidate their respective entities or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Interim 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 the financial statements of such entities included in the interim consolidated financial statements of which we are the 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 interim 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 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)
Sanjiv V. Pilgaonkar
Place: Mumbai |
Partner |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in Indian Rupee for the three months and year ended March 31, 2020
Index | Page No. |
Consolidated Balance Sheet | 1 |
Consolidated Statement of Comprehensive Income | 2 |
Consolidated Statement of Changes in Equity | 3 |
Consolidated Statement of Cash Flows | 5 |
Overview and notes to the financial statements | |
1. Overview | |
1.1 Company overview | 6 |
1.2 Basis of preparation of financial statements | 6 |
1.3 Basis of consolidation | 6 |
1.4 Use of estimates and judgements | 6 |
1.5 Critical accounting estimates | 6 |
1.6 Recent accounting pronouncements | 8 |
2. Notes to the Consolidated Financial Statements | |
2.1 Cash and cash equivalents | 9 |
2.2 Investments | 9 |
2.3 Financial instruments | 11 |
2.4 Prepayments and other assets | 17 |
2.5 Other liabilities | 18 |
2.6 Provisions and other contingent liabilities | 18 |
2.7 Property, plant and equipment | 20 |
2.8 Leases | 22 |
2.9 Goodwill and other Intangible assets | 24 |
2.10 Business combinations and Disposal group held for sale | 27 |
2.11 Employees' Stock Option Plans (ESOP) | 31 |
2.12 Income Taxes | 34 |
2.13 Reconciliation of basic and diluted shares used in computing earnings per share | 37 |
2.14 Related party transactions] | 38 |
2.15 Segment reporting | 41 |
2.16 Revenue from Operations | 43 |
2.17 Unbilled Revenue | 45 |
2.18 Expenses by nature | 46 |
2.19 Employee benefits | 47 |
2.20 Other Income | 52 |
2.21 Equity | 53 |
Infosys Limited and subsidiaries
(In crore except equity share data)
Consolidated Balance Sheet as at | Note | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 18,649 | 19,568 |
Current investments | 2.2 | 4,655 | 6,627 |
Trade receivables | 18,487 | 14,827 | |
Unbilled revenue | 2.17 | 7,121 | 5,374 |
Prepayments and other current assets | 2.4 | 5,595 | 5,723 |
Income tax assets | 2.12 | 7 | 423 |
Derivative financial instruments | 2.3 | 62 | 336 |
Total current assets | 54,576 | 52,878 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 13,699 | 13,356 |
Right-of-use assets | 2.8 | 4,168 | – |
Goodwill | 2.9 | 5,286 | 3,540 |
Intangible assets | 1,900 | 691 | |
Non-current investments | 2.2 | 4,137 | 4,634 |
Deferred income tax assets | 2.12 | 1,744 | 1,372 |
Income tax assets | 2.12 | 5,384 | 6,320 |
Other non-current assets | 2.4 | 1,874 | 1,947 |
Total non-current assets | 38,192 | 31,860 | |
Total assets | 92,768 | 84,738 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 2,852 | 1,655 | |
Lease liabilities | 2.8 | 619 | – |
Derivative financial instruments | 2.3 | 491 | 15 |
Current income tax liabilities | 2.12 | 1,490 | 1,567 |
Client deposits | 18 | 26 | |
Unearned revenue | 2,990 | 2,809 | |
Employee benefit obligations | 1,832 | 1,619 | |
Provisions | 2.6 | 572 | 576 |
Other current liabilities | 2.5 | 9,992 | 10,371 |
Total current liabilities | 20,856 | 18,638 | |
Non-current liabilities | |||
Lease liabilities | 2.8 | 4,014 | – |
Deferred income tax liabilities | 2.12 | 968 | 672 |
Employee benefit obligations | 38 | 44 | |
Other non-current liabilities | 2.5 | 1,048 | 378 |
Total liabilities | 26,924 | 19,732 | |
Equity | |||
Share capital - 5 par value 4,80,00,00,000 (4,80,00,00,000) equity shares authorized, issued and outstanding 4,24,07,53,210 (4,33,59,54,462) equity shares fully paid up, net of 1,82,39,356 (2,03,24,982) treasury shares as at March 31, 2020 (March 31, 2019) | 2.21 | 2,122 | 2,170 |
Share premium | 600 | 396 | |
Retained earnings | 57,506 | 58,848 | |
Cash flow hedge reserves | (15) | 21 | |
Other reserves | 4,070 | 2,570 | |
Capital redemption reserve | 111 | 61 | |
Other components of equity | 1,056 | 882 | |
Total equity attributable to equity holders of the Company | 65,450 | 64,948 | |
Non-controlling interests | 394 | 58 | |
Total equity | 65,844 | 65,006 | |
Total liabilities and equity | 92,768 | 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 |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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 Comprehensive Income for the | Note | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | ||
Revenues | 2.16 | 23,267 | 21,539 | 90,791 | 82,675 |
Cost of sales | 2.18 | 15,501 | 14,283 | 60,732 | 53,867 |
Gross profit | 7,766 | 7,256 | 30,059 | 28,808 | |
Operating expenses | |||||
Selling and marketing expenses | 2.18 | 1,172 | 1,226 | 4,711 | 4,473 |
Administrative expenses | 2.18 | 1,667 | 1,412 | 5,974 | 5,455 |
Total operating expenses | 2,839 | 2,638 | 10,685 | 9,928 | |
Operating profit | 4,927 | 4,618 | 19,374 | 18,880 | |
Other income, net | 2.20 | 614 | 665 | 2,803 | 2,882 |
Finance cost | 2.8 | (45) | – | (170) | – |
Reduction in the fair value of Disposal Group held for sale | 2.10.1 | – | – | – | (270) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.10.1 | – | – | – | (451) |
Profit before income taxes | 5,496 | 5,283 | 22,007 | 21,041 | |
Income tax expense | 2.12 | 1,161 | 1,205 | 5,368 | 5,631 |
Net profit | 4,335 | 4,078 | 16,639 | 15,410 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (21) | (3) | (180) | (22) | |
Equity instruments through other comprehensive income, net | (2) | 1 | (33) | 70 | |
(23) | (2) | (213) | 48 | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | – | (15) | (36) | 21 | |
Exchange differences on translation of foreign operations | 237 | (70) | 378 | 63 | |
Fair value changes on investments, net | 15 | 25 | 22 | 2 | |
252 | (60) | 364 | 86 | ||
Total other comprehensive income/(loss), net of tax | 229 | (62) | 151 | 134 | |
Total comprehensive income | 4,564 | 4,016 | 16,790 | 15,544 | |
Profit attributable to: | |||||
Owners of the Company | 4,321 | 4,074 | 16,594 | 15,404 | |
Non-controlling interests | 14 | 4 | 45 | 6 | |
4,335 | 4,078 | 16,639 | 15,410 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,545 | 4,012 | 16,732 | 15,538 | |
Non-controlling interests | 19 | 4 | 58 | 6 | |
4,564 | 4,016 | 16,790 | 15,544 | ||
Earnings per equity share | |||||
Equity shares of par value 5/- each | |||||
Basic () | 10.19 | 9.37 | 38.97 | 35.44 | |
Diluted () | 10.18 | 9.36 | 38.91 | 35.38 | |
Weighted average equity shares used in computing earnings per equity share | 2.13 | ||||
Basic | 4,240,181,854 | 4,347,129,592 | 4,257,754,522 | 4,347,130,157 | |
Diluted | 4,245,981,386 | 4,353,023,863 | 4,265,144,228 | 4,353,420,772 |
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 |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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 except equity share data)
Shares(1) | Share capital | Share premium | Retained earnings | Other reserves(2) | Capital redemption reserve | Other components of equity | Cash flow hedge reserve | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | |
Balance as at April 1, 2018 |
2,173,312,301 | 1,088 | 186 | 61,241 | 1,583 | 56 | 769 | – | 64,923 | 1 | 64,924 |
Changes in equity for the year ended March 31, 2019 | |||||||||||
Net profit | – | – | – | 15,404 | – | – | – | – | 15,404 | 6 | 15,410 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | (22) | – | (22) | – | (22) |
Fair value changes on derivatives designated as Cash flow hedge* | – | – | – | – | – | – | – | 21 | 21 | – | 21 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | 63 | – | 63 | – | 63 |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | 70 | – | 70 | – | 70 |
Fair value changes on investments, net* | – | – | – | – | – | – | 2 | – | 2 | – | 2 |
Total comprehensive income for the period | – | – | – | 15,404 | – | – | 113 | 21 | 15,538 | 6 | 15,544 |
Shares issued on exercise of employee stock options - before bonus issue (Refer to note 2.11) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of bonus issue | 2,173,704,829 | 1,088 | – | – | – | – | – | – | 1,088 | – | 1,088 |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) | 1,196,804 | – | 6 | – | – | – | – | – | 6 | – | 6 |
Buyback of equity shares (Refer to note 2.5 and 2.21) | (12,652,000) | (6) | – | (1,994) | – | – | – | – | (2,000) | – | (2,000) |
Transaction cost relating to buyback* (Refer note 2.21) | – | – | – | (12) | – | – | – | – | (12) | – | (12) |
Amount utilized for bonus issue | – | – | – | (1,088) | – | – | – | – | (1,088) | – | (1,088) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.21) | – | – | – | (5) | – | 5 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary |
– | – | – | – | – | – | – | – | – | 51 | 51 |
Employee stock compensation expense (refer to note 2.11) | – | – | 197 | – | – | – | – | – | 197 | – | 197 |
Tax effect on exercise of options | – | – | 8 | – | – | – | – | – | 8 | – | 8 |
Transfer on account of options not exercised | – | – | (1) | 1 | – | – | – | – | – | – | – |
Transferred to other reserves | – | – | – | (2,417) | 2,417 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 1,430 | (1,430) | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | – | (13,712) | – | – | – | – | (13,712) | – | (13,712) |
Balance as at March 31, 2019 |
4,335,954,462 | 2,170 | 396 | 58,848 | 2,570 | 61 | 882 | 21 | 64,948 | 58 | 65,006 |
Balance as at April 1, 2019 | 4,335,954,462 | 2,170 | 396 | 58,848 | 2,570 | 61 | 882 | 21 | 64,948 | 58 | 65,006 |
Impact on account of adoption of IFRS 16* (refer to note 2.8) | – | – | – | (40) | – | – | – | – | (40) | – | (40) |
4,335,954,462 | 2,170 | 396 | 58,808 | 2,570 | 61 | 882 | 21 | 64,908 | 58 | 64,966 | |
Changes in equity for the year ended March 31, 2020 | |||||||||||
Net profit | – | – | – | 16,594 | – | – | – | – | 16,594 | 45 | 16,639 |
Remeasurement of the net defined benefit liability/asset* (Refer to note 2.19) | – | – | – | – | – | – | (180) | – | (180) | – | (180) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | (33) | – | (33) | – | (33) |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | – | (36) | (36) | – | (36) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | 365 | – | 365 | 13 | 378 |
Fair value changes on investments, net* | – | – | – | – | – | – | 22 | – | 22 | – | 22 |
Total comprehensive income for the period | – | – | – | 16,594 | – | – | 174 | (36) | 16,732 | 58 | 16,790 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 2,666,014 | 1 | 5 | – | – | – | – | – | 6 | – | 6 |
Buyback of equity shares (Refer to note 2.5 and 2.21) | (97,867,266) | (49) | – | (6,211) | – | – | – | – | (6,260) | – | (6,260) |
Transaction cost relating to buyback* | – | – | – | (11) | – | – | – | – | (11) | – | (11) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.21) | – | – | – | (50) | – | 50 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.10) | – | – | – | – | – | – | – | – | – | 311 | 311 |
Employee stock compensation expense (refer to note 2.11) | – | – | 238 | – | – | – | – | – | 238 | – | 238 |
Income tax benefit arising on exercise of stock options | – | – | 9 | – | – | – | – | – | 9 | – | 9 |
Effect of modification of equity settled share based payment awards to cash settled awards (Refer to note 2.11) | – | – | (48) | (9) | – | – | – | – | (57) | – | (57) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | (33) | (33) |
Financial liability under option arrangements (refer to note 2.10) | – | – | – | (598) | – | – | – | – | (598) | – | (598) |
Transferred to other reserves | – | – | – | (2,580) | 2,580 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 1,080 | (1,080) | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | – | (9,517) | – | – | – | – | (9,517) | – | (9,517) |
Balance as at March 31, 2020 | 4,240,753,210 | 2,122 | 600 | 57,506 | 4,070 | 111 | 1,056 | (15) | 65,450 | 394 | 65,844 |
* net of tax
(1) | excludes treasury shares of 1,82,39,356 as at March 31, 2020, 20,324,982 as at April 1, 2019 and 10,801,956 as at April 1, 2018, held by consolidated trust. The treasury shares as at April 1, 2018 have not been adjusted for the September 2018 bonus issue. | |
(2) | Represents the Special Economic Zone Re-investment reserve created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Group for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961. |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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 | Year ended March 31, | |
2020 | 2019 | ||
Operating activities: | |||
Net Profit | 16,639 | 15,410 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.18 | 2,893 | 2,011 |
Income tax expense | 2.12 | 5,368 | 5,631 |
Finance cost | 2.8 | 170 | – |
Interest and dividend income | (488) | (910) | |
Effect of exchange rate changes on assets and liabilities | 184 | 66 | |
Impairment loss under expected credit loss model | 161 | 239 | |
Reduction in the fair value of Disposal Group held for sale | 2.10.1 | – | 270 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.10.1 | – | 451 |
Stock compensation expense | 2.11 | 249 | 202 |
Other adjustments | (131) | (102) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (3,862) | (2,881) | |
Prepayments and other assets | 505 | (839) | |
Trade payables | (373) | 916 | |
Client deposits | (15) | (11) | |
Unearned revenue | 148 | 334 | |
Other liabilities and provisions | 1,659 | 1,889 | |
Cash generated from operations | 23,107 | 22,676 | |
Income taxes paid | (4,550) | (6,832) | |
Net cash provided by operating activities | 18,557 | 15,844 | |
Investing activities: | |||
Expenditure on property, plant and equipment | (3,307) | (2,445) | |
Loans to employees | – | 14 | |
Deposits placed with corporation | (108) | (24) | |
Interest and dividend received | 375 | 554 | |
Payment of contingent consideration pertaining to acquisition of business | (6) | (18) | |
Payment towards acquisition of business, net of cash acquired | 2.10 | (1,860) | (550) |
Advance payment towards acquisition of business | – | (206) | |
Investment in equity and preference securities | (41) | (21) | |
Investment in others investments | (29) | (19) | |
Sale of others investments | – | 10 | |
Proceeds from sale of equity and preference securities | 27 | 115 | |
Investment in certificates of deposit | (1,114) | (2,393) | |
Redemption of certificates of deposit | 2,545 | 5,540 | |
Investment in quoted debt securities | (2,573) | (1,015) | |
Redemption of quoted debt securities | 3,649 | 862 | |
Redemption of commercial paper | 500 | 300 | |
Investment in commercial paper | – | (491) | |
Escrow and other deposits pertaining to Buyback | – | (257) | |
Redemption of escrow pertaining to Buyback | 2.4 | 257 | – |
Other receipts | 46 | – | |
Investment in liquid mutual fund units and fixed maturity plan securities | (34,839) | (78,355) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 34,685 | 76,821 | |
Net cash (used)/generated in investing activities | (1,793) | (1,578) | |
Financing activities: | |||
Payment of lease liabilities | 2.8 | (571) | – |
Payment of dividends including corporate dividend tax | (9,515) | (13,705) | |
Payment of dividends to non-controlling interests of subsidiary | (33) | – | |
Buyback of equity shares including transaction cost | 2.21.2 | (7,478) | (813) |
Shares issued on exercise of employee stock options | 6 | 6 | |
Net cash used in financing activities | (17,591) | (14,512) | |
Effect of exchange rate changes on cash and cash equivalents | (92) | (57) | |
Net increase/(decrease) in cash and cash equivalents | (827) | (246) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 19,568 | 19,871 |
Cash and cash equivalents at the end of the period | 2.1 | 18,649 | 19,568 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 396 | 358 |
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 |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A.G.S. Manikantha Company Secretary |
Notes to the 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 herein after referred to as the "Group".
The Company is a public limited company incorporated and domiciled in India and has its registered office at Bengaluru, Karnataka, India. The Company has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary Shares (ADS) representing equity shares is listed on the New York Stock Exchange (NYSE).
The Group's consolidated financial statements are authorized for issue by the Company's Board of Directors on April 20, 2020.
1.2 Basis of preparation of financial statements
The consolidated financial statements have been prepared in compliance with IAS 34, Interim Financial Reporting as issued by International Accounting Standards Board, under the historical cost convention on the accrual basis except for certain financial instruments which have been measured at fair values. 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 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 figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The consolidated financial statements comprise the financial statements of the Company, its controlled trusts and its subsidiaries. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.
The financial statements of the Group Companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. The financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the Company, are excluded.
1.4 Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in the financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID 19):
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group. The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these consolidated financial statements.
1.5 Critical accounting estimates and judgments
a. Revenue recognition
The Group’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Group uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The Company's two major tax jurisdictions are India and the U.S., though the Company also files tax returns in other overseas jurisdictions.
Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.
In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the group will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. (Refer to Note 2.12)
c. Business combinations and intangible assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires us to fair value identifiable intangible assets and contingent consideration to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Estimates are required to be made in determining the value of contingent consideration, value of option arrangements and intangible assets. These valuations are conducted by independent valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management (Refer to Note. 2.10).
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 2.7).
e. Impairment of Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGUs) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which represent the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell. Key assumptions in the cash flow projections are prepared based on current economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins. (Refer to Note no 2.9)
f. Leases
IFRS 16 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Group has concluded that no changes are required to lease period relating to the existing lease contracts. (Refer to Note no. 2.8)
g. Non-current assets and Disposal groups 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.
h. Loss allowance for receivables and unbilled revenue
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
1.6 Recent accounting pronouncements
New and revised IFRS Standards in issue but not yet effective:
Conceptual Framework | Amendments to References to the Conceptual Framework in IFRS Standards |
Amendments to IFRS 3 | Definition of a Business |
Amendments to IAS 1 and IAS 8 | Definition of Material |
Amendments to IFRS 9, IAS 39 and IFRS 7 | Interest Rate Benchmark Reform |
Amendments to References to the Conceptual Framework in IFRS Standards
In March 2018, International Accounting Standards Board (IASB) issued Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.
Not all amendments, however, update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate that definitions in the Standard have not been updated with the new definitions developed in the revised Conceptual Framework.
The amendments, where they actually are updates, are effective for annual periods beginning on or after 1 January 2020, with early application permitted.
The Group does not expect that the amendment to have any impact on its consolidated financial statements.
Amendments to IFRS 3 Definition of a business
On October 22, 2018, the International Accounting Standard Board has issued amendments to IFRS 3, ‘Business Combinations’, in connection with clarification of definition of business, to determine whether an acquisition is a business or a group of assets. The amendment added a concept called “Optional Concentration Test” that makes it easier to conclude that a company has acquired a group of assets rather than a business, if the value of the assets acquired is substantially concentrated in a single asset or group of similar assets. An entity may elect to apply or not to apply this optional concentration test on a transaction by transaction basis.
The amendment will apply to the Company effective April 1, 2020 and has to be applied prospectively. Hence there is no impact on the consolidated financial statement.
Amendments to IAS 1 and IAS 8 Definition of Material
In October 2018, the IASB issued Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to make the definition of material in IAS 1 easier to understand. The amendments are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency.
The amendments are required to be applied prospectively for annual periods beginning on or after 1 January 2020, with earlier application permitted.
The Group does not expect the amendment to have any material impact on its evaluation of materiality in relation to its financial statements.
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform
In September 2019, IASB introduced amendments, which modified specific hedge accounting requirements, so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark is not altered as a result of the interest rate benchmark reform.
The changes will mandatorily apply to all hedging relationships that are directly affected by the interest rate benchmark reform.
The Group does not expect the amendment to have any significant impact.
The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2020, although early adoption is permitted.
2. Notes to the condensed consolidated financial statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Cash and bank deposits | 12,288 | 14,197 |
Deposits with financial institutions | 6,361 | 5,371 |
Total Cash and cash equivalents | 18,649 | 19,568 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of 396 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.
2.2 Investments
The carrying value of the investments are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
(i) Current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | – | 18 |
Fair Value through profit or loss | ||
Liquid mutual fund units | ||
Fair value | 2,104 | 1,786 |
Fixed Maturity Plan Securities | ||
Fair value | 489 | – |
Fair Value through other comprehensive income | ||
Quoted Debt Securities | ||
Fair value | 936 | 1,846 |
Commercial paper | ||
Fair value | – | 495 |
Certificates of deposit | ||
Fair value | 1,126 | 2,482 |
Total current investments | 4,655 | 6,627 |
(ii) Non-current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | 1,846 | 1,893 |
Fair Value through other comprehensive income | ||
Quoted debt securities | ||
Fair value | 2,126 | 2,144 |
Unquoted equity and preference securities | ||
Fair value | 102 | 100 |
Fair Value through profit or loss | ||
Unquoted Preference securities | ||
Fair value | 9 | 23 |
Fixed Maturity Plan Securities | ||
Fair value | – | 458 |
Others | ||
Fair value(1) | 54 | 16 |
Total non-current investments | 4,137 | 4,634 |
Total investments | 8,792 | 11,261 |
Investments carried at amortised cost | 1,846 | 1,911 |
Investments carried at fair value through other comprehensive income | 4,290 | 7,067 |
Investments carried at fair value through profit or loss | 2,656 | 2,283 |
(1) | Uncalled capital commitments outstanding as at March 31, 2020 and March 31, 2019 was 61 crore and 86 crore, respectively. |
Refer note 2.3 for accounting policies on financial instruments.
Details of amounts recorded in Other comprehensive income :
(In crore)
Year ended March 31, 2020 | Year ended March 31, 2019 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Quoted debt securities | 27 | (3) | 24 | 6 | (1) | 5 |
Certificates of deposit | (4) | 2 | (2) | (5) | 2 | (3) |
Unquoted equity and preference securities | (27) | (6) | (33) | 63 | 7 | 70 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2020 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 2,104 | 1,786 |
Fixed maturity plan securities | Market observable inputs | 489 | 458 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 2,144 | 2,125 |
Quoted debt securities- carried at fair value through other comprehensive income | Quoted price and market observable inputs | 3,062 | 3,990 |
Certificates of deposit | Market observable inputs | 1,126 | 2,482 |
Commercial paper | Market observable inputs | – | 495 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 102 | 100 |
Unquoted equity and preference securities - carried at fair value through profit or loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 9 | 23 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 54 | 16 |
Total | 9,090 | 11,475 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.3 Financial instruments
Accounting Policy
2.3.1 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.
2.3.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income (FVOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
(iii) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration and financial liability under option arrangements recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments
The Group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
(i) Financial assets or financial liabilities, at fair value through profit or loss
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the Group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under IFRS 9, Financial Instruments. Any derivative that is either not designated as hedge, or is so designated but is ineffective as per IFRS 9, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of comprehensive income when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the Balance Sheet date.
(ii) Cash flow hedge
The Group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the statement of comprehensive income. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the statement of comprehensive income upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the consolidated statement of comprehensive income.
2.3.3 Derecognition of financial instruments
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IFRS 9. A financial liability (or a part of a financial liability) is derecognized from the Group's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
2.3.4 Fair value of financial instruments
In determining the fair value of its financial instruments, the Group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
Refer to table 'Financial instruments by category' below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the balance sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of those instruments.
2.3.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in consolidated statement of comprehensive income.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2020 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 to Note 2.1) | 18,649 | – | – | – | – | 18,649 | 18,649 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual fund units | – | – | 2,104 | – | – | 2,104 | 2,104 |
Fixed maturity plan securities | – | – | 489 | – | – | 489 | 489 |
Quoted debt securities | 1,846 | – | – | – | 3,062 | 4,908 | 5,206(1) |
Certificates of deposit | – | – | – | – | 1,126 | 1,126 | 1,126 |
Unquoted equity and preference securities | – | – | 9 | 102 | – | 111 | 111 |
Unquoted investment others | – | – | 54 | – | – | 54 | 54 |
Trade receivables | 18,487 | – | – | – | – | 18,487 | 18,487 |
Unbilled revenues (3) (Refer to Note 2.17) | 2,796 | – | – | – | – | 2,796 | 2,796 |
Prepayments and other assets (Refer to Note 2.4) | 3,596 | – | – | – | – | 3,596 | 3,514(2) |
Derivative financial instruments | – | – | 53 | – | 9 | 62 | 62 |
Total | 45,374 | – | 2,709 | 102 | 4,197 | 52,382 | 52,598 |
Liabilities: | |||||||
Trade payables | 2,852 | – | – | – | – | 2,852 | 2,852 |
Lease liabilities | 4,633 | – | – | – | – | 4,633 | 4,633 |
Derivative financial instruments | – | – | 471 | – | 20 | 491 | 491 |
Financial liability under option arrangements (Refer to note 2.10) | – | – | 621 | – | – | 621 | 621 |
Other liabilities including contingent consideration (Refer to Note 2.5) | 7,966 | – | 340 | – | – | 8,306 | 8,306 |
Total | 15,451 | – | 1,432 | – | 20 | 16,903 | 16,903 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost of 82 crore
(3) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 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 to Note 2.1) | 19,568 | – | – | – | – | 19,568 | 19,568 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual fund units | – | – | 1,786 | – | – | 1,786 | 1,786 |
Fixed maturity plan securities | – | – | 458 | – | – | 458 | 458 |
Quoted debt securities | 1,911 | – | – | – | 3,990 | 5,901 | 6,115(1) |
Certificates of deposit | – | – | – | – | 2,482 | 2,482 | 2,482 |
Commercial papers | – | – | – | – | 495 | 495 | 495 |
Unquoted equity and preference securities | – | – | 23 | 100 | – | 123 | 123 |
Unquoted investments others | – | – | 16 | – | – | 16 | 16 |
Trade receivables | 14,827 | – | – | – | – | 14,827 | 14,827 |
Unbilled revenue (3)(Refer to Note 2.17) | 2,093 | – | – | – | – | 2,093 | 2,093 |
Prepayments and other assets (Refer to Note 2.4) | 3,648 | – | – | – | – | 3,648 | 3,564(2) |
Derivative financial instruments | – | – | 299 | – | 37 | 336 | 336 |
Total | 42,047 | – | 2,582 | 100 | 7,004 | 51,733 | 51,863 |
Liabilities: | |||||||
Trade payables | 1,655 | – | – | – | – | 1,655 | 1,655 |
Derivative financial instruments | – | – | 15 | – | – | 15 | 15 |
Other liabilities including contingent consideration (Refer to Note 2.5) | 8,731 | – | 190 | – | – | 8,921 | 8,921 |
Total | 10,386 | – | 205 | – | – | 10,591 | 10,591 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost of 84 crore.
(3) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2– Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3- Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities as at March 31, 2020:
(In crore)
Particulars | As at March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 2,104 | 2,104 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 489 | – | 489 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 5,206 | 4,678 | 528 | – |
Investments in certificates of deposit (Refer to Note 2.2) | 1,126 | – | 1,126 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 111 | – | – | 111 |
Investments in unquoted investments others (Refer to Note 2.2) | 54 | – | – | 54 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 62 | – | 62 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 491 | – | 491 | – |
Financial liability under option arrangements (Refer to note 2.10) | 621 | – | – | 621 |
Liability towards contingent consideration (Refer to Note 2.5)* | 340 | – | – | 340 |
*Discount rate pertaining to contingent consideration ranges from 8% to 14%
During the year ended March 31, 2020, quoted debt securities of 662 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and quoted debt securities of 50 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
The following table presents fair value hierarchy of assets and liabilities as at March 31, 2019:
(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 fund units (Refer to Note 2.2) | 1,786 | 1,786 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 458 | – | 458 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 6,115 | 4,358 | 1,757 | – |
Investments in certificates of deposit (Refer to Note 2.2) | 2,482 | – | 2,482 | – |
Investments in commercial papers (Refer to Note 2.2) | 495 | – | 495 | – |
Investments in unquoted equity and preference securities(Refer to Note 2.2) | 123 | – | – | 123 |
Investments in unquoted investments others (Refer to Note 2.2) | 16 | – | – | 16 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 336 | – | 336 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 15 | – | 15 | – |
Liability towards contingent consideration (Refer to Note 2.5)* | 190 | – | – | 190 |
*Discount rate pertaining to contingent consideration ranges from 9% to 16%
During the year ended March 31, 2019, quoted debt securities of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and quoted debt securities of 746 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
Income from financial assets is as follows :
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Interest income from financial assets carried at amortised cost | 327 | 355 | 1,289 | 1,404 |
Interest income on financial assets fair valued through other comprehensive income | 65 | 142 | 322 | 646 |
Dividend income from investments carried at fair value through profit or loss | – | 1 | 2 | 2 |
Gain / (loss) on investments carried at fair value through profit or loss | 35 | 65 | 183 | 170 |
427 | 563 | 1,796 | 2,222 |
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 foreign currency risk from financial assets and liabilities as at March 31, 2020:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,228 | 507 | 163 | 208 | 1,242 | 3,348 |
Trade receivables | 11,565 | 2,331 | 1,064 | 652 | 2,200 | 17,812 |
Unbilled revenue | 5,371 | 1,064 | 314 | 292 | 544 | 7,585 |
Other assets | 754 | 102 | 67 | 38 | 217 | 1,178 |
Trade payables | (764) | (157) | (103) | (74) | (1,453) | (2,551) |
Lease liabilities | (1,681) | (988) | (355) | (59) | (496) | (3,579) |
Employee benefit obligations | (1,046) | (217) | (38) | (204) | (212) | (1,717) |
Other liabilities | (4,040) | (796) | (159) | (268) | (1,348) | (6,611) |
Net assets / (liabilities) | 11,387 | 1,846 | 953 | 585 | 694 | 15,465 |
The following table analyses foreign currency risk from financial 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 |
Unbilled revenue | 3,733 | 769 | 251 | 276 | 434 | 5,463 |
Other assets | 456 | 104 | 34 | 34 | 314 | 942 |
Trade payables | (708) | (128) | (139) | (80) | (107) | (1,162) |
Employee benefit obligations | (678) | (106) | (25) | (205) | (164) | (1,178) |
Other liabilities | (3,523) | (454) | (192) | (177) | (595) | (4,941) |
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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Impact on Group's incremental operating margins | 0.44% | 0.45% | 0.45% | 0.47% |
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 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. 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 following table gives details in respect of outstanding foreign exchange forward and option contracts:
Particulars | As at | As at | ||
March 31, 2020 | March 31, 2019 | |||
In million | In crore | In million | In crore | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 110 | 507 | 120 | 588 |
In Euro | 120 | 993 | 135 | 1,049 |
In United Kingdom Pound Sterling | 21 | 196 | 25 | 226 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 2 | 9 | 8 | 37 |
In Brazilian Real | 57 | 102 | 0 | 0 |
In Canadian dollars | 21 | 117 | 13 | 68 |
In Chinese Yuan | 210 | 226 | – | – |
In Euro | 191 | 1,581 | 176 | 1,367 |
In Japanese Yen | – | – | 550 | 34 |
In New Zealand dollars | 16 | 72 | 16 | 75 |
In Norwegian Krone | 40 | 29 | 40 | 32 |
In Poland złoty | 92 | 165 | – | – |
In Romanian Leu | 20 | 33 | – | – |
In South African Rand | – | – | – | – |
In Singapore dollars | 177 | 954 | 140 | 716 |
In Swedish Krona | 50 | 37 | 50 | 37 |
In Swiss Franc | 1 | 9 | 25 | 172 |
In U.S. dollars | 1,048 | 7,925 | 955 | 6,608 |
In United Kingdom Pound Sterling | 50 | 469 | 80 | 724 |
Option Contracts | ||||
In Australian dollars | – | – | 10 | 49 |
In Canadian dollars | – | – | 13 | 69 |
In Euro | – | – | 60 | 466 |
In Swiss Franc | – | – | 5 | 35 |
In U.S. dollars | 555 | 4,196 | 433 | 2,995 |
In United Kingdom Pound Sterling | – | – | 10 | 91 |
Total forwards & options | 17,620 | 15,438 |
The group recognized a net loss of 461 crore and 447 crore during the three months and year ended March 31, 2020 and a net gain of 207 crore and 240 crore during the three months and year ended March 31, 2019, respectively, on derivative financial instruments not designated as cash flow hedges which are included in other income.
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 | |
March 31, 2020 | March 31, 2019 | |
Not later than one month | 5,687 | 4,432 |
Later than one month and not later than three months | 8,727 | 6,921 |
Later than three months and not later than one year | 3,206 | 4,085 |
Total | 17,620 | 15,438 |
During the year ended March 31, 2020 and March 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 hedging reserve as at March 31, 2020 are expected to occur and reclassified to statement of comprehensive income within 3 months.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of its forecasted cash flows. 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 profit or loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the three months and year ended March 31, 2020 and March 31, 2019:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Gain / (Loss) | ||||
Balance at the beginning of the period | (15) | 36 | 21 | – |
Gain / (loss) recognised in other comprehensive income during the period | 30 | 25 | 25 | 118 |
Amount reclassified to profit and loss during the period | (32) | (45) | (73) | (90) |
Tax impact on above | 2 | 5 | 12 | (7) |
Balance at the end of the period | (15) | 21 | (15) | 21 |
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 following table provides quantitative information about offsetting of derivative financial assets and derivative financial liabilities:
(In crore)
Particulars | As at | |||
March 31, 2020 | March 31, 2019 | |||
Derivative financial asset |
Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 86 | (515) | 338 | (17) |
Amount set off | (24) | 24 | (2) | 2 |
Net amount presented in balance sheet | 62 | (491) | 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 18,487 crore and 14,827 crore as at March 31, 2020 and March 31, 2019, respectively and unbilled revenue amounting to 7,121crore and 5,374 crore as at March 31, 2020 and March 31, 2019, respectively. Trade receivables and unbilled revenue are typically unsecured and are derived from revenues from customers primarily located in the United States of America. 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 the expected credit loss model to assess any required allowances; and uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. This matrix takes into account available external and internal credit risk information such as CDS spead quotes, ratings from international credit rating agencies and the Group's historical collection experience for customers.
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. Exposure to customers is diversified and there is no single customer contributing more than 10% of outstanding trade receivables and unbilled revenues.
The following table gives details in respect of percentage of revenues generated from top customer and top ten customers:
(In %)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue from top customer | 3.1 | 3.3 | 3.1 | 3.6 |
Revenue from top ten customers | 18.7 | 19.7 | 19.2 | 19.0 |
Credit risk exposure
The allowance of lifetime expected credit loss on customer balances for the three months and year ended March 31, 2020 was 72 crore and 161 crore, respectively.
The allowance of lifetime expected credit losses for the three months and year ended March 31, 2019 was 15 crore and 239 crore, respectively
Movement in credit loss allowance:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Balance at the beginning | 653 | 615 | 627 | 449 |
Translation differences | 8 | (3) | 17 | 12 |
Impairment loss recognised / (reversed) | 72 | 15 | 161 | 239 |
Write-offs | (28) | – | (100) | (73) |
Balance at the end | 705 | 627 | 705 | 627 |
The gross carrying amount of a financial asset is written off (either partially or in full) when there is no realistic prospect of recovery.
The Group’s credit period generally ranges from 30-60 days.
Credit exposure
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Trade receivables | 18,487 | 14,827 |
Unbilled revenue | 7,121 | 5,374 |
Days Sales Outstanding (DSO) as of March 31, 2020 and March 31, 2019 was 69 days and 66 days, respectively.
Credit risk on cash and cash equivalents is limited as the Group generally invest in deposits with banks and financial institutions with high ratings assigned by international and domestic credit rating agencies. Ratings are monitored periodically and the Group has considered the latest available credit ratings in view of COVID – 19 as at the date of approval of these condensed consolidated financial statements..
Majority of investments of the Group are fair valued based on Level 1 or Level 2 inputs. These investments primarily include investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, commercial papers, quoted bonds issued by government and quasi-government organizations and non convertible debentures. The Group invests after considering counterparty risks based on multiple criteria including Tier I capital, Capital Adequacy Ratio, Credit Rating, Profitability, NPA levels and Deposit base of banks and financial institutions. These risks are monitored regularly as per its risk management program.
Liquidity risk
Liquidity risk is defined as the risk that the Group will not be able to settle or meet its obligations on time.
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 March 31, 2020, the Group had a working capital of 33,720 crore including cash and cash equivalents of 18,469 crore and current investments of 4,655 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 March 31, 2020 and March 31, 2019, the outstanding employee benefit obligations were 1,870 crore and 1,663 crore, respectively, which have been substantially funded. Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2020:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 2,852 | – | – | – | 2,852 |
Other financial liabilities (excluding liability towards contingent consideration) (Refer to Note 2.5) | 7,939 | 22 | 5 | – | 7,966 |
Financial liability under option arrangements | – | – | 621 | – | 621 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 225 | 75 | 67 | – | 367 |
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 contingent consideration) (Refer to Note 2.5) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 114 | 83 | – | 36 | 233 |
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Rental deposits | 27 | 15 |
Security deposits | 8 | 4 |
Loans to employees | 239 | 241 |
Prepaid expenses(1) | 968 | 751 |
Interest accrued and not due | 474 | 905 |
Withholding taxes and others(1) | 1,583 | 1,488 |
Advance payments to vendors for supply of goods(1) | 145 | 109 |
Deposit with corporations* | 1,795 | 1,671 |
Deferred contract cost(1) | 33 | 58 |
Escrow and other deposits pertaining to buyback (refer to note 2.21.2) | – | 257 |
Net investment in sublease of right of use asset (refer to note 2.8) | 35 | – |
Other assets (2) | 288 | 224 |
Total Current prepayment and other assets | 5,595 | 5,723 |
Non-current | ||
Loans to employees | 21 | 19 |
Deposit with corporations* | 55 | 67 |
Rental deposits | 221 | 193 |
Security deposits | 50 | 52 |
Withholding taxes and others(1) | 777 | 929 |
Deferred contract cost(1) | 101 | 277 |
Prepaid expenses(1) | 87 | 162 |
Advance pertaining to business acquisition (1) | – | 206 |
Net investment in sublease of right of use asset (refer to note 2.8) | 398 | – |
Prepaid gratuity(1) | 151 | 42 |
Other assets | 13 | – |
Total Non- current prepayment and other assets | 1,874 | 1,947 |
Total prepayment and other assets | 7,469 | 7,670 |
Financial assets in prepayments and other assets | 3,596 | 3,648 |
(1) Non financial assets
(2) Includes non financial assset of 28 crore
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. As at March 31, 2020, Cenvat recoverable includes 372 crore which are pending adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
* | Deposit with corporations represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business. |
2.5 Other liabilities
Other liabilities comprise the following :
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Accrued compensation to employees | 2,958 | 2,572 |
Accrued expenses | 3,921 | 3,319 |
Withholding taxes and others(1) | 1,759 | 1,487 |
Retention money | 72 | 112 |
Liabilities of controlled trusts | 188 | 168 |
Deferred income - government grant on land use rights(1) | 2 | 1 |
Accrued gratuity (1) | 3 | 2 |
Accrued provident fund liability (refer note 2.19) | 64 | – |
Liability towards contingent consideration | 219 | 102 |
Deferred rent (1) | – | 63 |
Capital Creditors | 280 | 676 |
Financial liability relating to buyback (2) | – | 1,202 |
Other non-financial liabilities | 6 | – |
Other financial liabilities | 520 | 667 |
Total current other liabilities | 9,992 | 10,371 |
Non-current | ||
Liability towards contingent consideration | 121 | 88 |
Accrued gratuity (1) | 28 | 30 |
Accrued provident fund liability (refer note 2.19) (1) | 185 | – |
Accrued compensation to employees | 22 | 15 |
Deferred income - government grant on land use rights(1) | 43 | 42 |
Deferred rent (1) | – | 174 |
Deferred income(1) | 21 | 29 |
Other financial liabilities | 5 | – |
Other non-financial liabilities(1) | 2 | – |
Financial liability under option arrangements (refer to note 2.10) | 621 | – |
Total non-current other liabilities | 1,048 | 378 |
Total other liabilities | 11,040 | 10,749 |
Financial liabilities included in other liabilities | 8,927 | 8,921 |
Financial liability towards contingent consideration on an undiscounted basis | 367 | 233 |
(1)Non financial liabilities
(2) | In accordance with IAS 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 2.21.2). The financial liability is recognized at the present value of the maximum amount that the Company would be required to pay to the registered broker for buy back, 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. |
Accrued expenses primarily relates to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance.
2.6 Provisions and other contingent liability
Accounting Policy
Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Post sales client support
The Group provides its clients with a fixed-period post sales support 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 cost of sales. The Group estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.
Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.
Provisions comprise the following:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Provision for post sales client support and other provisions | 572 | 576 |
572 | 576 |
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.
The movement in the provision for post sales client support and other provisions is as follows:
(In crore)
Particulars | Three months ended March 31, 2020 | Year ended March 31, 2020 |
Balance at the beginning | 603 | 576 |
Provision recognized / (reversed) | 1 | 116 |
Provision utilized | (66) | (174) |
Translation difference | 34 | 54 |
Balance at the end | 572 | 572 |
Provision for post sales client support and other provisions is included in cost of sales in the consolidated statement of comprehensive income.
As at March 31, 2020 and March 31, 2019 claims against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.12) amounted to 230 crore each.
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged 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 reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’s results of operations or financial condition.
2.7 Property, plant and equipment
Accounting Policy
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The Group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22-25 years |
Plant and machinery(1) | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Leasehold improvements | Lower of useful life of the asset or lease term |
(1) Includes solar plant with a useful life of 20 years
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the consolidated statement of comprehensive income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the consolidated statement of comprehensive income.
Impairment
Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in net profit in the statement of comprehensive income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in net profit in the statement of comprehensive income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated depreciation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2020:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at January 1, 2020 | 1,314 | 9,460 | 4,509 | 6,513 | 2,752 | 43 | 24,591 |
Additions | 2 | 524 | 192 | 192 | 144 | 1 | 1,055 |
Additions - Business combinations (Refer to Note 2.10) | – | – | 1 | 2 | 5 | – | 8 |
Deletions | – | – | (5) | (38) | (22) | – | (65) |
Translation difference | – | 32 | 4 | 7 | 8 | 1 | 52 |
Gross carrying value as at March 31, 2020 | 1,316 | 10,016 | 4,701 | 6,676 | 2,887 | 45 | 25,641 |
Accumulated depreciation as at January 1, 2020 | – | (3,190) | (3,041) | (4,711) | (1,774) | (26) | (12,742) |
Depreciation | – | (91) | (123) | (209) | (92) | (2) | (517) |
Accumulated depreciation on deletions | – | – | 5 | 38 | 22 | – | 65 |
Translation difference | – | (3) | (2) | (3) | (4) | – | (12) |
Accumulated depreciation as at March 31, 2020 | – | (3,284) | (3,161) | (4,885) | (1,848) | (28) | (13,206) |
Capital work-in progress as at January 1, 2020 | 1,689 | ||||||
Carrying value as at January 1, 2020 | 1,314 | 6,270 | 1,468 | 1,802 | 978 | 17 | 13,538 |
Capital work-in progress as at March 31, 2020 | 1,264 | ||||||
Carrying value as at March 31, 2020 | 1,316 | 6,732 | 1,540 | 1,791 | 1,039 | 17 | 13,699 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at January 1, 2019 | 1,957 | 8,633 | 3,609 | 5,516 | 2,040 | 35 | 21,790 |
Additions | 36 | 402 | 427 | 453 | 215 | 3 | 1,536 |
Additions- Business combinations (Refer note 2.10) | – | – | – | – | – | – | – |
Deletions | (83) | (116) | (86) | (122) | (32) | – | (439) |
Translation difference | – | 7 | 1 | (1) | (3) | – | 4 |
Gross carrying value as at March 31, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Accumulated depreciation as at January 1, 2019 | (35) | (2,948) | (2,655) | (4,101) | (1,503) | (21) | (11,263) |
Depreciation | (1) | (81) | (110) | (212) | (68) | (2) | (474) |
Accumulated depreciation on deletions | 3 | 103 | 68 | 122 | 29 | – | 325 |
Translation difference | – | (1) | – | (1) | 1 | 1 | – |
Accumulated depreciation as at March 31, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Capital work-in progress as at January 1, 2019 | 2,153 | ||||||
Carrying value as at January 1, 2019 | 1,922 | 5,685 | 954 | 1,415 | 537 | 14 | 12,680 |
Capital work-in progress as at March 31, 2019 | 1,877 | ||||||
Carrying value as at March 31, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2020:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Additions | 11 | 1,056 | 756 | 930 | 677 | 7 | 3,437 |
Additions - Business combinations (Refer to Note 2.10) | – | – | 1 | 62 | 15 | – | 78 |
Deletions | – | – | (14) | (179) | (39) | (1) | (233) |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | (605) | – | – | – | – | – | (605) |
Translation difference | – | 34 | 7 | 17 | 14 | 1 | 73 |
Gross carrying value as at March 31, 2020 | 1,316 | 10,016 | 4,701 | 6,676 | 2,887 | 45 | 25,641 |
Accumulated depreciation as at April 1, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Depreciation | – | (353) | (476) | (862) | (337) | (7) | (2,035) |
Accumulated depreciation on deletions | – | – | 14 | 178 | 39 | 1 | 232 |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | 33 | – | – | – | – | – | 33 |
Translation difference | – | (4) | (2) | (9) | (9) | – | (24) |
Accumulated depreciation as at March 31, 2020 | – | (3,284) | (3,161) | (4,885) | (1,848) | (28) | (13,206) |
Capital work-in progress as at April 1, 2019 | 1,877 | ||||||
Carrying value as at April 1, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
Capital work-in progress as at March 31, 2020 | 1,264 | ||||||
Carrying value as at March 31, 2020 | 1,316 | 6,732 | 1,540 | 1,791 | 1,039 | 17 | 13,699 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,900 | 8,130 | 3,373 | 4,884 | 1,861 | 31 | 20,179 |
Additions | 57 | 916 | 675 | 1,129 | 386 | 9 | 3,172 |
Additions- Business combinations (Refer note 2.10) | – | – | 3 | 34 | 10 | – | 47 |
Deletions | – | – | 3 | 40 | 25 | – | 68 |
Reclassified as held for sale (refer note no 2.10.1) | (47) | (116) | (102) | (239) | (59) | (2) | (565) |
Translation difference | – | (4) | (1) | (2) | (3) | – | (10) |
Gross carrying value as at March 31, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Accumulated depreciation as at April 1, 2018 | (31) | (2,719) | (2,342) | (3,630) | (1,323) | (18) | (10,063) |
Depreciation | (5) | (313) | (437) | (766) | (255) | (6) | (1,782) |
Accumulated depreciation on deletions | – | – | (2) | (25) | (20) | – | (47) |
Reclassified as held for sale (refer note no 2.10.1) | 3 | 103 | 83 | 229 | 55 | 2 | 475 |
Translation difference | – | 2 | 1 | – | 2 | – | 5 |
Accumulated depreciation as at March 31, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Capital work-in progress as at April 1, 2018 | 2,027 | ||||||
Carrying value as at April 1, 2018 | 1,869 | 5,411 | 1,031 | 1,254 | 538 | 13 | 12,143 |
Capital work-in progress as at March 31, 2019 | 1,877 | ||||||
Carrying value as at March 31, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
The aggregate depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
The contractual commitments for capital expenditure primarily comprises of commitments for infrastructure facilities and computer equipment’s aggregating to 1,365 crore and 1,724 crore as at March 31, 2020 and March 31, 2019, respectively.
2.8 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 year 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 sub-lease 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 IFRS 16 “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 in the Company’s 2019 Consolidated financial statements under IFRS for the 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 sub-lease' 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 operating profit, net profit for the period and earnings per share. IFRS 16 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, IFRS 16 is applied only to contracts that were previously identified as leases under IAS 17. |
The difference between the lease obligation recorded as at March 31, 2019 under IAS 17 disclosed under Note 2.15 of the 2019 Annual Report on Form 20F and the value of the lease liabilities as at 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 IFRS 16 and discounting the lease liabilities to the present value under IFRS 16.
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 March 31, 2020:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as of January 1, 2020 | 625 | 3,169 | 18 | 42 | 3,854 |
Additions* | 1 | 478 | – | 1 | 480 |
Deletions | – | (23) | (1) | – | (24) |
Depreciation | (1) | (149) | (2) | (2) | (154) |
Translation difference | 1 | 10 | – | 1 | 12 |
Balance as of March 31, 2020 | 626 | 3,485 | 15 | 42 | 4,168 |
*Net of lease incentives of 47 crore related to lease of buildings
Following are the changes in the carrying value of right of use assets for the year ended March 31, 2020:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as at April 1, 2019 | – | 2,898 | 9 | – | 2,907 |
Reclassified on account of adoption of IFRS 16 | 634 | – | – | – | 634 |
Additions* | 1 | 1,064 | 6 | 49 | 1,120 |
Additions through business combination (Refer to Note 2.10) | – | 177 | 10 | – | 187 |
Deletions | (3) | (130) | (1) | – | (134) |
Depreciation | (6) | (540) | (9) | (8) | (563) |
Translation difference | – | 16 | – | 1 | 17 |
Balance as at March 31, 2020 | 626 | 3,485 | 15 | 42 | 4,168 |
*Net of lease incentives of 115 crore related to lease of buildings
The aggregate depreciation expense on ROU assets is included in cost of sales in the consolidated statement of comprehensive income.
The following is the break-up of current and non-current lease liabilities as at March 31, 2020
(In crore)
Particulars | Amount |
Current lease liabilities | 619 |
Non-current lease liabilities | 4,014 |
Total | 4,633 |
The following is the movement in lease liabilities during the three months and year ended March 31, 2020.
(In crore)
Particulars | Three months ended March 31, 2020 |
Year ended March 31, 2020 |
Balance as at Beginning | 4,143 | 3,598 |
Additions | 575 | 1,241 |
Additions through business combination (Refer to Note 2.10) | – | 224 |
Deletions | (29) | (145) |
Finance cost accrued during the period | 45 | 170 |
Payment of lease liabilities | (208) | (639) |
Translation difference | 107 | 184 |
Balance as at end | 4,633 | 4,633 |
The table below provides details regarding the contractual maturities of lease liabilities as at March 31, 2020 on an undiscounted basis.
(In crore)
Particulars | Amount |
Less than one year | 796 |
One to five years | 2,599 |
More than five years | 2,075 |
Total | 5,470 |
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 recorded for short-term leases was 24 crore and 89 crore for the three months and year ended March 31, 2020.
The following is the movement in the net-investment in sub-lease of ROU asset during the three months and year ended March 31, 2020:
(In crore)
Particulars | Three months ended March 31, 2020 |
Year ended March 31, 2020 |
Balance as at Beginning | 417 | 430 |
Interest income accrued during the period | 4 | 15 |
Lease receipts | (12) | (46) |
Translation difference | 24 | 34 |
Balance as at end | 433 | 433 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as at March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 50 |
One to five years | 217 |
More than five years | 244 |
Total | 511 |
Leases not yet commenced to which Group is committed amounts to 655 crore for a lease term ranging from 2 years to 13 years.
2.9 Goodwill and other Intangible assets
2.9.1 Goodwill
Accounting Policy
Goodwill represents the purchase consideration in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquired entity. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the purchase consideration, the fair value of net assets acquired is reassessed and the bargain purchase excess is recognized immediately in the net profit in the Statement of Comprehensive Income. Goodwill is measured at cost less accumulated impairment losses.
Impairment
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the Statement of Comprehensive Income and is not reversed in the subsequent period.
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Carrying value at the beginning | 3,540 | 2,211 |
Goodwill on Wongdoody acquisition | – | 173 |
Goodwill on Fluido acquisition | – | 240 |
Goodwill reclassified from assets held for sale , net of reduction in recoverable amount | – | 863 |
Goodwill on Stater acquisition (Refer to note 2.10) | 399 | – |
Goodwill on Hipus acquisition (Refer to note 2.10) | 108 | – |
Goodwill on Simplus acquisition (Refer to note 2.10) | 983 | – |
Translation differences | 256 | 53 |
Carrying value at the end | 5,286 | 3,540 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the cash generating units (CGU) or groups of CGU’s, which benefit from the synergies of the acquisition.The Group internally reviews the goodwill for impairment at the operating segment level, after allocation of the goodwill to CGU’s or groups of CGUs.
The following table presents the allocation of goodwill to operating segments as at March 31, 2020 and March 31, 2019 respectively
(In crore)
Segment | As at | |
March 31, 2020 | March 31, 2019 | |
Financial services | 1,262 | 743 |
Retail | 500 | 437 |
Communication | 472 | 389 |
Energy, Utilities, Resources and Services | 886 | 374 |
Manufacturing | 378 | 239 |
3,498 | 2,182 | |
Operating segments without significant goodwill | 766 | 417 |
Total | 4,264 | 2,599 |
Consequent to reclassification from held for sale (refer note 2.10.2), the goodwill pertaining to Panaya, Kallidus and Skava are tested for impairment at the respective entity level, which amounts to 1,022 crore and 941 crore as at March 31, 2020 and March 31, 2019, respectively.
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. Value-in-use is determined based on discounted future cash flows. The key assumptions used for the calculations are as follows:
(in %)
As at | ||
March 31, 2020 | March 31, 2019 | |
Long term growth rate | 7-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 11.9 | 12.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. As at March 31, 2020, the estimated recoverable amount of the CGU exceeded its carrying amount. Reasonable sensitivities in the key assumptions consequent to the change in estimated future economic conditions on account of possible effects relating to Covid 19 is unlikely to cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.9.2 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), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset. 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 Company 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 net profit in the statement of comprehensive income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in net profit in the statement of comprehensive income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2020:
(In crore)
Particulars | Customer related | Software related | Intellectual property rights related | Brand or Trademark Related | Others* | Total |
Gross carrying value as at January 1, 2020 | 1,661 | 642 | 1 | 126 | 84 | 2,514 |
Additions during the period | – | 21 | – | – | – | 21 |
Acquisition through business combination (Refer note no. 2.10.1) | 152 | – | – | 111 | 325 | 588 |
Deletions | – | – | – | – | – | – |
Translation differences | 65 | 34 | – | 4 | 2 | 105 |
Gross carrying value as at March 31, 2020 | 1,878 | 697 | 1 | 241 | 411 | 3,228 |
Accumulated amortization as at January 1, 2020 | (685) | (402) | (1) | (59) | (46) | (1,193) |
Amortization expense | (40) | (23) | – | (5) | (10) | (78) |
Deletions | – | – | – | – | – | – |
Translation differences | (30) | (25) | – | (2) | – | (57) |
Accumulated amortization as at March 31, 2020 | (755) | (450) | (1) | (66) | (56) | (1,328) |
Carrying value as at January 1, 2020 | 976 | 240 | – | 67 | 38 | 1,321 |
Carrying value as at March 31, 2020 | 1,123 | 247 | – | 175 | 355 | 1,900 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-14 | 0-9 | – | 1-10 | 1-5 |
Following are the changes in the carrying value of acquired intangible assets for the three months 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 January 1, 2019 | 950 | 446 | 1 | 72 | 100 | 84 | 1,653 |
Additions during the period | – | – | – | – | – | – | |
Acquisition through business combination (Refer note no. 2.10.1) | – | – | – | – | – | – | – |
Deletions | – | – | – | – | – | – | |
Translation differences | (13) | (5) | – | 1 | (1) | (1) | (19) |
Gross carrying value as at March 31, 2019 | 937 | 441 | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at January 1, 2019 | (538) | (283) | (1) | (11) | (42) | (22) | (897) |
Amortization expense | (25) | (22) | – | (1) | (3) | (6) | (57) |
Deletions | – | – | – | – | – | – | – |
Translation differences | 6 | 3 | – | 1 | 1 | – | 11 |
Accumulated amortization as at March 31, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Carrying value as at January 1, 2019 | 412 | 163 | – | 61 | 58 | 62 | 756 |
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 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2020:
(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 during the period | – | 86 | – | – | – | – | 86 |
Acquisition through business combination (Refer note no. 2.10.1) | 817 | 110 | – | – | 135 | 325 | 1,387 |
Reclassified on account of adoption of IFRS 16 | – | – | – | (73) | – | – | (73) |
Deletions | – | – | – | – | – | – | – |
Translation differences | 124 | 60 | – | – | 7 | 3 | 194 |
Gross carrying value as at March 31, 2020 | 1,878 | 697 | 1 | – | 241 | 411 | 3,228 |
Accumulated amortization as at April 1, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Amortization expense | (146) | (105) | – | – | (17) | (27) | (295) |
Reclassified on account of adoption of IFRS 16 | – | – | – | 11 | – | – | 11 |
Deletions | – | – | – | – | – | – | – |
Translation differences | (52) | (43) | – | – | (5) | (1) | (101) |
Accumulated amortization as at March 31, 2020 | (755) | (450) | (1) | – | (66) | (56) | (1,328) |
Carrying value as at April 1, 2019 | 380 | 139 | – | 62 | 55 | 55 | 691 |
Carrying value as at March 31, 2020 | 1,123 | 247 | – | – | 175 | 355 | 1,900 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-14 | 0-9 | – | – | 1-10 | 1-5 |
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 |
Additions during the period | – | 9 | – | – | – | – | 9 |
Acquisition through business combination (Refer note no. 2.10.1) | 334 | – | – | – | 36 | 62 | 432 |
Deletions | – | – | – | – | – | – | – |
Reclassified as held for sale (refer note no 2.10.2) | 157 | 388 | 1 | – | 37 | – | 583 |
Translation differences | 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) |
Amortization expense | (112) | (90) | – | (2) | (10) | (15) | (229) |
Reduction in value | (93) | – | – | – | – | – | (93) |
Deletions | – | – | – | – | – | – | – |
Reclassified as held for sale (refer note no 2.10.2) | (56) | (182) | (1) | – | (21) | – | (260) |
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 |
* Majorly includes intangibles related to salesforce relationships
Research and development expense recognized in net profit in the consolidated statement of comprehensive income for the three months ended March 31, 2020 and March 31, 2019 was 209 crore and 196 crore respectively, and for the year ended March 31, 2020 and March 31, 2019 was 829 crore and 769 crore respectively.
2.10 BUSINESS COMBINATIONS AND DISPOSAL GROUP HELD FOR SALE
2.10.1 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. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the Statement of Comprehensive Income.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
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. Retention bonus is recognized in employee benefit expenses in the statement of Comprehensive Income over the period of service.
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 March 31, 2020 is $19 million (145 crore).
The transaction costs of 3 crore related to the acquisition have been included in the statement of Comprehensive Income 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 March 31, 2020 is SGD 7 million (37 crore).
The transaction costs of 3 crore related to the acquisition have been included in the statement of Comprehensive Income 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 March 31, 2020 was EUR 9 million (73 crore).
The transaction costs of 5 crore related to the acquisition have been included in the Consolidated Statement of Comprehensive Income 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 consolidated statement of comprehensive income for the year ended March 31, 2020.
Outbox systems Inc. dba Simplus
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus , a US based sales force advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of up to $250 million (approximately 1,892 crore), comprising of cash consideration of $180 million (approximately 1,362 crore), contingent consideration of up to $20 million (approximately 151 crore), additional performance bonus and retention payouts of upto $50 million (approximately 378 crore) payable to the employees of Simplus over the next three years, subject to their continuous employment with the group and meeting certain targets. Performance and retention bonus is recognized in employee benefit expenses in the Statement of Comprehensive Income over the period of service.
Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill. Goodwill includes the value expected from addition of new customers and estimated synergies which does not qualify as an intangible asset.
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(*) | 22 | – | 22 |
Intangible assets - Customer contracts and relationships | – | 152 | 152 |
Intangible assets - Salesforce Relationships | – | 325 | 325 |
Intangible assets - Brand | – | 111 | 111 |
Deferred tax liabilities on intangible assets | – | (152) | (152) |
22 | 436 | 458 | |
Goodwill | 983 | ||
Total purchase price | 1,441 |
* Includes cash and cash equivalents acquired of 7 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 | 1,357 |
Fair value of contingent consideration | 84 |
Total purchase price | 1,441 |
The gross amount of trade receivables acquired and its fair value is approximately 73 crore and the amount is recoverable
The payment of contingent consideration to sellers of Simplus is dependent upon the achievement of certain financial targets by Simplus. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 10.5% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration as of March 31, 2020 was $13 million (approximately 97 crore).
The transaction costs of 6 crore related to the acquisition have been included under administrative expenses in the consolidated statement of comprehensive income for the year ended March 31, 2020.
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.
2.10.2. 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 year ended March 31, 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 year ended March 31, 2019, 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.
Further, 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 Comprehensive Income for the year ended March 31, 2019.
2.11 Employees' Stock Option Plans (ESOP)
Accounting Policy
The Group recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with IFRS 2, 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 premium.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan)
On June 22, 2019 pursuant to the approval by the shareholders in the Annual General Meeting , the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 50,000,000 equity shares. To implement the 2019 Plan , up to 45,000,000 equity shares may be issued by way of secondary acquisition of shares by the Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 Plan) :
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC) . The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.
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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares 200,000 equity shares each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the three months and year ended March 31, 2020 and March 31, 2019:
2019 Plan | 2015 Plan | |||||||
Particulars | Three months ended March 31, | Year ended March 31, | Three months ended March 31, |
Year ended March 31, | ||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019* | |
Equity settled RSU | ||||||||
KMPs | 169,000 | – | 356,793 | – | 295,800 | 458,330 | 507,896 | 675,530 |
Employees other than KMP | 1,734,500 | – | 1,734,500 | – | 1,370,250 | 1,878,050 | 3,346,280 | 3,665,170 |
Total Grants | 1,903,500 | – | 2,091,293 | – | 1,666,050 | 2,336,380 | 3,854,176 | 4,340,700 |
Cash settled RSU | ||||||||
KMPs | – | – | – | – | 180,400 | – | 180,400 | – |
Employees other than KMP | – | – | – | – | 377,260 | 21,500 | 475,740 | 74,090 |
– | – | – | – | 557,660 | 21,500 | 656,140 | 74,090 | |
Total Grants | 19,03,500 | – | 20,91,293 | – | 22,23,710 | 2,357,880 | 45,10,316 | 44,14,790 |
*Information is adjusted for September 2018 bonus issue.
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with IFRS 2, Share based payments.
The Board, on April 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.
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. 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
Under the 2015 plan:
On February, 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 4 crore for financial year 2020 under the 2019 Plan. 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 KMPs
Under the 2015 plan:
On April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019. The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain performance targets.
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(in crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Granted to: | ||||
KMP | 11 | 10 | 56 | 33 |
Employees other than KMP | 55 | 49 | 193 | 169 |
Total (1) | 66 | 59 | 249 | 202 |
(1) Cash settled stock compensation expense included in the above | 7 | 1 | 11 | 5 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 57 crore is recognized as financial liability with a corresponding adjustment to equity.
The activity in the 2015 and 2019 plan for equity-settled share based payment transactions during the three months ended March 31, 2020 and March 31, 2019 is set out as follows:
Particulars | Three months ended March 31, 2020 | Three months ended March 31, 2019 | Year ended March 31, 2020 | Year ended March 31, 2019 | ||||
Shares arising out of options | Weighted average exercise price () | Shares arising out of options | Weighted average exercise price () | 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 | 8,679,944 | 3.77 | 7,659,466 | 2.50 | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Granted | 1,666,050 | 5.00 | 2,336,380 | 5.00 | 3,854,176 | 5.00 | 4,340,700 | 3.84 |
Exercised | 955,650 | 3.72 | 660,078 | 2.50 | 2,561,218 | 2.95 | 1,864,510 | 2.50 |
Modification to cash settled awards | 408,568 | – | – | – | 1,061,820 | – | – | – |
Forfeited and expired | 200,878 | 3.74 | 154,570 | 2.67 | 631,438 | 3.29 | 795,810 | 2.61 |
Outstanding at the end | 8,780,898 | 3.96 | 9,181,198 | 3.13 | 8,780,898 | 3.96 | 9,181,198 | 3.13 |
Exercisable at the end | 392,185 | 2.54 | 235,256 | 2.50 | 392,185 | 2.54 | 235,256 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||||||
Outstanding at the beginning | 1,146,354 | 520 | 1,641,600 | 519 | 1,623,176 | 516 | 1,933,826 | 493 |
Granted | – | – | – | – | – | – | – | – |
Exercised | 31,124 | 499 | 8,224 | 499 | 104,796 | 516 | 117,350 | 515 |
Modification to cash settled awards | – | – | – | – | 351,550 | – | – | – |
Forfeited and expired | 14,900 | 499 | 10,200 | 499 | 66,500 | 528 | 193,300 | 521 |
Outstanding at the end | 1,100,330 | 539 | 1,623,176 | 516 | 1,100,330 | 539 | 1,623,176 | 516 |
Exercisable at the end | 780,358 | 543 | 698,500 | 517 | 780,358 | 543 | 698,500 | 517 |
2019 Plan: RSU | ||||||||
Outstanding at the beginning | 187,793 | 5.00 | – | – | – | – | – | – |
Granted | 1,903,500 | 5.00 | – | – | 2,091,293 | 5.00 | – | – |
Exercised | – | – | – | – | – | – | – | – |
Forfeited and expired | – | – | – | – | – | – | – | – |
Outstanding at the end | 2,091,293 | 5.00 | – | – | 2,091,293 | 5.00 | – | – |
Exercisable at the end | – | – | – | – | – | – | – | – |
Information in the table above is adjusted for September, 2018 bonus issue
During the three months ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 720 and 732 respectively.
During the year ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 751 and 701 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2020 is as follows:
2019 plan - Options outstanding | 2015 plan - Options outstanding | |||||
Range of exercise prices per share () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () |
0 - 5 (RSU) | 2,091,293 | 1.76 | 5.00 | 8,780,898 | 1.59 | 3.96 |
450 - 600 (ESOP) | – | – | – | 1,100,330 | 3.48 | 539 |
2,091,293 | 1.76 | 5.00 | 9,881,228 | 1.80 | 64 |
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 was as follows:
2015 plan - 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) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
*Information in the table above is adjusted for September, 2018 bonus issue
As at March 31, 2020 and March 31, 2019, 18,12,895 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 48 crore and 9 crore as at March 31, 2020 and March 31, 2019 respectively.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant 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) | 728 | 10.52 | 696 | 10.77 |
Exercise price ()/ ($ ADS)(1) | 5.00 | 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) | 607 | 7.84 | 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.
2.12 INCOME TAXES
Accounting policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the Consolidated Statement of Comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered 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 comprehensive income comprises:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Current taxes | ||||
Domestic taxes | 1,181 | 1,080 | 4,454 | 4,195 |
Foreign taxes | 154 | 113 | 1,321 | 1,532 |
1,335 | 1,193 | 5,775 | 5,727 | |
Deferred taxes | ||||
Domestic taxes | (328) | (120) | (307) | 23 |
Foreign taxes | 154 | 132 | (100) | (119) |
(174) | 12 | (407) | (96) | |
Income tax expense | 1,161 | 1,205 | 5,368 | 5,631 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore which pertained to prior periods.
Additionally, income tax expense for the three months ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 183 crore and 82 crore, respectively. Income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 379 crore and 129 crore, respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions and on account of changes to tax regulations.
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 March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Profit before income taxes | 5,496 | 5,283 | 22,007 | 21,041 |
Enacted tax rates in India | 34.94% | 34.94% | 34.94% | 34.94% |
Computed expected tax expense | 1,921 | 1,846 | 7,691 | 7,353 |
Tax effect due to non-taxable income for Indian tax purposes | (741) | (755) | (2,718) | (2,705) |
Overseas taxes | 125 | 122 | 728 | 719 |
Tax provision (reversals) | (183) | (176) | (379) | (176) |
Effect of exempt non-operating income | (16) | (13) | (41) | (58) |
Effect of unrecognized deferred tax assets | (9) | 17 | 53 | 92 |
Effect of differential tax rates | (7) | 2 | (81) | (1) |
Effect of non-deductible expenses | 13 | 47 | 120 | 353 |
Branch profit tax (net of credits) | 55 | 108 | (35) | 25 |
Others | 3 | 7 | 30 | 29 |
Income tax expense | 1,161 | 1,205 | 5,368 | 5,631 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2020 and March 31, 2019 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 year ended March 31, 2020 and March 31, 2019 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, 2020, Infosys' U.S. branch net assets amounted to approximately 5,474 crore. As at March 31, 2020, the Company has a deferred tax liability for branch profit tax of 178 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 8,447 crore and 6,007 crore as at March 31, 2020 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 3,187 crore and 2,624 crore as at March 31, 2020 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 March 31, 2020:
(In crore)
Year | As at |
March 31, 2020 | |
2021 | 83 |
2022 | 142 |
2023 | 209 |
2024 | 172 |
2025 | 121 |
Thereafter | 2,460 |
Total | 3,187 |
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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Income tax assets | 5,391 | 6,743 |
Current income tax liabilities | 1,490 | 1,567 |
Net current income tax asset / (liability) at the end | 3,901 | 5,176 |
The gross movement in the current income tax asset/ (liability) for the three months and year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Net current income tax asset/ (liability) at the beginning | 3,739 | 4,783 | 5,176 | 4,027 |
Translation differences | (1) | 2 | (4) | (1) |
Income tax paid | 1,586 | 1,573 | 4,550 | 6,832 |
Current income tax expense | (1,335) | (1,193) | (5,775) | (5,727) |
Reclassified under assets held for sale (refer note no. 2.1.2) | – | – | – | 23 |
Reclassified from held for sale (Refer note 2.1.2) | – | – | – | 13 |
Income tax benefit arising on exercise of stock options | 3 | 5 | 9 | 8 |
Additions through business combination | – | – | (40) | (9) |
Tax impact on buyback expenses | – | 4 | 4 | 4 |
Income tax on other comprehensive income | (91) | 2 | (19) | 6 |
Net current income tax asset/ (liability) at the end | 3,901 | 5,176 | 3,901 | 5,176 |
The movement in gross deferred income tax assets / liabilities (before set off) for the three months ended March 31, 2020 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2020 | 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 at March 31, 2020 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 248 | (5) | – | – | – | – | 1 | 244 |
Lease liabilities | 79 | 57 | – | – | – | – | – | 136 |
Accrued compensation to employees | 36 | 16 | – | – | – | – | – | 52 |
Trade receivables | 185 | 12 | – | – | – | – | – | 197 |
Compensated absences | 439 | (6) | – | – | – | – | – | 433 |
Post sales client support | 108 | 2 | – | – | – | – | 1 | 111 |
Credits related to branch profits | 245 | 117 | – | – | – | – | 15 | 377 |
Derivative financial instruments | (8) | 168 | – | 2 | – | – | – | 162 |
Intangible assets | 18 | – | – | – | – | – | 2 | 20 |
Intangibles arising on business combinations | (277) | 14 | (150) | – | – | – | (13) | (426) |
Branch profit tax | (361) | (172) | – | – | – | – | (22) | (555) |
Others | 53 | (29) | – | – | – | – | 1 | 25 |
Total deferred income tax assets/(liabilities) | 765 | 174 | (150) | 2 | – | – | (15) | 776 |
The movement in gross deferred income tax assets / liabilities (before set off) for the three months ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2019 | 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 at March 31, 2019 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 242 | 20 | – | – | – | – | – | 262 |
Accrued compensation to employees | 25 | 6 | – | – | – | – | – | 31 |
Trade receivables | 165 | 11 | – | – | – | – | – | 176 |
Compensated absences | 387 | 10 | – | – | – | – | – | 397 |
Post sales client support | 111 | (7) | – | – | – | – | – | 104 |
Credits related to branch profits | 261 | 81 | – | – | – | – | (2) | 340 |
Derivative financial instruments | (104) | (7) | – | 5 | – | – | – | (106) |
Intangible assets | 16 | – | – | – | – | – | – | 16 |
Intangibles arising on business combinations | (163) | 34 | – | – | – | – | 1 | (128) |
Branch profit tax | (355) | (189) | – | – | – | – | 3 | (541) |
Others | 100 | 29 | – | 17 | – | – | 3 | 149 |
Total deferred income tax assets/(liabilities) | 685 | (12) | – | 22 | – | – | 5 | 700 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2020 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 March 31, 2020 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 262 | (20) | 1 | – | – | – | 1 | 244 |
Lease liabilities | 52 | 76 | – | – | 6 | – | 2 | 136 |
Accrued compensation to employees | 31 | 23 | – | – | – | – | (2) | 52 |
Trade receivables | 176 | 21 | – | – | – | – | – | 197 |
Compensated absences | 397 | 35 | – | – | – | – | 1 | 433 |
Post sales client support | 104 | 7 | – | – | – | – | – | 111 |
Credits related to branch profits | 340 | 14 | – | – | – | – | 23 | 377 |
Derivative financial instruments | (106) | 255 | – | 12 | – | – | 1 | 162 |
Intangible assets | 16 | 1 | – | – | – | – | 3 | 20 |
Intangibles arising on business combinations | (128) | 44 | (326) | – | – | – | (16) | (426) |
Branch profit tax | (541) | 22 | – | – | – | – | (36) | (555) |
Others | 97 | (71) | 9 | (7) | – | – | (3) | 25 |
Total deferred income tax assets/(liabilities) | 700 | 407 | (316) | 5 | 6 | – | (26) | 776 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2019 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 at March 31, 2019 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 215 | 46 | – | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | – | 1 | 104 |
Credits related to branch profits | 341 | (22) | – | – | – | – | 21 | 340 |
Derivative financial instruments | 11 | (111) | – | (7) | – | – | 1 | (106) |
Intangible assets | 9 | 6 | – | – | – | – | 1 | 16 |
Intangibles arising on business combinations | (38) | 63 | (56) | – | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | – | (33) | (541) |
Others | 91 | 32 | (8) | 8 | – | 28 | (2) | 149 |
Total deferred income tax assets/(liabilities) | 741 | 96 | (64) | 1 | – | (53) | (21) | 700 |
The deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Deferred income tax assets after set off | 1,744 | 1,372 |
Deferred income tax liabilities after set off | (968) | (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.
As at March 31, 2020 and March 31, 2019, claims against the Group not acknowledged as debts from the Income tax authorities amounted to 3,353 crore and 2,851 crore. The claims against the group majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes. These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.
Amount paid to statutory authorities against the above tax claims amounted to 5,352 crore.
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as of March 31, 2019.
2.13 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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,240,181,854 | 4,347,129,592 | 4,257,754,522 | 4,347,130,157 |
Effect of dilutive common equivalent shares - share options outstanding | 5,799,532 | 5,894,271 | 7,389,706 | 6,290,615 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,245,981,386 | 4,353,023,863 | 4,265,144,228 | 4,353,420,772 |
Information in the table above is adjusted for September, 2018 bonus issue wherever applicable
(1)excludes treasury shares
For the three months ended March 31, 2020 and March 31, 2019, 54,275 and Nil number of option to purchase equity shares had an anti-dilutive effect, respectively.
For the year ended March 31, 2020 and March 31, 2019, 13,093 and Nil number of options to purchase equity shares had an anti-dilutive effect, respectively.
2.14 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2020 | 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 | 100% | 99.99% |
Infosys CIS LLC(1)(18)(26) | 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 | 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(32) | Poland | 99.99% | 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(7)(31) | Japan | – | 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% | – |
Outbox systems Inc. dba Simplus (US)(27) | U.S. | 100% | – |
Simplus North America Inc.(28) | Canada | 100% | – |
Simplus ANZ Pty Ltd.(28) | Australia | 100% | – |
Simplus Australia Pty Ltd(30) | Australia | 100% | – |
Sqware Peg Digital Pty Ltd(30) | Australia | 100% | – |
Simplus Philippines, Inc.(28) | Philippines | 100% | – |
Simplus Europe, Ltd.(28) | U.K. | 100% | – |
Simplus U.K., Ltd.(29) | U.K. | 100% | – |
Simplus Ireland, Ltd.(29) | Ireland | 100% | – |
(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 subsidiary 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 of 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 subsidiary of Stater N.V | |
(23) | Majority-owned and controlled subsidiary of Stater Duitsland B.V. | |
(24) | Majority-owned and controlled subsidiary of Stater Participations B.V. | |
(25) | Effective October 1, 2019, merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd. | |
(26) | Under Liquidation | |
(27) | On March 13, 2020, Infosys Nova Holdings LLC, acquired 100% of the voting interests in Outbox Systems Inc. dba Simplus (US) | |
(28) | Wholly-owned subsidiary of Outbox Systems Inc. | |
(29) | Wholly-owned subsidiary of Simplus Europe, Ltd. | |
(30) | Wholly-owned subsidiary of Simplus ANZ Pty Ltd.. | |
(31) | Liquidated effective October 19, 2019 | |
(32) | On February 20, 2020, Infosys Poland, Sp z.o.o, a wholly owned subsidiary of Infosys BPM acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o, a wholly owned subsidiary of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
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 | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM 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 as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva (retired as member of the Board effective Febraury 3, 2020)
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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3) | 29 | 29 | 118 | 96 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 8 | 8 |
Total | 31 | 31 | 126 | 104 |
(1) | Total employee stock compensation expense for the three months ended March 31, 2020 and March 31, 2019 includes a charge of 11 crore and 10 crore, respectively, towards key managerial personnel. For the year ended March 31, 2020 and March 31, 2019, includes a charge of 56 crore and 33 crore respectively, towards key managerial personnel. (Refer to note 2.11) | |
(2) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. | |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
2.15 Segment reporting
IFRS 8 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The Group's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. The Chief Operating Decision Maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represents 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 centers 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. 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.
2.15.1 Business segments
Three months ended March 31, 2020 and March 31, 2019
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 | |
Identifiable operating expenses | 3,808 | 1,790 | 1,769 | 1,481 | 1,246 | 1,056 | 827 | 422 | 12,399 |
3,614 | 1,705 | 1,731 | 1,500 | 1,190 | 984 | 694 | 348 | 11,766 | |
Allocated expenses | 1,611 | 774 | 688 | 655 | 560 | 344 | 313 | 217 | 5,162 |
1,470 | 694 | 612 | 613 | 500 | 290 | 270 | 167 | 4,616 | |
Segment profit | 1,863 | 1,058 | 560 | 856 | 557 | 431 | 344 | 37 | 5,706 |
1,721 | 1,017 | 578 | 634 | 471 | 376 | 323 | 37 | 5,157 | |
Unallocable expenses* | 779 | ||||||||
539 | |||||||||
Operating profit | 4,927 | ||||||||
4,618 | |||||||||
Other income, net (Refer to note 2.20) | 614 | ||||||||
665 | |||||||||
Finance Costs (Refer Note 2.8) | (45) | ||||||||
– | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.10.1) | – | ||||||||
– | |||||||||
Profit before income taxes | 5,496 | ||||||||
5,283 | |||||||||
Income tax expense | 1,161 | ||||||||
1,205 | |||||||||
Net profit | 4,335 | ||||||||
4,078 | |||||||||
Depreciation and amortization expense | 749 | ||||||||
531 | |||||||||
Non-cash expenses other than depreciation and amortization | 30 | ||||||||
8 |
* | Unallocable expenses for the three months ended March 31, 2020 includes amortization on ROU assets consequent to adoption of IFRS 16 - Leases effective April 1, 2019 |
Year ended March 31, 2020 and March 31, 2019
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Identifiable operating expenses | 14,977 | 6,989 | 7,084 | 6,104 | 4,991 | 4,125 | 3,212 | 1,486 | 48,968 |
14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 | |
Allocated expenses | 6,342 | 2,834 | 2,476 | 2,416 | 2,081 | 1,243 | 1,194 | 921 | 19,507 |
5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 | |
Segment profit | 7,306 | 4,212 | 2,424 | 3,216 | 2,059 | 1,604 | 1,431 | 64 | 22,316 |
6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 | |
Unallocable expenses* | 2,942 | ||||||||
2,027 | |||||||||
Operating profit | 19,374 | ||||||||
18,880 | |||||||||
Other income, net (Refer to note 2.20) | 2,803 | ||||||||
2,882 | |||||||||
Finance Costs (Refer Note 2.8) | (170) | ||||||||
– | |||||||||
Reduction in the fair value of Disposal Group held for sale | – | ||||||||
(270) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.10.1) | – | ||||||||
(451) | |||||||||
Profit before income taxes | 22,007 | ||||||||
21,041 | |||||||||
Income tax expense | 5,368 | ||||||||
5,631 | |||||||||
Net profit | 16,639 | ||||||||
15,410 | |||||||||
Depreciation and amortization | 2,893 | ||||||||
2,011 | |||||||||
Non-cash expenses other than depreciation and amortization | 49 | ||||||||
740 |
* | Unallocable expenses for the year ended March 31, 2020 includes amortization on ROU assets consequent to adoption of IFRS 16 - Leases effective April 1, 2019 |
2.15.2 Significant clients
No client individually accounted for more than 10% of the revenues in the three months and year ended March 31, 2020 and March 31, 2019.
2.16 Revenue from Operations
Accounting Policy:
The Group derives revenues primarily from IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
Effective April 1, 2018, the Group adopted IFRS 15 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as at April 1, 2018. The effect on adoption of IFRS 15 was insignificant.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Group’s contracts may include variable consideration including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group 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).When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Group uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Group transfers the related goods or services to the customer.
The Group presents revenues net of indirect taxes in its consolidated statement of comprehensive income.
Revenues for the three months and year ended March 31, 2020 and March 31,2019 are as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue from software services | 21,808 | 20,372 | 85,260 | 78,359 |
Revenue from products and platforms | 1,459 | 1,167 | 5,531 | 4,316 |
Total revenue from operations | 23,267 | 21,539 | 90,791 | 82,675 |
The Group has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts;(ii) onerous obligations;(iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers.
The Group has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the
pandemic, the Group will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings for each of our business segments. The group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
Three months ended March 31, 2020 and March 31, 2019
(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 | 4,276 | 2,433 | 1,796 | 1,619 | 1,322 | 1,700 | 1,015 | 170 | 14,331 |
4,093 | 2,206 | 1,763 | 1,513 | 1,150 | 1,575 | 767 | 126 | 13,193 | |
Europe | 1,540 | 993 | 555 | 1,110 | 937 | 54 | 435 | 58 | 5,682 |
1,255 | 987 | 464 | 975 | 918 | 35 | 492 | 41 | 5,167 | |
India | 342 | 10 | 38 | 5 | 25 | 65 | 11 | 113 | 609 |
296 | 6 | 23 | 1 | 21 | 32 | 4 | 110 | 493 | |
Rest of the world | 1,124 | 186 | 628 | 258 | 79 | 12 | 23 | 335 | 2,645 |
1,161 | 217 | 671 | 258 | 72 | 8 | 24 | 275 | 2,686 | |
Total | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 | |
Revenue by offerings | |||||||||
Digital | 3,164 | 1,683 | 1,315 | 1,247 | 949 | 682 | 508 | 217 | 9,765 |
2,288 | 1,297 | 1,023 | 925 | 716 | 593 | 333 | 107 | 7,282 | |
Core | 4,118 | 1,939 | 1,702 | 1,745 | 1,414 | 1,149 | 976 | 459 | 13,502 |
4,517 | 2,119 | 1,898 | 1,822 | 1,445 | 1,057 | 954 | 445 | 14,257 | |
Total | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Year ended March 31, 2020 and March 31, 2019
(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 | 16,749 | 9,222 | 7,332 | 6,456 | 5,131 | 6,537 | 3,816 | 564 | 55,807 |
16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 | |
Europe | 5,983 | 3,966 | 1,925 | 4,207 | 3,576 | 191 | 1,892 | 176 | 21,916 |
4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 | |
India | 1,311 | 48 | 192 | 12 | 88 | 207 | 39 | 468 | 2,365 |
1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 | |
Rest of the world | 4,582 | 799 | 2,535 | 1,061 | 336 | 37 | 90 | 1,263 | 10,703 |
4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Revenue by offerings | |||||||||
Digital | 11,562 | 6,165 | 4,843 | 4,485 | 3,481 | 2,541 | 1,850 | 690 | 35,617 |
8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 | |
Core | 17,063 | 7,870 | 7,141 | 7,251 | 5,650 | 4,431 | 3,987 | 1,781 | 55,174 |
18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
* Geographical revenues is based on the domicile of customer.
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning, Stater digital platform and Infosys McCamish- insurance platform.
The percentage of revenue from fixed price contracts for each of the three months and year ended March 31, 2020 and March 31, 2019 is approximately 55%.
Trade Receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Group’s Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Group’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.
During the year months ended March 31, 2020 and March 31, 2019, the company recognized revenue of 2,421 crore and 2,237 crore arising from opening unearned revenue as of April 1, 2019 and April 1, 2018 respectively.
During the year ended March 31, 2020 and March 31, 2019, 2,971 crore and 2,685 crore of unbilled revenue pertaining to other 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 of 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 IFRS 15, 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 and unit of work based contracts. 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 March 31, 2020, other than those meeting the exclusion criteria mentioned above, is 55,926 crore. Out of this, the Group expects to recognize revenue of around 51% 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. Generally, customers have not terminated contracts without cause.
2.17 Unbilled Revenue
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Unbilled financial asset (1) | 2,796 | 2,093 |
Unbilled non financial asset (2) | 4,325 | 3,281 |
Total | 7,121 | 5,374 |
(1) Right to consideration is unconditional and is due only after passage of time.
(2) Right to consideration is dependent on completion of contractual milestones.
2.18 Expenses by nature
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit costs (Refer Note 2.19) | 12,916 | 12074 | 50,887 | 45,315 |
Depreciation and amortization charges (Refer Note 2.7 and 2.8) | 749 | 531 | 2,893 | 2,011 |
Travelling costs | 667 | 603 | 2,710 | 2,433 |
Consultancy and professional charges | 339 | 376 | 1,326 | 1,324 |
Cost of Software packages for own use | 268 | 237 | 1,035 | 930 |
Third party items bought for service delivery to clients | 487 | 452 | 1,668 | 1,623 |
Communication costs | 139 | 115 | 528 | 471 |
Cost of technical sub-contractors | 1,704 | 1601 | 6,714 | 6,033 |
Power and fuel | 53 | 49 | 229 | 221 |
Repairs and maintenance | 433 | 374 | 1,580 | 1,316 |
Rates and taxes | 64 | 52 | 193 | 184 |
Insurance charges | 23 | 19 | 90 | 67 |
Commission to non-whole time directors | 2 | 2 | 8 | 8 |
Branding and marketing expenses | 143 | 135 | 528 | 489 |
Provision for post-sales client support | – | (24) | – | 1 |
Impairment loss recognized / (reversed) on financial assets (Refer Note 2.3) | 74 | 18 | 172 | 248 |
Contribution towards Corporate Social Responsibility | 130 | 66 | 385 | 266 |
Short-term leases (Refer to note 2.8) | 24 | – | 89 | – |
Operating lease payments | – | 165 | – | 585 |
Others | 125 | 76 | 382 | 270 |
Total cost of sales, selling and marketing expenses and administrative expenses | 18,340 | 16,921 | 71,417 | 63,795 |
The table below provides details of break-up of expenses:
Cost of sales
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit costs | 11,547 | 10,770 | 45,477 | 40,498 |
Depreciation and amortization | 749 | 531 | 2,893 | 2,011 |
Travelling costs | 516 | 436 | 2,045 | 1,769 |
Cost of technical sub-contractors | 1,701 | 1,598 | 6,712 | 6,031 |
Cost of software packages for own use | 261 | 231 | 1,010 | 906 |
Third party items bought for service delivery to clients | 487 | 452 | 1,667 | 1,623 |
Operating lease payments | – | 103 | – | 362 |
Short-term leases (Refer to note 2.8) | 8 | – | 65 | – |
Consultancy and professional charges | 13 | 9 | 50 | 46 |
Communication costs | 75 | 64 | 300 | 238 |
Repairs and maintenance | 140 | 106 | 501 | 370 |
Provision for post-sales client support | – | (24) | – | 1 |
Others | 4 | 7 | 12 | 12 |
Total | 15,501 | 14,283 | 60,732 | 53,867 |
Selling and marketing expenses
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit costs | 903 | 882 | 3,620 | 3,236 |
Travelling costs | 79 | 102 | 374 | 409 |
Branding and marketing | 142 | 135 | 523 | 489 |
Operating leases | – | 22 | – | 80 |
Short-term leases (Refer to note 2.8) | 1 | – | 6 | – |
Communication costs | 3 | 4 | 17 | 18 |
Consultancy and professional charges | 20 | 66 | 118 | 200 |
Others | 24 | 15 | 53 | 41 |
Total | 1,172 | 1,226 | 4,711 | 4,473 |
Administrative expenses
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit costs | 466 | 422 | 1,790 | 1,581 |
Consultancy and professional charges | 306 | 301 | 1,158 | 1,078 |
Repairs and maintenance | 291 | 266 | 1,071 | 940 |
Power and fuel | 53 | 49 | 229 | 221 |
Communication costs | 61 | 47 | 211 | 215 |
Travelling costs | 72 | 65 | 291 | 255 |
Impairment loss recognized/(reversed) under expected credit loss model | 74 | 18 | 172 | 248 |
Rates and taxes | 64 | 52 | 193 | 184 |
Insurance charges | 23 | 19 | 88 | 67 |
Operating leases | – | 40 | – | 143 |
Short-term leases (Refer to note 2.8) | 14 | – | 19 | – |
Commission to non-whole time directors | 2 | 2 | 8 | 8 |
Contribution towards Corporate Social Responsibility | 130 | 66 | 385 | 266 |
Others | 111 | 65 | 359 | 249 |
Total | 1,667 | 1,412 | 5,974 | 5,455 |
2.19 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 Comprehensive income.
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as at March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,351 | 1,201 |
Service cost | 178 | 157 |
Interest expense | 90 | 85 |
Remeasurements - Actuarial (gains) / losses | (79) | 32 |
Benefits paid | (141) | (128) |
Translation difference | 3 | 2 |
Reclassified from held for sale (refer note no 2.10.2) | – | 2 |
Benefit obligations at the end | 1,402 | 1,351 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,361 | 1,216 |
Interest income | 97 | 90 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 9 | 4 |
Contributions | 191 | 174 |
Benefits paid | (136) | (123) |
Fair value of plan assets at the end | 1,522 | 1,361 |
Funded status | 120 | 10 |
Prepaid gratuity benefit | 151 | 42 |
Accrued gratuity | (31) | (32) |
Amount for the three months and year ended March 31, 2020 and March 31, 2019 recognized in the Consolidated Statement of Comprehensive income under employee benefit expense:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Service cost | 45 | 39 | 178 | 157 |
Net interest on the net defined benefit liability/asset | (3) | (2) | (7) | (5) |
Net gratuity cost | 42 | 37 | 171 | 152 |
Amount for the three months and year ended March 31, 2020 and March 31, 2019 recognized in the Consolidated Statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | (95) | 5 | (79) | 32 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 4 | 1 | (9) | (4) |
(91) | 6 | (88) | 28 |
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
(Gain)/loss from change in demographic assumptions | 1 | – | 1 | (4) |
(Gain)/loss from change in financial assumptions | (85) | 9 | (57) | 30 |
(Gain)/loss from experience adjustment | (11) | (4) | (23) | 6 |
(95) | 5 | (79) | 32 |
Amount recognised in statement of comprehensive income has been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Cost of sales | 38 | 33 | 153 | 136 |
Selling and marketing expenses | 3 | 3 | 12 | 11 |
Administrative expenses | 1 | 1 | 6 | 5 |
42 | 37 | 171 | 152 |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2020 and March 31, 2019 are set out below:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Discount rate | 6.2% | 7.1% |
Weighted average rate of increase in compensation levels | 6.0% | 8.0% |
Weighted average duration of defined benefit obligation | 5.9 years | 5.9 years |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and year ended March 31, 2020 and March 31, 2019 are set out below:
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Discount rate(%) | 7.1 | 7.5 | 7.1 | 7.5 |
Weighted average rate of increase in compensation levels(%) | 8.0 | 8.0 | 8.0 | 8.0 |
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The discount rate is based on the government securities yield.
Sensitivity of significant assumptions used for valuation of defined benefit obligation:
(in crore)
Impact from percentage point increase / decrease in | As at March 31, 2020 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
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 March 31, 2020 and March 31, 2019, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months ended March 31, 2020, and March 31, 2019 were 20 crore and 23 crore, respectively.
Actual return on assets for the year ended March 31, 2020, and March 31, 2019 were 106 crore and 95 crore, respectively.
The Group expects to contribute 145 crore to the gratuity trusts during fiscal 2021.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 215 |
1-2 year | 218 |
2-3 year | 220 |
3-4 year | 231 |
4-5 year | 148 |
5-10 years | 1,183 |
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.
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 March 31, 2020
(In crore)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 5,989 |
Service cost - employer contribution | 407 |
Employee contribution | 857 |
Interest expense | 561 |
Actuarial (gains) / loss | 216 |
Benefits paid | (664) |
Benefit obligations at the end | 7,366 |
Change in plan assets | |
Fair value of plan assets at the beginning | 5,989 |
Interest income | 561 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (33) |
Contributions (employer and employee) | 1,264 |
Benefits paid | (664) |
Fair value of plan assets at the end | 7,117 |
Net liability (refer to note 2.5) | (249) |
(1) Includes unrealized losses on certain investments in bonds
Amount for the three months and year ended March 31, 2020 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, |
2020 | 2020 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 69 | 216 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (48) | 33 |
21 | 249 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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. |
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately 72 crore and 108 crore on account of a 0.25% increase / decrease in the expected rate of return on plan assets.
The Group contributed 167 crore and 142 crore to the provident fund during the three months ended March 31, 2020 and March 31, 2019, respectively. The Group contributed 639 crore and 543 crore to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in the net profit in the consolidated Statement of comprehensive income under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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.
Provident Fund contribution have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Cost of sales | 149 | 126 | 571 | 485 |
Selling and marketing expenses | 12 | 11 | 45 | 39 |
Administrative expenses | 6 | 5 | 23 | 19 |
167 | 142 | 639 | 543 |
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
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.
The group contributed 60 crore and 57 crore to the superannuation plan during the three months ended March 31, 2020 and March 31, 2019, respectively.
The group contributed 240 crore and 215 crore to the superannuation plan during the year ended March 31, 2020 and March 31, 2019, respectively and the same has been recognized in the Consolidated Statement of comprehensive income under the head employee benefit expense.
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
Superannuation contribution have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Cost of sales | 54 | 51 | 214 | 192 |
Selling and marketing expenses | 4 | 4 | 17 | 15 |
Administrative expenses | 2 | 2 | 9 | 8 |
60 | 57 | 240 | 215 |
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.
Employee benefit costs include:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Salaries and bonus(1) | 12,647 | 11,838 | 49,837 | 44,405 |
Defined contribution plans | 85 | 81 | 338 | 307 |
Defined benefit plans | 184 | 155 | 712 | 603 |
12,916 | 12,074 | 50,887 | 45,315 |
(1) | Includes an employee stock compensation expense of 66 crore and 249 crore for the three months and year ended March 31, 2020 respectively. Similarly, includes employee stock compensation expense of 59 crore and 202 crore for the three months and year ended March 31, 2019 respectively. |
The employee benefit cost is recognised in the following line items in the consolidated statement of comprehensive income:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Cost of sales | 11,547 | 10,770 | 45,477 | 40,498 |
Selling and marketing expenses | 903 | 882 | 3,620 | 3,236 |
Administrative expenses | 466 | 422 | 1,790 | 1,581 |
12,916 | 12,074 | 50,887 | 45,315 |
2.20 Other income, net
a. Accounting Policy
Other income, net
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.
Effective April 1, 2018, the Group has adopted IFRS interpretation IFRIC 22- 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.
Foreign currency
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 recognized in the Consolidated Statement of Comprehensive Income and reported within exchange gains/ (losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
The translation of financial statements of the foreign subsidiaries to the presentation currency is performed for assets and liabilities using the exchange rate in effect at the Balance Sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the statement of comprehensive income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.
Government grants
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 statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the Consolidated Statement of Comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate.
Operating Profits
Operating profit of the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
Other income consists of the following:
(In crore)
Particulars | Three months ended March 31. |
Year ended March 31. | ||
2020 | 2019 | 2020 | 2019 | |
Interest income on financial assets carried at amortized cost | 327 | 355 | 1,289 | 1,404 |
Interest income on financial assets carried at fair value through OCI | 65 | 142 | 322 | 646 |
Dividend income on investments carried at fair value through profit or loss | – | 1 | 2 | 2 |
Gain/(loss) on investments carried at fair value through PL | 35 | 65 | 183 | 170 |
Gain/(loss) on investments carried at fair value through OCI | 4 | – | 41 | – |
Interest income on income tax refund | 8 | – | 259 | 51 |
Exchange gains / (losses) on forward and options contracts | (477) | 195 | (511) | 185 |
Exchange gains / (losses) on translation of other assets and liabilities | 594 | (139) | 1,023 | 133 |
Others | 58 | 46 | 195 | 291 |
Total | 614 | 665 | 2,803 | 2,882 |
2.21 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.
In December 2017, the International Accounting Standard Board issued amendments to IAS 12 – Income Taxes. The amendments clarify 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.
Description of reserves
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Share premium
The amount received in excess of the par value has been classified as share premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of comprehensive income is credited to share 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.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the consolidated Statement of Comprehensive Income upon the occurrence of the related forecasted transaction.
2.21.1 Dividend
The final dividend on shares are 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay / distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Final dividend for fiscal 2018* | – | – | – | 10.25 |
Special dividend for fiscal 2018* | – | – | – | 5.00 |
Interim dividend for fiscal 2019 | – | – | – | 7.00 |
Final dividend for fiscal 2019 | – | – | 10.50 | – |
Special dividend for fiscal 2019 | – | 4.00 | – | 4.00 |
Interim dividend for fiscal 2020 | – | – | 8.00 | – |
*Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue.
During the year ended March 31, 2020 on account of the final dividend for fiscal 2019 and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 9,517 crore (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID 19, the Company is working on an Annual General Meeting date which will be announced by the company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately 4,029 crore (excluding dividend paid on treasury shares).
2.21.2 Update on capital alocation 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 March 31, 2020 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 March 31, 2020, 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
2.21.3 Share capital and share premium
The Company has only one class of shares referred to as equity shares having a par value of 5/- each. 1,82,39,356 and 20,324,982 shares were held by controlled trust, as at March 31, 2020 and March 31, 2019, respectively.
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 April 20, 2020 |
Exhibit 99.9
Ind AS Standalone
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Interim Condensed Standalone Financial Statements
Opinion
We have audited the accompanying interim condensed standalone financial statements of INFOSYS LIMITED (the “Company”), which comprise the Condensed Balance Sheet as at March 31, 2020, the Condensed Statement of Profit and Loss (including Other Comprehensive Income) for the three months and year ended on that date, the Condensed Statement of Changes in Equity and the Condensed Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the “interim condensed standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim condensed standalone 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 state of affairs of the Company as at March 31, 2020, the profit and total comprehensive income for the three months and year ended on that date, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the interim condensed standalone 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 Condensed Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the interim condensed standalone 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 on the interim condensed standalone financial statements.
Emphasis of Matter
As more fully described in Note 2.20 to the Interim Condensed Standalone Financial Statements, the Company is responding to inquiries from Indian regulatory authorities. 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 Condensed Standalone Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these interim condensed standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with Ind AS 34 and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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 interim condensed standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the interim condensed standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Interim Condensed Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim condensed standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these interim condensed standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the interim condensed standalone 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim condensed standalone 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 Company to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the interim condensed standalone financial statements, including the disclosures, and whether the interim condensed standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
Materiality is the magnitude of misstatements in the interim condensed standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim condensed standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the interim condensed standalone financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No.117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) UDIN: 20039826AAAABX3754 |
INFOSYS LIMITED
Condensed Standalone Financial Statements under Indian Accounting Standards (Ind AS) for the three months and year ended March 31, 2020
Index
|
|
Condensed Balance Sheet | |
Condensed Statement of Profit and Loss | |
Condensed Statement of Changes in Equity | |
Condensed Statement of Cash Flows | |
Overview and notes to the financial statements | |
1. Overview | |
1.1 Company overview | |
1.2 Basis of preparation of financial statements | |
1.3 Use of estimates and judgments | |
1.4 Critical accounting estimates | |
2. Notes to financial statements | |
2.1 Property, plant and equipment | |
2.2 Leases | |
2.3 Investments and assets held for sale | |
2.4 Loans | |
2.5 Other financial assets | |
2.6 Trade Receivables | |
2.7 Cash and cash equivalents | |
2.8 Other assets | |
2.9 Financial instruments | |
2.10 Equity | |
2.11 Other financial liabilities | |
2.12 Trade payables | |
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 Reconciliation of basic and diluted shares used in computing earning per share | |
2.20 Contingent liabilities and commitments | |
2.21 Related party transactions | |
2.22 Segment Reporting |
INFOSYS LIMITED
(In ₹ crore)
Condensed Balance Sheet as at | Note No. | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.1 | 11,092 | 10,394 |
Right-of-use assets | 2.2 | 2,805 | – |
Capital work-in-progress | 945 | 1,212 | |
Goodwill | 29 | 29 | |
Other intangible assets | 48 | 74 | |
Financial assets | |||
Investments | 2.3 | 13,916 | 12,062 |
Loans | 2.4 | 298 | 16 |
Other financial assets | 2.5 | 613 | 196 |
Deferred tax assets (net) | 1,429 | 1,114 | |
Income tax assets (net) | 4,773 | 5,870 | |
Other non-current assets | 2.8 | 1,273 | 1,740 |
Total non - current Assets | 37,221 | 32,707 | |
Current assets | |||
Financial assets | |||
Investments | 2.3 | 4,006 | 6,077 |
Trade receivables | 2.6 | 15,459 | 13,370 |
Cash and cash equivalents | 2.7 | 13,562 | 15,551 |
Loans | 2.4 | 307 | 1,048 |
Other financial assets | 2.5 | 4,398 | 4,834 |
Income tax assets (net) | – | 423 | |
Other current assets | 2.8 | 6,088 | 4,920 |
Total current assets | 43,820 | 46,223 | |
Total Assets | 81,041 | 78,930 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.10 | 2,129 | 2,178 |
Other equity | 60,105 | 60,533 | |
Total equity | 62,234 | 62,711 | |
LIABILITIES | |||
Non-current liabilities | |||
Financial liabilities | |||
Lease liabilities | 2.2 | 2,775 | – |
Other financial liabilities | 2.11 | 49 | 79 |
Deferred tax liabilities (net) | 556 | 541 | |
Other non-current liabilities | 2.13 | 207 | 169 |
Total non - current liabilities | 3,587 | 789 | |
Current liabilities | |||
Financial liabilities | |||
Trade payables | 2.12 | ||
Total outstanding dues of micro enterprises and small enterprises | – | – | |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,529 | 1,604 | |
Lease liabilities | 2.2 | 390 | – |
Other financial liabilities | 2.11 | 7,936 | 8,528 |
Other current liabilities | 2.13 | 3,557 | 3,335 |
Provisions | 2.14 | 506 | 505 |
Income tax liabilities (net) | 1,302 | 1,458 | |
Total current liabilities | 15,220 | 15,430 | |
Total equity and liabilities | 81,041 | 78,930 |
The accompanying notes form an integral part of the interim condensed standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm's Registration Number: 117366W/W-100018 |
for and on behalf of the Board of Directors of Infosys Limited |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A.G.S. Manikantha Company Secretary |
INFOSYS LIMITED
(In ₹ crore except equity share and per equity share data)
Condensed Statement of Profit and Loss for the | Note No. | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | ||
Revenue from operations | 2.16 | 20,187 | 18,935 | 79,047 | 73,107 |
Other income, net | 2.17 | 585 | 639 | 2,700 | 2,852 |
Total income | 20,772 | 19,574 | 81,747 | 75,959 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 10,666 | 10,198 | 42,434 | 38,296 |
Cost of technical sub-contractors | 2,168 | 2,040 | 8,447 | 7,646 | |
Travel expenses | 564 | 486 | 2,241 | 1,906 | |
Cost of software packages and others | 2.18 | 457 | 392 | 1,656 | 1,646 |
Communication expenses | 100 | 87 | 381 | 339 | |
Consultancy and professional charges | 284 | 312 | 1,066 | 1,096 | |
Depreciation and amortization expense | 548 | 429 | 2,144 | 1,599 | |
Finance cost | 2.2 | 31 | – | 114 | – |
Other expenses | 2.18 | 826 | 677 | 2,787 | 2,770 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for sale" | 2.3.1 | – | – | – | 469 |
Reduction in the fair value of assets held for sale | 2.3.1 | – | – | – | 265 |
Total expenses | 15,644 | 14,621 | 61,270 | 56,032 | |
Profit before tax | 5,128 | 4,953 | 20,477 | 19,927 | |
Tax expense: | |||||
Current tax | 2.15 | 1,194 | 1,053 | 5,235 | 5,189 |
Deferred tax | 2.15 | (135) | 80 | (301) | 36 |
Profit for the period | 4,069 | 3,820 | 15,543 | 14,702 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (25) | (3) | (184) | (21) | |
Equity instruments through other comprehensive income, net | (3) | 9 | (31) | 78 | |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | – | (15) | (36) | 21 | |
Fair value changes on investments, net | 2.3 | 13 | 22 | 17 | 1 |
Total other comprehensive income/ (loss), net of tax | (15) | 13 | (234) | 79 | |
Total comprehensive income for the period | 4,054 | 3,833 | 15,309 | 14,781 | |
Earnings per equity share | |||||
Equity shares of par value ₹5/- each | |||||
Basic (₹) | 9.55 | 8.75 | 36.34 | 33.66 | |
Diluted (₹) | 9.55 | 8.74 | 36.32 | 33.64 | |
Weighted average equity shares used in computing earnings per equity share | |||||
Basic | 2.19 | 4,25,87,77,469 | 4,36,77,59,601 | 4,27,70,30,249 | 4,36,82,12,119 |
Diluted | 2.19 | 4,26,04,38,735 | 4,36,98,24,380 | 4,27,98,08,826 | 4,37,04,12,348 |
The accompanying notes form an integral part of the interim condensed standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm's Registration Number: 117366W/W-100018 |
for and on behalf of the Board of Directors of Infosys Limited |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A.G.S. Manikantha Company Secretary |
INFOSYS LIMITED
Condensed Statement of Changes in Equity
(In ₹ crore)
Particulars | Equity Share Capital | Other Equity | Total equity attributable to equity holders of the Company | ||||||||||||
Reserves & Surplus | Other comprehensive income | ||||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | ||||||
Capital reserve | Other reserves(2) | ||||||||||||||
Balance as at April 1, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 | ||
Changes in equity for the year ended March 31, 2019 | |||||||||||||||
Profit for the period | – | – | 14,702 | – | – | – | – | – | – | – | – | – | 14,702 | ||
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (21) | (21) | ||
Equity instruments through other comprehensive income* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | 78 | – | – | 78 | ||
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.9) | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 | ||
Fair value changes on investments, net* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 | ||
Total comprehensive income for the period | – | – | 14,702 | – | – | – | – | – | – | 78 | 21 | (20) | 14,781 | ||
Transfer to general reserve | – | – | (1,615) | 1,615 | – | – | – | – | – | – | – | – | – | ||
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,306) | – | – | 2,306 | – | – | – | – | – | – | – | ||
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,386 | – | – | (1,386) | – | – | – | – | – | – | – | ||
Amount transferred to capital redemption reserve upon buyback | – | – | – | (5) | – | – | – | – | 5 | – | – | – | – | ||
Exercise of stock options (refer note no. 2.10) | – | 99 | – | – | (99) | – | – | – | – | – | – | – | – | ||
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | ||
Increase in share capital on account of Bonus issue | 1,092 | – | – | – | – | – | – | – | – | – | – | – | 1,092 | ||
Amount utilised for Bonus issue | – | – | – | (1,092) | – | – | – | – | – | – | – | – | (1,092) | ||
Share based payment to employees (refer note no. 2.10) | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 | ||
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | 8 | ||
Buyback of equity shares | (6) | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) | ||
Transaction cost relating to buyback* | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) | ||
Dividends (including dividend distribution tax) | – | – | (13,768) | – | – | – | – | – | – | – | – | – | (13,768) | ||
Share issued on exercise of employee stock options (refer note no. 2.10) | – | 3 | – | – | – | – | – | – | – | – | – | – | 3 | ||
Balance as at March 31, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
INFOSYS LIMITED
Condensed Statement of Changes in Equity
(In ₹ crore)
Particulars | Equity Share Capital | Other Equity | Total equity attributable to equity holders of the Company | ||||||||||
Reserves & Surplus | Other comprehensive income | ||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | ||||
Capital reserve | Other reserves(2) | ||||||||||||
Balance as at April 1, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
Impact on account of adoption of Ind AS 116 (Refer to note 2.2) | – | – | (17) | – | – | – | – | – | – | – | – | – | (17) |
2,178 | 138 | 54,053 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,694 | |
Changes in equity for the year ended March 31, 2020 | |||||||||||||
Profit for the period | – | – | 15,543 | – | – | – | – | – | – | – | – | – | 15,543 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (184) | (184) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | – | – | (31) | – | – | (31) |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | – | – | – | – | (36) | – | (36) |
Fair value changes on investments* | – | – | – | – | – | – | – | – | – | – | – | 17 | 17 |
Total comprehensive income for the period | – | – | 15,543 | – | – | – | – | – | – | (31) | (36) | (167) | 15,309 |
Transfer to general reserve | – | – | (1,470) | 1,470 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,464) | – | – | 2,464 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,036 | – | – | (1,036) | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.10) | – | – | – | (50) | – | – | – | – | 50 | – | – | – | – |
Exercise of stock options (refer note no.2.10) | – | 119 | – | – | (119) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options (refer note no.2.10) | – | 2 | – | – | – | – | – | – | – | – | – | – | 2 |
Effect of modification of equity settled share based payment awards to cash settled awards (refer note no.2.10) | – | – | (9) | – | (48) | – | – | – | – | – | – | – | (57) |
Share based payments to employees (refer to note no. 2.10) | – | – | – | – | 238 | – | – | – | – | – | – | – | 238 |
Reserves on common control transactions (refer to note no. 2.21) | – | – | – | – | – | – | – | (137) | – | – | – | – | (137) |
Income tax benefit arising on exercise of stock options | – | 9 | – | – | – | – | – | – | – | – | – | – | 9 |
Buyback of equity shares ( refer note no. 2.10) | (49) | – | (4,717) | (1,494) | – | – | – | – | – | – | – | – | (6,260) |
Transaction cost relating to buyback* (refer note no 2.10) | – | – | – | (11) | – | – | – | – | – | – | – | – | (11) |
Dividends (including dividend distribution tax) | – | – | (9,553) | – | – | – | – | – | – | – | – | – | (9,553) |
Balance as at March 31, 2020 | 2,129 | 268 | 52,419 | 106 | 297 | 3,907 | 54 | 3,082 | 111 | 49 | (15) | (173) | 62,234 |
*net of tax
(1) | 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 Company 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. |
(2) | Profit / loss on transfer of business between entities under common control taken to reserve. |
The accompanying notes form an integral part of the interim condensed standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm's Registration Number: 117366W/W-100018 |
for and on behalf of the Board of Directors of Infosys Limited |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A.G.S. Manikantha Company Secretary |
INFOSYS LIMITED
Condensed 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 Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In ₹ crore)
Particulars | Note No. | Year ended March 31, | |
2020 | 2019 | ||
Cash flow from operating activities: | |||
Profit for the period | 15,543 | 14,702 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.1 | 2,144 | 1,599 |
Income tax expense | 2.15 | 4,934 | 5,225 |
Impairment loss recognized / (reversed) under expected credit loss model | 127 | 176 | |
Finance cost | 2.2 | 114 | – |
Interest and dividend income | (1,502) | (1,996) | |
Stock compensation expense | 226 | – | |
Other adjustments | (248) | 57 | |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for sale" | 2.3.1 | – | 469 |
Reduction in the fair value of assets held for sale | 2.3.1 | – | 265 |
Exchange differences on translation of assets and liabilities | 17 | 80 | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (3,621) | (2,268) | |
Other financial assets and other assets | 319 | (581) | |
Trade payables | (75) | 866 | |
Other financial liabilities, other liabilities and provisions | 1,475 | 1,666 | |
Cash generated from operations | 19,453 | 20,260 | |
Income taxes paid | (3,881) | (6,271) | |
Net cash generated by operating activities | 15,572 | 13,989 | |
Cash flow from investing activities: | |||
Expenditure on property, plant and equipment | (3,063) | (2,306) | |
Deposits placed with corporations | (112) | (116) | |
Loans to employees | (2) | 4 | |
Loan given to subsidiaries | (1,210) | (678) | |
Loan repaid by subsidiaries | 444 | 20 | |
Proceeds from redemption of debentures | 286 | 335 | |
Investment in subsidiaries | (1,338) | (228) | |
Proceeds from return of investment | – | 33 | |
Payment towards acquisition of business | 2.3 | – | (261) |
Payment of contingent consideration pertaining to acquisition | (6) | (6) | |
Redemption of escrow pertaining to buyback | 2.5 | 257 | (257) |
Other receipts | 46 | – | |
Payments to acquire investments | |||
Preference, equity securities and others | (41) | (18) | |
Liquid mutual fund units and fixed maturity plan securities | (30,500) | (72,889) | |
Tax free bonds and Government bonds | (11) | (11) | |
Certificates of deposit | (876) | (2,052) | |
Commercial paper | – | (491) | |
Non Convertible debentures | (733) | (100) | |
Government Securities | (1,561) | (838) | |
Others | (2) | – | |
Proceeds on sale of investments | |||
Preference and equity securities | – | 115 | |
Liquid mutual fund units and fixed maturity plan securities | 30,332 | 71,337 | |
Tax free bonds and Government bonds | 12 | 1 | |
Non-convertible debentures | 1,788 | 602 | |
Certificates of deposit | 2,175 | 5,150 | |
Commercial paper | 500 | 300 | |
Government Securities | 1,673 | 123 | |
Others | 9 | – | |
Interest and dividend received | 1,817 | 1,644 | |
Net cash used in investing activities | (116) | (587) | |
Cash flow from financing activities: | |||
Payment of lease liabilities | 2.2 | (364) | – |
Buyback of equity shares including transaction cost | (7,478) | (813) | |
Shares issued on exercise of employee stock options | 2 | 3 | |
Payment of dividends (including dividend distribution tax) | (9,551) | (13,761) | |
Net cash used in financing activities | (17,391) | (14,571) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (54) | (50) | |
Net increase / (decrease) in cash and cash equivalents | (1,935) | (1,169) | |
Cash and cash equivalents at the beginning of the period | 2.7 | 15,551 | 16,770 |
Cash and cash equivalents at the end of the period | 2.7 | 13,562 | 15,551 |
Supplementary information: | |||
Restricted cash balance | 2.7 | 101 | 143 |
The accompanying notes form an integral part of the interim condensed standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm's Registration Number: 117366W/W-100018 |
for and on behalf of the Board of Directors of Infosys Limited |
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A.G.S. Manikantha Company Secretary |
INFOSYS LIMITED
Notes to the interim condensed standalone 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.
The Company is a public limited company incorporated and domiciled in India and has its registered office at Electronic 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 interim condensed standalone financial statements are approved for issue by the Company's Board of Directors on April 20, 2020.
1.2 Basis of preparation of financial statements
These interim condensed standalone financial statements are prepared in accordance with Indian Accounting Standard 34 (Ind AS 34), 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). Accordingly, these interim condensed standalone financial statements do not include all the information required for a complete set of financial statements. These interim condensed standalone financial statements should be read in conjunction with the standalone financial statements and related notes included in the Company’s Annual Report for the year ended March 31, 2019. 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 there after.
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 figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Use of estimates and judgments
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note no. 1.4. 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 financial statements.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID 19):
The company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues and Investment in subsidiaries. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the company, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts . The company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Company's financial statements may differ from that estimated as at the date of approval of these condensed financial statements.
1.4 Critical accounting estimates and judgments
a. Revenue recognition
The Company’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Company’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Company uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Company to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The Company's two major tax jurisdictions are India and the U.S., though the Company also files tax returns in other overseas jurisdictions.
Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also refer note no. 2.15 and note no. 2.20.
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 company 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. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company. 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 Company's assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Refer note no. 2.1
d. 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 Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the company has concluded that no changes are required to lease period relating to the existing lease contracts. Refer note no 2.2
e. Non-current assets held for sale
Assets held for sale are measured at the lower of carrying amount or 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 assets held for sale has 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 and its recoverable amount at the date of the subsequent decision not to sell . Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
f. Loss allowance for receivables and unbilled revenues
The company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The company considered current and anticipated future economic conditions relating to industries the company deals with and the countries where it operates. In calculating expected credit loss, the company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
2.1 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 the management. The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building(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 | Lower of useful life of the asset or 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 Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the 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 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 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 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 March 31, 2020 are as follows:
(In ₹ crore)
Particulars |
Land- Freehold
|
Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total | |
Gross carrying value as at January 1, 2020 | 1,314 | 8,511 | 2,916 | 1,042 | 5,586 | 1,766 | 646 | 42 | 21,823 | |
Additions | 2 | 527 | 122 | 53 | 136 | 110 | 38 | 2 | 990 | |
Deletions | – | – | – | (1) | (32) | (1) | (15) | (1) | (50) | |
Gross carrying value as at March 31, 2020 | 1,316 | 9,038 | 3,038 | 1,094 | 5,690 | 1,875 | 669 | 43 | 22,763 | |
Accumulated depreciation as at January 1, 2020 | – | (3,032) | (1,979) | (759) | (4,056) | (1,191) | (230) | (25) | (11,272) | |
Depreciation | – | (82) | (74) | (29) | (172) | (56) | (33) | (2) | (448) | |
Accumulated depreciation on deletions | – | – | – | 1 | 31 | 1 | 15 | 1 | 49 | |
Accumulated depreciation as at March 31, 2020 | – | (3,114) | (2,053) | (787) | (4,197) | (1,246) | (248) | (26) | (11,671) | |
Carrying value as at January 1, 2020 | 1,314 | 5,479 | 937 | 283 | 1,530 | 575 | 416 | 17 | 10,551 | |
Carrying value as at March 31, 2020 | 1,316 | 5,924 | 985 | 307 | 1,493 | 629 | 421 | 17 | 11,092 |
The changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019 are as follows:
(In ₹ crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at January 1, 2019 | 1,269 | 640 | 7,784 | 2,341 | 908 | 4,746 | 1,344 | 305 | 34 | 19,371 |
Additions | 36 | – | 402 | 325 | 58 | 419 | 131 | 111 | 3 | 1,485 |
Deletions | – | (47) | (116) | (54) | (28) | (113) | (21) | (2) | – | (381) |
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Accumulated depreciation as at January 1, 2019 | – | (34) | (2,827) | (1,739) | (665) | (3,534) | (1,011) | (133) | (20) | (9,963) |
Depreciation | – | (1) | (73) | (69) | (28) | (184) | (44) | (22) | (1) | (422) |
Accumulated depreciation on deletions | – | 3 | 103 | 46 | 21 | 113 | 16 | 2 | – | 304 |
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Carrying value as at January 1, 2019 | 1,269 | 606 | 4,957 | 602 | 243 | 1,212 | 333 | 172 | 14 | 9,408 |
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2020 are as follows:
(In ₹ crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Additions | 11 | 968 | 428 | 159 | 765 | 427 | 270 | 7 | 3,035 | |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2) | – | (593) | – | – | – | – | – | – | – | (593) |
Deletions | – | – | – | (2) | (3) | (127) | (6) | (15) | (1) | (154) |
Gross carrying value as at March 31, 2020 | 1,316 | – | 9,038 | 3,038 | 1,094 | 5,690 | 1,875 | 669 | 43 | 22,763 |
Accumulated depreciation as at April 1, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Depreciation | – | (317) | (293) | (118) | (718) | (213) | (110) | (6) | (1,775) | |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2) | – | 32 | – | – | – | – | – | – | – | 32 |
Accumulated depreciation on deletions | – | – | 2 | 3 | 126 | 6 | 15 | 1 | 153 | |
Accumulated depreciation as at March 31, 2020 | – | – | (3,114) | (2,053) | (787) | (4,197) | (1,246) | (248) | (26) | (11,671) |
Carrying value as at April 1, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
Carrying value as at March 31, 2020 | 1,316 | – | 5,924 | 985 | 307 | 1,493 | 629 | 421 | 17 | 11,092 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2019 are as follows:
(In ₹ crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Additions | 78 | – | 915 | 460 | 130 | 1,023 | 238 | 187 | 9 | 3,040 |
Deletions | – | (68) | (116) | (57) | (33) | (200) | (31) | (8) | (1) | (514) |
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Accumulated depreciation as at April 1, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Depreciation | – | (5) | (278) | (285) | (116) | (660) | (169) | (54) | (5) | (1,572) |
Accumulated depreciation on deletions | – | 3 | 102 | 49 | 26 | 198 | 26 | 8 | 1 | 413 |
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Carrying value as at April 1, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
(1) | Buildings include ₹250/- being the value of five shares of ₹50/- each in Mittal Towers Premises Co-operative Society Limited. | |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries. |
The aggregate depreciation has been included under depreciation and amortization expense in the interim condensed statement of Profit and Loss.
2.2 LEASES
Accounting Policy
The Company as a lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company 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 Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company 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 Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company 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 Company as a lessor
Leases for which the Company 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 Company 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 Company 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 Company 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 Company’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 ₹1,861 crore, 'Net investment in sublease' of ROU asset of ₹430 crore and a lease liability of ₹2,491 crore. The cumulative effect of applying the standard, amounting to ₹17 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 annual standalone financial statements forming part of 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 4.4%
Following are the changes in the carrying value of right of use assets for the three months ended March 31, 2020:
(In ₹ crore)
Particulars | Category of ROU asset | Total | ||
Land | Buildings | Computers | ||
Balance as at January 1, 2020 | 555 | 1,974 | 42 | 2,571 |
Additions* | 1 | 336 | 1 | 338 |
Deletion | – | (10) | – | (10) |
Depreciation | (2) | (91) | (1) | (94) |
Balance as at March 31, 2020 | 554 | 2,209 | 42 | 2,805 |
*Net of lease incentives of 47 crore related to lease of buildings
Following are the changes in the carrying value of right of use assets for the year ended March 31, 2020:
(In ₹ crore)
Particulars | Category of ROU asset | Total | ||
Land | Buildings | Computers | ||
Balance as at April 1, 2019 | – | 1,861 | – | 1,861 |
Reclassified on account of adoption of Ind AS 116 (refer to note 2.1) | 561 | – | – | 561 |
Additions* | 1 | 737 | 49 | 787 |
Deletion | (3) | (58) | – | (61) |
Depreciation | (5) | (331) | (7) | (343) |
Balance as at March 31, 2020 | 554 | 2,209 | 42 | 2,805 |
* Net of lease incentives of 101 crore related to lease of buildings
The aggregate depreciation expense on ROU assets is included under depreciation and amortization expense in the interim condensed statement of Profit and Loss.
The following is the break-up of current and non-current lease liabilities as at March 31, 2020
(In ₹ crore)
Particulars | As at |
March 31, 2020 | |
Current lease liabilities | 390 |
Non-current lease liabilities | 2,775 |
Total | 3,165 |
The following is the movement in lease liabilities during the three months and year ended March 31, 2020:
(In ₹ crore)
Particulars | Three Months ended March 31, 2020 |
Year ended March 31, 2020 |
Balance at the beginning | 2,790 | 2,491 |
Additions | 425 | 886 |
Finance cost accrued during the period | 31 | 114 |
Deletions | (10) | (61) |
Payment of lease liabilities | (162) | (418) |
Translation Difference | 91 | 153 |
Balance at the end | 3,165 | 3,165 |
The table below provides details regarding the contractual maturities of lease liabilities as at March 31, 2020 on an undiscounted basis:
(In ₹ crore)
Particulars | As at |
March 31, 2020 | |
Less than one year | 512 |
One to five years | 1,744 |
More than five years | 1,490 |
Total | 3,746 |
The Company 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 recorded for short-term leases was ₹13 crore and ₹37 crore for the three months ended March 31, 2020 and year ended March 31,2020 respectively.
Rental income on assets given on operating lease to subsidiaries was ₹14 crore and ₹58 crore for the three months ended March 31, 2020 and year ended March 31,2020 respectively.
The following is the movement in the net investment in sublease in ROU asset during the three months and year ended March 31, 2020:
(In ₹ crore)
Particulars | Three Months ended March 31, 2020 | Year ended March 31, 2020 |
Balance at the beginning of the period | 417 | 430 |
Interest income accrued during the period | 4 | 15 |
Lease receipts | (12) | (46) |
Translation Difference | 24 | 34 |
Balance at the end of the period | 433 | 433 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as at March 31, 2020 on an undiscounted basis:
(In ₹ crore)
Particulars | As at |
March 31, 2020 | |
Less than one year | 50 |
One to five years | 217 |
More than five years | 244 |
Total | 511 |
Leases not yet commenced to which Company is committed amounts to 655 crore for a lease term ranging from 2 years to 13 years.
2.3 INVESTMENTS AND ASSETS HELD FOR SALE
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current investments | ||
Equity instruments of subsidiaries | 7,553 | 6,349 |
Debentures of subsidiary | 1,159 | 1,445 |
Redeemable Preference shares of subsidiary | 1,318 | – |
Preference securities and equity instruments | 103 | 90 |
Others | 30 | 16 |
Tax free bonds | 1,825 | 1,828 |
Government bonds | 13 | – |
Fixed maturity plans securities | – | 401 |
Non-convertible debentures | 1,251 | 1,209 |
Government Securities | 664 | 724 |
Total non-current investments | 13,916 | 12,062 |
Current investments | ||
Liquid mutual fund units | 2,019 | 1,701 |
Certificates of deposit | 886 | 2,123 |
Government bonds | – | 12 |
Fixed maturity plans securities | 428 | – |
Non-convertible debentures | 673 | 1,746 |
Commercial paper | – | 495 |
Total current investments | 4,006 | 6,077 |
Total carrying value | 17,922 | 18,139 |
(In ₹ crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPM Limited | 660 | 659 |
3,38,23,444 (3,38,22,319) equity shares of ₹10/- each, fully paid up | ||
Infosys Technologies (China) Co. Limited | 333 | 333 |
Infosys Technologies (Australia) Pty Limited (1) | – | 5 |
Nil (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | ||
Infosys Technologies, S. de R.L. de C.V., Mexico | 65 | 65 |
17,49,99,990 (17,49,99,990) equity shares of MXN 1 par value, fully paid up | ||
Infosys Technologies (Sweden) AB | 76 | 76 |
1,000 (1,000) equity shares of SEK 100 par value, fully paid | ||
Infosys Technologia do Brasil Ltda | – | 276 |
Nil (12,84,20,748) shares of BRL 1.00 par value, fully paid | ||
Infosys Technologies (Shanghai) Company Limited | 900 | 900 |
Infosys Public Services, Inc. | 99 | 99 |
3,50,00,000 (3,50,00,000) shares of USD 0.50 par value, fully paid | ||
Infosys Consulting Holding AG | 1,323 | 1,323 |
23,350 (23,350) - Class A shares of CHF 1,000 each and | ||
26,460 (26,460) - Class B Shares of CHF 100 each, fully paid up | ||
Infosys Americas Inc. | 1 | 1 |
10,000 (10,000) shares of USD 10 per share, fully paid up | ||
EdgeVerve Systems Limited | 1,312 | 1,312 |
1,31,18,40,000 (1,31,18,40,000) equity shares of ₹10/- each, fully paid up | ||
Infosys Nova Holdings LLC (1) | 1,335 | – |
Infosys Consulting Pte Ltd | 10 | 10 |
1,09,90,000 (1,09,90,000) shares of SGD 1.00 par value, fully paid | ||
Brilliant Basics Holding Limited | 59 | 59 |
1,346 (1,346 ) shares of GBP 0.005 each, fully paid up | ||
Infosys Arabia Limited | 2 | 2 |
70 (70) shares | ||
Kallidus Inc. | 150 | 150 |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited | 59 | 59 |
25,000 (25,000) shares of ₹10/- each, fully paid up | ||
Panaya Inc. | 582 | 582 |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Chile SpA | 7 | 7 |
100 (100) shares | ||
Wongdoody Holding Company Inc | 359 | 350 |
2,000 (2,000) shares | ||
Infosys Luxembourg S.a r.l. | 4 | 4 |
3,700 (3,700) shares | ||
Infosys Austria GmBH ( formerly known as Lodestone Management Consultants GmbH) | – | |
80,000 (80,000) shares of EUR 1 par value, fully paid up | ||
Infosys Consulting Brazil | 183 | 43 |
16,49,15,570 (8,26,56,605) shares of BRL 1 per share, fully paid up | ||
Infosys Romania | 34 | 34 |
99,183 (99,183) shares of RON 100 per share, fully paid up | ||
Investment in Redeemable Preference shares of subsidiary | ||
Infosys Consulting Pte Ltd | – | |
24,92,00,000 (Nil) shares of SGD 1 per share, fully paid up | 1,318 | |
8,871 | 6,349 | |
Investment carried at amortized cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited | ||
12,58,00,000 (14,45,00,000) Unsecured redeemable, non-convertible debentures of ₹ 100/- each fully paid up | 1,159 | 1,445 |
1,159 | 1,445 | |
Investments carried at fair value through profit or loss | ||
Others (2) | 30 | 16 |
30 | 16 | |
Investment carried at fair value through other comprehensive income (FVOCI) | ||
Preference securities | 101 | 89 |
Equity instruments | 2 | 1 |
103 | 90 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds | 1,825 | 1,828 |
Government bonds | 13 | – |
1,838 | 1,828 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | – | 401 |
– | 401 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,251 | 1,209 |
Government Securities | 664 | 724 |
1,915 | 1,933 | |
Total non-current investments | 13,916 | 12,062 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units | 2,019 | 1,701 |
2,019 | 1,701 | |
Investments carried at fair value through other comprehensive income | ||
Commercial paper | – | 495 |
Certificates of deposit | 886 | 2,123 |
886 | 2,618 | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds | – | 12 |
– | 12 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | 428 | – |
428 | – | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 673 | 1,746 |
673 | 1,746 | |
Total current investments | 4,006 | 6,077 |
Total investments | 17,922 | 18,139 |
Aggregate amount of quoted investments | 4,854 | 5,920 |
Market value of quoted investments (including interest accrued), current | 1,101 | 1,757 |
Market value of quoted investments (including interest accrued), non current | 4,048 | 4,374 |
Aggregate amount of unquoted investments | 13,068 | 12,219 |
(1) Aggregate amount of impairment in value of investments | 121 | 122 |
Reduction in the fair value of assets held for sale | 854 | 854 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 469 | 469 |
Investments carried at cost | 8,871 | 6,349 |
Investments carried at amortized cost | 2,997 | 3,285 |
Investments carried at fair value through other comprehensive income | 3,577 | 6,387 |
Investments carried at fair value through profit or loss | 2,477 | 2,118 |
(2) | Uncalled capital commitments outstanding as of March 31, 2020 and March 31, 2019 was ₹15 crore and ₹17 crore, respectively. |
Refer note no. 2.9 for accounting policies on financial instruments.
Method of fair valuation:
(In ₹ crore)
Class of investment | Method | Fair value as at | |
March 31, 2020 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 2,019 | 1,701 |
Fixed maturity plan securities | Market observable inputs | 428 | 401 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,135 | 2,048 |
Non-convertible debentures | Quoted price and market observable inputs | 1,924 | 2,955 |
Government Securities | Quoted price | 664 | 724 |
Certificate of deposits | Market observable inputs | 886 | 2,123 |
Commercial paper | Market observable inputs | – | 495 |
Unquoted equity and preference securities | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 103 | 90 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 30 | 16 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
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 transaction is between a holding company and a wholly owned subsidiary and the resulting impact would be recorded in “Business Transfer Reserve” at the time of transfer.
2.3.1 Assets 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 year ended March 31, 2018 the Company had initiated identification and evaluation of potential buyers for the sale of its investment in subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya. The investment in these subsidiaries was classified and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. During the year ended March 31, 2019, 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 investment amounting to ₹265 crore in respect of Panaya.
Further, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the investments in Panaya and Skava 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 investment in subsidiaries, Panaya and Skava have been included in non-current investments line item in the standalone financial statements as at March 31, 2019.
On reclassification from “Held for sale”, the investment in subsidiaries, 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 ₹469 crore in respect of Skava in the standalone statement of profit and loss for the year ended March 31, 2019.
2.4 LOANS
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non- Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries | 277 | – |
Other Loans | ||
Loans to employees | 21 | 16 |
298 | 16 | |
Unsecured, considered doubtful | ||
Other Loans | ||
Loans to employees | 24 | 18 |
322 | 34 | |
Less: Allowance for doubtful loans to employees | 24 | 18 |
Total non - current loans | 298 | 16 |
Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries | 103 | 841 |
Other Loans | ||
Loans to employees | 204 | 207 |
Total current loans | 307 | 1,048 |
Total Loans | 605 | 1,064 |
2.5 OTHER FINANCIAL ASSETS
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Security deposits (1) | 46 | 47 |
Net investment in Sublease of right of use asset (refer to note 2.2) (1) | 398 | – |
Rental deposits (1) | 169 | 149 |
Total non-current other financial assets | 613 | 196 |
Current | ||
Security deposits (1) | 1 | 1 |
Rental deposits (1) | 4 | 3 |
Restricted deposits (1)* | 1,643 | 1,531 |
Unbilled revenues (1)(5)# | 1,973 | 1,541 |
Interest accrued but not due (1) | 441 | 865 |
Foreign currency forward and options contracts (2)(3) | 19 | 321 |
Net investment in Sublease of right of use asset (refer to note 2.2) (1) | 35 | – |
Escrow and other deposits pertaining to buyback (refer to note 2.10)(1) | – | 257 |
Others (1)(4) | 282 | 315 |
Total current other financial assets | 4,398 | 4,834 |
Total other financial assets | 5,011 | 5,030 |
(1) Financial assets carried at amortized cost | 4,992 | 4,709 |
(2) Financial assets carried at fair value through other comprehensive income | 9 | 37 |
(3) Financial assets carried at fair value through Profit or Loss | 10 | 284 |
(4) Includes dues from subsidiaries | 65 | 34 |
(5) Includes dues from subsidiaries | 84 | 51 |
* | Restricted deposits represent deposit 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 and is due only after a passage of time.
2.6 TRADE RECEIVABLES
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good(2) | 15,459 | 13,370 |
Considered doubtful | 491 | 431 |
15,950 | 13,801 | |
Less: Allowances for credit losses | 491 | 431 |
Total trade receivables(1) | 15,459 | 13,370 |
(1) Includes dues from companies where directors are interested | – | – |
(2) Includes dues from subsidiaries | 408 | 325 |
2.7 CASH AND CASH EQUIVALENTS
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 8,048 | 10,957 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 5,514 | 4,594 |
Total Cash and cash equivalents | 13,562 | 15,551 |
Balances with banks in unpaid dividend accounts | 30 | 29 |
Deposit with more than 12 months maturity | 6,171 | 6,048 |
Balances with banks held as margin money deposits against guarantees | 71 | 114 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of ₹101 crore and ₹143 crore, respectively. The restrictions are primarily on account of bank balances held as margin money deposits against guarantees.
The deposits maintained by the Company with banks and financial institutions comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
2.8 OTHER ASSETS
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Capital advances | 310 | 486 |
Others | ||
Prepaid expenses | 51 | 95 |
Prepaid gratuity | 143 | 25 |
Deferred contract cost | 10 | 226 |
Withholding taxes and others | 759 | 908 |
Total non-current other assets | 1,273 | 1,740 |
Current | ||
Advances other than capital advance | ||
Payment to vendors for supply of goods | 129 | 94 |
Others | ||
Unbilled revenues(2) | 3,856 | 2,904 |
Prepaid expenses (1) | 736 | 580 |
Deferred contract cost | 11 | 52 |
Withholding taxes and others | 1,356 | 1,290 |
Total current other assets | 6,088 | 4,920 |
Total other assets | 7,361 | 6,660 |
(1) Includes dues from subsidiaries | 168 | 109 |
(2) Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. As at March 31, 2020 Cenvat recoverable includes ₹355 crore which are pending adjudication. The Company expects these amounts to be sustainable on adjudication and recoverable on final resolution.
2.9 FINANCIAL INSTRUMENTS
Accounting Policy
2.9.1 Initial recognition
The Company 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, which 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.
2.9.2 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
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 Company 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 are 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 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 fair value due to the short maturity of these instruments.
(v) Investment in subsidiaries
Investment in subsidiaries is carried at cost in the separate financial statements.
b. Derivative financial instruments
The Company 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 includes derivative financial assets or liabilities which are not designated as hedges.
Although the Company 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 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 Company 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 hedge 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 hedge reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the 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 hedge reserve till the period the hedge was effective remains in cash flow hedge reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedge reserve is transferred to the net profit in the 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 hedge reserve is reclassified to net profit in the Statement of Profit and Loss.
2.9.3 Derecognition of financial instruments
The Company 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 Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
2.9.4 Fair value of financial instruments
In determining the fair value of its financial instruments, the Company 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 financial instruments by category table below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of these instruments.
2.9.5 Impairment
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenues which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in statement of profit or loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2020 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. 2.7) | 13,562 | – | – | – | – | 13,562 | 13,562 |
Investments (Refer note no.2.3) | |||||||
Preference securities, Equity instruments and others | – | – | 30 | 103 | – | 133 | 133 |
Tax free bonds and government bonds | 1,838 | – | – | – | – | 1,838 | 2,135(2) |
Liquid mutual fund units | – | – | 2,019 | – | – | 2,019 | 2,019 |
Redeemable, non-convertible debentures (1) | 1,159 | – | – | – | – | 1,159 | 1,159 |
Fixed maturity plan securities | – | – | 428 | – | – | 428 | 428 |
Commercial Paper | – | – | – | – | – | – | – |
Certificates of deposit | – | – | – | – | 886 | 886 | 886 |
Non convertible debentures | – | – | – | – | 1,924 | 1,924 | 1,924 |
Government Securities | – | – | – | – | 664 | 664 | 664 |
Trade receivables (Refer Note no. 2.6) | 15,459 | – | – | – | – | 15,459 | 15,459 |
Loans (Refer note no. 2.4) | 605 | – | – | – | – | 605 | 605 |
Other financial assets (Refer Note no. 2.5) (4) | 4,992 | – | 10 | – | 9 | 5,011 | 4,929(3) |
Total | 37,615 | – | 2,487 | 103 | 3,483 | 43,688 | 43,903 |
Liabilities: | |||||||
Trade payables (Refer Note no. 2.12) | 1,529 | – | – | – | – | 1,529 | 1,529 |
Lease liabilities (Refer Note no. 2.2) | 3,165 | – | – | – | – | 3,165 | 3,165 |
Other financial liabilities (Refer Note no. 2.11) | 5,827 | – | 592 | – | 20 | 6,439 | 6,439 |
Total | 10,521 | – | 592 | – | 20 | 11,133 | 11,133 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds and government bonds carried at amortized cost of ₹82 crore
(4) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 2019 were 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. 2.7) | 15,551 | – | – | – | – | 15,551 | 15,551 |
Investments (Refer Note no. 2.3) | |||||||
Preference securities, Equity instruments and others | – | – | 16 | 90 | – | 106 | 106 |
Tax free bonds and government bonds | 1,840 | – | – | – | – | 1,840 | 2,048(2) |
Liquid mutual fund units | – | – | 1,701 | – | – | 1,701 | 1,701 |
Redeemable, non-convertible debentures (1) | 1,445 | – | – | – | – | 1,445 | 1,445 |
Fixed maturity plan securities | – | – | 401 | – | – | 401 | 401 |
Certificates of deposit | – | – | – | – | 2,123 | 2,123 | 2,123 |
Government Securities | – | – | – | – | 724 | 724 | 724 |
Non convertible debentures | – | – | – | – | 2,955 | 2,955 | 2,955 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Trade receivables (Refer Note no. 2.6) | 13,370 | – | – | – | – | 13,370 | 13,370 |
Loans (Refer note no. 2.4) | 1,064 | – | – | – | – | 1,064 | 1,064 |
Other financial assets (Refer Note no. 2.5)(4) | 4,709 | – | 284 | – | 37 | 5,030 | 4,948(3) |
Total | 37,979 | – | 2,402 | 90 | 6,334 | 46,805 | 46,931 |
Liabilities: | |||||||
Trade payables (Refer note no. 2.12) | 1,604 | – | – | – | – | 1,604 | 1,604 |
Other financial liabilities (Refer Note no. 2.11) | 7,067 | – | 128 | – | 1 | 7,196 | 7,196 |
Total | 8,671 | – | 128 | – | 1 | 8,800 | 8,800 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds and government bonds carried at amortized cost of ₹82 crore
(4) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The fair value hierarchy of assets and liabilities as at March 31, 2020 is as follows:
(In ₹ crore)
Particulars | March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer note no. 2.3) | 2,122 | 1,960 | 162 | – |
Investments in government bonds (Refer note no. 2.3) | 13 | 13 | – | – |
Investments in liquid mutual fund units (Refer note no. 2.3) | 2,019 | 2,019 | – | – |
Investments in equity instruments (Refer note no. 2.3) | 2 | – | – | 2 |
Investments in preference securities (Refer note no. 2.3) | 101 | – | – | 101 |
Investments in fixed maturity plan securities (Refer note no. 2.3) | 428 | – | 428 | – |
Investments in certificates of deposit (Refer note no. 2.3) | 886 | 886 | – | – |
Investments in non convertible debentures (Refer note no. 2.3) | 1,924 | 1,558 | 366 | – |
Investments in government securities (Refer note no. 2.3) | 664 | 664 | – | – |
Other investments (Refer note no. 2.3) | 30 | – | – | 30 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer note no. 2.5) | 19 | – | 19 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note no. 2.11) | 461 | – | 461 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1) | 151 | – | – | 151 |
(1)Discount rate pertaining to contingent consideration is 14%
During the year ended March 31, 2020, tax free bonds and non-convertible debentures of ₹518 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on Quoted price, and tax free bonds of ₹50 crore were 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 | March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in government securities (Refer Note no. 2.3) | 724 | 724 | – | – |
Investments in tax free bonds (Refer Note no. 2.3) | 2,036 | 1,765 | 271 | – |
Investments in liquid mutual fund units (Refer Note no. 2.3) | 1,701 | 1,701 | – | – |
Investments in government bonds (Refer Note no. 2.3) | 12 | 12 | – | – |
Investments in equity instruments (Refer Note no. 2.3) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.3) | 89 | – | – | 89 |
Investments in fixed maturity plan securities (Refer Note no. 2.3) | 401 | – | 401 | – |
Investments in certificates of deposit (Refer Note no. 2.3) | 2,123 | – | 2,123 | – |
Investments in non convertible debentures (Refer Note no. 2.3) | 2,955 | 1,612 | 1,343 | – |
Investments in commercial paper (Refer Note no. 2.3) | 495 | – | 495 | – |
Other investments (Refer Note no. 2.3) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.5) | 321 | – | 321 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note 2.11) | 13 | – | 13 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1) | 116 | – | – | 116 |
(1)Discount rate pertaining to contingent consideration ranges from 10% 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 were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
2.10 EQUITY
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity share capital . 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.
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 Company adopted these amendments and there was no impact of these amendments on the Company’s financial statements.
Description of reserves
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Company.
Securities premium
The amount received in excess of the par value of equity shares has been classified as securities premium.
Share Options Outstanding Account
The Share options outstanding account is used to record the fair value of equity-settled share based payment transactions with employees. The amounts recorded in share options outstanding account are transferred to securities premium upon exercise of stock options and transferred to general reserve on account of stock options not exercised by employees.
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 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.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the statement of Profit and Loss upon the occurrence of the related forecasted transaction.
2.10.1 EQUITY SHARE CAPITAL
(In ₹ crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | 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) | 2,129 | 2,178 |
4,25,89,92,566 (4,35,62,79,444) equity shares fully paid-up | ||
2,129 | 2,178 |
(1) Refer note no. 2.19 for details of basic and diluted shares
Forfeited shares amounted to ₹1,500/- (₹1,500/-)
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 Depository 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.
Update on buyback of equity shares
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 March 31, 2020, 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.
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 of March 31, 2020, 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.
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2020 and March 31, 2019 is set out below:
in ₹ crore, except as stated otherwise
Particulars | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | Amount | Number of shares | Amount | |
As at the beginning of the period | 4,35,62,79,444 | 2,178 | 2,18,41,14,257 | 1,092 |
Add: Shares issued on exercise of employee stock options -before bonus issue | – | – | 77,233 | – |
Add: Bonus shares issued | – | – | 2,18,41,91,490 | 1,092 |
Add: Shares issued on exercise of employee stock options - after bonus issue | 580,388 | – | 548,464 | – |
Less: Shares bought back(1)(2) | 9,78,67,266 | 49 | 1,26,52,000 | 6 |
As at the end of the period | 4,25,89,92,566 | 2,129 | 4,35,62,79,444 | 2,178 |
(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 |
2.10.2 DIVIDEND
Final dividend on shares are 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay/distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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.
The amount of per share dividend recognized as distribution to equity shareholders is as follows:
(in ₹)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Interim Dividend for fiscal 2020 | – | – | 8.00 | – |
Final Dividend for fiscal 2019 | – | – | 10.50 | – |
Interim Dividend for fiscal 2019 | – | – | – | 7.00 |
Special dividend for fiscal 2019* | – | 4.00 | – | 4.00 |
Final Dividend for fiscal 2018* | – | – | – | 10.25 |
Special dividend for fiscal 2018* | – | – | – | 5.00 |
* Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
During the year ended March 31, 2020 on account of the final dividend for fiscal 2020, and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 8,624 crore inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID-19, the Company is working on an Annual General Meeting date which will be announced by the company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately 4,046 crore.
2.10.3 Employee Stock Option Plan (ESOP):
Accounting Policy
The Company 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 50,000,000 equity shares. To implement the 2019 Plan , upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and remuneration committee). The performance parameters will be based on a combination of relative total shareholders return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 Plan) :
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.
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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares, 200,000 equity shares each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the three months and year ended March 31, 2020 and March 31, 2019 :
Particulars | 2019 plan | 2015 plan | ||||||
Three months ended March 31, | Year ended March 31, | Three months ended March 31, | Year ended March 31, | |||||
2020 | 2019 | 2020 | 2019* | 2020 | 2019 | 2020 | 2019* | |
Equity settled RSU | ||||||||
KMPs | 169,000 | – | 356,793 | – | 295,800 | 458,330 | 507,896 | 675,530 |
Employees other than KMPs | 1,734,500 | – | 1,734,500 | – | 1,370,250 | 1,878,050 | 3,346,280 | 3,665,170 |
1,903,500 | – | 2,091,293 | – | 1,666,050 | 2,336,380 | 3,854,176 | 4,340,700 | |
Cash settled RSU | ||||||||
KMPs | – | – | – | – | 180,400 | – | 180,400 | – |
Employees other than KMPs | – | – | – | – | 377,260 | 21,500 | 475,740 | 74,090 |
– | – | – | – | 557,660 | 21,500 | 656,140 | 74,090 | |
Total Grants | 1,903,500 | – | 2,091,293 | – | 2,223,710 | 2,357,880 | 4,510,316 | 44,14,790 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value ₹3.25 crore which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, 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.
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.
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. 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
Under the 2015 plan:
On February 20, 2020, Based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 ₹4 crore for financial year 2020 under the 2019 Plan. 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 KMPs
Under the 2015 plan:
On April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019. The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain performance targets.
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(in ₹ crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Granted to: | ||||
KMP | 11 | 10 | 56 | 33 |
Employees other than KMP | 49 | 43 | 170 | 149 |
Total (1) | 60 | 53 | 226 | 182 |
(1) Cash settled stock compensation expense included in the above | 7 | 1 | 10 | 2 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 ₹57 crore is recognized as financial liability with a corresponding adjustment to equity.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant 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) | 728 | 10.52 | 696 | 10.77 |
Exercise price (₹)/ ($ADS)(1) | 5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-30 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date (₹) / ($ADS)(1) | 607 | 7.84 | 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.
2.11 OTHER FINANCIAL LIABILITIES
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Compensated absences | 32 | 38 |
Accrued compensation to employees | 12 | – |
Payable for acquisition of business- Contingent consideration | – | 41 |
Rental deposit | 5 | – |
Total non-current other financial liabilities | 49 | 79 |
Current | ||
Unpaid dividends | 30 | 29 |
Others | ||
Accrued compensation to employees | 2,264 | 2,006 |
Accrued expenses (1) | 2,646 | 2,310 |
Retention monies | 30 | 60 |
Payable for acquisition of business - Contingent consideration | 151 | 75 |
Capital creditors | 254 | 653 |
Financial liability relating to buyback # | – | 1,202 |
Compensated absences | 1,497 | 1,373 |
Other payables (2) | 603 | 807 |
Foreign currency forward and options contracts | 461 | 13 |
Total current other financial liabilities | 7,936 | 8,528 |
Total other financial liabilities | 7,985 | 8,607 |
Financial liability carried at amortized cost | 5,827 | 7,067 |
Financial liability carried at fair value through profit or loss | 592 | 128 |
Financial liability carried at fair value through other comprehensive income | 20 | 1 |
Contingent consideration on undiscounted basis | 152 | 135 |
(1) Includes dues to subsidiaries | 2 | 6 |
(2) Includes dues to subsidiaries | 47 | 13 |
# | 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 2.10). 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 buy back, 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. |
2.12 TRADE PAYABLES
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Trade payables(1) | 1,529 | 1,604 |
Total trade payables | 1,529 | 1,604 |
(1)Includes dues to subsidiaries | 271 | 220 |
2.13 OTHER LIABILITIES
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non current | ||
Accrued provident fund liability (refer to note 2.18.2) | 185 | – |
Others | ||
Deferred income | 22 | 29 |
Deferred rent (refer to note 2.2) | – | 140 |
Total non - current other liabilities | 207 | 169 |
Current | ||
Accrued provident fund liability (refer to note 2.18.2) | 64 | – |
Unearned revenue | 2,140 | 2,094 |
Client deposits | 9 | 19 |
Others | ||
Withholding taxes and others | 1,344 | 1,168 |
Deferred rent (refer to note 2.2) | – | 54 |
Total current other liabilities | 3,557 | 3,335 |
Total other liabilities | 3,764 | 3,504 |
2.14 PROVISIONS
Accounting Policy
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
a. Post sales client support
The Company 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 in the Statement of Profit and Loss. The Company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.
b. Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company 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 Company recognizes any impairment loss on the assets associated with that contract.
Provision for post-sales client support and others
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and others | 506 | 505 |
Total provisions | 506 | 505 |
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 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. 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 Company 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 statement of profit and loss comprises:
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Current taxes | 1,194 | 1,053 | 5,235 | 5,189 |
Deferred taxes | (135) | 80 | (301) | 36 |
Income tax expense | 1,059 | 1,133 | 4,934 | 5,225 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore which pertained to prior periods.
Additionally, income tax expense for the three months ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of ₹175 crore and includes provisions (net of reversals) ₹73 crore, respectively. Income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of ₹298 crore and ₹97 crore, respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions.
Deferred income tax for the three months and year ended March 31, 2020 and March 31, 2019, substantially relates to origination and reversal of temporary differences.
2.16 REVENUE FROM OPERATIONS
Accounting Policy
The Company derives revenues primarily from IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Company’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
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.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Company has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Company allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Company estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Company’s contracts may include variable consideration including rebates, volume discounts and penalties. The Company includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Company’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company 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 Company is unable to determine the standalone selling price, the Company uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period.
Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS).When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Company uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Company is acting as an agent between the customer and the vendor, and gross when the Company is the principal for the transaction. In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. The Company considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Company expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Company transfers the related goods or services to the customer.
The Company presents revenues net of indirect taxes in its statement of profit and loss.
Revenue from operations for the three months and year ended March 31, 2020 and March 31, 2019 is as follows:
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue from software services | 20,116 | 18,870 | 78,809 | 72,845 |
Revenue from products and platforms | 71 | 65 | 238 | 262 |
Total revenue from operations | 20,187 | 18,935 | 79,047 | 73,107 |
The company has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts;(ii) onerous obligations;(iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The company has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the pandemic, the company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by offerings for the three months and year ended March 31, 2020 and March 31, 2019 respectively. The Company 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.
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue by offerings | ||||
Core | 11,574 | 12,386 | 47,533 | 49,463 |
Digital | 8,613 | 6,549 | 31,514 | 23,644 |
Total | 20,187 | 18,935 | 79,047 | 73,107 |
Digital Services
Digital Services comprise of service and solution offerings of the company 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 company 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 Company also derives revenues from the sale of products and platforms including Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning.
The percentage of revenue from fixed price contracts for each of the three months and year ended March 31, 2020 and March 31, 2019 is approximately 55%.
Trade receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Company’s balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Company’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the balance Sheet.
2.17 OTHER INCOME, NET
2.17.1 Other income - Accounting Policy
Other income is comprised primarily of interest income, dividend income, gain / loss on investments and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.
2.17.2 Foreign currency - Accounting Policy
Functional currency
The functional currency of the Company is the Indian rupee. 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 recognized in the Statement of Profit and Loss and reported within exchange gains/(losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the 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.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Effective April 1, 2018, the company 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.
Other income for the three months and year ended March 31, 2020 and March 31, 2019 is as follows:
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Interest income on financial assets carried at amortized cost | ||||
Tax free bonds and government bonds | 34 | 34 | 138 | 137 |
Deposit with Bank and others | 268 | 317 | 1,080 | 1,276 |
Interest income on financial assets fair valued through other comprehensive income | ||||
Non-convertible debentures, commercial paper, certificates of deposit and government securities | 58 | 128 | 282 | 581 |
Income on investments carried at fair value through other comprehensive income | 4 | – | 41 | – |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | – | 1 | 2 | 2 |
Gain / (loss) on liquid mutual funds and other investments | 54 | 57 | 188 | 175 |
Interest income on income tax refund | 8 | – | 250 | 50 |
Exchange gains/(losses) on foreign currency forward and options contracts | (484) | 185 | (528) | 184 |
Exchange gains/(losses) on translation of assets and liabilities | 607 | (139) | 1,056 | 144 |
Miscellaneous income, net | 36 | 56 | 191 | 303 |
Total other income | 585 | 639 | 2,700 | 2,852 |
2.18 EXPENSES
Accounting Policy
2.18.1 Gratuity
The Company provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees. 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 Company.
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). Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by Indian law.
The Company 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 are recognized in net profit in the statement of Profit and Loss.
2.18.2 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.
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 March 31, 2020
(In ₹ crore)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 5,989 |
Service cost - employer contribution | 407 |
Employee contribution | 857 |
Interest expense | 561 |
Actuarial (gains) / loss | 216 |
Benefits paid | (664) |
Benefit obligations at the end | 7,366 |
Change in plan assets | |
Fair value of plan assets at the beginning | 5,989 |
Interest income | 561 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (33) |
Contributions (employer and employee) | 1,264 |
Benefits paid | (664) |
Fair value of plan assets at the end | 7,117 |
Net liability (refer to note 2.13) | (249) |
(1) Includes unrealized losses on certain investments in bonds
Amount for the three months and year ended March 31, 2020 recognized in the statement of other comprehensive income:
(In ₹ crore)
Particulars | Three months ended March 31, | Year ended March 31, |
2020 | 2020 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 69 | 216 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (48) | 33 |
21 | 249 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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.
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately ₹72 crore and ₹108 crore on account of a 0.25% increase / decrease in the expected rate of return on plan assets.
The Company contributed ₹142 crore and ₹118 crore to the provident fund during the three months ended March 31, 2020 and March 31, 2019, respectively. The Company contributed ₹541 crore and ₹451 crore to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in the net profit in the statement of profit and loss under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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.
2.18.3 Superannuation
Certain employees of Infosys are participants in a defined contribution plan. The Company has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
2.18.4 Compensated absences
The Company 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.
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit expenses | ||||
Salaries including bonus | 10,340 | 9,896 | 41,159 | 37,185 |
Contribution to provident and other funds | 241 | 208 | 938 | 797 |
Share based payments to employees (Refer note no. 2.10) | 60 | 53 | 226 | 182 |
Staff welfare | 25 | 41 | 111 | 132 |
10,666 | 10,198 | 42,434 | 38,296 | |
Cost of software packages and others | ||||
For own use | 209 | 187 | 814 | 793 |
Third party items bought for service delivery to clients | 248 | 205 | 842 | 853 |
457 | 392 | 1,656 | 1,646 | |
Other expenses | ||||
Power and fuel | 41 | 37 | 176 | 171 |
Brand and Marketing | 122 | 114 | 441 | 406 |
Short-term leases (refer to note 2.2) | 13 | – | 37 | – |
Operating leases | – | 96 | – | 339 |
Rates and taxes | 48 | 25 | 143 | 110 |
Repairs and Maintenance | 328 | 295 | 1,198 | 1,051 |
Consumables | 12 | 10 | 32 | 33 |
Insurance | 18 | 15 | 72 | 55 |
Provision for post-sales client support and others | 1 | (31) | 3 | (6) |
Commission to non-whole time directors | 2 | 2 | 8 | 7 |
Impairment loss recognized / (reversed) under expected credit loss model | 66 | 11 | 137 | 184 |
Auditor's remuneration | ||||
Statutory audit fees | 4 | 1 | 7 | 4 |
Tax matters | – | 1 | – | 1 |
Other services | – | – | 2 | – |
Contributions towards Corporate Social Responsibility | 124 | 61 | 360 | 245 |
Others | 47 | 40 | 171 | 170 |
826 | 677 | 2,787 | 2,770 |
2.19 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNING 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
2.20 CONTINGENT LIABILITIES AND COMMITMENTS
(In ₹ crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 3,410 | 2,947 |
[Amount paid to statutory authorities ₹5,229 crore (₹5,861 crore)] | ||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,305 | 1,653 |
(net of advances and deposits)(2) | ||
Other Commitments* | 15 | 17 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2020, claims against the Company not acknowledged as debts in respect of income tax matters amounted to ₹3,274 crore. The claims against the Company majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes. These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Company's financial position and results of operations. |
Amount paid to statutory authorities against the above tax claims amounted to ₹5,228 crore.
(2) Capital contracts primarily comprises of commitments for infrastructure facilities and computer equipment’s.
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal securities laws. The Company is presently unable to predict the scope, duration or the outcome of these matters.
The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s management reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Company’s results of operations or financial condition.
2.21 RELATED PARTY TRANSACTIONS
Refer to the Company's Annual Report for the year ended March 31, 2020 for the full names and other details of the Company's subsidiaries and controlled trusts.
Changes in Subsidiaries
During the year ended March 31, 2020, the following are the changes in the subsidiaries:
- | On April 1, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 81% of voting interest in HIPUS Co Ltd, Japan, a wholly owned subsidiary of Hitachi Ltd, Japan. |
- | On May 23, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 75% of voting interest in Stater N.V along with its eight subsidiaries Stater Netherland B.V., Stater Duitsland B.V., Stater XXL B.V., HypoCasso B.V., Stater Participations B.V., Stater Deutschland Verwaltungs-GmbH, Stater Deutschland GmbH & Co.KG, Stater Belgium N.V./S.A. |
- | Infosys Technologies (Australia) Pty. Limited (Infosys Australia) has been liquidated effective November 17, 2019 |
- | Infosys Tecnologia Do Brasil Ltda, a wholly owned subsidiary of Infosys Ltd merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd effective October 1, 2019. (Refer note no. 2.3) |
- | Panaya Japan Co. Ltd, a wholly owned subsidiary of Panaya Inc. has been liquidated effective October 31, 2019 |
- | On February 20, 2020, Infosys Poland, Sp z.o.o, a wholly owned subsidiary of Infosys BPM acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o, a wholly owned subsidiary of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
- | On March 13, 2020, Infosys Nova Holdings LLC, a wholly-owned subsidiary of Infosys Limited, acquired 100% of voting interest in Outbox systems Inc. dba Simplus (US) along with its eight subsidiaries Simplus North America Inc., Simplus ANZ Pty Ltd., Simplus Australia Pty Ltd, Sqware Peg Digital Pty Ltd, Simplus Philippines, Inc., Simplus Europe, Ltd., Simplus U.K., Ltd., Simplus Ireland, Ltd. |
Changes in controlled trusts
During the year ended 'March 31, 2020, the following are the changes in the controlled trusts:
- On May 15, 2019, the Company registered Infosys Expanded Stock Ownership Trust
The Company’s material related party transactions during the three months and year ended March 31, 2020 and March 31, 2019 and outstanding balances as at March 31, 2020 and March 31, 2019 are with its subsidiaries with whom the Company generally enters into transactions which are at arms length and in the ordinary course of business.
Change in key management personnel
The following are the changes in the Key management personnel
Roopa Kudva (retired as member of the Board effective February 3, 2020).
Transactions with key management personnel
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
(In ₹ crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3) | 29 | 29 | 118 | 96 |
Commission and other benefits to non-executive / independent directors | 2 | 2 | 8 | 7 |
Total | 31 | 31 | 126 | 103 |
(1) | Total employee stock compensation expense for the three months ended March 31, 2020 and March 31, 2019 includes a charge of ₹11 crore and ₹10 crore, respectively, towards key managerial personnel. For the year ended March 31, 2020 and March 31, 2019, includes a charge of ₹56 crore and ₹33 crore respectively, towards key managerial personnel. (Refer to note 2.10) |
(2) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
2.22 SEGMENT REPORTING
The Company publishes this financial statement along with the interim consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the interim consolidated financial statements.
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 April 20, 2020 |
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFOSYS LIMITED
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of INFOSYS LIMITED (the “Company”), which comprise the Balance Sheet as at March 31, 2020, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows ended on that date, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as the “standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2020, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (“SA”s) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the standalone financial 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 on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone 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 |
Fixed price contracts using the percentage of completion method
|
Principal Audit Procedures |
Fixed price maintenance revenue is recognized either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using percentage of completion method when the pattern of benefits from services rendered to the customer and Company’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive.
Revenue from other fixed-price, fixed -timeframe contracts, where the performance obligations are satisfied over time has been recognized using the percentage-of-completion method. Use of the percentage-of-completion method requires the Company to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
We identified the estimate of total efforts or efforts to complete fixed price contracts measured using the percentage of completion method as a key audit matter as the estimation of efforts or costs involves significant judgement throughout the period of the contract and is subject to revision as the contract progresses based on the latest available information. This estimate has a high inherent uncertainty and requires consideration of progress of the contract, efforts or costs incurred to-date and estimates of efforts or costs required to complete the remaining contract performance obligations over the lives of the contracts.
Refer Notes 1.4(a) and 2.17 to the Standalone financial statements.
|
Our audit procedures related to estimates of total expected costs or efforts to complete for fixed-price contracts included the following, among others:
We tested the effectiveness of controls relating to (1) recording of efforts or costs incurred and estimation of efforts or costs required to complete the remaining contract performance obligations and (2) access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
We selected a sample of fixed price contracts with customers accounted using percentage-of-completion method and performed the following:
· Compared efforts or costs incurred with Company’s estimate of efforts or costs incurred to date to identify significant variations and evaluate whether those variations have been considered appropriately in estimating the remaining costs or efforts to complete the contract.
· Tested the estimate for consistency with the status of delivery of milestones and customer acceptances and sign off from customers to identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligations. | |
2 |
Allowance for credit losses
|
Principal Audit Procedures
|
The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the Company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
We identified allowance for credit losses as a key audit matter because the Company exercises significant judgment in calculating the expected credit losses.
Refer Notes 1.4(f), 2.7 and 2.10 to the Standalone financial statements.
|
Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following, among others:
We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses.
For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information.
We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Company. |
Emphasis of Matter
As more fully described in Note 2.22 to the standalone financial statements, the Company is responding to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Information Other than the Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the standalone financial statements and our auditor’s report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibilities for the Standalone Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone 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 standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the standalone 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the 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 Company’s ability 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 standalone 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 Company to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone 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 standalone financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone 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.
Report on Other Legal and Regulatory Requirements
1. | As required by Section 143(3) of the Act, based on our audit we report that: |
a) | We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. |
b) | In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books. |
c) | The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account. |
d) | In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act. |
e) | On the basis of the written representations received from the directors as on March 31, 2020 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2020 from being appointed as a director in terms of Section 164(2) of the Act. |
f) | With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting. |
g) | With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended: |
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) | With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us: |
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements.
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company and its subsidiary companies incorporated in India.
2. | As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No.117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) |
ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT
(Referred to in paragraph 1 (f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
We have audited the internal financial controls over financial reporting of INFOSYS LIMITED (the “Company”) as of March 31, 2020 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Management’s Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the “ICAI”). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the ICAI and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2020, based on the internal financial control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No.117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) UDIN : 20039826AAAABY7886 |
ANNEXURE ‘B’ TO THE INDEPENDENT AUDITOR’S REPORT
(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)
i. | In respect of the Company’s fixed assets: |
(a) | The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. |
(b) | The Company has a program of verification to cover all the items of fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification. |
(c) | According to the information and explanations given to us, the records examined by us and based on the examination of the conveyance deeds / registered sale deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date. In respect of immovable properties of land and building that have been taken on lease and disclosed as fixed assets in the standalone financial statements, the lease agreements are in the name of the Company. |
ii. | The Company is in the business of providing software services and does not have any physical inventories. Accordingly, reporting under clause 3 (ii) of the Order is not applicable to the Company. |
iii. | According to the information and explanations given to us, the Company has granted unsecured loans to four bodies corporate, covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which: |
(a) | The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company’s interest. |
(b) | The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations. |
(c) | There is no overdue amount remaining outstanding as at the year-end. |
iv. | In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable. |
v. | The Company has not accepted deposits during the year and does not have any unclaimed deposits as at March 31, 2020 and therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company. |
vi. | The maintenance of cost records has not been specified by the Central Government under section 148(1) of the Companies Act, 2013 for the business activities carried out by the Company. Thus reporting under clause 3(vi) of the order is not applicable to the Company. |
vii. | According to the information and explanations given to us, in respect of statutory dues: |
(a) | The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. |
(b) | There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues in arrears as at March 31, 2020 for a period of more than six months from the date they became payable. |
(c) | Details of dues of Income Tax, Sales Tax, Service Tax, Excise Duty and Value Added Tax which have not been deposited as at March 31, 2020 on account of dispute are given below: |
Nature of the statute | Nature of dues | Forum where Dispute is Pending |
Period to which the Amount Relates |
Amount ₹ Crores |
The Income Tax Act, 1961 | Income Tax | Appellate Tribunal (1) | A.Y. 2010-11 and A.Y. 2012-13 | 1,029 |
Income Tax | Appellate Authority upto Commissioner's Level (2) | A.Y. 2008-09 to A.Y. 2011-12; A.Y. 2013-14 to A.Y. 2016-17 and A.Y. 2018-19 to A.Y. 2020-21 | 2,219 | |
Finance Act, 1994 | Service Tax | Appellate Tribunal (3) | F.Y. 2004-05 to F.Y.2014-15 | 60 |
Central Excise Act, 1944 | Excise Duty | Supreme Court(3) | F.Y. 2005-06 to F.Y. 2015-16 | 68 |
Excise Duty | Appellate Tribunal | F.Y. 2015-16 | -* | |
Customs Act, 1962 | Custom Duty and Interest | Specified Officer of SEZ | F.Y. 2008 -09 to F.Y. 2011-12 | 5 |
Sales Tax Act and VAT Laws | Sales Tax and interest | High Court | F.Y. 2007-08 | -* |
Sales Tax and interest | Appellate Authority upto Commissioner's Level (3) | F.Y. 2006-07 to F.Y. 2010-11, F.Y. 2014-15 | 2 | |
(1) In respect of A.Y. 2012-13, stay order has been granted against the amount of ₹1,029 crores disputed and not been deposited. (2) In respect of A.Y. 2016-17, ₹ 599 crores is erroneous interest demand on paid liability. (3) Stay order has been granted. * Less than ₹ 1 crore.
|
viii. | The Company has not taken any loans or borrowings from financial institutions, banks and government or has not issued any debentures. Hence reporting under clause 3 (viii) of the Order is not applicable to the Company. |
ix. | The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under clause 3 (ix) of the Order is not applicable to the Company. |
x. | To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company or no material fraud on the Company by its officers or employees has been noticed or reported during the year. |
xi. | In our opinion and according to the information and explanations given to us, the Company has paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act. |
xii. | The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to the Company. |
xiii. | In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards. |
xiv. | During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures and hence reporting under clause 3 (xiv) of the Order is not applicable to the Company. |
xv. | In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors and hence provisions of section 192 of the Companies Act, 2013 are not applicable to the Company. |
xvi. | The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No.117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 | Partner (Membership No. 039826) |
INFOSYS LIMITED
Standalone Financial Statements under Indian Accounting Standards (Ind AS) for the year ended March 31, 2020
Index | Page No. |
Balance Sheet | 1 |
Statement of Profit and Loss | 2 |
Statement of Changes in Equity | 3 |
Statement of Cash Flows | 5 |
Overview and notes to the financial statements | |
1. Overview | |
1.1 Company overview | 7 |
1.2 Basis of preparation of financial statements | 7 |
1.3 Use of estimates and judgments | 7 |
1.4 Critical accounting estimates | 7 |
2. Notes to financial statements | |
2.1 Property, plant and equipment | 9 |
2.2 Goodwill and other intangible assets | 11 |
2.3 Leases | 12 |
2.4 Investments and assets held for sale | 14 |
2.5 Loans | 20 |
2.6 Other financial assets | 20 |
2.7 Trade Receivables | 20 |
2.8 Cash and cash equivalents | 21 |
2.9 Other assets | 21 |
2.10 Financial instruments | 22 |
2.11 Equity | 28 |
2.12 Other financial liabilities | 33 |
2.13 Trade payables | 33 |
2.14 Other liabilities | 33 |
2.15 Provisions | 34 |
2.16 Income taxes | 34 |
2.17 Revenue from operations | 37 |
2.18 Other income, net | 39 |
2.19 Expenses | 40 |
2.20 Employee Benefits | 41 |
2.21 Reconciliation of basic and diluted shares used in computing earning per share | 45 |
2.22 Contingent liabilities and commitments | 45 |
2.23 Related party transactions | 46 |
2.24 Corporate social responsibility | 50 |
2.25 Segment Reporting | 50 |
2.26 Function-wise classification of statement of profit and loss | 51 |
INFOSYS LIMITED
(In crore)
Balance Sheet as at |
Note No. | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.1 | 11,092 | 10,394 |
Right-of-use assets | 2.3 | 2,805 | – |
Capital work-in-progress | 945 | 1,212 | |
Goodwill | 2.2 | 29 | 29 |
Other intangible assets | 2.2 | 48 | 74 |
Financial assets | |||
Investments | 2.4 | 13,916 | 12,062 |
Loans | 2.5 | 298 | 16 |
Other financial assets | 2.6 | 613 | 196 |
Deferred tax assets (net) | 2.16 | 1,429 | 1,114 |
Income tax assets (net) | 2.16 | 4,773 | 5,870 |
Other non-current assets | 2.9 | 1,273 | 1,740 |
Total non - current Assets | 37,221 | 32,707 | |
Current assets | |||
Financial assets | |||
Investments | 2.4 | 4,006 | 6,077 |
Trade receivables | 2.7 | 15,459 | 13,370 |
Cash and cash equivalents | 2.8 | 13,562 | 15,551 |
Loans | 2.5 | 307 | 1,048 |
Other financial assets | 2.6 | 4,398 | 4,834 |
Income tax assets (net) | 2.16 | – | 423 |
Other current assets | 2.9 | 6,088 | 4,920 |
Total current assets | 43,820 | 46,223 | |
Total Assets | 81,041 | 78,930 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,129 | 2,178 |
Other equity | 60,105 | 60,533 | |
Total equity | 62,234 | 62,711 | |
LIABILITIES | |||
Non-current liabilities | |||
Financial liabilities | |||
Lease liabilities | 2.3 | 2,775 | – |
Other financial liabilities | 2.12 | 49 | 79 |
Deferred tax liabilities (net) | 2.16 | 556 | 541 |
Other non-current liabilities | 2.14 | 207 | 169 |
Total non - current liabilities | 3,587 | 789 | |
Current liabilities | |||
Financial liabilities | |||
Trade payables | 2.13 | ||
Total outstanding dues of micro enterprises and small enterprises | – | – | |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,529 | 1,604 | |
Lease liabilities | 2.3 | 390 | – |
Other financial liabilities | 2.12 | 7,936 | 8,528 |
Other current liabilities | 2.14 | 3,557 | 3,335 |
Provisions | 2.15 | 506 | 505 |
Income tax liabilities (net) | 2.16 | 1,302 | 1,458 |
Total current liabilities | 15,220 | 15,430 | |
Total equity and liabilities | 81,041 | 78,930 |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Statement of Profit and Loss
(In crore except equity share and per equity share data)
Particulars | Note No. | Year ended March 31, | |
2020 | 2019 | ||
Revenue from operations | 2.17 | 79,047 | 73,107 |
Other income, net | 2.18 | 2,700 | 2,852 |
Total income | 81,747 | 75,959 | |
Expenses | |||
Employee benefit expenses | 2.19 | 42,434 | 38,296 |
Cost of technical sub-contractors | 8,447 | 7,646 | |
Travel expenses | 2,241 | 1,906 | |
Cost of software packages and others | 2.19 | 1,656 | 1,646 |
Communication expenses | 381 | 339 | |
Consultancy and professional charges | 1,066 | 1,096 | |
Depreciation and amortization expense | 2.1 & 2.2.2 & 2.3 | 2,144 | 1,599 |
Finance cost | 2.3 | 114 | – |
Other expenses | 2.19 | 2,787 | 2,770 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for sale" | 2.4.7 | – | 469 |
Reduction in the fair value of assets held for sale | 2.4.7 | – | 265 |
Total expenses | 61,270 | 56,032 | |
Profit before tax | 20,477 | 19,927 | |
Tax expense: | |||
Current tax | 2.16 | 5,235 | 5,189 |
Deferred tax | 2.16 | (301) | 36 |
Profit for the year | 15,543 | 14,702 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset, net | 2.16 & 2.20 | (184) | (21) |
Equity instruments through other comprehensive income, net | 2.4 & 2.16 | (31) | 78 |
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | 2.10 & 2.16 | (36) | 21 |
Fair value changes on investments, net | 2.4 & 2.16 | 17 | 1 |
Total other comprehensive income/ (loss), net of tax | (234) | 79 | |
Total comprehensive income for the year | 15,309 | 14,781 | |
Earnings per equity share | |||
Equity shares of par value 5/- each | |||
Basic () | 36.34 | 33.66 | |
Diluted () | 36.32 | 33.64 | |
Weighted average equity shares used in computing earnings per equity share | |||
Basic | 2.21 | 4,27,70,30,249 | 4,36,82,12,119 |
Diluted | 2.21 | 4,27,98,08,826 | 4,37,04,12,348 |
The accompanying notes form an integral
part of the standalone financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Statement of Changes in Equity
(In crore)
Particulars | Equity Share Capital | Other Equity | Total equity attributable to equity holders of the Company | ||||||||||
Reserves & Surplus | Other comprehensive income | ||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | ||||
Capital reserve | Other reserves(2) | ||||||||||||
Balance as at April 1, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 |
Changes in equity for the year ended March 31, 2019 | |||||||||||||
Profit for the year | – | – | 14,702 | – | – | – | – | – | – | – | – | – | 14,702 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (21) | (21) |
Equity instruments through other comprehensive income* (refer note no. 2.4) | – | – | – | – | – | – | – | – | – | 78 | – | – | 78 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 |
Fair value changes on investments, net* (refer note no. 2.4) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Total comprehensive income for the year | – | – | 14,702 | – | – | – | – | – | – | 78 | 21 | (20) | 14,781 |
Transfer to general reserve | – | – | (1,615) | 1,615 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,306) | – | – | 2,306 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,386 | – | – | (1,386) | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.11) | – | – | – | (5) | – | – | – | – | 5 | – | – | – | – |
Exercise of stock options (refer note no. 2.11) | – | 99 | – | – | (99) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issue (refer note no. 2.11) | 1,092 | – | – | – | – | – | – | – | – | – | – | – | 1,092 |
Amount utilised for Bonus issue (refer note no. 2.11) | – | – | – | (1,092) | – | – | – | – | – | – | – | – | (1,092) |
Share based payment to employees of the group (refer note no. 2.11) | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | 8 |
Buyback of equity shares (refer note no. 2.11 and 2.12) | (6) | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) |
Transaction cost relating to buyback* | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) |
Dividends (including dividend distribution tax) | – | – | (13,768) | – | – | – | – | – | – | – | – | – | (13,768) |
Share issued on exercise of employee stock options (refer note no. 2.11) | – | 3 | – | – | – | – | – | – | – | – | – | – | 3 |
Balance as at March 31, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
INFOSYS LIMITED
Statement of Changes in Equity
(In crore)
Particulars | Equity Share Capital |
Other Equity
|
Total equity attributable to equity holders of the Company | ||||||||||
Reserves & Surplus | Other comprehensive income | ||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | ||||
Capital reserve | Other reserves(2) | ||||||||||||
Balance as at April 1, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
Impact on account of adoption of Ind AS 116 (refer note no 2.3) | – | – | (17) | – | – | – | – | – | – | – | – | – | (17) |
2,178 | 138 | 54,053 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,694 | |
Changes in equity for the year ended March 31, 2020 | |||||||||||||
Profit for the year | – | – | 15,543 | – | – | – | – | – | – | – | – | – | 15,543 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (184) | (184) |
Equity instruments through other comprehensive income* (refer note no. 2.4) | – | – | – | – | – | – | – | – | – | (31) | – | – | (31) |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | (36) | – | (36) |
Fair value changes on investments* (refer note no. 2.4) | – | – | – | – | – | – | – | – | – | – | – | 17 | 17 |
Total comprehensive income for the year | – | – | 15,543 | – | – | – | – | – | – | (31) | (36) | (167) | 15,309 |
Transfer to general reserve | – | – | (1,470) | 1,470 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,464) | – | – | 2,464 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,036 | – | – | (1,036) | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.11) | – | – | – | (50) | – | – | – | – | 50 | – | – | – | – |
Exercise of stock options (refer note no.2.11) | – | 119 | – | – | (119) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options (refer note no.2.11) | – | 2 | – | – | – | – | – | – | – | – | – | – | 2 |
Effect of modification of equity settled share based payment awards to cash settled awards (refer note no.2.11) | – | – | (9) | – | (48) | – | – | – | – | – | – | – | (57) |
Share based payments to employees (refer note no. 2.11) | – | – | – | – | 238 | – | – | – | – | – | – | – | 238 |
Reserves on common control transactions | – | – | – | – | – | – | – | (137) | – | – | – | – | (137) |
Income tax benefit arising on exercise of stock options | – | 9 | – | – | – | – | – | – | – | – | – | – | 9 |
Buyback of equity shares (refer note no. 2.11 and 2.12) | (49) | – | (4,717) | (1,494) | – | – | – | – | – | – | – | – | (6,260) |
Transaction cost relating to buyback* (refer note no 2.11) | – | – | – | (11) | – | – | – | – | – | – | – | – | (11) |
Dividends (including dividend distribution tax) | – | – | (9,553) | – | – | – | – | – | – | – | – | – | (9,553) |
Balance as at March 31, 2020 | 2,129 | 268 | 52,419 | 106 | 297 | 3,907 | 54 | 3,082 | 111 | 49 | (15) | (173) | 62,234 |
*net of tax
(1) | 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 Company 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. |
(2) | Profit / loss on transfer of business between entities under common control taken to reserve. |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Statement of Cash Flows
Accounting Policy
Cash flows are reported using the indirect method, whereby profit for the year 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 Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Note No. | Year ended March 31, | |
2020 | 2019 | ||
Cash flow from operating activities: | |||
Profit for the year | 15,543 | 14,702 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.1 & 2.2.2 & 2.3 | 2,144 | 1,599 |
Income tax expense | 2.16 | 4,934 | 5,225 |
Impairment loss recognized / (reversed) under expected credit loss model | 127 | 176 | |
Finance cost | 2.3 | 114 | – |
Interest and dividend income | (1,502) | (1,996) | |
Stock compensation expense | 226 | – | |
Other adjustments | (248) | 57 | |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for sale" | – | 469 | |
Reduction in the fair value of assets held for sale | 2.4.7 | – | 265 |
Exchange differences on translation of assets and liabilities | 17 | 80 | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (3,621) | (2,268) | |
Other financial assets and other assets | 319 | (581) | |
Trade payables | 2.12 | (75) | 866 |
Other financial liabilities, other liabilities and provisions | 1,475 | 1,666 | |
Cash generated from operations | 19,453 | 20,260 | |
Income taxes paid | (3,881) | (6,271) | |
Net cash generated by operating activities | 15,572 | 13,989 | |
Cash flow from investing activities: | |||
Expenditure on property, plant and equipment | (3,063) | (2,306) | |
Deposits placed with corporations | (112) | (116) | |
Loans to employees | (2) | 4 | |
Loan given to subsidiaries | (1,210) | (678) | |
Loan repaid by subsidiaries | 444 | 20 | |
Proceeds from redemption of debentures | 2.4 | 286 | 335 |
Investment in subsidiaries | 2.4 | (1,338) | (228) |
Proceeds from return of investment | – | 33 | |
Payment towards acquisition of business | 2.4 | – | (261) |
Payment of contingent consideration pertaining to acquisition | (6) | (6) | |
Redemption of escrow pertaining to buyback | 2.6 | 257 | (257) |
Other receipts | 46 | – | |
Payments to acquire investments | |||
Preference, equity securities and others | (41) | (18) | |
Liquid mutual fund units and fixed maturity plan securities | (30,500) | (72,889) | |
Tax free bonds and Government bonds | (11) | (11) | |
Certificates of deposit | (876) | (2,052) | |
Commercial paper | – | (491) | |
Non Convertible debentures | (733) | (100) | |
Government Securities | (1,561) | (838) | |
Others | (2) | – | |
Proceeds on sale of investments | |||
Preference and equity securities | – | 115 | |
Liquid mutual fund units and fixed maturity plan securities | 30,332 | 71,337 | |
Tax free bonds and Government bonds | 12 | 1 | |
Non-convertible debentures | 1,788 | 602 | |
Certificates of deposit | 2,175 | 5,150 | |
Commercial paper | 500 | 300 | |
Government Securities | 1,673 | 123 | |
Others | 9 | – | |
Interest and dividend received | 1,817 | 1,644 | |
Net cash used in investing activities | (116) | (587) | |
Cash flow from financing activities: | |||
Payment of lease liabilities | 2.3 | (364) | – |
Buyback of equity shares including transaction cost | (7,478) | (813) | |
Shares issued on exercise of employee stock options | 2 | 3 | |
Payment of dividends (including dividend distribution tax) | (9,551) | (13,761) | |
Net cash used in financing activities | (17,391) | (14,571) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (54) | (50) | |
Net increase / (decrease) in cash and cash equivalents | (1,935) | (1,169) | |
Cash and cash equivalents at the beginning of the year | 2.8 | 15,551 | 16,770 |
Cash and cash equivalents at the end of the year | 2.8 | 13,562 | 15,551 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 101 | 143 |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Notes to the 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.
The Company is a public limited company incorporated and domiciled in India and has its registered office at Electronic 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 financial statements are approved for issue by the Company's Board of Directors on April 20, 2020.
1.2 Basis of preparation of financial statements
These financial statements are prepared in accordance with Indian Accounting Standard (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 there after.
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 year figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Use of estimates and judgments
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note no. 1.4. 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 financial statements.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19):
The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues and investment in subsidiaries. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts. The Company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Company's financial statements may differ from that estimated as at the date of approval of these financial statements.
1.4 Critical accounting estimates and judgments
a. Revenue recognition
The Company’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Company’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Company uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Company to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The Company's two major tax jurisdictions are India and the U.S., though the Company also files tax returns in other overseas jurisdictions.
Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also refer note no. 2.16 and note no. 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 company 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. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company. 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 Company's assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology. Refer note no. 2.1
d. 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 Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Company has concluded that no changes are required to lease period relating to the existing lease contracts (refer note no 2.3).
e. Non-current assets held for sale
Assets held for sale are measured at the lower of carrying amount or 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 assets held for sale has 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 and its recoverable amount at the date of the subsequent decision not to sell . Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
f. Loss allowance for receivables and unbilled revenues
The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to industries the company deals with and the countries where it operates. In calculating expected credit loss, the Company has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
2.1 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 the management. The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building(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 | Lower of useful life of the asset or 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 year |
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 Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the 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 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 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 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 year ended March 31, 2020 are as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Additions | 11 | – | 968 | 428 | 159 | 765 | 427 | 270 | 7 | 3,035 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.3) | – | (593) | – | – | – | – | – | – | – | (593) |
Deletions | – | – | – | (2) | (3) | (127) | (6) | (15) | (1) | (154) |
Gross carrying value as at March 31, 2020 | 1,316 | – | 9,038 | 3,038 | 1,094 | 5,690 | 1,875 | 669 | 43 | 22,763 |
Accumulated depreciation as at April 1, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Depreciation | – | – | (317) | (293) | (118) | (718) | (213) | (110) | (6) | (1,775) |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.3) | – | 32 | – | – | – | – | – | – | – | 32 |
Accumulated depreciation on deletions | – | – | – | 2 | 3 | 126 | 6 | 15 | 1 | 153 |
Accumulated depreciation as at March 31, 2020 | – | – | (3,114) | (2,053) | (787) | (4,197) | (1,246) | (248) | (26) | (11,671) |
Carrying value as at April 1, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
Carrying value as at March 31, 2020 | 1,316 | – | 5,924 | 985 | 307 | 1,493 | 629 | 421 | 17 | 11,092 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2019 are as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Additions | 78 | – | 915 | 460 | 130 | 1,023 | 238 | 187 | 9 | 3,040 |
Deletions | – | (68) | (116) | (57) | (33) | (200) | (31) | (8) | (1) | (514) |
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Accumulated depreciation as at April 1, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Depreciation | – | (5) | (278) | (285) | (116) | (660) | (169) | (54) | (5) | (1,572) |
Accumulated depreciation on deletions | – | 3 | 102 | 49 | 26 | 198 | 26 | 8 | 1 | 413 |
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Carrying value as at April 1, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
(1) | Buildings include 250/- being the value of five shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries. |
The aggregate depreciation has been included under depreciation and amortization expense in the statement of Profit and Loss.
Tangible assets provided on operating lease to subsidiaries as at March 31, 2020 and March 31, 2019 are as follows:
(In crore)
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 186 | 91 | 95 |
186 | 84 | 102 | |
Plant and machinery | 30 | 30 | – |
30 | 28 | 2 | |
Furniture and fixtures | 24 | 24 | – |
24 | 23 | 1 | |
Computer Equipment | 3 | 3 | – |
3 | 3 | – | |
Office equipment | 16 | 16 | – |
16 | 15 | 1 |
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Aggregate depreciation charged on above assets | 11 | 19 |
Rental income from subsidiaries | 58 | 63 |
2.2 GOODWILL AND OTHER INTANGIBLE ASSETS
2.2.1 Goodwill
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Carrying value at the beginning | 29 | 29 |
Translation differences | – | – |
Carrying value at the end | 29 | 29 |
2.2.2 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), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset. 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 Company 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.
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2020:
(In crore)
Particulars | Customer related | Sub-Contracting rights related | Trade name related | Others | Total |
Gross carrying value as at April 1, 2019 | 113 | – | 26 | 26 | 165 |
Transfer of Assets | – | – | – | – | – |
Deletions during the year | – | – | – | – | – |
Gross carrying value as at March 31, 2020 | 113 | – | 26 | 26 | 165 |
Accumulated amortization as at April 1, 2019 | (56) | – | (18) | (17) | (91) |
Transfer of Assets | – | – | – | – | – |
Amortization expense | (16) | – | (5) | (5) | (26) |
Accumulated amortization on deletions | – | – | – | – | – |
Accumulated amortization as at March 31, 2020 | (72) | – | (23) | (22) | (117) |
Carrying value as at March 31, 2020 | 41 | – | 3 | 4 | 48 |
Carrying value as at April 1, 2019 | 57 | – | 8 | 9 | 74 |
Estimated Useful Life (in years) | 7 | – | 5 | 5 | – |
Estimated Remaining Useful Life (in years) | 3 | – | 1 | 1 | – |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2019:
(In crore)
Particulars | Customer related | Sub-Contracting rights related | Trade name related | Others | Total |
Gross carrying value as at April 1, 2018 | 113 | – | 26 | 26 | 165 |
Transfer of Assets | – | – | – | – | – |
Deletions during the year | – | – | – | – | – |
Gross carrying value as at March 31, 2019 | 113 | – | 26 | 26 | 165 |
Accumulated amortization as at April 1, 2018 | (40) | – | (12) | (12) | (64) |
Transfer of Assets | – | – | – | – | – |
Amortization expense | (16) | – | (6) | (5) | (27) |
Accumulated amortization on deletions | – | – | – | – | – |
Accumulated amortization as at March 31, 2019 | (56) | – | (18) | (17) | (91) |
Carrying value as at March 31, 2019 | 57 | – | 8 | 9 | 74 |
Carrying value as at April 1, 2018 | 73 | – | 14 | 14 | 101 |
Estimated Useful Life (in years) | 7 | – | 5 | 5 | – |
Estimated Remaining Useful Life (in years) | 4 | – | 2 | 2 | – |
Research and Development expense recognized in net profit in the statement of profit and loss for the year ended March 31, 2020 and March 31, 2019 is 458 crore and 416 crore, respectively.
2.3 LEASES
Accounting Policy
The Company as a lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company 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 Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company 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 Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company 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 Company as a lessor
Leases for which the Company 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 Company 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 Company 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 Company 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 Company’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 1,861 crore, 'Net investment in sublease' of ROU asset of 430 crore and a lease liability of 2,491 crore. The cumulative effect of applying the standard, amounting to 17 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 annual standalone financial statements forming part of 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 4.4%
Following are the changes in the carrying value of right of use assets for the year ended March 31, 2020:
(In crore)
Particulars | Category of ROU asset | Total | ||
Land | Buildings | Computers | ||
Balance as at April 1, 2019 | – | 1,861 | – | 1,861 |
Reclassified on account of adoption of Ind AS 116 (refer to note 2.1) | 561 | – | – | 561 |
Additions* | 1 | 737 | 49 | 787 |
Deletion | (3) | (58) | – | (61) |
Depreciation | (5) | (331) | (7) | (343) |
Balance as at March 31, 2020 | 554 | 2,209 | 42 | 2,805 |
*Net of lease incentives of 101 crore related to lease of buildings
The aggregate depreciation expense on ROU assets is included under depreciation and amortization expense in the statement of Profit and Loss.
The following is the break-up of current and non-current lease liabilities as at March 31, 2020
(In crore)
Particulars | As at |
March 31, 2020 | |
Current lease liabilities | 390 |
Non-current lease liabilities | 2,775 |
Total | 3,165 |
The following is the movement in lease liabilities during the year ended March 31, 2020:
(In crore)
Particulars | Year ended March 31, 2020 |
Balance at the beginning | 2,491 |
Additions | 886 |
Finance cost accrued during the period | 114 |
Deletions | (61) |
Payment of lease liabilities | (418) |
Translation Difference | 153 |
Balance at the end | 3,165 |
The table below provides details regarding the contractual maturities of lease liabilities as at March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | As at |
March 31, 2020 | |
Less than one year | 512 |
One to five years | 1,744 |
More than five years | 1,490 |
Total | 3,746 |
The Company 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 recorded for short-term leases was 37 crore for the year ended March 31,2020.
Rental income on assets given on operating lease to subsidiaries was 58 crore for the year ended March 31,2020.
The following is the movement in the net investment in sublease in ROU asset during the year ended March 31, 2020:
(In crore)
Particulars | Year ended March 31, 2020 |
Balance at the beginning of the period | 430 |
Interest income accrued during the period | 15 |
Lease receipts | (46) |
Translation Difference | 34 |
Balance at the end of the period | 433 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as at March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | As at |
March 31, 2020 | |
Less than one year | 50 |
One to five years | 217 |
More than five years | 244 |
Total | 511 |
Leases not yet commenced to which Company is committed amounts to 655 crore for a lease term ranging from 2 years to 13 years.
2.4 INVESTMENTS AND ASSETS HELD FOR SALE
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current investments | ||
Equity instruments of subsidiaries | 7,553 | 6,349 |
Debentures of subsidiary | 1,159 | 1,445 |
Redeemable Preference shares of subsidiary | 1,318 | – |
Preference securities and equity instruments | 103 | 90 |
Others | 30 | 16 |
Tax free bonds | 1,825 | 1,828 |
Government bonds | 13 | – |
Fixed maturity plans securities | – | 401 |
Non-convertible debentures | 1,251 | 1,209 |
Government Securities | 664 | 724 |
Total non-current investments | 13,916 | 12,062 |
Current investments | ||
Liquid mutual fund units | 2,019 | 1,701 |
Certificates of deposit | 886 | 2,123 |
Government bonds | – | 12 |
Fixed maturity plans securities | 428 | – |
Non-convertible debentures | 673 | 1,746 |
Commercial paper | – | 495 |
Total current investments | 4,006 | 6,077 |
Total carrying value | 17,922 | 18,139 |
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPM Limited | 660 | 659 |
3,38,23,444 (3,38,22,319) equity shares of 10/- each, fully paid up | ||
Infosys Technologies (China) Co. Limited | 333 | 333 |
Infosys Technologies (Australia) Pty Limited (1) | – | 5 |
Nil (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | ||
Infosys Technologies, S. de R.L. de C.V., Mexico | 65 | 65 |
17,49,99,990 (17,49,99,990) equity shares of MXN 1 par value, fully paid up | ||
Infosys Technologies (Sweden) AB | 76 | 76 |
1,000 (1,000) equity shares of SEK 100 par value, fully paid | ||
Infosys Technologia do Brasil Ltda | – | 276 |
Nil (12,84,20,748) shares of BRL 1.00 par value, fully paid | ||
Infosys Technologies (Shanghai) Company Limited | 900 | 900 |
Infosys Public Services, Inc. | 99 | 99 |
3,50,00,000 (3,50,00,000) shares of USD 0.50 par value, fully paid | ||
Infosys Consulting Holding AG | 1,323 | 1,323 |
23,350 (23,350) - Class A shares of CHF 1,000 each and | ||
26,460 (26,460) - Class B Shares of CHF 100 each, fully paid up | ||
Infosys Americas Inc. | 1 | 1 |
10,000 (10,000) shares of USD 10 per share, fully paid up | ||
EdgeVerve Systems Limited | 1,312 | 1,312 |
1,31,18,40,000 (1,31,18,40,000) equity shares of 10/- each, fully paid up | ||
Infosys Nova Holdings LLC | 1,335 | – |
Infosys Consulting Pte Ltd | 10 | 10 |
1,09,90,000 (1,09,90,000) shares of SGD 1.00 par value, fully paid | ||
Brilliant Basics Holding Limited | 59 | 59 |
1,346 (1,346 ) shares of GBP 0.005 each, fully paid up | ||
Infosys Arabia Limited | 2 | 2 |
70 (70) shares | ||
Kallidus Inc. | 150 | 150 |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited | 59 | 59 |
25,000 (25,000) shares of 10/- each, fully paid up | ||
Panaya Inc. | 582 | 582 |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Chile SpA | 7 | 7 |
100 (100) shares | ||
Wongdoody Holding Company Inc | 359 | 350 |
2,000 (2,000) shares | ||
Infosys Luxembourg S.a r.l. | 4 | 4 |
3,700 (3,700) shares | ||
Infosys Austria GmBH ( formerly known as Lodestone Management Consultants GmbH) | – | – |
80,000 (80,000) shares of EUR 1 par value, fully paid up | ||
Infosys Consulting Brazil | 183 | 43 |
16,49,15,570 (8,26,56,605) shares of BRL 1 per share, fully paid up | ||
Infosys Romania | 34 | 34 |
99,183 (99,183) shares of RON 100 per share, fully paid up | ||
Investment in Redeemable Preference shares of subsidiary | ||
Infosys Consulting Pte Ltd | ||
24,92,00,000 (Nil) shares of SGD 1 per share, fully paid up | 1,318 | – |
8,871 | 6,349 | |
Investment carried at amortized cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited | ||
12,58,00,000 (14,45,00,000) Unsecured redeemable, non-convertible debentures of 100/- each fully paid up | 1,159 | 1,445 |
1,159 | 1,445 | |
Investments carried at fair value through profit or loss | ||
Others (2) | 30 | 16 |
30 | 16 | |
Investment carried at fair value through other comprehensive income (FVOCI) | ||
Preference securities | 101 | 89 |
Equity instruments | 2 | 1 |
103 | 90 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds | 1,825 | 1,828 |
Government bonds | 13 | – |
1,838 | 1,828 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | – | 401 |
– | 401 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,251 | 1,209 |
Government Securities | 664 | 724 |
1,915 | 1,933 | |
Total non-current investments | 13,916 | 12,062 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units | 2,019 | 1,701 |
2,019 | 1,701 | |
Investments carried at fair value through other comprehensive income | ||
Commercial paper | – | 495 |
Certificates of deposit | 886 | 2,123 |
886 | 2,618 | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds | – | 12 |
– | 12 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | 428 | – |
428 | – | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 673 | 1,746 |
673 | 1,746 | |
Total current investments | 4,006 | 6,077 |
Total investments | 17,922 | 18,139 |
Aggregate amount of quoted investments | 4,854 | 5,920 |
Market value of quoted investments (including interest accrued), current | 1,101 | 1,757 |
Market value of quoted investments (including interest accrued), non current | 4,048 | 4,374 |
Aggregate amount of unquoted investments | 13,068 | 12,219 |
(1) Aggregate amount of impairment in value of investments | 121 | 122 |
Reduction in the fair value of assets held for sale | 854 | 854 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 469 | 469 |
Investments carried at cost | 8,871 | 6,349 |
Investments carried at amortized cost | 2,997 | 3,285 |
Investments carried at fair value through other comprehensive income | 3,577 | 6,387 |
Investments carried at fair value through profit or loss | 2,477 | 2,118 |
(2) | Uncalled capital commitments outstanding as of March 31, 2020 and March 31, 2019 was 15 crore and 17 crore, respectively. Refer note no. 2.10 for accounting policies on financial instruments. |
Details of amounts recorded in Other comprehensive income:
(In crore)
Year ended | ||||||
March 31, 2020 | March 31, 2019 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 23 | (3) | 20 | 1 | – | 1 |
Government Securities | – | – | – | 4 | (1) | 3 |
Certificate of deposits | (5) | 2 | (3) | (5) | 2 | (3) |
Equity and preference securities | (29) | (2) | (31) | 73 | 5 | 78 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2020 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 2,019 | 1,701 |
Fixed maturity plan securities | Market observable inputs | 428 | 401 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,135 | 2,048 |
Non-convertible debentures | Quoted price and market observable inputs | 1,924 | 2,955 |
Government Securities | Quoted price | 664 | 724 |
Certificate of deposits | Market observable inputs | 886 | 2,123 |
Commercial paper | Market observable inputs | – | 495 |
Unquoted equity and preference securities | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 103 | 90 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 30 | 16 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.4.1 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. Retention bonus is recognized in employee benefit expenses in the statement of Profit or Loss over the period of service. The fair value of contingent consideration on the date of acquisition is 89 crore.
2.4.2 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 transaction is between a holding company and a wholly owned subsidiary and the resulting impact would be recorded in “Business Transfer Reserve” at the time of transfer.
2.4.3 Details of Investments
The details of non-current other investments in preferred stock and equity instruments as at March 31, 2020 and March 31, 2019 are as follows:
(in crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Preference Securities | ||
Airviz Inc. | – | 3 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop Inc | 40 | 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) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | ||
13,35,707 (13,35,707) Preferred Series C Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 42 | 27 |
11,80,358 (11,80,358) Preferred Stock | ||
Ideaforge | 9 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of 10 each, fully paid up. | ||
Equity Instrument | ||
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 | 2 | 1 |
15,000 (15,000) equity shares at 1,000/- each, fully paid up, par value 1,000/- each | ||
Ideaforge | – | – |
100 (100) equity shares at 10/-, fully paid up | ||
Others | ||
Stellaris Venture Partners India | 30 | 16 |
133 | 106 |
2.4.4 Details of Investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2020 | 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 | 20,00,000 | 201 | 20,00,000 | 201 |
7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030 | 1,000 | 4,22,800 | 42 | 4,22,800 | 42 |
7.28% National Highways Authority of India Limited Bonds 18SEP2030 | 10,00,000 | 3,300 | 341 | 3,300 | 342 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000 | 21,00,000 | 210 | 21,00,000 | 210 |
7.35% National Highways Authority of India Limited Bonds 11JAN2031 | 1,000 | 5,71,396 | 57 | 5,71,396 | 57 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000 | 2,00,000 | 20 | 2,00,000 | 21 |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000 | 5,00,000 | 52 | 5,00,000 | 52 |
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 | 5,00,000 | 53 | 5,00,000 | 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 | 5,00,000 | 50 | 5,00,000 | 50 |
Total investments in tax-free bonds | 68,05,416 | 1,825 | 68,05,416 | 1,828 |
The balances held in government bonds as at March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | Face Value PHP | March 31, 2020 | March 31, 2019 | ||
Units | Amount | Units | Amount | ||
Treasury Notes Philippines Govt. 17APRIL2019 | 100 | 90,000 | 13 | 90,000 | 12 |
Total investments in government bonds | 90,000 | 13 | 90,000 | 12 |
2.4.5 Details of investments in liquid mutual fund units and fixed maturity plan securities
The balances held in liquid mutual fund as at March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 2,66,97,315 | 211 | 1,96,00,407 | 141 |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | – | – | 79,75,385 | 201 |
HDFC Money market Fund- Direct Plan- Growth Option | – | – | 7,72,637 | 303 |
ICICI Prudential Savings Fund- Direct Plan-Growth | – | – | 83,40,260 | 301 |
IDFC Corporate Bond - Fund Direct Plan | – | – | 11,95,81,942 | 154 |
Kotak Money Market Fund- Direct Plan- Growth Option | – | – | 9,73,751 | 301 |
SBI Premier Liquid Fund -Direct Plan -Growth | 3,31,803 | 103 | 10,25,678 | 300 |
Axis Treasury Advantage Fund -Growth | 8,65,146 | 201 | – | – |
HDFC Liquid Fund- Direct Plan- Growth Option | 5,55,555 | 217 | – | – |
HDFC Overnight Fund Direct Plan- Growth Option | 10,10,508 | 300 | – | – |
ICICI Prudential Liquid Fund –Direct plan –Growth | 77,26,245 | 227 | – | – |
IDFC Banking and PSU fund - Direct Plan- Growth Option | 8,88,49,927 | 160 | – | – |
Kotak Liquid Fund - Direct Plan -Growth | 7,47,509 | 300 | – | – |
SBI Overnight Fund -Direct Plan -Growth | 9,22,151 | 300 | – | – |
Total investments in liquid mutual fund units | 12,77,06,159 | 2,019 | 15,82,70,060 | 1,701 |
The balances held in fixed maturity plan security as at March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct | 5,00,00,000 | 62 | 5,00,00,000 | 58 |
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 | 2,80,00,000 | 35 | 2,80,00,000 | 32 |
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 | 4,00,00,000 | 50 | 4,00,00,000 | 46 |
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 | 19 | 1,50,00,000 | 17 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 43 | 3,50,00,000 | 40 |
Nippon India Fixed Horizon Fund-XXXII Series 8-Dividend Plan | 3,50,00,000 | 42 | 3,50,00,000 | 38 |
Total investments in fixed maturity plan securities | 35,50,00,000 | 428 | 35,50,00,000 | 401 |
2.4.6 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 March 31, 2020 and March 31, 2019 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | |||
Face Value | Units | Amount | Units | Amount | |
7.03% LIC Housing Finance Ltd 28DEC2021 | 10,00,000/- | 2,500 | 254 | – | – |
7.24% LIC Housing Finance Ltd 23AUG2021 | 10,00,000/- | 2,500 | 259 | – | – |
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 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 312 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 131 | 1,250 | 127 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 53 | 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 | 215 | 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 | 49 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 106 | 100 | 105 |
8.50% LIC Housing Finance Ltd 20JUN2022 | 10,00,000/- | 2,200 | 241 | – | – |
8.59% Housing Development Finance Corporation Ltd 14JUN2019 | 1,00,00,000/- | – | – | 50 | 51 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,400 | 149 | 1,400 | 149 |
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 | 500,000/- | – | – | 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 | 101 | 1,000 | 101 |
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 | 17,850 | 1,924 | 26,195 | 2,955 |
The balances held in government securities as at March 31, 2020 and March 31, 2019 are as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | |||
Face Value | Units | Amount | Units | Amount | |
7.17% Government of India 8JAN2028 | 10000/- | 1,25,000 | 132 | 6,75,000 | 672 |
7.26% Government of India 14JAN2029 | 10000/- | 5,00,000 | 532 | – | – |
7.95% Government of India 28AUG2032 | 10000/- | – | – | 50,000 | 52 |
Total investments in government securities | 6,25,000 | 664 | 7,25,000 | 724 |
The balances held in certificate of deposits as at March 31, 2020 and March 31, 2019 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | |||
Face Value | Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | – | – | 80,000 | 774 |
ICICI Bank | 1,00,000/- | – | – | 75,000 | 738 |
Kotak Bank | 1,00,000/- | – | – | 50,000 | 486 |
Vijaya Bank | 1,00,000/- | – | – | 12,500 | 125 |
Bank of Baroda | 1,00,000/- | 65,000 | 638 | – | – |
Oriental Bank of Commerce | 1,00,000/- | 25,000 | 248 | – | – |
Total investments in certificates of deposit | 90,000 | 886 | 2,17,500 | 2,123 |
The balances held in commercial paper as at March 31, 2020 and March 31, 2019 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2020 | March 31, 2019 | |||
Face Value | Units | Amount | Units | Amount | |
LIC | 5,00,000/- | – | – | 10,000 | 495 |
Total investments in commercial paper | – | – | 10,000 | 495 |
2.4.7 Assets 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.
During the year ended March 31, 2018, the Company had initiated identification and evaluation of potential buyers for the sale of its investment in subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya. The investment in these subsidiaries was classified and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. During the year ended March 31, 2019, 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 investment amounting to 265 crore in respect of Panaya.
Further based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the investments in Panaya and Skava 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 investment in subsidiaries, Panaya and Skava have been included in non-current investments line item in the standalone financial statements as at March 31, 2019.
On reclassification from “Held for sale”, the investment in subsidiaries, 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 469 crore in respect of Skava in the standalone statement of profit and loss for the year ended March 31, 2019.
2.5 LOANS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non- Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries | 277 | – |
Other Loans | ||
Loans to employees | 21 | 16 |
298 | 16 | |
Unsecured, considered doubtful | ||
Other Loans | ||
Loans to employees | 24 | 18 |
322 | 34 | |
Less: Allowance for doubtful loans to employees | 24 | 18 |
Total non - current loans | 298 | 16 |
Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries | 103 | 841 |
Other Loans | ||
Loans to employees | 204 | 207 |
Total current loans | 307 | 1,048 |
Total Loans | 605 | 1,064 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Security deposits (1) | 46 | 47 |
Net investment in Sublease of right of use asset (refer to note 2.3) (1) | 398 | – |
Rental deposits (1) | 169 | 149 |
Total non-current other financial assets | 613 | 196 |
Current | ||
Security deposits (1) | 1 | 1 |
Rental deposits (1) | 4 | 3 |
Restricted deposits (1)* | 1,643 | 1,531 |
Unbilled revenues (1)(5)# | 1,973 | 1,541 |
Interest accrued but not due (1) | 441 | 865 |
Foreign currency forward and options contracts (2)(3) | 19 | 321 |
Net investment in Sublease of right of use asset (refer to note 2.3) (1) | 35 | – |
Escrow and other deposits pertaining to buyback (refer to note 2.11)(1) | – | 257 |
Others (1)(4) | 282 | 315 |
Total current other financial assets | 4,398 | 4,834 |
Total other financial assets | 5,011 | 5,030 |
(1) Financial assets carried at amortized cost | 4,992 | 4,709 |
(2)Financial assets carried at fair value through other comprehensive income | 9 | 37 |
(3)Financial assets carried at fair value through Profit or Loss | 10 | 284 |
(4) Includes dues from subsidiaries | 65 | 34 |
(5) Includes dues from subsidiaries | 84 | 51 |
* Restricted deposits represent deposit 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 and is due only after a passage of time.
2.7 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good(2) | 15,459 | 13,370 |
Considered doubtful | 491 | 431 |
15,950 | 13,801 | |
Less: Allowances for credit losses | 491 | 431 |
Total trade receivables(1) | 15,459 | 13,370 |
(1) Includes dues from companies where directors are interested | – | – |
(2) Includes dues from subsidiaries | 408 | 325 |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 8,048 | 10,957 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 5,514 | 4,594 |
Total Cash and cash equivalents | 13,562 | 15,551 |
Balances with banks in unpaid dividend accounts | 30 | 29 |
Deposit with more than 12 months maturity | 6,171 | 6,048 |
Balances with banks held as margin money deposits against guarantees | 71 | 114 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of 101 crore and 143 crore, respectively. The restrictions are primarily on account of bank balances held as margin money deposits against guarantees.
The deposits maintained by the Company with banks and financial institutions comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
2.9 OTHER ASSETS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Capital advances | 310 | 486 |
Others | ||
Prepaid expenses | 51 | 95 |
Prepaid gratuity (refer note 2.20) | 143 | 25 |
Deferred contract cost | 10 | 226 |
Withholding taxes and others | 759 | 908 |
Total non-current other assets | 1,273 | 1,740 |
Current | ||
Advances other than capital advance | ||
Payment to vendors for supply of goods | 129 | 94 |
Others | ||
Unbilled revenues(2) | 3,856 | 2,904 |
Prepaid expenses (1) | 736 | 580 |
Deferred contract cost | 11 | 52 |
Withholding taxes and others | 1,356 | 1,290 |
Total current other assets | 6,088 | 4,920 |
Total other assets | 7,361 | 6,660 |
(1) Includes dues from subsidiaries | 168 | 109 |
(2) Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. As at March 31, 2020 Cenvat recoverable includes 355 crore which are pending adjudication. The Company expects these amounts to be sustainable on adjudication and recoverable on final resolution.
2.10 FINANCIAL INSTRUMENTS
Accounting Policy
2.10.1 Initial recognition
The Company 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, which 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
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 Company 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 are 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 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 fair value due to the short maturity of these instruments.
(v) Investment in subsidiaries
Investment in subsidiaries is carried at cost in the separate financial statements.
b. Derivative financial instruments
The Company 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 includes derivative financial assets or liabilities which are not designated as hedges.
Although the Company 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 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 Company 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 hedge 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 hedge reserve. Any ineffective portion of changes
in the fair value of the derivative is recognized immediately in the net profit in the 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 hedge reserve till the period the hedge was effective remains in cash flow hedge reserve until the forecasted transaction
occurs. The cumulative gain or loss previously recognized in the cash flow hedge reserve is transferred to the net profit in the
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 hedge reserve is reclassified to net profit in the Statement of Profit
and Loss.
2.10.3 Derecognition of financial instruments
The Company 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 Company'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 Company 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 financial instruments by category table below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of these instruments.
2.10.5 Impairment
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenues which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in statement of profit or loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2020 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) | 13,562 | – | – | – | – | 13,562 | 13,562 |
Investments (Refer note no.2.4) | |||||||
Preference securities, Equity instruments and others | – | – | 30 | 103 | – | 133 | 133 |
Tax free bonds and government bonds | 1,838 | – | – | – | – | 1,838 | 2,135(2) |
Liquid mutual fund units | – | – | 2,019 | – | – | 2,019 | 2,019 |
Redeemable, non-convertible debentures (1) | 1,159 | – | – | – | – | 1,159 | 1,159 |
Fixed maturity plan securities | – | – | 428 | – | – | 428 | 428 |
Certificates of deposit | – | – | – | – | 886 | 886 | 886 |
Non convertible debentures | – | – | – | – | 1,924 | 1,924 | 1,924 |
Government Securities | – | – | – | – | 664 | 664 | 664 |
Trade receivables (Refer Note no. 2.7) | 15,459 | – | – | – | – | 15,459 | 15,459 |
Loans (Refer note no. 2.5) | 605 | – | – | – | – | 605 | 605 |
Other financial assets (Refer Note no. 2.6) (4) | 4,992 | – | 10 | – | 9 | 5,011 | 4,929(3) |
Total | 37,615 | – | 2,487 | 103 | 3,483 | 43,688 | 43,903 |
Liabilities: | |||||||
Trade payables (Refer Note no. 2.13) | 1,529 | – | – | – | – | 1,529 | 1,529 |
Lease liabilities (Refer Note no. 2.3) | 3,165 | – | – | – | – | 3,165 | 3,165 |
Other financial liabilities (Refer Note no. 2.12) | 5,827 | – | 592 | – | 20 | 6,439 | 6,439 |
Total | 10,521 | – | 592 | – | 20 | 11,133 | 11,133 |
(1) | The carrying value of debentures approximates fair value as the instruments are at prevailing market rates |
(2) | On account of fair value changes including interest accrued |
(3) | Excludes interest accrued on tax free bonds and government bonds carried at amortized cost of 82 crore |
(4) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 2019 were 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) | 15,551 | – | – | – | – | 15,551 | 15,551 |
Investments (Refer Note no. 2.4) | |||||||
Preference securities, Equity instruments and others | – | – | 16 | 90 | – | 106 | 106 |
Tax free bonds and government bonds | 1,840 | – | – | – | – | 1,840 | 2,048(2) |
Liquid mutual fund units | – | – | 1,701 | – | – | 1,701 | 1,701 |
Redeemable, non-convertible debentures (1) | 1,445 | – | – | – | – | 1,445 | 1,445 |
Fixed maturity plan securities | – | – | 401 | – | – | 401 | 401 |
Certificates of deposit | – | – | – | – | 2,123 | 2,123 | 2,123 |
Government Securities | – | – | – | – | 724 | 724 | 724 |
Non convertible debentures | – | – | – | – | 2,955 | 2,955 | 2,955 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Trade receivables (Refer Note no. 2.7) | 13,370 | – | – | – | – | 13,370 | 13,370 |
Loans (Refer note no. 2.5) | 1,064 | – | – | – | – | 1,064 | 1,064 |
Other financial assets (Refer Note no. 2.6)(4) | 4,709 | – | 284 | – | 37 | 5,030 | 4,948(3) |
Total | 37,979 | – | 2,402 | 90 | 6,334 | 46,805 | 46,931 |
Liabilities: | |||||||
Trade payables (Refer note no. 2.13) | 1,604 | – | – | – | – | 1,604 | 1,604 |
Other financial liabilities (Refer Note no. 2.12) | 7,067 | – | 128 | – | 1 | 7,196 | 7,196 |
Total | 8,671 | – | 128 | – | 1 | 8,800 | 8,800 |
(1) | The carrying value of debentures approximates fair value as the instruments are at prevailing market rates |
(2) | On account of fair value changes including interest accrued |
(3) | Excludes interest accrued on tax free bonds and government bonds carried at amortized cost of 82 crore |
(4) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The fair value hierarchy of assets and liabilities as at March 31, 2020 is as follows:
(In crore)
Particulars | March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer note no. 2.4) | 2,122 | 1,960 | 162 | – |
Investments in government bonds (Refer note no. 2.4) | 13 | 13 | – | – |
Investments in liquid mutual fund units (Refer note no. 2.4) | 2,019 | 2,019 | – | – |
Investments in equity instruments (Refer note no. 2.4) | 2 | – | – | 2 |
Investments in preference securities (Refer note no. 2.4) | 101 | – | – | 101 |
Investments in fixed maturity plan securities (Refer note no. 2.4) | 428 | – | 428 | – |
Investments in certificates of deposit (Refer note no. 2.4) | 886 | 886 | – | – |
Investments in non convertible debentures (Refer note no. 2.4) | 1,924 | 1,558 | 366 | – |
Investments in government securities (Refer note no. 2.4) | 664 | 664 | – | – |
Other investments (Refer note no. 2.4) | 30 | – | – | 30 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer note no. 2.6) | 19 | – | 19 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note no. 2.12) | 461 | – | 461 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 151 | – | – | 151 |
(1) | Discount rate pertaining to contingent consideration is 14% |
During the year ended March 31, 2020, tax free bonds and non-convertible debentures of 518 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on Quoted price, and tax free bonds of 50 crore were 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 | March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in government securities (Refer Note no. 2.4) | 724 | 724 | – | – |
Investments in tax free bonds (Refer Note no. 2.4) | 2,036 | 1,765 | 271 | – |
Investments in liquid mutual fund units (Refer Note no. 2.4) | 1,701 | 1,701 | – | – |
Investments in government bonds (Refer Note no. 2.4) | 12 | 12 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.4) | 89 | – | – | 89 |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 401 | – | 401 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 2,123 | – | 2,123 | – |
Investments in non convertible debentures (Refer Note no. 2.4) | 2,955 | 1,612 | 1,343 | – |
Investments in commercial paper (Refer Note no. 2.4) | 495 | – | 495 | – |
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) | 321 | – | 321 | – |
Liabilities |
||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note 2.12) | 13 | – | 13 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 116 | – | – | 116 |
(1) | Discount rate pertaining to contingent consideration ranges from 10% 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 were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
Financial risk management
Financial risk factors
The Company's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company'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 Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company'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.
The gross carrying amount of a financial asset is written off (either partially or in full) when there is no realistic prospect of recovery.
Market risk
The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company 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 Company 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 Company’s operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
The following table analyses the foreign currency risk from financial assets and liabilities as at March 31, 2020:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 434 | 80 | 15 | 40 | 162 | 731 |
Trade receivables | 10,369 | 2,035 | 1,061 | 610 | 733 | 14,808 |
Other financial assets , loans and other current assets | 5,611 | 1,088 | 341 | 290 | 578 | 7,908 |
Lease Liabilities | (1,520) | (378) | (337) | (47) | (127) | (2,409) |
Trade payables | (746) | (132) | (179) | (73) | (77) | (1,207) |
Other financial liabilities | (4,012) | (553) | (189) | (371) | (415) | (5,540) |
Net assets / (liabilities) | 10,136 | 2,140 | 712 | 449 | 854 | 14,291 |
The following table analyses the foreign currency risk from financial 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 | 1,013 | 102 | 23 | 58 | 185 | 1,381 |
Trade Receivables | 9,009 | 1,688 | 1,005 | 484 | 693 | 12,879 |
Other financials assets ( including loans) | 3,617 | 815 | 280 | 259 | 997 | 5,968 |
Trade payables | (645) | (99) | (201) | (77) | (52) | (1,074) |
Other financial liabilities | (3,546) | (364) | (196) | (290) | (257) | (4,653) |
Net assets / (liabilities) | 9,448 | 2,142 | 911 | 434 | 1,566 | 14,501 |
Sensitivity analysis between Indian Rupee and USD
Particulars | Year ended March 31, | |
2020 | 2019 | |
Impact on the Company's incremental Operating Margins | 0.47% | 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 Company 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 | |||
March 31, 2020 | March 31, 2019 | |||
In million | In crore | In million | In crore | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 110 | 507 | 120 | 588 |
In Euro | 120 | 993 | 135 | 1,049 |
In United Kingdom Pound Sterling | 21 | 196 | 25 | 226 |
Other derivatives | ||||
Forward contracts | ||||
In Canadian dollars | 21 | 117 | 13 | 68 |
In Euro | 171 | 1,415 | 166 | 1,289 |
In Japanese Yen | – | – | 550 | 34 |
In New Zealand dollars | 16 | 72 | 16 | 75 |
In Norwegian Krone | 40 | 29 | 40 | 32 |
In Singapore dollars | 80 | 425 | 140 | 716 |
In Swedish Krona | 50 | 37 | 50 | 37 |
In Swiss Franc | – | – | 25 | 172 |
In U.S. dollars | 925 | 6,990 | 855 | 5,910 |
In United Kingdom Pound Sterling | 45 | 421 | 70 | 634 |
Option Contracts | ||||
In Australian dollars | – | – | 10 | 49 |
In Canadian dollars | – | – | 13 | 69 |
In Euro | – | – | 60 | 466 |
In Swiss Franc | – | – | 5 | 35 |
In U.S. dollars | 555 | 4,196 | 433 | 2,995 |
In United Kingdom Pound Sterling | – | – | 10 | 91 |
Total forwards and option contracts | 15,398 | 14,535 |
The foreign exchange forward and option contracts mature within twelve months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as at the balance sheet date:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Not later than one month | 4,796 | 4,082 |
Later than one month and not later than three months | 7,396 | 6,368 |
Later than three months and not later than one year | 3,206 | 4,085 |
15,398 | 14,535 |
During the year ended March 31, 2019, the Company 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 hedge reserve as at March 31, 2019 are expected to occur and reclassified to statement of profit and loss within 3 months.
The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of its forecasted cash flows. 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 following table provides the reconciliation of cash flow hedge reserve for the year ended March 31, 2020 and March 31, 2019 :
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Gain / (Loss) | ||
Balance at the beginning of the year | 21 | – |
Gain / (Loss) recognized in other comprehensive income during the year | 25 | 118 |
Amount reclassified to profit and loss during the year | (73) | (90) |
Tax impact on above | 12 | (7) |
Balance at the end of the year | (15) | 21 |
The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the Company intends either to settle on a net basis, or to realize 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 | |||
March 31, 2020 | March 31, 2019 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset / liability | 43 | (485) | 323 | (15) |
Amount set off | (24) | 24 | (2) | 2 |
Net amount presented in Balance Sheet | 19 | (461) | 321 | (13) |
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 15,459 crore and 13,370 crore as at March 31, 2020 and March 31, 2019, respectively and unbilled revenue amounting to 5,829 crore and 4,445 crore as at March 31, 2020 and March 31, 2019, respectively. Trade receivables and unbilled revenue are typically unsecured and are derived from revenue from customers primarily located in the United States of Americas. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of the customers to which the Company grants credit terms in the normal course of business. The Company uses the expected credit loss model to assess any required allowances; and uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. This matrix takes into account available external and internal credit risk information such as CDS spread quotes, ratings from international credit rating agencies and the Company's historical collection experience for customers.
The Company'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. Exposure to customers is diversified and there is no single customer contributing more than 10% of outstanding trade receivables and unbilled revenues.
The details in respect of percentage of revenues generated from top customer and top 10 customers are as follows:
(In %)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue from top customer | 3.5 | 4.0 |
Revenue from top 10 customers | 20.6 | 20.3 |
Credit risk exposure
The allowance for lifetime expected credit loss on customer balances for the year ended March 31, 2020 and March 31, 2019 is 127 crore and 176 crore, respectively.
Movement in credit loss allowance:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Balance at the beginning | 521 | 401 |
Impairment loss recognized/ (reversed) | 127 | 176 |
Amounts written off | (89) | (67) |
Translation differences | 21 | 11 |
Balance at the end | 580 | 521 |
The gross carrying amount of a financial asset is written off (either partially or in full) when there is no realistic prospect of recovery.
Credit risk on cash and cash equivalents is limited
as the Company generally invest in deposits with banks and financial institutions with high ratings assigned by international and
domestic credit rating agencies. Ratings are monitored periodically and the Company has considered the latest available credit
ratings in view of COVID – 19 as at the date of approval of these financial statements.
Majority of investments of the Company are fair valued based on Level 1 or Level 2 inputs. These investments primarily include
investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, commercial papers, quoted bonds
issued by government and quasi-government organizations and non convertible debentures. The Company invests after considering counterparty
risks based on multiple criteria including Tier I capital, Capital Adequacy Ratio, Credit Rating, Profitability, NPA levels and
deposit base of banks and financial institutions. These risks are monitored regularly as per its risk management program.
Liquidity risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time.
The Company's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2020, the Company had a working capital of 28,600 crore including cash and cash equivalents of 13,562 crore and current investments of 4006 crore. As at March 31, 2019, the Company had a working capital of 30,793 crore including cash and cash equivalents of 15,551 crore and current investments of 6,077 crore.
As at March 31, 2020 and March 31, 2019, the outstanding compensated absences were 1,529 crore and 1,411 crore, respectively, which have been substantially funded. Accordingly, no liquidity risk is perceived.
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2020 are as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,529 | – | – | – | 1,529 |
Other financial liabilities (excluding liability towards contingent consideration) (Refer Note no. 2.12) | 5,827 | – | – | – | 5,827 |
Liability towards contingent consideration on an undiscounted basis (Refer Note no. 2.12) | 152 | – | – | – | 152 |
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2019 were as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,604 | – | – | – | 1,604 |
Other financial liabilities (excluding liability towards contingent consideration) (Refer Note no. 2.12) | 7,067 | – | – | – | 7,067 |
Liability towards contingent consideration on an undiscounted basis (Refer Note no. 2.12) | 82 | 53 | – | – | 135 |
2.11 EQUITY
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity share capital . 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.
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 Company adopted these amendments and there was no impact of these amendments on the Company’s financial statements.
Description of reserves
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Company.
Securities premium
The amount received in excess of the par value of equity shares has been classified as securities premium.
Share Options Outstanding Account
The Share options outstanding account is used to record the fair value of equity-settled share based payment transactions with employees. The amounts recorded in share options outstanding account are transferred to securities premium upon exercise of stock options and transferred to general reserve on account of stock options not exercised by employees.
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 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.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the statement of Profit and Loss upon the occurrence of the related forecasted transaction.
2.11.1 EQUITY SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | 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) | 2,129 | 2,178 |
4,25,89,92,566 (4,35,62,79,444) equity shares fully paid-up | ||
2,129 | 2,178 |
(1) | Refer note no. 2.21 for details of basic and diluted shares |
Forfeited shares amounted to 1,500/- (1,500/-)
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 Depository 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.
In the period of five years immediately preceding March 31, 2020:
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 March 31, 2020 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 March 31, 2020, 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.
2.11.2 DIVIDEND
Final dividend on shares are 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay/distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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 statement
of cash flows prepared under IND AS. Dividend and buyback include applicable taxes.
The amount of per share dividend recognized as distribution to equity shareholders is as follows:
(in )
Particulars | Year ended March 31, | |
2020 | 2019 | |
Interim Dividend for fiscal 2020 | 8.00 | – |
Final Dividend for fiscal 2019 | 10.50 | – |
Interim Dividend for fiscal 2019 | – | 7.00 |
Special dividend for fiscal 2019* | – | 4.00 |
Final Dividend for fiscal 2018* | – | 10.25 |
Special dividend for fiscal 2018* | – | 5.00 |
* Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
During the year ended March 31, 2020 on account of the final dividend for fiscal 2020 and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 8,624 crore inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of Covid-19, the Company is working on an Annual General Meeting date which will be announced by the company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately 4,046 crore.
The details of shareholder holding more than 5% shares as at March 31, 2020 and March 31, 2019 are set out below :
Name of the shareholder | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 73,93,01,182 | 17.36 | 74,62,54,648 | 17.11 |
Life Insurance Corporation of India | 28,20,08,863 | 6.62 | 25,43,32,376 | 5.83 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2020 and March 31, 2019 is set out below:
in crore,except as stated otherwise
Particulars | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | Amount | Number of shares | Amount | |
As at the beginning of the period | 4,35,62,79,444 | 2,178 | 2,18,41,14,257 | 1,092 |
Add: Shares issued on exercise of employee stock options -before bonus issue | – | – | 77,233 | – |
Add: Bonus shares issued | – | – | 2,18,41,91,490 | 1,092 |
Add: Shares issued on exercise of employee stock options - after bonus issue | 5,80,388 | – | 5,48,464 | – |
Less: Shares bought back(1)(2) | 9,78,67,266 | 49 | 1,26,52,000 | 6 |
As at the end of the period | 4,25,89,92,566 | 2,129 | 4,35,62,79,444 | 2,178 |
(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 |
2.11.3 Employee Stock Option Plan (ESOP):
Accounting Policy
The Company 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 50,000,000 equity shares. To implement the 2019 Plan , upto 45,000,000
equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted
under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator
(Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative total shareholders
return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics
of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation
of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of
3 years from the grant date.
2015 Stock Incentive Compensation Plan (the
2015 Plan) :
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this
includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects
to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be
adjusted for the September 2018 bonus issue.
The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable
within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal
to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.
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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares, 200,000 each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the year ended March 31, 2020 and March 31, 2019:
2019 Plan | 2015 Plan | |||
Particulars | Year ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019* | |
Equity settled RSU | ||||
KMPs | 3,56,793 | – | 5,07,896 | 6,75,530 |
Employees other than KMPs | 17,34,500 | – | 33,46,280 | 36,65,170 |
20,91,293 | – | 38,54,176 | 43,40,700 | |
Cash settled RSU | ||||
KMPs | – | – | 1,80,400 | – |
Employees other than KMPs | – | – | 4,75,740 | 74,090 |
– | – | 6,56,140 | 74,090 | |
Total Grants | 20,91,293 | – | 45,10,316 | 44,14,790 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, 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.
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.
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. 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
Under the 2015 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 4 crore for financial year 2020 under the 2019 Plan. 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 KMPs
Under the 2015 plan:
On April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019.
The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain
performance targets.
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based
grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest
over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(in crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Granted to: | ||
KMP | 56 | 33 |
Employees other than KMP | 170 | 149 |
Total (1) | 226 | 182 |
(1) Cash settled stock compensation expense included in the above | 10 | 2 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 57 crore is recognized as financial liability with a corresponding adjustment to equity.
The activity in the 2015 and 2019 Plan for equity-settled share based payment transactions during the year ended March 31, 2020 and March 31, 2019 is set out as follows:
Particulars | Year ended March 31, 2020 | Year ended March 31, 2019* | ||
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 | 38,54,176 | 5.00 | 43,40,700 | 3.84 |
Exercised | 25,61,218 | 2.95 | 18,64,510 | 2.50 |
Modification to cash settled awards | 10,61,820 | – | – | – |
Forfeited and expired | 6,31,438 | 3.29 | 7,95,810 | 2.61 |
Outstanding at the end | 87,80,898 | 3.96 | 91,81,198 | 3.13 |
Exercisable at the end | 3,92,185 | 2.54 | 2,35,256 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 16,23,176 | 516 | 19,33,826 | 493 |
Granted | – | – | – | – |
Exercised | 1,04,796 | 516 | 1,17,350 | 515 |
Modification to cash settled awards | 3,51,550 | – | – | – |
Forfeited and expired | 66,500 | 528 | 1,93,300 | 521 |
Outstanding at the end | 11,00,330 | 539 | 16,23,176 | 516 |
Exercisable at the end | 7,80,358 | 543 | 6,98,500 | 517 |
2019 Plan: RSU | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 20,91,293 | 5.00 | – | – |
Exercised | – | – | – | – |
Forfeited and expired | – | – | – | – |
Outstanding at the end | 20,91,293 | 5.00 | – | – |
Exercisable at the end | – | – | – | – |
*Information in the table above is adjusted for September 2018 bonus issue.
During the year ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 751 and 701 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2020 is as follows:
2019 plan - Options outstanding | 2015 plan - Options outstanding | |||||
Range of exercise prices per share () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () |
2015 Plan: | ||||||
0 - 5 (RSU) | 20,91,293 | 1.76 | 5.00 | 87,80,898 | 1.59 | 3.96 |
450 - 600 (ESOP) | – | – | – | 11,00,330 | 3.48 | 539 |
20,91,293 | 1.76 | 5.00 | 98,81,228 | 1.80 | 64 |
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 was as follows:
2015 plan - 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) | 91,81,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 16,23,176 | 5.04 | 516 |
1,08,04,374 | 2.20 | 80 |
*Information in the table above is adjusted for September 2018 bonus issue.
As at March 31, 2020 and March 31, 2019, 18,12,895 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 48 crore and 9 crore as at March 31, 2020 and March 31, 2019 respectively.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant 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) | 728 | 10.52 | 696 | 10.77 |
Exercise price ()/ ($ADS)(1) | 5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-30 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date () / ($ADS)(1) | 607 | 7.84 | 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.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Compensated absences | 32 | 38 |
Accrued compensation to employees | 12 | – |
Payable for acquisition of business- Contingent consideration | – | 41 |
Rental deposit | 5 | – |
Total non-current other financial liabilities | 49 | 79 |
Current | ||
Unpaid dividends | 30 | 29 |
Others | ||
Accrued compensation to employees | 2,264 | 2,006 |
Accrued expenses (1) | 2,646 | 2,310 |
Retention monies | 30 | 60 |
Payable for acquisition of business - Contingent consideration | 151 | 75 |
Capital creditors | 254 | 653 |
Financial liability relating to buyback # | – | 1,202 |
Compensated absences | 1,497 | 1,373 |
Other payables (2) | 603 | 807 |
Foreign currency forward and options contracts | 461 | 13 |
Total current other financial liabilities | 7,936 | 8,528 |
Total other financial liabilities | 7,985 | 8,607 |
Financial liability carried at amortized cost | 5,827 | 7,067 |
Financial liability carried at fair value through profit or loss | 592 | 128 |
Financial liability carried at fair value through other comprehensive income | 20 | 1 |
Contingent consideration on undiscounted basis | 152 | 135 |
(1) Includes dues to subsidiaries | 2 | 6 |
(2) Includes dues to subsidiaries | 47 | 13 |
# 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 buy back, 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 TRADE PAYABLES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Trade payables(1) | 1,529 | 1,604 |
Total trade payables | 1,529 | 1,604 |
(1)Includes dues to subsidiaries | 271 | 220 |
As at March 31, 2020 and March 31, 2019, there are no outstanding dues to Micro, Small and Medium Enterprises. There is no interest due or outstanding on the same. During the year ended March 31, 2020 and March 31, 2019, an amount of 11 crore and 30 crore was paid beyond the appointed day as defined in the Micro, Small and Medium Enterprises Development Act 2006.
2.14 OTHER LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non current | ||
Accrued provident fund liability (refer to note 2.20.2) | 185 | – |
Others | ||
Deferred income | 22 | 29 |
Deferred rent (refer to note 2.3) | – | 140 |
Total non - current other liabilities | 207 | 169 |
Current | ||
Accrued provident fund liability (refer to note 2.20.2) | 64 | – |
Unearned revenue | 2,140 | 2,094 |
Client deposits | 9 | 19 |
Others | ||
Withholding taxes and others | 1,344 | 1,168 |
Deferred rent (refer to note 2.3) | – | 54 |
Total current other liabilities | 3,557 | 3,335 |
Total other liabilities | 3,764 | 3,504 |
2.15 PROVISIONS
Accounting Policy
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
a. Post sales client support
The Company 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 in the Statement of Profit and Loss. The Company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.
b. Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company 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 Company recognizes any impairment loss on the assets associated with that contract.
Provision for post-sales client support and others
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and others | 506 | 505 |
Total provisions | 506 | 505 |
The movement in the provision for post-sales client support and others is as follows :
(In crore)
Particulars | Year ended March 31, 2020 |
Balance at the beginning | 505 |
Provision recognized/(reversed) | 112 |
Provision utilized | (159) |
Exchange difference | 48 |
Balance at the end | 506 |
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.
2.16 INCOME TAXES
Accounting Policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the 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. 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 Company 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.
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 statement of profit and loss comprises:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Current taxes | 5,235 | 5,189 |
Deferred taxes | (301) | 36 |
Income tax expense | 4,934 | 5,225 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore which pertained to prior periods.
Additionally, income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 298 crore and 97 crore, respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions.
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 | Year ended March 31, | |
2020 | 2019 | |
Profit before income taxes | 20,477 | 19,927 |
Enacted tax rates in India | 34.94% | 34.94% |
Computed expected tax expense | 7,155 | 6,963 |
Tax effect due to non-taxable income for Indian tax purposes | (2,637) | (2,628) |
Overseas taxes | 700 | 643 |
Tax provision (reversals) | (298) | (144) |
Effect of exempt non-operating income | (49) | (62) |
Effect of non-deductible expenses | 109 | 376 |
Branch profit tax (net of credits) | (35) | 25 |
Others | (11) | 52 |
Income tax expense | 4,934 | 5,225 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2020 and March 31, 2019 is 34.94%
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Company has benefited from certain income tax incentives that the Government of India had provided for export of software from the units registered under the Special Economic Zones Act (SEZs), 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 for the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
Entire deferred income tax for the year ended March 31, 2020 and March 31, 2019, relates to origination and reversal of temporary differences.
Infosys is subject to a 15% Branch Profit Tax (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, 2020, Infosys' U.S. branch net assets amounted to approximately 5,474 crore. As at March 31, 2020, the Company has a deferred tax liability for branch profit tax of 178 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 8,447 crore and 6,007 crore as at March 31, 2020 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 372 crore and 146 crore as at March 31, 2020 and March 31, 2019, respectively as it is probable that future taxable profit will be not be available against which the unused tax losses can be utilized in the foreseeable future. Majority of the accumulated losses as at March 31, 2020 will expire in financial year 2029.
The following table provides the details of income tax assets and income tax liabilities as at March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Income tax assets | 4,773 | 6,293 |
Current income tax liabilities | 1,302 | 1,458 |
Net current income tax asset/ (liability) at the end | 3,471 | 4,835 |
The gross movement in the current income tax asset/ (liability) for the year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Net current income tax asset/ (liability) at the beginning | 4,835 | 3,734 |
Income tax paid | 3,881 | 6,271 |
Current income tax expense | (5,235) | (5,189) |
Income tax benefit arising on exercise of stock options | 9 | 8 |
Income tax on other comprehensive income | (21) | 6 |
Tax impact on buyback expenses | 4 | 4 |
Translation differences | (2) | 1 |
Net current income tax asset/ (liability) at the end | 3,471 | 4,835 |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2020 is as follows:
(In crore)
Particulars | Carrying value as of April 1, 2019 | Changes through profit and loss | Changes through OCI | Impact on Account of Ind AS 116 | Translation difference | Carrying value as of March 31, 2020 |
Property, plant and equipment | 223 | (20) | – | – | – | 203 |
Lease liabilities | 48 | 70 | – | 2 | – | 120 |
Trade receivables | 164 | 18 | – | – | – | 182 |
Compensated absences | 349 | 31 | – | – | – | 380 |
Post sales client support | 95 | 6 | – | – | – | 101 |
Derivative financial instruments | (102) | 245 | 12 | – | 155 | |
Credits related to branch profits | 340 | 13 | – | – | 24 | 377 |
Branch profit tax | (541) | 22 | – | – | (36) | (555) |
Others | (3) | (84) | (3) | – | – | (90) |
Total Deferred income tax assets and liabilities | 573 | 301 | 9 | 2 | (12) | 873 |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as of April 1, 2018 | Changes through profit and loss | Changes through OCI | Addition on account of business combination | Translation difference | Carrying value as of March 31, 2019 |
Property, plant and equipment | 181 | 43 | – | – | (1) | 223 |
Trade receivables | 129 | 35 | – | – | – | 164 |
Compensated absences | 325 | 24 | – | – | – | 349 |
Post sales client support | 92 | 3 | – | – | – | 95 |
Derivative financial instruments | 12 | (106) | (7) | – | (1) | (102) |
Credits related to branch profits | 341 | (22) | – | – | 21 | 340 |
Branch profit tax | (505) | (3) | – | – | (33) | (541) |
Others | 48 | (10) | 4 | – | 3 | 45 |
Total Deferred income tax assets and liabilities | 623 | (36) | (3) | – | (11) | 573 |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Deferred income tax assets after set off | 1,429 | 1,114 |
Deferred income tax liabilities after set off | 556 | 541 |
Deferred tax assets and deferred tax liabilities have been offset wherever the Company 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 Company 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.
2.17 REVENUE FROM OPERATIONS
Accounting Policy
The Company derives revenues primarily from IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Company’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
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.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Company has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Company assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Company allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Company estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Company’s contracts may include variable consideration including rebates, volume discounts and penalties. The Company includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Company’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company 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 Company is unable to determine the standalone selling price, the Company uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period.
Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Company uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Company is acting as an agent between the customer and the vendor, and gross when the Company is the principal for the transaction. In doing so, the Company first evaluates whether it controls the good or service before it is transferred to the customer. The Company considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Company expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Company transfers the related goods or services to the customer.
The Company presents revenues net of indirect taxes in its statement of profit and loss.
Revenue from operations for the year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue from software services | 78,809 | 72,845 |
Revenue from products and platforms | 238 | 262 |
Total revenue from operations | 79,047 | 73,107 |
The Company has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts;(ii) onerous obligations;(iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Company has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the pandemic, the Company will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by offerings for the year ended March 31, 2020 and March 31, 2019 respectively. The Company 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.
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue by offerings | ||
Core | 47,533 | 49,463 |
Digital | 31,514 | 23,644 |
Total | 79,047 | 73,107 |
Digital Services
Digital Services comprise of service and solution offerings of the company 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 company 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 Company also derives revenues from the sale of products and platforms including Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning.
Trade receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Company’s Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Company’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the Balance Sheet.
During the year ended March 31, 2020 and March
31, 2019 , the company recognized revenue of 1,835 crore and 1,776 crore arising from opening unearned revenue as
of April 1, 2019 and April 1, 2018 respectively.
During the year ended March 31, 2020 and March 31, 2019, 2,648 crore and 2,355 crore of unbilled revenue pertaining
to other 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.
Remaining performance obligation disclosure
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 Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company 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 and unit of work based contracts. 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 March 31, 2020, other than those meeting the exclusion criteria mentioned above, is 48,958 crore. Out of this, the Company expects to recognize revenue of around 52% 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 44,904 crore. The contracts can generally be terminated by the customers and typically includes an enforceable termination penalty payable by them. Generally, customers have not terminated contracts without cause.
2.18 OTHER INCOME, NET
2.18.1 Other income - Accounting Policy
Other income is comprised primarily of interest income, dividend income, gain / loss on investments and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.
2.18.2 Foreign currency - Accounting Policy
Functional currency
The functional currency of the Company is the Indian rupee. 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 recognized in the Statement of Profit and Loss and reported within exchange gains/(losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the 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.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Effective April 1, 2018, the company 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.
Other income for the year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Interest income on financial assets carried at amortized cost | ||
Tax free bonds and government bonds | 138 | 137 |
Deposit with Bank and others | 1,080 | 1,276 |
Interest income on financial assets fair valued through other comprehensive income | ||
Non-convertible debentures, commercial paper, certificates of deposit and government securities | 282 | 581 |
Income on investments carried at fair value through other comprehensive income | 41 | – |
Income on investments carried at fair value through profit or loss | ||
Dividend income on liquid mutual funds | 2 | 2 |
Gain / (loss) on liquid mutual funds and other investments | 188 | 175 |
Interest income on income tax refund | 250 | 50 |
Exchange gains/(losses) on foreign currency forward and options contracts | (528) | 184 |
Exchange gains/(losses) on translation of assets and liabilities | 1,056 | 144 |
Miscellaneous income, net | 191 | 303 |
Total other income | 2,700 | 2,852 |
2.19 EXPENSES
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Employee benefit expenses | ||
Salaries including bonus | 41,159 | 37,185 |
Contribution to provident and other funds | 938 | 797 |
Share based payments to employees (Refer note no. 2.11) | 226 | 182 |
Staff welfare | 111 | 132 |
42,434 | 38,296 | |
Cost of software packages and others | ||
For own use | 814 | 793 |
Third party items bought for service delivery to clients | 842 | 853 |
1,656 | 1,646 | |
Other expenses | ||
Power and fuel | 176 | 171 |
Brand and Marketing | 441 | 406 |
Short-term leases (refer to note 2.3) | 37 | – |
Operating leases | – | 339 |
Rates and taxes | 143 | 110 |
Repairs and Maintenance | 1,198 | 1,051 |
Consumables | 32 | 33 |
Insurance | 72 | 55 |
Provision for post-sales client support and others | 3 | (6) |
Commission to non-whole time directors | 8 | 7 |
Impairment loss recognized / (reversed) under expected credit loss model | 137 | 184 |
Auditor's remuneration | ||
Statutory audit fees | 7 | 4 |
Tax matters | – | 1 |
Other services | 2 | – |
Contributions towards Corporate Social Responsibility | 360 | 245 |
Others | 171 | 170 |
2,787 | 2,770 |
2.20 EMPLOYEE BENEFITS
Accounting Policy
2.20.1 Gratuity
The Company provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees. 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 Company.
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). Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by Indian law.
The Company 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 are recognized in net profit in the Statement of Profit and Loss.
2.20.2 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.
2.20.3 Superannuation
Certain employees of Infosys are participants in a defined contribution plan. The Company has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
2.20.4 Compensated absences
The Company 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.
a. Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Company's financial statements as at March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at March 31, | |
2020 | 2019 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,158 | 1,028 |
Service cost | 155 | 135 |
Interest expense | 78 | 73 |
Transfer of obligation | 1 | 1 |
Remeasurements - Actuarial (gains)/ losses | (78) | 31 |
Benefits paid | (119) | (110) |
Benefit obligations at the end | 1,195 | 1,158 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,183 | 1051 |
Interest income | 84 | 78 |
Transfer of assets | 1 | 2 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 8 | 4 |
Contributions | 180 | 158 |
Benefits paid | (118) | (110) |
Fair value of plan assets at the end | 1,338 | 1,183 |
Funded status | 143 | 25 |
The amount for the year ended March 31, 2020 and March 31, 2019 recognized in the Statement of Profit and Loss under employee benefit expense are as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Service cost | 155 | 135 |
Net interest on the net defined benefit liability/asset | (6) | (5) |
Curtailment gain | – | – |
Net gratuity cost | 149 | 130 |
The amounts for the year ended March 31, 2020 and March 31, 2019 recognized in statement of other comprehensive income are as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | (78) | 31 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (8) | (4) |
(86) | 27 |
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
(Gain)/loss from change in demographic assumptions | – | – |
(Gain)/loss from change in financial assumptions | (61) | 26 |
(Gain)/loss from change in experience assumptions | (17) | 5 |
(78) | 31 |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2020 and March 31, 2019 are set out below:
Particulars | As at March 31 | |
2020 | 2019 | |
Discount rate (1) | 6.2% | 7.1% |
Weighted average rate of increase in compensation levels(2) | 6.0% | 8.0% |
Weighted average duration of defined benefit obligation (3) | 5.9 years | 5.9 years |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2020 and March 31, 2019 are set out below:
Particulars | Year ended March 31, | |
2020 | 2019 | |
Discount rate | 7.1% | 7.5% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
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 obligations
( in crore)
Impact from percentage point increase / decrease in | As at March 31, |
2020 | |
Discount Rate | 67 |
Weighted average rate of increase in compensation level | 59 |
Sensitivity for 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. The sensitivity analysis is based on a change in an assumption while holding all other 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. Trustees administer contributions made to the trust. As at March 31, 2020 and March 31, 2019, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for each of the year ended March 31, 2020 and March 31, 2019 was 92 crore and 82 crore respectively.
The Company expects to contribute 100 crore to the gratuity trusts during the fiscal 2021.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 171 |
1-2 year | 178 |
2-3 year | 184 |
3-4 year | 196 |
4-5 year | 114 |
5-10 years | 1,059 |
b. Superannuation
The Company contributed 223 crore and 199 crore to the Superannuation trust during the year ended March 31, 2020 and March 31, 2019 respectively and the same has been recognized in the Statement of Profit and Loss account under the head employee benefit expense.
c. 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 March 31, 2020
(In crore)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 5,989 |
Service cost - employer contribution | 407 |
Employee contribution | 857 |
Interest expense | 561 |
Actuarial (gains) / loss | 216 |
Benefits paid | (664) |
Benefit obligations at the end | 7,366 |
Change in plan assets | |
Fair value of plan assets at the beginning | 5,989 |
Interest income | 561 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (33) |
Contributions (employer and employee) | 1,264 |
Benefits paid | (664) |
Fair value of plan assets at the end | 7,117 |
Net liability (refer to note 2.14) | (249) |
(1) | Includes unrealized losses on certain investments in bonds |
Amount for the year ended March 31, 2020 recognized in the statement of other comprehensive income:
(In crore)
Particulars | Year ended March 31, |
2020 | |
Remeasurements of the net defined benefit liability/ (asset) | |
Actuarial (gains) / losses | 216 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 33 |
249 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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. |
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately 72 crore and 108 crore on account of a 0.25% increase / decrease in the expected rate of return on plan assets.
The Company contributed 541 crore and 451 crore to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in the net profit in the statement of profit and loss under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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.
Employee benefits cost include:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Salaries and bonus(1) | 41,521 | 37,516 |
Defined contribution plans | 223 | 199 |
Defined benefit plans | 690 | 581 |
42,434 | 38,296 |
(1) | Includes employee stock compensation expense of 226 crore and 182 crore for the year ended March 31, 2020 and March 31, 2019, respectively (Refer note 2.11). |
2.21 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNING 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 | Year ended March 31, | |
2020 | 2019* | |
Basic earnings per equity share - weighted average number of equity shares outstanding | 4,27,70,30,249 | 4,36,82,12,119 |
Effect of dilutive common equivalent shares - share options outstanding | 27,78,577 | 22,00,229 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,27,98,08,826 | 4,37,04,12,348 |
* Information in above table is adjusted for September 2018 Bonus issue.(refer note no.2.11)
For the year ended March 31, 2020 and March 31, 2019 no number of options to purchase equity shares had an anti-dilutive effect.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 3,410 | 2,947 |
[Amount paid to statutory authorities 5,229 crore (5,861 crore)] | ||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,305 | 1,653 |
(net of advances and deposits)(2) | ||
Other Commitments* | 15 | 17 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2020, claims against the Company not acknowledged as debts in respect
of income tax matters amounted to 3,274 crore. The claims against the Company majorly represent demands arising on completion
of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such
as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees
under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated
Enterprises held as liable for withholding of taxes. These matters are pending before various Appellate Authorities and the management
including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material
adverse effect on the Company's financial position and results of operations. Amount paid to statutory authorities against the above tax claims amounted to 5,228 crore. |
(2) | Capital contracts primarily comprises of commitments for infrastructure facilities and computer equipment’s. |
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification
from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on
this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to
cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged violations of the US federal securities laws. The Company is presently unable to
predict the scope, duration or the outcome of these matters.
The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s management reasonably expects that these legal actions, when ultimately concluded and determined, will not 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 | |
March 31, 2020 | 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 | 100% | 99.99% |
Infosys CIS LLC(1) (18) (26) | 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 | 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(32) | Poland | 99.99% | 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(7)(31) | Japan | – | 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% | – |
Outbox systems Inc. dba Simplus (US)(27) | U.S. | 100% | – |
Simplus North America Inc.(28) | Canada | 100% | – |
Simplus ANZ Pty Ltd.(28) | Australia | 100% | – |
Simplus Australia Pty Ltd(30) | Australia | 100% | – |
Sqware Peg Digital Pty Ltd(30) | Australia | 100% | – |
Simplus Philippines, Inc.(28) | Philippines | 100% | – |
Simplus Europe, Ltd.(28) | U.K. | 100% | – |
Simplus U.K., Ltd.(29) | U.K. | 100% | – |
Simplus Ireland, Ltd.(29) | Ireland | 100% | – |
(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 of 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 subsidiary of Stater N.V |
(23) | Majority owned and controlled subsidiary of Stater Duitsland B.V. |
(24) | Majority owned and controlled subsidiary of Stater Participations B.V. |
(25) | Effective October 1, 2019, merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd. |
(26) | Under Liquidation |
(27) | On March 13, 2020, Infosys Nova Holdings LLC, acquired 100% of the voting interests in Outbox Systems Inc. |
(28) | Wholly-owned subsidiary of Outbox Systems Inc. |
(29) | Wholly-owned subsidiary of Simplus Europe, Ltd. |
(30) | Wholly-owned subsidiary of Simplus ANZ Pty Ltd.. |
(31) | Liquidated effective October 31, 2019 |
(32) | On February 20, 2020, Infosys Poland, Sp z.o.o, acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o from Infosys Consulting Holding AG (formerly Lodestone Holding AG). |
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 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 |
*Registered on May 15, 2019
The Company’s material related party transactions during the year ended March 31, 2020 and March 31, 2019 and outstanding balances as at March 31, 2020 and March 31, 2019 are with its subsidiaries with whom the Company generally enters into transactions which are at arms length and in the ordinary course of business.
Refer note no. 2.20 for information on transactions with post-employment benefit plans mentioned above.
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 as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva (retired as member of the Board effective February 3, 2020)
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
The details of amounts due to or due from related parties as at March 31, 2020 and March 31, 2019 are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Investment in debentures | ||
EdgeVerve(1) | 1,159 | 1,445 |
1,159 | 1,445 | |
Trade receivables | ||
EdgeVerve | 16 | 3 |
Brilliant Basics Limited | 1 | – |
Infosys China | 24 | 23 |
Infosys Mexico | 7 | 3 |
Infosys Brasil | – | 1 |
Infosys BPM | 10 | 10 |
Infy Consulting Company Ltd. | 6 | 13 |
Infosys Public Services | 69 | 57 |
Infosys Shanghai | 5 | 6 |
Infosys Sweden | 4 | – |
Infosys Consulting Ltda. | 6 | – |
Infosys McCamish Systems LLC | 104 | 89 |
Panaya Ltd | 129 | 115 |
Infosys Compaz Pte. Ltd | 27 | 5 |
408 | 325 | |
Loans | ||
Infosys China (2) | 94 | 82 |
Infosys Consulting Holding AG(3) | – | 89 |
Brilliant Basics Holdings Limited (4) | – | 7 |
Infosys Consulting Pte Ltd (5) | 277 | 663 |
Infosys Consulting S.R.L.(6) | 9 | – |
380 | 841 | |
Prepaid expense and other assets | ||
Panaya Ltd. | 168 | 109 |
168 | 109 | |
Other financial assets | ||
Infosys BPM | 8 | 10 |
Panaya Ltd. | 3 | 3 |
Infosys Austria GmbH | 3 | – |
Infosys Consulting GmbH | 1 | 2 |
Infosys China | 8 | 2 |
Infosys Shanghai | 1 | 1 |
Infy Consulting Company Ltd. | 3 | 3 |
Infosys Management Consulting Pty Limited | 1 | – |
Infosys Consulting AG | 1 | 1 |
Infosys Public Services | 1 | 3 |
Kallidus | 2 | 2 |
Infosys Consulting Ltda. | 3 | 1 |
Skava Systems Pvt. Ltd. | 1 | 1 |
Infy Consulting B.V. | 1 | – |
Infosys Brasil | – | 1 |
Brilliant Basics Limited | 2 | 1 |
Infosys Mexico | 2 | 1 |
McCamish Systems LLC | 1 | 1 |
Infosys Poland sp. z o o | 1 | – |
Stater NV | 21 | – |
Fluido Denmark A/S | 1 | – |
Infosys Compaz Pte. Ltd | – | 1 |
65 | 34 | |
Unbilled revenues | ||
EdgeVerve | 45 | 40 |
Kallidus | 8 | 11 |
Stater Nederland B.V. | 31 | – |
84 | 51 | |
Trade payables | ||
Infosys China | 6 | 8 |
Infosys BPM | 60 | 50 |
Infosys (Czech Republic) Limited s.r.o. | 10 | 6 |
Infosys Mexico | 4 | 6 |
Infosys Sweden | 3 | 3 |
Infosys Shanghai | 5 | 6 |
Infosys Management Consulting Pty Limited | 8 | 9 |
Infosys Consulting Pte Ltd. | 3 | 4 |
Infy Consulting Company Ltd. | 93 | 87 |
Infosys Brasil | – | 2 |
Infosys consulting Ltda | 5 | – |
Brilliant Basics Limited | 8 | 7 |
Panaya Ltd. | 12 | 4 |
Infosys Public Services | 3 | 4 |
Kallidus | 5 | 2 |
Portland Group Pty Ltd | 2 | 1 |
Infosys Chile SpA | 3 | 1 |
Infosys Compaz Pte. Ltd (formerly Trusted Source Pte. Ltd) | 1 | – |
Infosys Middle East FZ-LLC | 12 | 12 |
Infosys Poland Sp Z.o.o | 3 | 1 |
Infosys Consulting S.R.L. | 10 | – |
Skava Systems Pvt. Ltd. | 1 | – |
McCamish Systems LLC | 1 | 1 |
WDW Communications, Inc. | 13 | 6 |
271 | 220 | |
Other financial liabilities | ||
Infosys BPM | 4 | 4 |
Brilliant Basics Limited | 1 | – |
Fluido Oy | 9 | – |
Fluido Sweden AB | 2 | – |
Infosys Mexico | 1 | 2 |
Infosys Consulting Ltda. | 1 | – |
Infosys Compaz Pte. Ltd | 1 | – |
Infosys China | 2 | 1 |
Kallidus Inc, | 3 | – |
Infosys Consulting GmbH | – | 5 |
Stater Nederland B.V. | 20 | – |
Infosys Middle East FZ-LLC | 3 | – |
Infosys Consulting AG | – | 1 |
47 | 13 | |
Accrued expenses | ||
Infosys BPM | 2 | 6 |
2 | 6 |
(1) | At an interest rate of 8.35% per annum. |
(2) | Interest at the rate of 6% per annum repayable on demand |
(3) | Interest at the rate of 2.5% per annum repayable on demand |
(4) | Interest at the rate of 3.5% per annum repayable on demand |
(5) | Interest at the rate of 3% per annum repayable on demand. |
(6) | Interest at the rate of 4% per annum repayable on demand. |
(In crore)
Particulars | Maximum amount outstanding during the | |
Year ended March 31, 2020 | Year ended March 31, 2019 | |
Loans and advances in the nature of loans given to Subsidiaries: | ||
Infosys China | 94 | 86 |
Brilliant Basics | 8 | 8 |
Infosys Consulting Pte Ltd | 1,906 | 678 |
Infosys Consulting Holding AG | 86 | 114 |
Infosys Consulting S.R.L Argentina | 8 | – |
Infosys Consulting S.R.L. Romania | 9 | – |
The details of the related parties transactions entered into by the Company for the year ended March 31, 2020 and March 31, 2019 are as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Capital transactions: | ||
Financing transactions | ||
Equity | ||
Infosys Consulting Brazil | 140 | 43 |
Wongdoody Holding Company Inc | 9 | 261 |
Infosys Chile SpA | – | 7 |
Infosys BPM | 1 | – |
Infosys Nova Holdings LLC | 1,335 | – |
Brilliant Basics Holding Limited | – | 13 |
Infosys Luxembourg S.a r.l. | – | 4 |
Infosys Australia (1) | – | (33) |
Infosys Brazil | – | 127 |
S.C. Infosys Consulting S.R.L | – | 34 |
Preference shares | ||
Infosys Consulting Pte Ltd.(2) | 1,318 | – |
2,803 | 456 | |
Debentures (net of repayment) | ||
Edgeverve | (286) | (335) |
(286) | (335) | |
Loans (net of repayment) | ||
Infosys Consulting Holding AG | (92) | (20) |
Brilliant Basics Holdings Limited | (7) | – |
Infosys Consulting Pte Ltd.(2) | (496) | 678 |
Infosys Consulting S.R.L. | 8 | – |
(587) | 658 | |
Revenue transactions: | ||
Purchase of services | ||
Infosys China | 76 | 85 |
Infosys Management Consulting Pty Limited | 108 | 94 |
Infy Consulting Company Limited | 1,030 | 857 |
Infosys Consulting Pte Ltd. | 34 | 40 |
Portland Group Pty Ltd | 22 | 16 |
Infosys (Czech Republic) Limited s.r.o. | 98 | 56 |
Infosys BPM | 733 | 655 |
Infosys Sweden | 48 | 52 |
Infosys Shanghai | 74 | 74 |
Infosys Mexico | 67 | 71 |
Infosys Public Services | 35 | 39 |
Panaya Ltd. | 102 | 94 |
Infosys Brasil | 10 | 13 |
Infosys Poland Sp Z.o.o | 30 | 29 |
Infosys Consulting S.R.L. | 22 | – |
Infosys Compaz Pte. Ltd (formerly Trusted Source Pte. Ltd) | 6 | – |
Infosys Consulting Ltda. | 14 | – |
Kallidus | 26 | 51 |
Brilliant Basics Limited | 95 | 74 |
Brilliant Basics (MENA) | – | 3 |
Infosys Chile SpA | 14 | 5 |
Infosys Middle East FZ-LLC | 83 | 95 |
Fluido Oy | 12 | – |
Fluido Sweden AB (Extero) | 18 | – |
McCamish Systems LLC | 6 | 7 |
WDW Communications, Inc. | 61 | 11 |
WongDoody, Inc. | – | 2 |
2,824 | 2,423 | |
Purchase of shared services including facilities and personnel | ||
Brilliant Basics Limited | 5 | 7 |
Infosys BPM | 3 | 3 |
Fluido Oy | 1 | – |
WDW Communications, Inc. | 12 | 1 |
21 | 11 | |
Interest income | ||
Infosys China | 6 | 5 |
Infosys Consulting Holding AG | 1 | 2 |
Infosys Consulting Pte Ltd. | 39 | 6 |
EdgeVerve | 107 | 141 |
153 | 154 | |
Guarantee income | ||
Infosys Consulting Pte Ltd. | 1 | – |
1 | – | |
Sale of services | ||
Infosys China | 23 | 31 |
Infosys Mexico | 34 | 20 |
Infy Consulting Company Limited | 44 | 54 |
Infosys Brasil | 3 | 6 |
Infosys BPM | 121 | 101 |
McCamish Systems LLC | 320 | 238 |
Infosys Sweden | 11 | 3 |
Infosys Shanghai | 5 | 8 |
EdgeVerve | 597 | 469 |
Infosys Public Services | 749 | 766 |
Infosys Compaz Pte Ltd | 64 | 13 |
Infosys Consulting Ltda. | 5 | – |
Infosys Austria GmbH | 2 | – |
Fluido Denmark A/S | 1 | – |
Stater Nederland B.V. | 45 | – |
2,024 | 1,709 | |
Sale of shared services including facilities and personnel | ||
EdgeVerve | 33 | 36 |
Panaya Ltd. | 9 | 45 |
HIPUS | 1 | – |
Infosys BPM | 25 | 27 |
68 | 108 |
(1) | Represents redemption of investment |
(2) | Includes redemption by way of issuing Redeemable preference shares |
Transactions with key management personnel
The related party transactions with above KMP which comprise directors and executive officers are as follows :
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3) | 118 | 96 |
Commission and other benefits to non-executive/independent directors | 8 | 7 |
Total | 126 | 103 |
(1) | Total employee stock compensation expense for the year ended March 31, 2020 and March 31, 2019 includes a charge of 56 crore and 33 crore, towards key managerial personnel respectively. (Refer note no. 2.11) |
(2) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
2.24 CORPORATE SOCIAL RESPONSIBILITY
As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief, COVID-19 and rural development projects. A CSR committee has been formed by the company as per the Act. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013.
a)Gross amount required to be spent by the company during the year is 360 crore.
b)Amount spent during the year on:
(in crore)
Particulars | In Cash | Yet to be paid in Cash | Total |
1. Construction / acquisition of any asset | – | – | – |
2. On purposes other than (1) above | 357 | 3 | 360 |
2.25 SEGMENT REPORTING
The Company publishes this financial statement along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.
2.26 FUNCTION-WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
(in crore)
Particulars | Note No. | Year ended March 31, | |
2020 | 2019 | ||
Revenue from operations | 2.17 | 79,047 | 73,107 |
Cost of sales | 52,816 | 47,412 | |
Gross Profit | 26,231 | 25,695 | |
Operating expenses | |||
Selling and marketing expenses | 3,814 | 3,661 | |
General and administration expenses | 4,526 | 4,225 | |
Total operating expenses | 8,340 | 7,886 | |
Operating profit | 17,891 | 17,809 | |
Reduction in the fair value of assets held for sale | 2.4.7 | – | 265 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.4.7 | – | 469 |
Interest expense | 114 | – | |
Other income, net | 2.18 | 2,700 | 2,852 |
Profit before tax | 20,477 | 19,927 | |
Tax expense: | |||
Current tax | 2.16 | 5,235 | 5,189 |
Deferred tax | 2.16 | (301) | 36 |
Profit for the year | 15,543 | 14,702 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset, net | (184) | (21) | |
Equity instruments through other comprehensive income, net | (31) | 78 | |
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | (36) | 21 | |
Fair value changes on investments, net | 2.4 | 17 | 1 |
Total other comprehensive income/(loss), net of tax | (234) | 79 | |
Total comprehensive income for the year | 15,309 | 14,781 |
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 April 20, 2020 |
Exhibit 99.10
Ind AS Consolidated
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFOSYS LIMITED
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying 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 March 31, 2020, and the Consolidated Statement of Profit and Loss (including Other Comprehensive Income), the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended, and a summary of significant accounting policies and other explanatory information (hereinafter referred to as the “consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial statements, give the information required by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (“Ind AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended and other accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at March 31, 2020, the consolidated profit, consolidated total comprehensive income, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with the Standards on Auditing (“SA”s) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the 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 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 on the consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the 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 |
Fixed price contracts using the percentage of completion method
|
Principal Audit Procedures |
Fixed price maintenance revenue is recognized either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using percentage of completion method when the pattern of benefits from services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive.
Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time has been recognized using the percentage-of-completion method. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
We identified the estimate of total efforts or efforts to complete fixed price contracts measured using the percentage of completion method as a key audit matter as the estimation of efforts or costs involves significant judgement throughout the period of the contract and is subject to revision as the contract progresses based on the latest available information. This estimate has a high inherent uncertainty and requires consideration of progress of the contract, efforts or costs incurred to-date and estimates of efforts or costs required to complete the remaining contract performance obligations over the lives of the contracts.
Refer Notes 1.5(a) and 2.16 to the consolidated financial statements.
|
Our audit procedures related to estimates of total expected costs or efforts to complete for fixed-price contracts included the following, among others:
We tested the effectiveness of controls relating to (1) recording of efforts or costs incurred and estimation of efforts or costs required to complete the remaining contract performance obligations and (2) access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
We selected a sample of fixed price contracts with customers accounted using percentage-of-completion method and performed the following:
· Compared efforts or costs incurred with Group’s estimate of efforts or costs incurred to date to identify significant variations and evaluate whether those variations have been considered appropriately in estimating the remaining costs or efforts to complete the contract.
· Tested the estimate for consistency with the status of delivery of milestones and customer acceptances and sign off from customers to identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligations. |
Sr. No. | Key Audit Matter | Auditor’s Response |
2 |
Allowance for credit losses
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
We identified allowance for credit losses as a key audit matter because the Group exercises significant judgment in calculating the expected credit losses.
Refer Notes 1.5(h), 2.7 and 2.10 to the consolidated financial statements.
|
Principal Audit Procedures
Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following, among others:
We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses.
For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information.
We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Group.
|
Emphasis of Matter
As more fully described in Note 2.22 to the consolidated financial statements, the Company is responding to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Information Other than the Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the consolidated financial statements, standalone financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibilities for the Consolidated Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance including other comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with the Ind AS and other accounting principles generally accepted in India. The respective Boards of Directors of the companies included in the Group are responsible for maintenance of 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 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 consolidated financial statements by the Directors of the Company, as aforesaid.
In preparing the consolidated financial statements, the respective Boards of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Boards of Directors either intend to liquidate their respective entities or to cease operations, or have no realistic alternative but to do so.
The respective Boards of Directors of the companies included in the Group are also responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company and its subsidiary companies which are companies incorporated in India, has adequate internal financial controls system in place and the operating effectiveness of such controls. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the 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 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 consolidated financial statements, including the disclosures, and whether the 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 consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the consolidated financial statements of which we are the independent auditors. |
Materiality is the magnitude of misstatements in the consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the 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 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 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.
Report on Other Legal and Regulatory Requirements
1. | As required by Section 143(3) of the Act, based on our audit we report that: |
a) | We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements. |
b) | In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated financial statements have been kept so far as it appears from our examination of those books. |
c) | The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income), Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated financial statements. |
d) | In our opinion, the aforesaid consolidated financial statements comply with the Ind AS specified under section 133 of the Act. |
e) | On the basis of the written representations received from the directors of the Company as on March 31, 2020 taken on record by the Boards of Directors of the Company and its subsidiaries incorporated in India and the reports of the statutory auditors of its subsidiary companies incorporated in India, none of the directors of the Group companies incorporated in India is disqualified as on March 31, 2020 from being appointed as a director in terms of Section 164 (2) of the Act. |
f) | With respect to the adequacy of the internal financial controls over financial reporting and the operating effectiveness of such controls, refer to our separate Report in “Annexure A” which is based on the auditors’ reports of the Company and its subsidiary companies incorporated in India. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of internal financial controls over financial reporting of those companies. |
g) | With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended: |
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) | With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us: |
i) | The consolidated financial statements disclose the impact of pending litigations on the consolidated financial position of the Group. |
ii) | Provision has been made in the consolidated financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; |
iii) | There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company and its subsidiary companies incorporated in India. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No.117366W/W-100018)
Sanjiv V. Pilgaonkar
Place: Mumbai Date: April 20, 2020 |
UDIN: 20039826AAAABV6735 |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian Accounting Standards (Ind AS) for the year ended March 31, 2020
Index | Page No. |
Consolidated Balance Sheet | 1 |
Consolidated Statement of Profit and Loss | 2 |
Consolidated Statement of Changes in Equity | 3 |
Consolidated Statement of Cash Flows | 6 |
Overview and notes to the consolidated financial statements | |
1. Overview | |
1.1 Company overview | 8 |
1.2 Basis of preparation of financial statements | 8 |
1.3 Basis of consolidation | 8 |
1.4 Use of estimates and judgements | 8 |
1.5 Critical accounting estimates and judgments | 8 |
2. Notes to the consolidated financial statements | |
2.1 Business combinations and disposal group held for sale | 11 |
2.2 Property, plant and equipment | 15 |
2.3 Goodwill and other intangible assets | 16 |
2.4 Investments | 18 |
2.5 Loans | 22 |
2.6 Other financial assets | 22 |
2.7 Trade receivables | 22 |
2.8 Cash and cash equivalents | 23 |
2.9 Other assets | 23 |
2.10 Financial instruments | 24 |
2.11 Equity | 31 |
2.12 Other financial liabilities | 36 |
2.13 Other liabilities | 36 |
2.14 Provisions | 37 |
2.15 Income taxes | 38 |
2.16 Revenue from operations | 41 |
2.17 Other income, net | 44 |
2.18 Expenses | 45 |
2.19 Leases | 45 |
2.20 Employee benefits | 48 |
2.21 Reconciliation of basic and diluted shares used in computing earnings per share | 52 |
2.22 Contingent liabilities and commitments(to the extent not provided for) | 52 |
2.23 Related party transactions | 53 |
2.24 Segment reporting | 58 |
2.25 Function wise classification of Consolidated Statement of Profit and Loss | 59 |
INFOSYS LIMITED AND SUBSIDIARIES
(In crore )
Consolidated Balance Sheets as at | Note No. | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.2 | 12,435 | 11,479 |
Right-of-use assets | 2.19 | 4,168 | – |
Capital work-in-progress | 954 | 1,388 | |
Goodwill | 2.3.1 and 2.1 | 5,286 | 3,540 |
Other intangible assets | 2.3.2 | 1,900 | 691 |
Financial assets: | |||
Investments | 2.4 | 4,137 | 4,634 |
Loans | 2.5 | 21 | 19 |
Other financial assets | 2.6 | 737 | 312 |
Deferred tax assets (net) | 2.15 | 1,744 | 1,372 |
Income tax assets (net) | 2.15 | 5,384 | 6,320 |
Other non-current assets | 2.9 | 1,426 | 2,105 |
Total non-current assets | 38,192 | 31,860 | |
Current assets | |||
Financial assets: | |||
Investments | 2.4 | 4,655 | 6,627 |
Trade receivables | 2.7 | 18,487 | 14,827 |
Cash and cash equivalents | 2.8 | 18,649 | 19,568 |
Loans | 2.5 | 239 | 241 |
Other financial assets | 2.6 | 5,457 | 5,505 |
Income tax assets (net) | 2.15 | 7 | 423 |
Other Current assets | 2.9 | 7,082 | 5,687 |
Total current assets | 54,576 | 52,878 | |
Total assets | 92,768 | 84,738 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,122 | 2,170 |
Other equity | 63,328 | 62,778 | |
Total equity attributable to equity holders of the Company | 65,450 | 64,948 | |
Non-controlling interests | 394 | 58 | |
Total equity | 65,844 | 65,006 | |
Liabilities | |||
Non-current liabilities | |||
Financial Liabilities | |||
Lease liabilities | 2.19 | 4,014 | – |
Other financial liabilities | 2.12 | 807 | 147 |
Deferred tax liabilities (net) | 2.15 | 968 | 672 |
Other non-current liabilities | 2.13 | 279 | 275 |
Total non-current liabilities | 6,068 | 1,094 | |
Current liabilities | |||
Financial Liabilities | |||
Trade payables | 2,852 | 1,655 | |
Lease liabilities | 2.19 | 619 | – |
Other financial liabilities | 2.12 | 10,481 | 10,452 |
Other current liabilities | 2.13 | 4,842 | 4,388 |
Provisions | 2.14 | 572 | 576 |
Income tax liabilities (net) | 2.15 | 1,490 | 1,567 |
Total current liabilities | 20,856 | 18,638 | |
Total equity and liabilities | 92,768 | 84,738 |
The accompanying notes form an integral part of the interim condensed consolidated financial statements.
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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. | Year ended March 31, | |
2020 | 2019 | ||
Revenue from operations | 2.16 | 90,791 | 82,675 |
Other income, net | 2.17 | 2,803 | 2,882 |
Total income | 93,594 | 85,557 | |
Expenses | |||
Employee benefit expenses | 2.18 | 50,887 | 45,315 |
Cost of technical sub-contractors | 6,714 | 6,033 | |
Travel expenses | 2,710 | 2,433 | |
Cost of software packages and others | 2.18 | 2,703 | 2,553 |
Communication expenses | 528 | 471 | |
Consultancy and professional charges | 1,326 | 1,324 | |
Depreciation and amortisation expenses | 2.2 and 2.3.2 | 2,893 | 2,011 |
Finance cost | 2.19 | 170 | – |
Other expenses | 2.18 | 3,656 | 3,655 |
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 |
Total expenses | 71,587 | 64,516 | |
Profit before tax | 22,007 | 21,041 | |
Tax expense: | |||
Current tax | 2.15 | 5,775 | 5,727 |
Deferred tax | 2.15 | (407) | (96) |
Profit for the period | 16,639 | 15,410 | |
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 | (180) | (22) |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | (33) | 70 |
(213) | 48 | ||
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 | (36) | 21 |
Exchange differences on translation of foreign operations | 378 | 63 | |
Fair value changes on investments, net | 2.4 and 2.15 | 22 | 2 |
364 | 86 | ||
Total other comprehensive income /(loss), net of tax | 151 | 134 | |
Total comprehensive income for the period | 16,790 | 15,544 | |
Profit attributable to: | |||
Owners of the Company | 16,594 | 15,404 | |
Non-controlling interests | 45 | 6 | |
16,639 | 15,410 | ||
Total comprehensive income attributable to: | |||
Owners of the Company | 16,732 | 15,538 | |
Non-controlling interests | 58 | 6 | |
16,790 | 15,544 | ||
Earnings per Equity share | |||
Equity shares of par value 5/- each | |||
Basic () | 38.97 | 35.44 | |
Diluted () | 38.91 | 35.38 | |
Weighted average equity shares used in computing earnings per equity share | 2.21 | ||
Basic | 4,257,754,522 | 4,347,130,157 | |
Diluted | 4,265,144,228 | 4,353,420,772 |
The accompanying notes form an integral part of the interim condensed consolidated financial statements.
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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 year ended March 31, 2019 | ||||||||||||||||
Profit for the period | – | – | 15,404 | – | – | – | – | – | – | – | – | – | – | 15,404 | 6 | 15,410 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (22) | (22) | – | (22) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 70 | – | – | – | 70 | – | 70 |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 | – | 21 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 63 | – | – | 63 | – | 63 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 2 | 2 | – | 2 |
Total Comprehensive income for the period | – | – | 15,404 | – | – | – | – | – | – | 70 | 63 | 21 | (20) | 15,538 | 6 | 15,544 |
Share based payments to employees (Refer to note 2.11) | – | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 | – | 197 |
Dividends (including dividend distribution tax) | – | – | (13,712) | – | – | – | – | – | – | – | – | – | – | (13,712) | – | (13,712) |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (6) | – | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) | – | (2,000) |
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) | – | 99 | – | – | – | (99) | – | – | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | – | 8 | – | 8 |
Transfer to general reserve | – | – | (1,615) | – | 1,615 | – | – | – | – | – | – | – | – | – | – | – |
Amount transferred to other reserves | – | – | (1) | – | – | – | – | 1 | – | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer to note no. 2.11) |
– | – | – | – | (5) | – | – | – | 5 | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options – after bonus issue (Refer to note 2.11) |
– | 6 | – | – | – | – | – | – | – | – | – | – | – | 6 | – | 6 |
Transaction costs related to buyback* (refer to note no.2.11 ) | – | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) | – | (12) |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,417) | – | – | – | 2,417 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,430 | – | – | – | (1,430) | – | – | – | – | – | – | – | – | – |
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 March 31, 2019 | 2,170 | 149 | 57,566 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,948 | 58 | 65,006 |
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 year ended March 31, 2020 | ||||||||||||||||
Profit for the period | – | – | 16,594 | – | – | – | – | – | – | – | – | – | – | 16,594 | 45 | 16,639 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (180) | (180) | – | (180) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | (33) | – | – | – | (33) | – | (33) |
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 | – | – | – | – | – | – | – | – | – | – | 365 | – | – | 365 | 13 | 378 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 22 | 22 | – | 22 |
Total Comprehensive income for the period | – | – | 16,594 | – | – | – | – | – | – | (33) | 365 | (36) | (158) | 16,732 | 58 | 16,790 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 1 | 5 | – | – | – | – | – | – | – | – | – | – | – | 6 | – | 6 |
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) | – | – | – | – | – | 238 | – | – | – | – | – | – | – | 238 | – | 238 |
Exercise of stock options (refer to note no. 2.11) | – | 119 | – | – | – | (119) | – | – | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | – | – |
Effect of modification of equity settled share based payment awards to cash settled awards (Refer to note 2.11) | – | – | (9) | – | – | (48) | – | – | – | – | – | – | – | (57) | – | (57) |
Income tax benefit arising on exercise of stock options | – | 9 | – | – | – | – | – | – | – | – | – | – | – | 9 | – | 9 |
Financial liability under option arrangements (refer to note 2.1) | – | – | (598) | – | – | – | – | – | – | – | – | – | – | (598) | – | (598) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | – | – | – | – | – | (33) | (33) |
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 | – | – | (2,580) | – | – | – | 2,580 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,080 | – | – | – | (1,080) | – | – | – | – | – | – | – | – | – |
Balance as at March 31, 2020 | 2,122 | 282 | 56,309 | 54 | 1,158 | 297 | 4,070 | 6 | 111 | 39 | 1,207 | (15) | (190) | 65,450 | 394 | 65,844 |
(246) (52,429) (54) (1,158) (286) (3,643) (6) (112) (41) (971) 15 (375)
* Net of tax36 3,8
80 - - 11 427 (0) (1) (2) 236 (0) (190) 19 65,844
(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 condensed consolidated financial statements.
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 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. | Year ended March 31, | |
2020 | 2019 | ||
Cash flow from operating activities | |||
Profit for the period | 16,639 | 15,410 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Income tax expense | 2.15 | 5,368 | 5,631 |
Depreciation and amortization | 2.2 and 2.3.2 | 2,893 | 2,011 |
Interest and dividend income | (1,613) | (2,052) | |
Finance cost | 2.19 | 170 | – |
Impairment loss recognized / (reversed) under expected credit loss model | 161 | 239 | |
Exchange differences on translation of assets and liabilities | 184 | 66 | |
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 | 249 | 202 |
Other adjustments | (131) | (102) | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (3,861) | (2,881) | |
Loans, other financial assets and other assets | 76 | (700) | |
Trade payables | (373) | 916 | |
Other financial liabilities, other liabilities and provisions | 1,791 | 2,212 | |
Cash generated from operations | 21,553 | 21,673 | |
Income taxes paid | (4,550) | (6,832) | |
Net cash generated by operating activities | 17,003 | 14,841 | |
Cash flows from investing activities | |||
Expenditure on property, plant and equipment | (3,307) | (2,445) | |
Loans to employees | – | 14 | |
Deposits placed with corporation | (108) | (24) | |
Interest and dividend received | 1,929 | 1,557 | |
Payment towards acquisition of business, net of cash acquired | (1,860) | (550) | |
Payment of contingent consideration pertaining to acquisition of business | (6) | (18) | |
Advance payment towards acquisition of business | – | (206) | |
Redemption of escrow pertaining to Buyback | 2.6 | 257 | (257) |
Other receipts | 46 | – | |
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 | (34,839) | (78,355) | |
Non convertible debentures | (993) | (160) | |
Certificates of deposit | (1,114) | (2,393) | |
Government securities | (1,561) | (838) | |
Commercial paper | – | (491) | |
Others | (29) | (19) | |
Proceeds on sale of financial assets | |||
Tax free bonds and government bonds | 87 | 1 | |
Non-convertible debentures | 1,888 | 738 | |
Government securities | 1,674 | 123 | |
Commercial paper | 500 | 300 | |
Certificates of deposit | 2,545 | 5,540 | |
Liquid mutual funds and fixed maturity plan securities | 34,685 | 76,821 | |
Preference and equity securities | 27 | 115 | |
Others | – | 10 | |
Net cash (used in)/from in investing activities | (239) | (575) | |
Cash flows from financing activities: | |||
Payment of lease liabilities | 2.19 | (571) | – |
Payment of dividends (including dividend distribution tax) | (9,515) | (13,705) | |
Payment of dividend to non-controlling interest of subsidiary | (33) | – | |
Shares issued on exercise of employee stock options | 6 | 6 | |
Buyback of equity shares including transaction cost | (7,478) | (813) | |
Net cash used in financing activities | (17,591) | (14,512) | |
Net increase / (decrease) in cash and cash equivalents | (827) | (246) | |
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 | (92) | (57) | |
Cash and cash equivalents at the end of the period | 2.8 | 18,649 | 19,568 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 396 | 358 |
The accompanying notes form an integral part of the interim condensed consolidated financial statements.
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 20, 2020 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Notes to the 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 April 20, 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 year figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The 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 consolidated financial statements.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19) :
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues, goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group . The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these consolidated financial statements.
1.5 Critical accounting estimates and judgements
a. Revenue recognition
The Group’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Group uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The Company's two major tax jurisdictions are India and the U.S., though the Company also files tax returns in other overseas jurisdictions.
Significant 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. 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 independent valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management (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. For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which represent the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell.
Key assumptions in the cash flow projections are prepared based on current economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins. (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. After considering current and future economic conditions, the Group has concluded that no changes are required to lease period relating to the existing lease contracts (Refer to Note no. 2.19).
h. Loss allowance for receivables and unbilled revenues
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
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. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the Statement of Profit and Loss.
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. Retention bonus is recognized in employee benefit expenses in the Statement of Profit and Loss over the period of service.
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 March 31, 2020 is $19 million (145 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 March 31, 2020 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 March 31, 2020 was EUR 9 million (73 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 Profit and Loss 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 Profit and Loss for the year ended March 31, 2020.
Outbox systems Inc. dba Simplus
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus , a US based sales force advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of up to $250 million (approximately 1,892 crore), comprising of cash consideration of $180 million (approximately 1,362 crore), contingent consideration of up to $20 million (approximately 151 crore), additional performance bonus and retention payouts of upto $50 million (approximately 378 crore) payable to the employees of Simplus over the next three years, subject to their continuous employment with the group and meeting certain targets. Performance and retention bonus is recognized in employee benefit expenses in the statement of Profit or Loss over the period of service.
Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill. Goodwill includes the value expected from addition of new customers and estimated synergies which does not qualify as an intangible asset.
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(*) | 22 | – | 22 |
Intangible assets - Customer contracts and relationships | – | 152 | 152 |
Intangible assets - Salesforce Relationships | – | 325 | 325 |
Intangible assets - Brand | – | 111 | 111 |
Deferred tax liabilities on intangible assets | – | (152) | (152) |
22 | 436 | 458 | |
Goodwill | 983 | ||
Total purchase price | 1,441 |
* Includes cash and cash equivalents acquired of 7 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 | 1,357 |
Fair value of contingent consideration | 84 |
Total purchase price | 1,441 |
The gross amount of trade receivables acquired and its fair value is approximately 73 crore and the amount is recoverable
The payment of contingent consideration to sellers of Simplus is dependent upon the achievement of certain financial targets by Simplus. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 10.5% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration as of March 31, 2020 was $13 million (approximately 97 crore).
The transaction costs of 6 crore related to the acquisition have been included under administrative expenses in the statement of profit and loss for the year ended March 31, 2020.
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 year 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 year ended March 31, 2019, 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.
Further, 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 year ended March 31, 2019.
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 | Lower of useful life of the asset or 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 year ended March 31, 2020 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 | 11 | – | 1,056 | 475 | 169 | 930 | 465 | 324 | 7 | 3,437 |
Additions - Business Combination | – | – | – | – | 1 | 62 | 9 | 6 | – | 78 |
Deletions | – | – | – | (3) | (8) | (179) | (24) | (18) | (1) | (233) |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | (605) | – | – | – | – | – | – | – | (605) |
Translation difference | – | – | 34 | 4 | 2 | 17 | 3 | 12 | 1 | 73 |
Gross carrying value as at March 31, 2020 | 1,318 | – | 10,016 | 3,185 | 1,265 | 6,676 | 2,073 | 1,063 | 45 | 25,641 |
Accumulated depreciation as at April 1, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Depreciation | – | – | (353) | (306) | (128) | (862) | (233) | (146) | (7) | (2,035) |
Accumulated depreciation on deletions | – | – | – | 3 | 8 | 179 | 23 | 18 | 1 | 232 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | 33 | – | – | – | – | – | – | – | 33 |
Translation difference | – | – | (4) | (1) | (1) | (10) | – | (8) | – | (24) |
Accumulated depreciation as at March 31, 2020 | – | – | (3,284) | (2,145) | (934) | (4,885) | (1,380) | (550) | (28) | (13,206) |
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 March 31, 2020 | 1,318 | – | 6,732 | 1,040 | 331 | 1,791 | 693 | 513 | 17 | 12,435 |
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 purchase consideration in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquired entity. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the purchase consideration, the fair value of net assets acquired is reassessed and the bargain purchase excess is recognized in 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 the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in 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 | |
March 31, 2020 | 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 acquisition (Refer note no. 2.1.1) | 399 | – |
Goodwill on Simplus acquisition (Refer note no. 2.1.1) | 983 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) | – | 863 |
Translation differences | 256 | 53 |
Carrying value at the end | 5,286 | 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 Group internally reviews the goodwill for impairment at the operating segment level, after allocation of the goodwill to CGU’s or groups of CGUs.
The following table presents the allocation of goodwill to operating segments as at March 31, 2020 and March 31, 2019 respectively:
(In crore)
Segment | As at | |
March 31, 2020 | March 31, 2019 | |
Financial services | 1,262 | 743 |
Retail | 500 | 437 |
Communication | 472 | 389 |
Energy, Utilities, Resources and Services | 886 | 374 |
Manufacturing | 378 | 239 |
3,498 | 2,182 | |
Operating segments without significant goodwill | 766 | 417 |
Total | 4,264 | 2,599 |
Consequent to reclassification from held for sale (refer note no 2.1.2), the goodwill pertaining to Panaya, Kallidus and Skava acquisitions are tested for impairment at the respective entity level, which amounts to 1,022 crore and 941 crore as at March 31, 2020 and March 31, 2019, respectively.
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. Value-in-use is determined based on discounted future cash flows. The key assumptions used for the calculations are as follows:
(in %)
As at | ||
March 31, 2020 | March 31, 2019 | |
Long term growth rate | 7-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 11.9 | 12.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. As at March 31, 2020, the estimated recoverable amount of the CGU exceeded its carrying amount. Reasonable sensitivities in key assumptions consequent to the change in estimated future economic conditions on account of possible effects relating to Covid 19 is unlikely to 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.
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2020:
(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 | – | 86 | – | – | – | – | 86 |
Acquisition through business combination (Refer note no. 2.1.1) | 817 | 110 | – | – | 135 | 325 | 1,387 |
Reclassified on account of adoption of IndAS 116 | – | – | – | (73) | – | – | (73) |
Translation difference | 124 | 60 | – | – | 7 | 3 | 194 |
Gross carrying value as at March 31, 2020 | 1,878 | 697 | 1 | – | 241 | 411 | 3,228 |
Accumulated amortization as at April 1, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Amortization expense | (146) | (105) | – | – | (17) | (27) | (295) |
Reclassified on account of adoption of IndAS 116 | – | – | – | 11 | – | – | 11 |
Translation differences | (52) | (43) | – | – | (5) | (1) | (101) |
Accumulated amortization as at March 31, 2020 | (755) | (450) | (1) | – | (66) | (56) | (1,328) |
Carrying value as at April 1, 2019 | 380 | 139 | – | 62 | 55 | 55 | 691 |
Carrying value as at March 31, 2020 | 1,123 | 247 | – | – | 175 | 355 | 1,900 |
Estimated Useful Life (in years) | 1–15 | 3–10 | – | – | 5–10 | 3–5 | |
Estimated Remaining Useful Life (in years) | 0–14 | 0–9 | – | – | 1–10 | 1–5 |
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 |
* Majorly includes intangibles related to salesforce relationships
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 the consolidated Statement of Profit and Loss for the year ended March 31, 2020 and March 31, 2019 was 829 crore and 769 crore respectively
2.4 INVESTMENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Unquoted | ||
Investments carried at fair value through other comprehensive income(refer note no. 2.4.1) | ||
Preference securities | 101 | 89 |
Equity instruments | 1 | 11 |
102 | 100 | |
Investments carried at fair value through profit and loss(refer note no. 2.4.1) | ||
Preference securities | 9 | 23 |
Others (1) | 54 | 16 |
63 | 39 | |
Quoted | ||
Investments carried at amortized cost(refer note no. 2.4.2) | ||
Tax free bonds | 1,825 | 1,893 |
Government Bonds | 21 | – |
1,846 | 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 | 1,462 | 1,420 |
Government securities | 664 | 724 |
2,126 | 2,144 | |
Total non-current investments | 4,137 | 4,634 |
Current |
||
Unquoted | ||
Investments carried at fair value through profit or loss(refer note no. 2.4.3) | ||
Liquid mutual fund units | 2,104 | 1,786 |
2,104 | 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) | 1,126 | 2,482 |
1,126 | 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 | 489 | – |
489 | – | |
Investments carried at fair value through other comprehensive income(refer note no. 2.4.4) | ||
Non convertible debentures | 936 | 1,846 |
936 | 1,846 | |
Total current investments | 4,655 | 6,627 |
Total investments | 8,792 | 11,261 |
Aggregate amount of quoted investments | 5,397 | 6,359 |
Market value of quoted investments (including interest accrued), current | 1,425 | 1,862 |
Market value of quoted investments (including interest accrued), non current | 4,268 | 4,711 |
Aggregate amount of unquoted investments | 3,395 | 4,902 |
Aggregate amount of impairment on value of investments | – | – |
Investments carried at amortized cost | 1,846 | 1,911 |
Investments carried at fair value through other comprehensive income | 4,290 | 7,067 |
Investments carried at fair value through profit or loss | 2,656 | 2,283 |
(1) | Uncalled capital commitments outstanding as at March 31, 2020 and March 31, 2019 was 61 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)
Year ended March 31, 2020 | Year ended March 31, 2019 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 27 | (3) | 24 | 1 | – | 1 |
Certificates of deposit | (4) | 2 | (2) | (5) | 2 | (3) |
Government securities | – | – | – | 5 | (1) | 4 |
Equity and preference securities | (27) | (6) | (33) | 63 | 7 | 70 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2020 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 2,104 | 1,786 |
Fixed maturity plan securities | Market observable inputs | 489 | 458 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,144 | 2,125 |
Non-convertible debentures | Quoted price and market observable inputs | 2,398 | 3,266 |
Government securities | Quoted price | 664 | 724 |
Commercial Papers | Market observable inputs | – | 495 |
Certificate of deposits | Market observable inputs | 1,126 | 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. | 102 | 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. | 9 | 23 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 54 | 16 |
Total | 9,090 | 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 March 31, 2020 and March 31, 2019 are as follows:
(In crore, except otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Preference securities | ||
Airviz, Inc. | – | 3 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop, Inc. | 40 | 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 |
Nil (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Nil (13,35,707) Series C Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 42 | 27 |
31,40,181 (11,80,358) Series C-1 Preferred Stock | ||
Tidalscale, Inc. | 9 | 23 |
36,74,269 (36,74,269) Series B Preferred Stock | ||
Ideaforge Technology Private Limited | 9 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of 10 each, fully paid up | ||
Total investment in preference securities | 110 | 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 | – | 10 |
Nil (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 | 1 | 11 |
Others | ||
Stellaris Venture Partners India | 30 | 16 |
The House Fund II, L.P. | 24 | – |
Total investment in others | 54 | 16 |
Total | 165 | 139 |
2.4.2 Details of investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 | 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 | 341 | 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 |
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 |
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 | 68,05,416 | 1,825 | 74,55,416 | 1,893 |
The balances held in government bonds as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 | As at March 31, 2019 | |||
Face Value PHP | Units | Amount | Units | Amount | |
Treasury Notes Philippines Govt. 29MAY2019 | 100 | – | – | 45,000 | 6 |
Treasury Notes Philippines Govt. 17APRIL2019 | 100 | – | – | 90,000 | 12 |
Treasury Notes Philippines Govt. 8MARCH2023 | 100 | 55,000 | 8 | – | – |
Treasury Notes Philippines Govt. 4DECEMBER2022 | 100 | 90,000 | 13 | – | – |
Total investments in government bonds | 145,000 | 21 | 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 March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Liquid Fund -Growth -Direct Plan | 1,690,522 | 54 | 13,32,847 | 40 |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 2,66,97,315 | 211 | 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 | 1,68,237 | 8 | 1,11,344 | 5 |
Axis Treasury Advantage Fund - Growth | 8,65,146 | 201 | – | – |
HDFC Overnight Fund Direct Plan- Growth Option | 10,10,508 | 300 | – | – |
HDFC Money market Fund- Direct Plan- Growth Option | – | – | 7,72,637 | 303 |
HDFC Liquid fund-Direct Plan growth option | 5,55,555 | 217 | 68,035 | 25 |
ICICI Prudential Liquid Fund –Direct plan –Growth | 79,30,594 | 233 | – | – |
ICICI Prudential Savings Fund- Direct Plan-Growth | – | – | 83,40,260 | 301 |
IDFC Corporate Bond - Fund Direct Plan | 1,19,02,495 | 17 | 13,14,84,437 | 169 |
Kotak Liquid Fund- Direct Plan- Growth Option | 7,47,509 | 300 | – | - |
Kotak Money Market Fund- Direct Plan- Growth Option | – | – | 9,73,751 | 301 |
SBI Overnight Fund -Direct Plan -Growth | 922,151 | 300 | – | – |
SBI Premier Liquid Fund -Direct Plan -Growth | 3,31,803 | 103 | 10,25,678 | 300 |
HDFC Corporate Bond Fund -Growth -Direct Plan | – | – | – | – |
IDFC Banking and PSU fund Direct Plan- Growth Option | 8,88,49,927 | 160 | – | – |
Total investments in liquid mutual fund units | 14,16,71,762 | 2,104 | 17,16,84,781 | 1,786 |
The balances held in fixed maturity plans as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 | 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 | 74 | 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 | 47 | 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 | 68 | 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 | 19 | 1,50,00,000 | 17 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 44 | 3,50,00,000 | 40 |
Nippon India Fixed Horizon Fund-XXXII Series 8-Dividend Plan | 5,00,00,000 | 60 | 5,00,00,000 | 54 |
Total investments in fixed maturity plan securities | 40,50,00,000 | 489 | 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 March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | Face Value | As at March 31, 2020 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | ||
7.03% LIC Housing Finance Ltd 28DEC2021 | 10,00,000/– | 2,500 | 254 | – | – |
7.24% LIC Housing Finance Ltd 23AUG2021 | 10,00,000/– | 2,500 | 259 | – | – |
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 | 52 | 500 | 51 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/– | 3,000 | 312 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/– | 1,250 | 131 | 1,250 | 127 |
7.78% Housing Development Finance Corporation Ltd 24MAR2020 | 1,00,00,000/– | – | – | 100 | 100 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/– | 500 | 53 | 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 | 215 | 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 | 49 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/– | 100 | 106 | 100 | 105 |
8.50% LIC Housing Finance Ltd 20JUN2022 | 10,00,000/– | 2,950 | 323 | – | – |
8.58% Housing Development Finance Corporation Ltd 22MAR2022 | 10,00,000/– | 1,250 | 129 | – | – |
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 | 107 | 1,000 | 107 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/– | 1,750 | 187 | 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/– | – | – | 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 | 101 | 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 | 22,350 | 2,398 | 28,295 | 3,266 |
The balances held in government securities as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | Face Value | As at March 31, 2020 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | ||
7.17% Government of India 8JAN2028 | 10,000/– | 1,25,000 | 132 | 6,75,000 | 672 |
7.26% Government of India 14JAN2029 | 10,000/– | 5,00,000 | 532 | – | – |
7.95% Government of India 28AUG2032 | 10,000/– | – | – | 50,000 | 52 |
Total investments in government securities | 6,25,000 | 664 | 725,000 | 724 |
The balances held in certificates of deposit as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | Face Value | As at March 31, 2020 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | ||
Axis Bank | 1,00,000/– | 25,000 | 240 | 90,000 | 872 |
Bank of Baroda | 1,00,000/– | 65,000 | 638 | – | – |
ICICI Bank | 1,00,000/– | – | – | 75,000 | 738 |
Kotak Bank | 1,00,000/– | – | – | 77,000 | 747 |
Oriental Bank of Commerce | 1,00,000/– | 25,000 | 248 | – | – |
Vijaya Bank | 1,00,000/– | – | – | 12,500 | 125 |
Total investments in certificates of deposit | 1,15,000 | 1,126 | 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 | Face Value | As at March 31, 2019 | |
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 | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 21 | 19 |
21 | 19 | |
Unsecured, considered doubtful | ||
Other loans | ||
Loans to employees | 30 | 24 |
51 | 43 | |
Less: Allowance for doubtful loans to employees | 30 | 24 |
Total non-current loans | 21 | 19 |
Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 239 | 241 |
Total current loans | 239 | 241 |
Total loans | 260 | 260 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Security deposits (1) | 50 | 52 |
Rental deposits (1) | 221 | 193 |
Net investment in sublease of right of use asset (refer to note 2.19) (1) | 398 | – |
Restricted deposits(1)* | 55 | 67 |
Others (1) | 13 | – |
Total non-current other financial assets | 737 | 312 |
Current | ||
Security deposits (1) | 8 | 4 |
Rental deposits (1) | 27 | 15 |
Restricted deposits (1)* | 1,795 | 1,671 |
Unbilled revenues (1)# | 2,796 | 2,093 |
Interest accrued but not due (1) | 474 | 905 |
Foreign currency forward and options contracts (2) (3) | 62 | 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) | 35 | – |
Others (1) | 260 | 224 |
Total current other financial assets | 5,457 | 5,505 |
Total other financial assets | 6,194 | 5,817 |
(1) Financial assets carried at amortized cost | 6,132 | 5,481 |
(2) Financial assets carried at fair value through other comprehensive income | 9 | 37 |
(3) Financial assets carried at fair value through profit or loss | 53 | 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 and is due only after a passage of time.
2.7 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good (1) | 18,487 | 14,827 |
Considered doubtful | 557 | 483 |
19,044 | 15,310 | |
Less: Allowance for credit loss | 557 | 483 |
Total trade receivables | 18,487 | 14,827 |
(1) Includes dues from companies where directors are interested | – | – |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 12,288 | 14,197 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 6,361 | 5,371 |
Total cash and cash equivalents | 18,649 | 19,568 |
Balances with banks in unpaid dividend accounts | 30 | 29 |
Deposit with more than 12 months maturity | 6,895 | 6,582 |
Balances with banks held as margin money deposits against guarantees | 71 | 114 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of 396 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 | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Capital advances | 310 | 489 |
Advances other than capital advances | ||
Others | ||
Withholding taxes and others | 777 | 929 |
Prepaid gratuity (refer note no. 2.20.1) | 151 | 42 |
Prepaid expenses | 87 | 162 |
Deferred Contract Cost | 101 | 277 |
Advance for business acquisition (refer note no. 2.1.1) | – | 206 |
Total Non-Current other assets | 1,426 | 2,105 |
Current | ||
Advances other than capital advances | ||
Payment to vendors for supply of goods | 145 | 109 |
Others | ||
Unbilled revenues # | 4,325 | 3,281 |
Withholding taxes and others | 1,583 | 1,488 |
Prepaid expenses | 968 | 751 |
Deferred Contract Cost | 33 | 58 |
Other receivables | 28 | – |
Total Current other assets | 7,082 | 5,687 |
Total other assets | 8,508 | 7,792 |
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. As at March 31 2020, cenvat recoverable includes 372 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 March 31, 2020 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) | 18,649 | – | – | – | – | 18,649 | 18,649 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | 9 | 102 | – | 111 | 111 |
Tax-free bonds and government bonds | 1,846 | – | – | – | – | 1,846 | 2,144(1) |
Liquid mutual fund units | – | – | 2,104 | – | – | 2,104 | 2,104 |
Non convertible debentures | – | – | – | – | 2,398 | 2,398 | 2,398 |
Government securities | – | – | – | – | 664 | 664 | 664 |
Certificates of deposit | – | – | – | – | 1,126 | 1,126 | 1,126 |
Other investments | – | – | 54 | – | – | 54 | 54 |
Fixed maturity plan securities | – | – | 489 | – | – | 489 | 489 |
Trade receivables (Refer Note no. 2.7) | 18,487 | – | – | – | – | 18,487 | 18,487 |
Loans (Refer Note no. 2.5) | 260 | – | – | – | – | 260 | 260 |
Other financials assets (Refer Note no. 2.6)(3) | 6,132 | – | 53 | – | 9 | 6,194 | 6,112(2) |
Total | 45,374 | – | 2,709 | 102 | 4,197 | 52,382 | 52,598 |
Liabilities: | |||||||
Trade payables | 2,852 | – | – | – | – | 2,852 | 2,852 |
Lease liabilities | 4,633 | – | – | – | – | 4,633 | 4,633 |
Financial Liability under option arrangements (refer to note 2.1.1) | – | – | 621 | – | – | 621 | 621 |
Other financial liabilities (Refer Note no. 2.12) | 7,966 | – | 811 | – | 20 | 8,797 | 8,797 |
Total | 15,451 | – | 1,432 | – | 20 | 16,903 | 16,903 |
(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 82 crore |
(3) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 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 | 2,125(1) |
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 | 5,733(2) |
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 on contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 -Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3- Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as at March 31, 2020:
(In crore)
Particulars | As at March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 2,104 | 2,104 | – | – |
Investments in tax-free bonds (Refer Note no. 2.4) | 2,122 | 1,960 | 162 | – |
Investments in government bonds (Refer Note no. 2.4) | 22 | 22 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.4) | 110 | – | – | 110 |
Investments in non convertible debentures (Refer Note no. 2.4) | 2,398 | 2,032 | 366 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 1,126 | – | 1,126 | – |
Investment in Government securities (Refer Note no. 2.4) | 664 | 664 | – | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 489 | – | 489 | – |
Other investments (Refer Note no. 2.4) | 54 | – | – | 54 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 62 | – | 62 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 491 | – | 491 | – |
Financial liability under option arrangements (refer to note 2.1.1) | 621 | – | – | 621 |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 340 | – | – | 340 |
(1) | Discount rate pertaining to contingent consideration ranges from 8% to 14% . |
During the year ended March 31, 2020, tax free bonds and non-convertible debentures of 662 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and 50 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 financial assets and liabilities as at March 31, 2020:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,228 | 507 | 163 | 208 | 1,242 | 3,348 |
Trade receivables | 11,565 | 2,331 | 1,064 | 652 | 2,200 | 17,812 |
Other financial assets , loans and other current assets | 6,125 | 1,166 | 381 | 330 | 761 | 8,763 |
Trade payables | (764) | (157) | (103) | (74) | (1,453) | (2,551) |
Lease liabilities | (1,681) | (988) | (355) | (59) | (496) | (3,579) |
Other financial liabilities | (5,086) | (1,013) | (197) | (472) | (1,560) | (8,328) |
Net assets / (liabilities) | 11,387 | 1,846 | 953 | 585 | 694 | 15,465 |
The following table analyses the foreign currency risk from financial 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 | Year ended March 31, | |
2020 | 2019 | |
Impact on the Group's incremental operating margins | 0.45% | 0.47% |
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 | ||
March 31, 2020 | March 31, 2019 | |||
In million | In crore | In million | In crore | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 110 | 507 | 120 | 588 |
In Euro | 120 | 993 | 135 | 1,049 |
In United Kingdom Pound Sterling | 21 | 196 | 25 | 226 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 2 | 9 | 8 | 37 |
In Brazilian Real | 57 | 102 | – | – |
In Canadian dollars | 21 | 117 | 13 | 68 |
In Chinese Yuan | 210 | 226 | – | – |
In Euro | 191 | 1,581 | 176 | 1,367 |
In Japanese Yen | – | – | 550 | 34 |
In New Zealand dollars | 16 | 72 | 16 | 75 |
In Norwegian Krone | 40 | 29 | 40 | 32 |
In Philippine Peso | – | – | – | – |
In Poland Zloty | 92 | 165 | – | – |
In Romanian Leu | 20 | 33 | – | – |
In Singapore dollars | 177 | 954 | 140 | 716 |
In South African Rand | – | – | – | – |
In Swedish Krona | 50 | 37 | 50 | 37 |
In Swiss Franc | 1 | 9 | 25 | 172 |
In U.S. dollars | 1,048 | 7,925 | 955 | 6,608 |
In United Kingdom Pound Sterling | 50 | 469 | 80 | 724 |
Option Contracts | ||||
In Australian dollars | – | – | 10 | 49 |
In Canadian Dollars | – | – | 13 | 69 |
In Euro | – | – | 60 | 466 |
In Swiss Franc | – | – | 5 | 35 |
In U.S. dollars | 555 | 4,196 | 433 | 2,995 |
In United Kingdom Pound Sterling | – | – | 10 | 91 |
Total forwards and options contracts | 17,620 | 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 | |
March 31, 2020 | March 31, 2019 | |
Not later than one month | 5,687 | 4,432 |
Later than one month and not later than three months | 8,727 | 6,921 |
Later than three months and not later than one year | 3,206 | 4,085 |
17,620 | 15,438 |
During the year ended March 31, 2020, 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 March 31, 2020 are expected to occur and reclassified to the consolidated statement of profit and loss within 3 months.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of its forecasted cash flows. 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 following table provides reconciliation of cash flow hedge reserve for the year ended March 31, 2020 and March 31, 2019:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Gain/(Loss) | ||
Balance at the beginning of the period | 21 | – |
Gain / (Loss) recognised in other comprehensive income during the period | 25 | 118 |
Amount reclassified to profit or loss during the period | (73) | (90) |
Tax impact on above | 12 | (7) |
Balance at the end of the period | (15) | 21 |
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 | ||
March 31, 2020 | March 31, 2019 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 86 | (515) | 338 | (17) |
Amount set off | (24) | 24 | (2) | 2 |
Net amount presented in Balance Sheet | 62 | (491) | 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 18,487 crore and 14,827 crore as at March 31, 2020 and March 31, 2019, respectively and unbilled revenues amounting to 7,121 crore and 5,374 crore as at March 31, 2020 and March 31, 2019, respectively. Trade receivables and unbilled revenues are typically unsecured and are derived from revenues from customers primarily located in the United States of America. 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 the expected credit loss model to assess any required allowances; and uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The matrix takes into account available external and internal credit risk information such as CDS spread quotes, ratings from international credit rating agencies and the Group's historical collection experience for customers.
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. Exposure to customers is diversified and there is no single customer contributing more than 10% of outstanding trade receivables and unbilled revenues.
The following table gives details in respect of percentage of revenues generated from top customer and top ten customers:
(In %)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue from top customer | 3.1 | 3.6 |
Revenue from top 10 customers | 19.2 | 19.0 |
Credit risk exposure
The allowance for lifetime ECL on customer balances for year ended March 31, 2020 and March 31, 2019 was 161 crore and 239 crore, respectively.
The movement in credit loss allowance on customer balance is as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Balance at the beginning | 627 | 449 |
Impairment loss recognized | 161 | 239 |
Write-offs | (100) | (73) |
Translation differences | 17 | 12 |
Balance at the end | 705 | 627 |
The gross carrying amount of a financial asset is written off (either partially or in full) when there is no realistic prospect of recovery.
Credit exposure
The Group’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Trade receivables | 18,487 | 14,827 |
Unbilled revenues | 7,121 | 5,374 |
Days sales outstanding was 69 days and 66 days as of March 31, 2020 and March 31, 2019, respectively
Credit risk on cash and cash equivalents is limited as the Group generally invest in deposits with banks and financial institutions with high ratings assigned by international and domestic credit rating agencies. Ratings are monitored periodically and the Group has considered the latest available credit ratings in view of COVID – 19 as at the date of approval of these condensed consolidated financial statements.
Majority of investments of the Group are fair valued based on Level 1 or Level 2 inputs. These investments primarily include investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, commercial papers, quoted bonds issued by government and quasi-government organizations and non convertible debentures. The Group invests after considering counterparty risks based on multiple criteria including Tier I Capital, Capital Adequacy Ratio, Credit Rating, Profitability, NPA levels and Deposit base of banks and financial institutions. These risks are monitored regularly as per its risk management program.
Liquidity risk
Liquidity risk is defined as the risk that the Group will not be able to settle or meet its obligations on time.
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 March 31, 2020, the Group had a working capital of 33,720 crore including cash and cash equivalents of 18,649 crore and current investments of 4,655 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 March 31, 2020 and March 31, 2019, the outstanding compensated absences were 1,870 crore and 1,663 crore, respectively, which have been substantially funded. Accordingly no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2020:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 2,852 | – | – | – | 2,852 |
Other financial liabilities (excluding liability towards contingent consideration) (Refer Note no. 2.12) | 7,939 | 22 | 5 | – | 7,966 |
Financial liability under option arrangements | – | – | 621 | – | 621 |
Liability towards contingent consideration on an undiscounted basis (Refer Note no. 2.12) | 225 | 75 | 67 | – | 367 |
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 contingent consideration) (Refer Note no. 2.12) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards contingent consideration on an undiscounted basis (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.
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.
Description of reserves
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.
Share Options Outstanding Account
The Share options outstanding account is used to record the fair value of equity-settled share based payment transactions with employees. The amounts recorded in share options outstanding account are transferred to securities premium upon exercise of stock options and transferred to general reserve on account of stock options not exercised by employees.
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.
Currency translation reserve
The exchange differences arising from the translation of financial statements of foreign subsidiaries with functional currency other than Indian rupees is recognised in other comprehensive income and is presented within equity.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the consolidated Statement of Profit and Loss upon the occurrence of the related forecasted transaction.
SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | 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 |
4,24,07,53,210 (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 1,82,39,356 (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 March 31, 2020:
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 March 31, 2020 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 March 31, 2020, 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay/distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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 | Year ended March 31, | |
2020 | 2019 | |
Final dividend for fiscal 2018* | – | 10.25 |
Special dividend for fiscal 2018* | – | 5.00 |
Interim dividend for fiscal 2019 | – | 7.00 |
Special dividend for fiscal 2019 | – | 4.00 |
Final dividend for fiscal 2019 | 10.50 | – |
Interim dividend for fiscal 2020 | 8.00 | – |
*Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
During the year ended March 31, 2020 on account of the final dividend for fiscal 2019 and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 9,517 crore (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID - 19 the Company is working on an Annual General Meeting date which will be announced by the Company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately 4,029 crore (excluding dividend paid on treasury shares).
The details of shareholder holding more than 5% shares as at March 31, 2020 and March 31, 2019 are as follows :
Name of the shareholder | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 73,93,01,182 | 17.36 | 74,62,54,648 | 17.11 |
Life Insurance Corporation of India | 28,20,08,863 | 6.62 | 25,43,32,376 | 5.83 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as stated otherwise)
Particulars | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | Amount | Number of shares | Amount | |
As at the beginning of the period | 433,59,54,462 | 2,170 | 217,33,12,301 | 1,088 |
Add: Shares issued on exercise of employee stock options - before bonus issue | – | – | 3,92,528 | – |
Add: Bonus shares issued | – | – | 2,173,704,829 | 1,088 |
Add: Shares issued on exercise of employee stock options - after bonus issue | 2,666,014 | 1 | 1,196,804 | – |
Less: Shares bought back (1)(2) | 97,867,266 | 49 | 12,652,000 | 6 |
As at the end of the period | 424,07,53,210 | 2,122 | 433,59,54,462 | 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 50,000,000 equity shares. To implement the 2019 Plan, upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 Plan) :
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.
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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares 200,000 equity shares each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the year ended March 31, 2020 and March 31, 2019 :
Particulars | 2019 Plan | 2015 Plan | ||
Year ended March 31, | Year ended March 31, | |||
2020 | 2019 | 2020 | 2019* | |
Equity Settled RSU | ||||
KMPs | 356,793 | – | 507,896 | 675,530 |
Employees other than KMP | 1,734,500 | – | 3,346,280 | 3,665,170 |
2,091,293 | – | 3,854,176 | 4,340,700 | |
Cash settled RSU | ||||
KMPs | – | – | 180,400 | – |
Employees other than KMP # | – | – | 475,740 | 74,090 |
– | – | 656,140 | 74,090 | |
2,091,293 | – | 4,510,316 | 4,414,790 |
*Information is adjusted for September 2018 bonus issue.
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, 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.
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.
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. 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
Under the 2015 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 4 crore for financial year 2020 under the 2019 Plan. 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 KMPs
Under the 2015 plan:
On April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019. The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain performance targets.
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense:
(in crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Granted to: | ||
KMP | 56 | 33 |
Employees other than KMP | 193 | 169 |
Total (1) | 249 | 202 |
(1) | Cash-settled stock compensation expense included above 11 5 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 57 crore is recognized as financial liability with a corresponding adjustment to equity.
The activity in the 2015 and 2019 Plan for equity-settled share based payment transactions during the year ended March 31, 2020 and March 31, 2019 is set out as follows:
Particulars | Year ended March 31, 2020 | Year ended March 31, 2019* | ||
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 | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Granted | 3,854,176 | 5.00 | 4,340,700 | 3.84 |
Exercised | 2,561,218 | 2.95 | 1,864,510 | 2.50 |
Modification to cash settled awards | 1,061,820 | – | – | – |
Forfeited and expired | 631,438 | 3.29 | 795,810 | 2.61 |
Outstanding at the end | 8,780,898 | 3.96 | 9,181,198 | 3.13 |
Exercisable at the end | 392,185 | 2.54 | 235,256 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,623,176 | 516 | 1,933,826 | 493 |
Granted | – | – | – | – |
Exercised | 104,796 | 516 | 117,350 | 515 |
Modification to cash settled awards | 351,550 | – | – | – |
Forfeited and expired | 66,500 | 528 | 193,300 | 521 |
Outstanding at the end | 1,100,330 | 539 | 1,623,176 | 516 |
Exercisable at the end | 780,358 | 543 | 698,500 | 517 |
2019 Plan: RSU | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 2,091,293 | 5.00 | – | – |
Exercised | – | – | – | – |
Forfeited and expired | – | – | – | – |
Outstanding at the end | 2,091,293 | 5.00 | – | – |
Exercisable at the end | – | – | – | – |
* Information is adjusted for September, 2018 bonus issue
During the year ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 751 and 701 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2020 is as follows:
2019 plan - Options outstanding | 2015 plan - Options outstanding | |||||
Range of exercise prices per share () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () |
0 - 5 (RSU) | 2,091,293 | 1.76 | 5.00 | 8,780,898 | 1.59 | 3.96 |
450 - 600 (ESOP) | – | – | – | 1,100,330 | 3.48 | 539 |
2,091,293 | 1.76 | 5.00 | 9,881,228 | 1.80 | 64 |
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 was as follows:
2015 plan - 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) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
* Information is adjusted for September, 2018 bonus issue
As at March 31, 2020 and March 31, 2019, 18,12,895 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 48 crore and 9 crore as at March 31, 2020 and March 31, 2019 respectively.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant 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) | 728 | 10.52 | 696 | 10.77 |
Exercise price ()/ ($ADS)(1) | 5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-30 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date () / ($ADS)(1) | 607 | 7.84 | 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.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Accrued compensation to employees (1) | 22 | 15 |
Compensated absences | 38 | 44 |
Financial liability under option arrangements (refer to note 2.1.1)(2) | 621 | – |
Payable for acquisition of business (refer to note 2.1.1) (2) | ||
Contingent consideration | 121 | 88 |
Other Payables (1) | 5 | – |
Total non-current other financial liabilities | 807 | 147 |
Current |
||
Unpaid dividends (1) | 30 | 29 |
Others | ||
Accrued compensation to employees (1) | 2,958 | 2,572 |
Accrued expenses (1) | 3,921 | 3,319 |
Retention monies (1) | 72 | 112 |
Payable for acquisition of business | ||
Contingent consideration (refer note no. 2.1.1) (2) | 219 | 102 |
Payable by controlled trusts (1) | 188 | 168 |
Financial liability relating to buyback (refer to note 2.11)(1) (4) | – | 1,202 |
Compensated absences | 1,832 | 1,619 |
Foreign currency forward and options contracts (2)(3) | 491 | 15 |
Capital creditors (1) | 280 | 676 |
Other payables (1) | 490 | 638 |
Total current other financial liabilities | 10,481 | 10,452 |
Total other financial liabilities | 11,288 | 10,599 |
(1) Financial liability carried at amortized cost | 7,966 | 8,731 |
(2) Financial liability carried at fair value through profit or loss | 1,432 | 205 |
(3) Financial liability carried at fair value through other comprehensive income | 20 | – |
Contingent consideration on undiscounted basis | 367 | 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 | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Deferred income - government grant on land use rights | 43 | 42 |
Accrued gratuity (refer to note 2.20.1) | 28 | 30 |
Accrued provident fund liability (refer to note 2.20.2) | 185 | – |
Deferred rent (refer to note 2.19) | – | 174 |
Deferred income | 21 | 29 |
Others | 2 | – |
Total non-current other liabilities | 279 | 275 |
Current | ||
Unearned revenue | 2,990 | 2,809 |
Client deposit | 18 | 26 |
Others | ||
Withholding taxes and others | 1,759 | 1,487 |
Accrued gratuity (refer to note 2.20.1) | 3 | 2 |
Accrued provident fund liability (refer to note 2.20.2) | 64 | – |
Deferred rent (refer to note 2.19) | – | 63 |
Deferred income - government grant on land use rights | 2 | 1 |
Others | 6 | – |
Total current other liabilities | 4,842 | 4,388 |
Total other liabilities | 5,121 | 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.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
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 | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and other provisions | 572 | 576 |
Total provisions | 572 | 576 |
The movement in the provision for post-sales client support and other provisions is as follows:
(In crore)
Particulars | Year ended |
March 31, 2020 | |
Balance at the beginning | 576 |
Provision recognized/(reversed) | 116 |
Provision utilized | (174) |
Exchange difference | 54 |
Balance at the end | 572 |
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. 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 | Year ended March 31, | |
2020 | 2019 | |
Current taxes | 5,775 | 5,727 |
Deferred taxes | (407) | (96) |
Income tax expense | 5,368 | 5,631 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore which pertained to prior periods.
Additionally, income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 379 crore and 129 crore, respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions and on account of changes to tax regulations.
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 | Year ended March 31, | |
2020 | 2019 | |
Profit before income taxes | 22,007 | 21,041 |
Enacted tax rates in India | 34.94% | 34.94% |
Computed expected tax expense | 7,691 | 7,353 |
Tax effect due to non-taxable income for Indian tax purposes | (2,718) | (2,705) |
Overseas taxes | 728 | 719 |
Tax provision (reversals) | (379) | (176) |
Effect of exempt non-operating income | (41) | (58) |
Effect of unrecognized deferred tax assets | 53 | 92 |
Effect of differential tax rates | (81) | (1) |
Effect of non-deductible expenses | 120 | 353 |
Branch profit tax (net of credits) | (35) | 25 |
Others | 30 | 29 |
Income tax expense | 5,368 | 5,631 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2020 and March 31, 2019 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 year ended March 31, 2020 and March 31, 2019 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, 2020, Infosys' U.S. branch net assets amounted to approximately 5,474 crore. As at March 31, 2020, the Company has a deferred tax liability for branch profit tax of 178 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 8,447 crore and 6,007 crore as at March 31, 2020 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 3,187 crore and 2,624 crore as at March 31, 2020 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 March 31, 2020:
(In crore)
Year | As at |
March 31, 2020 | |
2021 | 83 |
2022 | 142 |
2023 | 209 |
2024 | 172 |
2025 | 121 |
Thereafter | 2,460 |
Total | 3,187 |
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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Income tax assets | 5,391 | 6,743 |
Current income tax liabilities | 1,490 | 1,567 |
Net current income tax asset / (liability) at the end | 3,901 | 5,176 |
The gross movement in the current income tax asset/ (liability) for the year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Net current income tax asset/ (liability) at the beginning | 5,176 | 4,027 |
Translation differences | (4) | (1) |
Income tax paid | 4,550 | 6,832 |
Current income tax expense | (5,775) | (5,727) |
Reclassified under assets held for sale (refer note no. 2.1.2) | – | 23 |
Reclassified from held for sale (Refer note 2.1.2) | – | 13 |
Income tax benefit arising on exercise of stock options | 9 | 8 |
Additions through business combination | (40) | (9) |
Tax impact on buyback expenses | 4 | 4 |
Income tax on other comprehensive income | (19) | 6 |
Net current income tax asset/ (liability) at the end | 3,901 | 5,176 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2020 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 March 31, 2020 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 262 | (20) | 1 | – | – | – | 1 | 244 |
Lease liabilities | 52 | 76 | – | – | 6 | – | 2 | 136 |
Accrued compensation to employees | 31 | 23 | – | – | – | – | (2) | 52 |
Trade receivables | 176 | 21 | – | – | – | – | – | 197 |
Compensated absences | 397 | 35 | – | – | – | – | 1 | 433 |
Post sales client support | 104 | 7 | – | – | – | – | – | 111 |
Credits related to branch profits | 340 | 14 | – | – | – | – | 23 | 377 |
Derivative financial instruments | (106) | 255 | – | 12 | – | – | 1 | 162 |
Intangible assets | 16 | 1 | – | – | – | – | 3 | 20 |
Intangibles arising on business combinations | (128) | 44 | (326) | – | – | – | (16) | (426) |
Branch profit tax | (541) | 22 | – | – | – | – | (36) | (555) |
Others | 97 | (71) | 9 | (7) | – | – | (3) | 25 |
Total deferred income tax assets/(liabilities) | 700 | 407 | (316) | 5 | 6 | – | (26) | 776 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2019 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 March 31, 2019 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 215 | 46 | – | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | – | 1 | 104 |
Credits related to branch profits | 341 | (22) | – | – | – | – | 21 | 340 |
Derivative financial instruments | 11 | (111) | – | (7) | – | – | 1 | (106) |
Intangible assets | 9 | 6 | – | – | – | – | 1 | 16 |
Intangibles arising on business combinations | (38) | 63 | (56) | – | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | – | (33) | (541) |
Others | 91 | 32 | (8) | 8 | – | 28 | (2) | 149 |
Total deferred income tax assets/(liabilities) | 741 | 96 | (64) | 1 | – | (53) | (21) | 700 |
The deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Deferred income tax assets after set off | 1,744 | 1,372 |
Deferred income tax liabilities after set off | (968) | (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 IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
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.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Group’s contracts may include variable consideration including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group 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).When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Group uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Group transfers the related goods or services to the customer.
The Group presents revenues net of indirect taxes in its consolidated statement of profit and loss.
Revenues for the year ended March 31, 2020 and March 31, 2019 are as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Revenue from software services | 85,260 | 78,359 |
Revenue from products and platforms | 5,531 | 4,316 |
Total revenue from operations | 90,791 | 82,675 |
The Group has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts;(ii) onerous obligations;(iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Group has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the pandemic, the Group will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Disaggregated revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
For the year ended March 31, 2020 and March 31, 2019
(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 | 16,749 | 9,222 | 7,332 | 6,456 | 5,131 | 6,537 | 3,816 | 564 | 55,807 |
16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 | |
Europe | 5,983 | 3,966 | 1,925 | 4,207 | 3,576 | 191 | 1,892 | 176 | 21,916 |
4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 | |
India | 1,311 | 48 | 192 | 12 | 88 | 207 | 39 | 468 | 2,365 |
1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 | |
Rest of the world | 4,582 | 799 | 2,535 | 1,061 | 336 | 37 | 90 | 1,263 | 10,703 |
4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Revenue by offerings | |||||||||
Digital | 11,562 | 6,165 | 4,843 | 4,485 | 3,481 | 2,541 | 1,850 | 690 | 35,617 |
8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 | |
Core | 17,063 | 7,870 | 7,141 | 7,251 | 5,650 | 4,431 | 3,987 | 1,781 | 55,174 |
18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) | Financial Services include enterprises in Financial Services and Insurance |
(2) | Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics |
(3) | Communication includes enterprises in Communication, Telecom OEM and Media |
(4) | Life Sciences includes enterprises in Life sciences and Health care |
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
* Geographical revenues is based on the domicile of customer.
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning, Stater digital platform and Infosys McCamish- insurance platform.
The percentage of revenue from fixed price contracts for each of the three months and year ended March 31, 2020 and March 31, 2019 is approximately 55%.
Trade Receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Group’s Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Group’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.
During the year ended March 31, 2020 and March 31, 2019 , the company recognized revenue of 2,421 crore and 2,237 crore arising from opening unearned revenue as of April 1, 2019 and April 1, 2018 respectively.
During the year ended March 31, 2020 and March 31, 2019, 2,971 crore and 2,685 crore of unbilled revenue pertaining to other 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 and unit of work based contracts. 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 March 31, 2020, other than those meeting the exclusion criteria mentioned above, is 55,926 crore. Out of this, the Group expects to recognize revenue of around 51% 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. Generally, customers have not terminated contracts without cause.
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 recognized in the Consolidated Statement of Profit and Loss and reported within exchange gains/ (losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
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.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.
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 year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Interest income on financial assets carried at amortized cost: | ||
Tax free bonds and Government bonds | 143 | 143 |
Deposit with Bank and others | 1,146 | 1,261 |
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 | 322 | 646 |
Income on investments carried at fair value through profit or loss | ||
Dividend income on liquid mutual funds | 2 | 2 |
Gain / (loss) on liquid mutual funds and other investments | 183 | 170 |
Income on investments carried at fair value through other comprehensive income | 41 | – |
Interest income on income tax refund | 259 | 51 |
Exchange gains/ (losses) on foreign currency forward and options contracts | (511) | 185 |
Exchange gains/ (losses) on translation of assets and liabilities | 1,023 | 133 |
Miscellaneous income, net | 195 | 291 |
Total other income | 2,803 | 2,882 |
2.18 EXPENSES
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Employee benefit expenses | ||
Salaries including bonus | 49,252 | 43,894 |
Contribution to provident and other funds | 1,107 | 946 |
Share based payments to employees (Refer note no. 2.11) | 249 | 202 |
Staff welfare | 279 | 273 |
50,887 | 45,315 | |
Cost of software packages and others | ||
For own use | 1,035 | 930 |
Third party items bought for service delivery to clients | 1,668 | 1,623 |
2,703 | 2,553 | |
Other expenses | ||
Repairs and maintenance | 1,480 | 1,269 |
Power and fuel | 229 | 221 |
Brand and marketing | 528 | 489 |
Short-term leases (Refer to Note 2.19) | 89 | – |
Operating leases | – | 585 |
Rates and taxes | 193 | 184 |
Consumables | 100 | 47 |
Insurance | 90 | 67 |
Provision for post-sales client support and others | – | 1 |
Commission to non-whole time directors | 8 | 8 |
Impairment loss recognized / (reversed) under expected credit loss model | 172 | 248 |
Contributions towards Corporate Social responsibility | 385 | 266 |
Others | 382 | 270 |
3,656 | 3,655 |
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 year ended March 31, 2020:
(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* | 1 | 1,064 | 6 | 49 | 1,120 |
Additions through business combination (Refer to note 2.1) | – | 177 | 10 | – | 187 |
Deletions | (3) | (130) | (1) | – | (134) |
Depreciation | (6) | (540) | (9) | (8) | (563) |
Translation difference | – | 16 | – | 1 | 17 |
Balance as of March 31, 2020 | 626 | 3,485 | 15 | 42 | 4,168 |
*Net of lease incentives of 115 crore related to lease of buildings
The following is the break-up of current and non-current lease liabilities as of March 31, 2020
(In crore)
Particulars | Amount |
Current lease liabilities | 619 |
Non-current lease liabilities | 4,014 |
Total | 4,633 |
The following is the movement in lease liabilities during the year ended March 31, 2020:
(In crore)
Particulars | Year ended March 31, 2020 |
Balance at the beginning | 3,598 |
Additions | 1,241 |
Additions through business combination (Refer to note 2.1) | 224 |
Deletions | (145) |
Finance cost accrued during the period | 170 |
Payment of lease liabilities | (639) |
Translation difference | 184 |
Balance at the end | 4,633 |
The table below provides details regarding the contractual maturities of lease liabilities as of March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 796 |
One to five years | 2,599 |
More than five years | 2,075 |
Total | 5,470 |
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 recorded for short-term leases was 89 crore for the year ended March 31,2020
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 year ended March 31, 2020:
(In crore)
Particulars | Year ended March 31, 2020 |
Balance at the beginning | 430 |
Interest income accrued during the period | 15 |
Lease receipts | (46) |
Translation difference | 34 |
Balance at the end | 433 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as of March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 50 |
One to five years | 217 |
More than five years | 244 |
Total | 511 |
Leases not yet commenced to which Group is committed is 655 crore for a lease term ranging from 2 years to 13 years.
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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,351 | 1,201 |
Service cost | 178 | 157 |
Interest expense | 90 | 85 |
Remeasurements - Actuarial (gains) / losses | (79) | 32 |
Benefits paid | (141) | (128) |
Translation difference | 3 | 2 |
Reclassified from held for sale (refer note no 2.1.2) | – | 2 |
Benefit obligations at the end | 1,402 | 1,351 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,361 | 1,216 |
Interest income | 97 | 90 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 9 | 4 |
Contributions | 191 | 174 |
Benefits paid | (136) | (123) |
Fair value of plan assets at the end | 1,522 | 1,361 |
Funded status | 120 | 10 |
Prepaid gratuity benefit (refer to note no 2.9) | 151 | 42 |
Accrued gratuity (refer to note no 2.13) | (31) | (32) |
Amount for the year ended March 31, 2020 and March 31, 2019 recognized in the consolidated statement of Profit and Loss under employee benefit expense:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Service cost | 178 | 157 |
Net interest on the net defined benefit liability/(asset) | (7) | (5) |
Net gratuity cost | 171 | 152 |
Amount for the year ended March 31, 2020 and March 31, 2019 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | (79) | 32 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (9) | (4) |
(88) | 28 |
(In crore)
Particulars | Year ended March 31, | |
2020 | 2019 | |
(Gain)/loss from change in demographic assumptions | 1 | (4) |
(Gain)/loss from change in financial assumptions | (57) | 30 |
(Gain)/loss from experience adjustment | (23) | 6 |
(79) | 32 |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2020 and March 31, 2019 are set out below:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Discount rate (1) | 6.2% | 7.1% |
Weighted average rate of increase in compensation levels (2) | 6.0% | 8.0% |
Weighted average duration of defined benefit obligation (3) | 5.9 years | 5.9 years |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2020 and March 31, 2019 are set out below:
Particulars | Year ended March 31, | |
2020 | 2019 | |
Discount rate (%) | 7.1 | 7.5 |
Weighted average rate of increase in compensation levels (%) | 8.0 | 8.0 |
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 March 31, 2020 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
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 March 31, 2020 and March 31, 2019, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the year ended March 31, 2020 and March 31, 2019 were 106 crore and 95 crore, respectively.
The Group expects to contribute 145 crore to the gratuity trusts during fiscal 2021.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 215 |
1-2 year | 218 |
2-3 year | 220 |
3-4 year | 231 |
4-5 year | 148 |
5-10 years | 1,183 |
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 March 31, 2020
(In crore)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 5,989 |
Service cost - employer contribution | 407 |
Employee contribution | 857 |
Interest expense | 561 |
Actuarial (gains) / loss | 216 |
Benefits paid | (664) |
Benefit obligations at the end | 7,366 |
Change in plan assets | |
Fair value of plan assets at the beginning | 5,989 |
Interest income | 561 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (33) |
Contributions | 1,264 |
Benefits paid | (664) |
Fair value of plan assets at the end | 7,117 |
Net liability (refer to note 2.13) | (249) |
(1) | Includes unrealized losses on certain investments in bonds |
Amount for the year ended March 31, 2020 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Year ended March 31, 2020 |
Remeasurements of the net defined benefit liability/ (asset) | |
Actuarial (gains) / losses | 216 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 33 |
249 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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. |
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately 72 crore and 108 on account of a 0.25% increase / decrease in the expected rate of return on plan assets.
The Group contributed 639 crore and 543 crore to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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 240 crore and 215 crore during the year ended March 31, 2020 and March 31, 2019, respectively and the 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 | Year ended March 31, | |
2020 | 2019 | |
Salaries and bonus(1) | 49,837 | 44,405 |
Defined contribution plans | 338 | 307 |
Defined benefit plans | 712 | 603 |
50,887 | 45,315 |
(1) | Includes employee stock compensation expense of 249 crore and 202 crore for the year ended March 31, 2020 and March 31, 2019 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 | Year ended March 31, | |
2020 | 2019 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,257,754,522 | 4,347,130,157 |
Effect of dilutive common equivalent shares - share options outstanding | 7,389,706 | 6,290,615 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,265,144,228 | 4,353,420,772 |
Information in the table above is adjusted for September 2018 bonus issue where ever applicable (Refer note no 2.11)
(1) | Excludes treasury shares |
For the year ended March 31, 2020 and March 31, 2019, 13,093 and Nil number of options to purchase equity shares had an anti-dilutive effect, respectively.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Group, not acknowledged as debts(1) | 3,583 | 3,081 |
[Amount paid to statutory authorities 5,353 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)(2) | 1,365 | 1,724 |
Other commitments* | 61 | 86 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2020, claims against the Group not acknowledged as debts in respect of income tax matters amounted to 3,353 crore. The claims against the group majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes. These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations. |
Amount paid to statutory authorities against the above tax claims amounted to 5,352 crore.
(2) | Capital contracts primarily comprises of commitments for infrastructure facilities and computer equipment’s. |
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements.
The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged 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 reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’s results of operations or financial condition.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2020 | 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 | 100% | 99.99% |
Infosys CIS LLC(1) (18) (26) | 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 | 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(32) | Poland | 99.99% | 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(7)(31) | Japan | – | 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% | – |
Outbox systems Inc. dba Simplus (US)(27) | U.S. | 100% | – |
Simplus North America Inc.(28) | Canada | 100% | – |
Simplus ANZ Pty Ltd.(28) | Australia | 100% | – |
Simplus Australia Pty Ltd(30) | Australia | 100% | – |
Sqware Peg Digital Pty Ltd(30) | Australia | 100% | – |
Simplus Philippines, Inc.(28) | Philippines | 100% | – |
Simplus Europe, Ltd.(28) | U.K. | 100% | – |
Simplus U.K., Ltd.(29) | U.K. | 100% | – |
Simplus Ireland, Ltd.(29) | Ireland | 100% | – |
(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 subsidiary of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(6) | Majority owned and controlled subsidiary 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 of 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 subsidiary of Stater N.V |
(23) | Majority owned and controlled subsidiary of Stater Duitsland B.V. |
(24) | Majority owned and controlled subsidiary of Stater Participations B.V. |
(25) | Effective October 1, 2019, merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd. |
(26) | Under Liquidation |
(27) | On March 13, 2020, Infosys Nova Holdings LLC, acquired 100% of the voting interests in Outbox Systems Inc. |
(28) | Wholly-owned subsidiary of Outbox Systems Inc. |
(29) | Wholly-owned subsidiary of Simplus Europe, Ltd. |
(30) | Wholly-owned subsidiary of Simplus ANZ Pty Ltd.. |
(31) | Liquidated effective October 31, 2019 |
(32) | On February 20, 2020, Infosys Poland, Sp z.o.o, acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o from Infosys Consulting Holding AG (formerly Lodestone Holding AG). |
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 | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM 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 as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva (retired as member of the Board effective February 3, 2020)
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 | Year ended March 31, | |
2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3) | 118 | 96 |
Commission and other benefits to non-executive/independent directors | 8 | 8 |
Total | 126 | 104 |
(1) | Total employee stock compensation expense for the year ended March 31, 2020 and March 31, 2019, includes a charge of 56 crore and 33 crore respectively, towards key managerial personnel. (Refer to note 2.11) |
(2) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
Additional information pursuant to para 2 of general instructions for the preparation of Consolidated Financial Statements
(In crore)
Name of entity | Net Assets | Share in profit or loss | Share in other comprehensive income | Share in total comprehensive income | ||||
as %age of consolidated net assets | Amount | as %age of consolidated profit or loss | Amount | as %age of consolidated other comprehensive income | Amount | as %age of consolidated total comprehensive income | Amount | |
Infosys Ltd. | 85.38% | 62,234 | 90.95% | 15,543 | 102.6% | (234) | 90.8% | 15,309 |
Indian Subsidiaries | ||||||||
Infosys BPM Limited | 6.40% | 4,666 | 3.79% | 648 | (1.32%) | 3 | 3.86% | 651 |
EdgeVerve Systems Limited | (0.83%) | (607) | 2.22% | 379 | (0.44%) | 1 | 2.25% | 380 |
Skava Systems Pvt. Ltd. | 0.06% | 45 | (0.03%) | (4) | 0.00% | – | (0.02%) | (4) |
Foreign Subsidiaries | ||||||||
Brilliant Basics (MENA) DMCC | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Brilliant Basics Holdings Limited | 0.02% | 12 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Brilliant Basics Limited | 0.01% | 8 | 0.05% | 9 | 0.00% | – | 0.05% | 9 |
Infosys Middle East FZ LLC | (0.01%) | (7) | 0.07% | 11 | (2.19%) | 5 | 0.09% | 16 |
Infosys BPO (Poland) Sp Z.o.o. | 0.82% | 600 | 0.02% | 3 | (1.32%) | 3 | 0.04% | 6 |
Fluido Denmark A/S | 0.00% | 1 | 0.03% | 4 | 0.00% | – | 0.02% | 4 |
Fluido Newco AB | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Fluido Norway A/S | 0.01% | 4 | 0.03% | 4 | 0.00% | – | 0.02% | 4 |
Fluido Oy | 0.08% | 56 | 0.04% | 7 | 0.00% | – | 0.04% | 7 |
Fluido Slovakia s.r.o. | 0.01% | 4 | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
Fluido Sweden AB | (0.01%) | (6) | (0.05%) | (8) | 0.00% | – | (0.05%) | (8) |
Infosys Americas Inc. | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Arabia Limited | 0.00% | 3 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Technologies (Australia) Pty. Limited | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys BPO Americas LLC | 0.01% | 8 | (0.01%) | (2) | 0.00% | – | (0.01%) | (2) |
Infosys (Czech Republic) Limited s.r.o. | 0.10% | 72 | 0.07% | 12 | 2.63% | (6) | 0.04% | 6 |
Infosys Tecnologia DO Brasil LTDA | 0.00% | – | (0.16%) | (28) | 0.00% | – | (0.17%) | (28) |
Infosys Technologies (China) Co. Limited | 0.22% | 157 | 0.03% | 4 | 0.00% | – | 0.02% | 4 |
Infosys Chile SpA | 0.01% | 5 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Luxembourg S.a.r.l. | 0.00% | 3 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Infosys Technologies S. de R. L. de C. V. | 0.28% | 203 | 0.24% | 41 | 0.00% | – | 0.24% | 41 |
Infosys Nova Holdings LLC | 1.87% | 1,362 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Technologies (Shanghai) Company Limited | 0.84% | 614 | (0.71%) | (121) | 0.00% | – | (0.72%) | (121) |
Infosys Technologies (Sweden) AB. | 0.04% | 32 | 0.05% | 9 | 0.00% | – | 0.05% | 9 |
Infosys Public Services, Inc. | 0.80% | 581 | 0.47% | 80 | 0.00% | – | 0.47% | 80 |
Kallidus Inc. | (0.08%) | (60) | (0.17%) | (29) | 0.00% | – | (0.17%) | (29) |
Infosys Consulting S.R.L. | 0.00% | 3 | 0.03% | 5 | 0.00% | – | 0.03% | 5 |
Infosys Management Consulting Pty Limited | 0.03% | 22 | 0.03% | 5 | 0.00% | – | 0.03% | 5 |
Infosys Austria GmbH | 0.00% | 2 | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
Infosys Consulting (Belgium) NV | (0.03%) | (19) | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
Infosys Consulting Ltda. | (0.08%) | (59) | (0.39%) | (67) | 0.00% | – | (0.40%) | (67) |
Infosys Consulting (Shanghai) Co. Ltd. | (0.27%) | (196) | (0.11%) | (19) | 0.00% | – | (0.11%) | (19) |
Infosys Consulting s.r.o. | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Consulting SAS | 0.01% | 9 | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
Infosys Consulting GmbH | 0.04% | 32 | 0.26% | 44 | 0.00% | – | 0.26% | 44 |
Infosys Consulting Holding AG | 0.48% | 348 | 0.54% | 93 | 0.00% | – | 0.55% | 93 |
Infy Consulting B.V. | 0.02% | 15 | 0.04% | 7 | 0.00% | – | 0.04% | 7 |
Infosys Consulting Sp. z.o.o. | 0.02% | 16 | 0.10% | 17 | 0.00% | – | 0.10% | 17 |
Lodestone Management Consultants Portugal, Unipessoal, Lda. | 0.01% | 6 | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
S.C. Infosys Consulting S.R.L. | 0.04% | 28 | 0.03% | 6 | 0.00% | – | 0.04% | 6 |
Infosys Consulting Pte Limited | 1.74% | 1,270 | 0.24% | 40 | 0.00% | – | 0.24% | 40 |
Infosys Consulting AG | 0.18% | 131 | 0.23% | 39 | 0.00% | – | 0.23% | 39 |
Infy Consulting Company Ltd. | 0.05% | 35 | 0.15% | 25 | 0.00% | – | 0.15% | 25 |
Lodestone Management Consultants Inc. | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys McCamish Systems LLC | 0.58% | 425 | 0.74% | 127 | 0.00% | – | 0.75% | 127 |
Noah Consulting LLC | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
Noah Information Management Consulting Inc. | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Panaya GmbH | 0.00% | (2) | 0.00% | (1) | 0.00% | – | (0.01%) | (1) |
Panaya Inc. | 0.19% | 139 | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
Panaya Japan Co. Ltd. | 0.00% | – | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
Panaya Ltd. | (0.88%) | (644) | (0.25%) | (43) | 0.00% | – | (0.26%) | (43) |
Portland Group Pty Ltd | 0.16% | 112 | 0.03% | 5 | 0.00% | – | 0.03% | 5 |
Infosys Compaz Pte. Ltd | 0.23% | 164 | 0.31% | 54 | 0.00% | – | 0.32% | 54 |
WDW Communications, Inc. | (0.25%) | (180) | (0.07%) | (12) | 0.00% | – | (0.07%) | (12) |
WongDoody Holding Company Inc. | 0.01% | 9 | 0.00% | – | 0.00% | – | 0.00% | – |
WongDoody, Inc. | 0.36% | 262 | 0.17% | 29 | 0.00% | – | 0.17% | 29 |
HIPUS Co. Ltd. | 0.09% | 62 | 0.10% | 17 | 0.00% | – | 0.10% | 17 |
Stater N.V. | 1.20% | 878 | 0.44% | 74 | 0.00% | – | 0.44% | 74 |
Stater Nederland B.V. | 0.37% | 270 | 0.29% | 49 | 0.00% | – | 0.29% | 49 |
Stater Duitsland B.V. | (0.21%) | (152) | 0.00% | – | 0.00% | – | 0.00% | – |
Stater XXL B.V. | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
HypoCasso B.V. | 0.04% | 29 | 0.09% | 16 | 0.00% | – | 0.09% | 16 |
Stater Participations B.V. | (0.33%) | (242) | 0.00% | – | 0.00% | – | 0.00% | – |
Stater Deutschland Verwaltungs-GmbH | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Stater Deutschland GmbH & Co. KG | 0.03% | 25 | 0.00% | – | 0.00% | – | 0.00% | – |
Stater Belgium N.V./S.A. | 0.10% | 70 | 0.02% | 3 | 0.00% | – | 0.02% | 3 |
Outbox systems Inc. dba Simplus (US) | 0.05% | 33 | 0.00% | 1 | 0.00% | – | 0.01% | 1 |
Simplus Australia Pty Ltd | (0.02%) | (15) | 0.00% | – | 0.00% | – | 0.00% | – |
Simplus Philippines, Inc. | 0.01% | 5 | 0.00% | – | 0.00% | – | 0.00% | – |
Simplus U.K., Ltd. | 0.00% | 1 | 0.00% | - | 0.00% | - | 0.00% | - |
Simplus Ireland, Ltd. | 0.00% | (2) | 0.00% | – | 0.00% | – | 0.00% | – |
Subtotal | 100.00% | 72,884 | 100% | 17,086 | 100% | (228) | 100% | 16,858 |
Adjustment arising out of consolidation | (7,199) | (450) | 379 | (71) | ||||
Controlled Trusts | 159 | 3 | – | 3 | ||||
65,844 | 16,639 | 151 | 16,790 | |||||
Non-controlling Interests | (394) | (45) | (13) | (58) | ||||
Total | 65,450 | 16,594 | 138 | 16,732 |
2.24 SEGMENT 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 centers 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
Year ended March 31, 2020 and March 31, 2019:
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Identifiable operating expenses | 14,977 | 6,989 | 7,084 | 6,104 | 4,991 | 4,125 | 3,212 | 1,486 | 48,968 |
14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 | |
Allocated expenses | 6,342 | 2,834 | 2,476 | 2,416 | 2,081 | 1,243 | 1,194 | 921 | 19,507 |
5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 | |
Segmental operating income | 7,306 | 4,212 | 2,424 | 3,216 | 2,059 | 1,604 | 1,431 | 64 | 22,316 |
6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 | |
Unallocable expenses* | 2,942 | ||||||||
2,027 | |||||||||
Other income, net (Refer to note 2.17) | 2,803 | ||||||||
2,882 | |||||||||
Finance costs (Refer to note 2.19) | (170) | ||||||||
– | |||||||||
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 | 22,007 | ||||||||
21,041 | |||||||||
Income Tax Expense | 5,368 | ||||||||
5,631 | |||||||||
Net Profit | 16,639 | ||||||||
15,410 | |||||||||
Depreciation and amortization expense | 2,893 | ||||||||
2,011 | |||||||||
Non-cash expenses other than depreciation and amortization | 49 | ||||||||
740 |
* | Unallocable expenses for the year ended March 31, 2020 includes amortization on ROU assets consequent to adoption of Ind AS 116 - Leases effective April 1, 2019 |
Significant clients
No client individually accounted for more than 10% of the revenues in the year ended March 31, 2020 and March 31, 2019
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note no | Year ended March 31, | |
2020 | 2019 | ||
Revenue from operations | 2.16 | 90,791 | 82,675 |
Cost of Sales | 60,732 | 53,867 | |
Gross profit | 30,059 | 28,808 | |
Operating expenses | |||
Selling and marketing expenses | 4,711 | 4,473 | |
General and administration expenses | 5,974 | 5,455 | |
Total operating expenses | 10,685 | 9,928 | |
Operating profit | 19,374 | 18,880 | |
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) |
Other income, net | 2.17 | 2,803 | 2,882 |
Finance cost | 2.19 | 170 | – |
Profit before tax | 22,007 | 21,041 | |
Tax expense: | |||
Current tax | 2.15 | 5,775 | 5,727 |
Deferred tax | 2.15 | (407) | (96) |
Profit for the period | 16,639 | 15,410 | |
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 | (180) | (22) |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | (33) | 70 |
(213) | 48 | ||
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 | (36) | 21 |
Exchange differences on translation of foreign operations, net | 378 | 63 | |
Fair value changes on investments, net | 2.4 and 2.15 | 22 | 2 |
364 | 86 | ||
Total other comprehensive income / (loss), net of tax | 151 | 134 | |
Total comprehensive income for the period | 16,790 | 15,544 | |
Profit attributable to: | |||
Owners of the Company | 16,594 | 15,404 | |
Non-controlling interests | 45 | 6 | |
16,639 | 15,410 | ||
Total comprehensive income attributable to: | |||
Owners of the Company | 16,732 | 15,538 | |
Non-controlling interests | 58 | 6 | |
16,790 | 15,544 |
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 | ||
April 20, 2020 |
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 March 31, 2020, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income) for the three months and year ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year 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 March 31, 2020, the consolidated profit and consolidated total comprehensive income for the three months and year ended on that date, consolidated changes in equity and the consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with the Standards on Auditing (“SA”s) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibility 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 on the Interim Consolidated Financial Statements.
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 |
Fixed price contracts using the percentage of completion method
|
Principal Audit Procedures |
Fixed price maintenance revenue is recognized either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using percentage of completion method when the pattern of benefits from services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive.
Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time has been recognized using the percentage-of-completion method. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
We identified the estimate of total efforts or efforts to complete fixed price contracts measured using the percentage of completion method as a key audit matter as the estimation of efforts or costs involves significant judgement throughout the period of the contract and is subject to revision as the contract progresses based on the latest available information. This estimate has a high inherent uncertainty and requires consideration of progress of the contract, efforts or costs incurred to-date and estimates of efforts or costs required to complete the remaining contract performance obligations over the lives of the contracts.
Refer Notes 1.5(a) and 2.16 to the consolidated financial statements.
|
Our audit procedures related to estimates of total expected costs or efforts to complete for fixed-price contracts included the following, among others:
We tested the effectiveness of controls relating to (1) recording of efforts or costs incurred and estimation of efforts or costs required to complete the remaining contract performance obligations and (2) access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
We selected a sample of fixed price contracts with customers accounted using percentage-of-completion method and performed the following:
· Compared efforts or costs incurred with Group’s estimate of efforts or costs incurred to date to identify significant variations and evaluate whether those variations have been considered appropriately in estimating the remaining costs or efforts to complete the contract.
· Tested the estimate for consistency with the status of delivery of milestones and customer acceptances and sign off from customers to identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligations. | |
2 |
Allowance for credit losses
|
Principal Audit Procedures
|
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
We identified allowance for credit losses as a key audit matter because the Group exercises significant judgment in calculating the expected credit losses.
Refer Notes 1.5(h), 2.7 and 2.10 to the consolidated financial statements.
|
Our audit procedures related to the allowance for credit losses for trade receivables and unbilled revenue included the following, among others:
We tested the effectiveness of controls over the (1) development of the methodology for the allowance for credit losses, including consideration of the current and estimated future economic conditions (2) completeness and accuracy of information used in the estimation of probability of default and (3) computation of the allowance for credit losses.
For a sample of customers: We tested the input data such as credit reports and other credit related information used in estimating the probability of default by comparing them to external and internal sources of information.
We tested the mathematical accuracy and computation of the allowances by using the same input data used by the Group. |
Emphasis of Matter
As more fully described in Note 2.22 to the interim consolidated financial statements, the Company is responding to inquiries from Indian regulatory authorities. The scope, duration or outcome of these matters are uncertain.
Our opinion is not modified in respect of this matter.
Management’s Responsibilities for the Interim Consolidated Financial Statements
The 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 the Ind AS 34 and other accounting principles generally accepted in India. The respective Boards of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and 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 Boards of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Boards of Directors either intend to liquidate their respective entities or to cease operations, or have no realistic alternative but to do so.
The respective Boards of Directors of the companies included in the Group are 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 scepticism 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 the 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)
Sanjiv V. Pilgaonkar
Place: Mumbai | Partner |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian Accounting Standards (Ind AS) for the three months and year ended March 31, 2020
Index | Page No. |
Consolidated Balance Shee | 1 |
Consolidated Statement of Profit and Loss | 2 |
Consolidated Statement of Changes in Equity | 3 |
Consolidated Statement of Cash Flows | 6 |
Overview and notes to the consolidated financial statements | |
1. Overview | |
1.1 Company overview | 8 |
1.2 Basis of preparation of financial statements | 8 |
1.3 Basis of consolidation | 8 |
1.4 Use of estimates and judgements | 8 |
1.5 Critical accounting estimates and judgments | 9 |
2. Notes to the consolidated financial statements | |
2.1 Business combinations and disposal group held for sale | 11 |
2.2 Property, plant and equipment | 15 |
2.3 Goodwill and other intangible assets | 17 |
2.4 Investments | 20 |
2.5 Loans | 24 |
2.6 Other financial assets | 24 |
2.7 Trade receivables | 24 |
2.8 Cash and cash equivalents | 25 |
2.9 Other assets | 25 |
2.10 Financial instruments | 26 |
2.11 Equity | 33 |
2.12 Other financial liabilities | 38 |
2.13 Other liabilities | 38 |
2.14 Provisions | 39 |
2.15 Income taxes | 40 |
2.16 Revenue from operations | 43 |
2.17 Other income, net | 46 |
2.18 Expenses | 47 |
2.19 Leases | 47 |
2.20 Employee benefits | 50 |
2.21 Reconciliation of basic and diluted shares used in computing earnings per share | 54 |
2.22 Contingent liabilities and commitments(to the extent not provided for) | 54 |
2.23 Related party transactions | 55 |
2.24 Segment reporting | 58 |
2.25 Function wise classification of Consolidated Statement of Profit and Loss | 60 |
INFOSYS LIMITED AND SUBSIDIARIES
(In crore )
Consolidated Balance Sheets as at | Note No. | March 31, 2020 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.2 | 12,435 | 11,479 |
Right-of-use assets | 2.19 | 4,168 | – |
Capital work-in-progress | 954 | 1,388 | |
Goodwill | 2.3.1 and 2.1 | 5,286 | 3,540 |
Other intangible assets | 2.3.2 | 1,900 | 691 |
Financial assets: | |||
Investments | 2.4 | 4,137 | 4,634 |
Loans | 2.5 | 21 | 19 |
Other financial assets | 2.6 | 737 | 312 |
Deferred tax assets (net) | 2.15 | 1,744 | 1,372 |
Income tax assets (net) | 2.15 | 5,384 | 6,320 |
Other non-current assets | 2.9 | 1,426 | 2,105 |
Total non-current assets | 38,192 | 31,860 | |
Current assets | |||
Financial assets: | |||
Investments | 2.4 | 4,655 | 6,627 |
Trade receivables | 2.7 | 18,487 | 14,827 |
Cash and cash equivalents | 2.8 | 18,649 | 19,568 |
Loans | 2.5 | 239 | 241 |
Other financial assets | 2.6 | 5,457 | 5,505 |
Income tax assets (net) | 2.15 | 7 | 423 |
Other Current assets | 2.9 | 7,082 | 5,687 |
Total current assets | 54,576 | 52,878 | |
Total assets | 92,768 | 84,738 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,122 | 2,170 |
Other equity | 63,328 | 62,778 | |
Total equity attributable to equity holders of the Company | 65,450 | 64,948 | |
Non-controlling interests | 394 | 58 | |
Total equity | 65,844 | 65,006 | |
Liabilities | |||
Non-current liabilities | |||
Financial Liabilities | |||
Lease liabilities | 2.19 | 4,014 | – |
Other financial liabilities | 2.12 | 807 | 147 |
Deferred tax liabilities (net) | 2.15 | 968 | 672 |
Other non-current liabilities | 2.13 | 279 | 275 |
Total non-current liabilities | 6,068 | 1,094 | |
Current liabilities | |||
Financial Liabilities | |||
Trade payables | 2,852 | 1,655 | |
Lease liabilities | 2.19 | 619 | – |
Other financial liabilities | 2.12 | 10,481 | 10,452 |
Other current liabilities | 2.13 | 4,842 | 4,388 |
Provisions | 2.14 | 572 | 576 |
Income tax liabilities (net) | 2.15 | 1,490 | 1,567 |
Total current liabilities | 20,856 | 18,638 | |
Total equity and liabilities | 92,768 | 84,738 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | |||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
|
Bengaluru April 20, 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 March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | ||
Revenue from operations | 2.16 | 23,267 | 21,539 | 90,791 | 82,675 |
Other income, net | 2.17 | 614 | 665 | 2,803 | 2,882 |
Total income | 23,881 | 22,204 | 93,594 | 85,557 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 12,916 | 12,074 | 50,887 | 45,315 |
Cost of technical sub-contractors | 1,704 | 1,601 | 6,714 | 6,033 | |
Travel expenses | 667 | 603 | 2,710 | 2,433 | |
Cost of software packages and others | 2.18 | 755 | 689 | 2,703 | 2,553 |
Communication expenses | 139 | 115 | 528 | 471 | |
Consultancy and professional charges | 339 | 376 | 1,326 | 1,324 | |
Depreciation and amortisation expenses | 2.2 and 2.3.2 | 749 | 531 | 2,893 | 2,011 |
Finance cost | 2.19 | 45 | – | 170 | – |
Other expenses | 2.18 | 1,071 | 932 | 3,656 | 3,655 |
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 |
Total expenses | 18,385 | 16,921 | 71,587 | 64,516 | |
Profit before tax | 5,496 | 5,283 | 22,007 | 21,041 | |
Tax expense: | |||||
Current tax | 2.15 | 1,335 | 1,193 | 5,775 | 5,727 |
Deferred tax | 2.15 | (174) | 12 | (407) | (96) |
Profit for the period | 4,335 | 4,078 | 16,639 | 15,410 | |
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 | (21) | (3) | (180) | (22) |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | (2) | 1 | (33) | 70 |
(23) | (2) | (213) | 48 | ||
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 | – | (15) | (36) | 21 |
Exchange differences on translation of foreign operations | 237 | (70) | 378 | 63 | |
Fair value changes on investments, net | 2.4 and 2.15 | 15 | 25 | 22 | 2 |
252 | (60) | 364 | 86 | ||
Total other comprehensive income /(loss), net of tax | 229 | (62) | 151 | 134 | |
Total comprehensive income for the period | 4,564 | 4,016 | 16,790 | 15,544 | |
Profit attributable to: | |||||
Owners of the Company | 4,321 | 4,074 | 16,594 | 15,404 | |
Non-controlling interests | 14 | 4 | 45 | 6 | |
4,335 | 4,078 | 16,639 | 15,410 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,545 | 4,012 | 16,732 | 15,538 | |
Non-controlling interests | 19 | 4 | 58 | 6 | |
4,564 | 4,016 | 16,790 | 15,544 | ||
Earnings per Equity share | |||||
Equity shares of par value 5/- each | |||||
Basic () | 10.19 | 9.37 | 38.97 | 35.44 | |
Diluted () | 10.18 | 9.36 | 38.91 | 35.38 | |
Weighted average equity shares used in computing earnings per equity share | 2.21 | ||||
Basic | 4,240,181,854 | 4,347,129,592 | 4,257,754,522 | 4,347,130,157 | |
Diluted | 4,245,981,386 | 4,353,023,863 | 4,265,144,228 | 4,353,420,772 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | |||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
|
Bengaluru April 20, 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 | |
Balance as at April 1, 2018 | 1,088 | 36 | 58,477 | 54 | 2,725 | 130 | 1,583 | 5 | 56 | 2 | 779 | – | (12) | 64,923 |
Changes in equity for the year ended March 31, 2019 | ||||||||||||||
Profit for the period | – | – | 15,404 | – | – | – | – | – | – | – | – | – | – | 15,404 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (22) | (22) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 70 | – | – | – | 70 |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 63 | – | – | 63 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 2 | 2 |
Total Comprehensive income for the period | – | – | 15,404 | – | – | – | – | – | – | 70 | 63 | 21 | (20) | 15,538 |
Share based payments to employees (Refer to note 2.11) | – | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 |
Dividends (including dividend distribution tax) | – | – | (13,712) | – | – | – | – | – | – | – | – | – | – | (13,712) |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (6) | – | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) |
Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) |
– | – | – | – | – | – | – | – | – | – | – | – | – | – |
Exercise of stock options (refer to note no 2.11) | – | 99 | – | – | – | (99) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | – | 8 |
Transfer to general reserve | – | – | (1,615) | – | 1,615 | – | – | – | – | – | – | – | – | – |
Amount transferred to other reserves | – | – | (1) | – | – | – | – | 1 | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer to note no. 2.11) |
– | – | – | – | (5) | – | – | – | 5 | – | – | – | – | – |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) |
– | 6 | – | – | – | – | – | – | – | – | – | – | – | 6 |
Transaction costs related to buyback* (refer to note no.2.11 ) | – | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,417) | – | – | – | 2,417 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,430 | – | – | – | (1,430) | – | – | – | – | – | – | – |
Increase in Equity share capital on account of bonus issue (refer to note no 2.11) | 1,088 | – | – | – | – | – | – | – | – | – | – | – | – | 1,088 |
Amounts utilized for bonus issue (Refer to note 2.11) | – | – | – | – | (1,088) | – | – | – | – | – | – | – | – | (1,088) |
Balance as at March 31, 2019 | 2,170 | 149 | 57,566 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,948 |
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 | |
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 |
Impact on account of adoption of Ind AS 116 (Refer to note 2.19)* | – | – | (40) | – | – | – | – | – | – | – | – | – | – | (40) |
2,170 | 149 | 57,526 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,908 | |
Changes in equity for the year ended March 31, 2020 | ||||||||||||||
Profit for the period | – | – | 16,594 | – | – | – | – | – | – | – | – | – | – | 16,594 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (180) | (180) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | (33) | – | – | – | (33) |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | (36) | – | (36) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 365 | – | – | 365 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 22 | 22 |
Total Comprehensive income for the period | – | – | 16,594 | – | – | – | – | – | – | (33) | 365 | (36) | (158) | 16,732 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 1 | 5 | – | – | – | – | – | – | – | – | – | – | – | 6 |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (49) | – | (4,717) | – | (1,494) | – | – | – | – | – | – | – | – | (6,260) |
Transaction costs relating to buyback * (Refer to note 2.11) | – | – | – | – | (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) | – | – | – | – | – | 238 | – | – | – | – | – | – | – | 238 |
Exercise of stock options (refer to note no. 2.11) | – | 119 | – | – | – | (119) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Effect of modification of equity settled share based payment awards to cash settled awards (Refer to note 2.11) | – | – | (9) | – | – | (48) | – | – | – | – | – | – | – | (57) |
Income tax benefit arising on exercise of stock options | – | 9 | – | – | – | – | – | – | – | – | – | – | – | 9 |
Financial liability under option arrangements (refer to note 2.1) | – | – | (598) | – | – | – | – | – | – | – | – | – | – | (598) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (9,517) | – | – | – | – | – | – | – | – | – | – | (9,517) |
Non–controlling interests on acquisition of subsidiary (refer to note no.2.11) | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Transfer to general reserve | – | – | (1,470) | – | 1,470 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,580) | – | – | – | 2,580 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,080 | – | – | – | (1,080) | – | – | – | – | – | – | – |
Balance as at March 31, 2020 | 2,122 | 282 | 56,309 | 54 | 1,158 | 297 | 4,070 | 6 | 111 | 39 | 1,207 | (15) | (190) | 65,450 |
* Net of tax
2 (1) - - (1) 1 1 (0) (1) - 0 - 0 -
(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
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | |||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
|
Bengaluru April 20, 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. | Year ended March 31, | |
2020 | 2019 | ||
Cash flow from operating activities | |||
Profit for the period | 16,639 | 15,410 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Income tax expense | 2.15 | 5,368 | 5,631 |
Depreciation and amortization | 2.2 ,2.3.2 & 2.19 | 2,893 | 2,011 |
Interest and dividend income | 2.17 | (1,613) | (2,052) |
Finance cost | 2.19 | 170 | – |
Impairment loss recognized / (reversed) under expected credit loss model | 161 | 239 | |
Exchange differences on translation of assets and liabilities | 184 | 66 | |
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 | 249 | 202 |
Other adjustments | (131) | (102) | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (3,861) | (2,881) | |
Loans, other financial assets and other assets | 76 | (700) | |
Trade payables | (373) | 916 | |
Other financial liabilities, other liabilities and provisions | 1,791 | 2,212 | |
Cash generated from operations | 21,553 | 21,673 | |
Income taxes paid | (4,550) | (6,832) | |
Net cash generated by operating activities | 17,003 | 14,841 | |
Cash flows from investing activities | |||
Expenditure on property, plant and equipment | (3,307) | (2,445) | |
Loans to employees | – | 14 | |
Deposits placed with corporation | (108) | (24) | |
Interest and dividend received | 1,929 | 1,557 | |
Payment towards acquisition of business, net of cash acquired | (1,860) | (550) | |
Payment of contingent consideration pertaining to acquisition of business | (6) | (18) | |
Advance payment towards acquisition of business | – | (206) | |
Redemption of escrow pertaining to Buyback | 2.6 | 257 | (257) |
Other receipts | 46 | – | |
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 | (34,839) | (78,355) | |
Non convertible debentures | (993) | (160) | |
Certificates of deposit | (1,114) | (2,393) | |
Government securities | (1,561) | (838) | |
Commercial paper | – | (491) | |
Others | (29) | (19) | |
Proceeds on sale of financial assets | |||
Tax free bonds and government bonds | 87 | 1 | |
Non-convertible debentures | 1,888 | 738 | |
Government securities | 1,674 | 123 | |
Commercial paper | 500 | 300 | |
Certificates of deposit | 2,545 | 5,540 | |
Liquid mutual funds and fixed maturity plan securities | 34,685 | 76,821 | |
Preference and equity securities | 27 | 115 | |
Others | – | 10 | |
Net cash used in investing activities | (239) | (575) | |
Cash flows from financing activities: | |||
Payment of lease liabilities | 2.19 | (571) | – |
Payment of dividends (including dividend distribution tax) | (9,515) | (13,705) | |
Payment of dividend to non-controlling interest of subsidiary | (33) | – | |
Shares issued on exercise of employee stock options | 6 | 6 | |
Buyback of equity shares including transaction cost | (7,478) | (813) | |
Net cash used in financing activities | (17,591) | (14,512) | |
Net increase / (decrease) in cash and cash equivalents | (827) | (246) | |
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 | (92) | (57) | |
Cash and cash equivalents at the end of the period | 2.8 | 18,649 | 19,568 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 396 | 358 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
forDeloitte Haskins & Sells LLP Chartered Accountants Firm’s Registration No 117366W/ W-100018 |
for and on behalf of the Board of Directors of Infosys Limited | |||
Sanjiv V. Pilgaonkar Partner Membership No. 39826 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and Managing Director |
U.B. Pravin Rao Chief Operating Officer and Whole-time Director |
|
Bengaluru April 20, 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 April 20, 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 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 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.
Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19):
The Group has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, unbilled revenues , goodwill and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group, as at the date of approval of these financial statements has used internal and external sources of information including credit reports and related information, economic forecasts and consensus estimates from market sources on the expected future performance of the Group. The Group has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these consolidated financial statements.
1.5 Critical accounting estimates and judgments
a. Revenue recognition
The Group’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.
The Group uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.
Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
b. Income taxes
The Company's two major tax jurisdictions are India and the U.S., though the Company also files tax returns in other overseas jurisdictions.Significant 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. 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 independent valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management (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. For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which represent the lowest level at which goodwill is monitored for internal management purposes. The recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell. Key assumptions in the cash flow projections are prepared based on current economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins. (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. After considering current and future economic conditions, the Group has concluded that no changes are required to lease period relating to the existing lease contracts. (Refer to Note no. 2.19)
h. Loss allowance for receivables and unbilled revenues
The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.
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. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the Statement of Profit and Loss.
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. Retention bonus is recognized in employee benefit expenses in the Statement of Profit and Loss over the period of service.
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 March 31, 2020 is $19 million (145 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)INFOSYS COMPAZ 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 March 31, 2020 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 March 31, 2020 was EUR 9 million (73 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 Profit and Loss 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 Profit and Loss for the year ended March 31, 2020.
Outbox systems Inc. dba Simplus
On March 13, 2020, Infosys Nova Holdings LLC (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Outbox systems Inc. dba Simplus , a US based sales force advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of up to $250 million (approximately 71,892 crore), comprising of cash consideration of $180 million (approximately 71,362 crore), contingent consideration of up to $20 million (approximately 7151 crore), additional performance bonus and retention payouts of upto $50 million (approximately 7378 crore) payable to the employees of Simplus over the next three years, subject to their continuous employment with the group and meeting certain targets. Performance and retention bonus is recognized in employee benefit expenses in the statement of Profit and Loss over the period of service.
Simplus brings to Infosys globally recognized Salesforce expertise, industry knowledge, solution assets, deep ecosystem relationships and a broad clientele, across a variety of industries. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill. Goodwill includes the value expected from addition of new customers and estimated synergies which does not qualify as an intangible asset.
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(*) | 22 | – | 22 |
Intangible assets - Customer contracts and relationships | – | 152 | 152 |
Intangible assets - Salesforce Relationships | – | 325 | 325 |
Intangible assets - Brand | – | 111 | 111 |
Deferred tax liabilities on intangible assets | – | (152) | (152) |
22 | 436 | 458 | |
Goodwill | 983 | ||
Total purchase price | 1,441 |
* Includes cash and cash equivalents acquired of 7 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 | 1,357 |
Fair value of contingent consideration | 84 |
Total purchase price | 1,441 |
The gross amount of trade receivables acquired and its fair value is approximately 73 crore and the amount is recoverable
The payment of contingent consideration to sellers of Simplus is dependent upon the achievement of certain financial targets by Simplus. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 10.5% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration as of March 31, 2020 was $13 million (approximately 97 crore).
The transaction costs of 6 crore related to the acquisition have been included under administrative expenses in the statement of profit and loss for the year ended March 31, 2020.
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.
During the year 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 year ended March 31, 2019, 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.
Further, 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 year ended March 31, 2019.
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 | Lower of useful life of the asset or 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 March 31, 2020 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 January 1, 2020 | 1,316 | 9,460 | 3,060 | 1,209 | 6,513 | 1,964 | 1,026 | 43 | 24,591 |
Additions | 2 | 524 | 124 | 55 | 192 | 115 | 42 | 1 | 1,055 |
Additions - Business Combination | – | – | – | 1 | 2 | 1 | 4 | – | 8 |
Deletions | – | – | (1) | (1) | (38) | (8) | (17) | – | (65) |
Translation difference | – | 32 | 2 | 1 | 7 | 1 | 8 | 1 | 52 |
Gross carrying value as at March 31, 2020 | 1,318 | 10,016 | 3,185 | 1,265 | 6,676 | 2,073 | 1,063 | 45 | 25,641 |
Accumulated depreciation as at January 1, 2020 | – | (3,190) | (2,066) | (903) | (4,711) | (1,327) | (519) | (26) | (12,742) |
Depreciation | – | (91) | (79) | (32) | (209) | (62) | (42) | (2) | (517) |
Accumulated depreciation on deletions | – | – | 1 | 1 | 38 | 8 | 17 | – | 65 |
Translation difference | – | (3) | (1) | – | (3) | 1 | (6) | – | (12) |
Accumulated depreciation as at March 31, 2020 | – | (3,284) | (2,145) | (934) | (4,885) | (1,380) | (550) | (28) | (13,206) |
Carrying value as at January 1, 2020 | 1,316 | 6,270 | 994 | 306 | 1,802 | 637 | 507 | 17 | 11,849 |
Carrying value as at March 31, 2020 | 1,318 | 6,732 | 1,040 | 331 | 1,791 | 693 | 513 | 17 | 12,435 |
The changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019 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 January 1, 2019 | 1,307 | 652 | 8,632 | 2,440 | 1,069 | 5,515 | 1,503 | 636 | 36 | 21,790 |
Additions/adjustments | 36 | – | 402 | 326 | 62 | 453 | 141 | 113 | 3 | 1,536 |
Deletions | (36) | (47) | (116) | (56) | (29) | (122) | (24) | (9) | – | (439) |
Translation difference | – | – | 8 | (1) | (1) | – | – | (1) | (1) | 4 |
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 January 1, 2019 | – | (35) | (2,948) | (1,817) | (804) | (4,101) | (1,142) | (395) | (21) | (11,263) |
Depreciation | – | (1) | (81) | (71) | (31) | (212) | (48) | (28) | (2) | (474) |
Accumulated depreciation on deletions | – | 3 | 103 | 47 | 22 | 121 | 20 | 9 | – | 325 |
Translation difference | – | – | (1) | – | – | – | – | – | 1 | – |
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 January 1, 2019 | 1,307 | 617 | 5,684 | 623 | 265 | 1,414 | 361 | 241 | 15 | 10,527 |
Carrying value as at March 31, 2019 | 1,307 | 572 | 5,999 | 868 | 288 | 1,654 | 450 | 325 | 16 | 11,479 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2020 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 | 11 | – | 1,056 | 475 | 169 | 930 | 465 | 324 | 7 | 3,437 |
Additions - Business Combination | – | – | – | – | 1 | 62 | 9 | 6 | – | 78 |
Deletions | – | – | – | (3) | (8) | (179) | (24) | (18) | (1) | (233) |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | (605) | – | – | – | – | – | – | – | (605) |
Translation difference | – | – | 34 | 4 | 2 | 17 | 3 | 12 | 1 | 73 |
Gross carrying value as at March 31, 2020 | 1,318 | – | 10,016 | 3,185 | 1,265 | 6,676 | 2,073 | 1,063 | 45 | 25,641 |
Accumulated depreciation as at April 1, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Depreciation | – | – | (353) | (306) | (128) | (862) | (233) | (146) | (7) | (2,035) |
Accumulated depreciation on deletions | – | – | – | 3 | 8 | 179 | 23 | 18 | 1 | 232 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | 33 | – | – | – | – | – | – | – | 33 |
Translation difference | – | – | (4) | (1) | (1) | (10) | – | (8) | – | (24) |
Accumulated depreciation as at March 31, 2020 | – | – | (3,284) | (2,145) | (934) | (4,885) | (1,380) | (550) | (28) | (13,206) |
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 March 31, 2020 | 1,318 | – | 6,732 | 1,040 | 331 | 1,791 | 693 | 513 | 17 | 12,435 |
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 purchase consideration in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquired entity. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds purchase consideration, the fair value of net assets acquired is reassessed and the bargain purchase excess is recognized in 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 the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in 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 | |
March 31, 2020 | 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 acquisition (Refer note no. 2.1.1) | 399 | – |
Goodwill on Simplus acquisition (Refer note no. 2.1.1) | 983 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) | – | 863 |
Translation differences | 256 | 53 |
Carrying value at the end | 5,286 | 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 Group internally reviews the goodwill for impairment at the operating segment level, after allocation of the goodwill to CGU’s or groups of CGUs.
The following table presents the allocation of goodwill to operating segments as at March 31, 2020 and March 31, 2019 respectively:
(In crore)
Segment | As at | |
March 31, 2020 | March 31, 2019 | |
Financial services | 1,262 | 743 |
Retail | 500 | 437 |
Communication | 472 | 389 |
Energy, Utilities, Resources and Services | 886 | 374 |
Manufacturing | 378 | 239 |
3,498 | 2,182 | |
Operating segments without significant goodwill | 766 | 417 |
Total | 4,264 | 2,599 |
Consequent to reclassification from held for sale (refer note no 2.1.2) the goodwill pertaining to Panaya, Kallidus and Skava acquisitions are tested for impairment at the respective entity level, which amounts to 1,022 crore and 941 crore as at March 31, 2020 and March 31, 2019, respectively.
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. Value-in-use is determined based on discounted future cash flows . The key assumptions used for the calculations are as follows:
(in %)
As at | ||
March 31, 2020 | March 31, 2019 | |
Long term growth rate | 7-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 11.9 | 12.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. As at March 31, 2020, the estimated recoverable amount of the CGU exceeded its carrying amount. Reasonable sensitivities in key assumptions consequent to the change in estimated future economic conditions on account of possible effects relating to Covid 19 is unlikely to 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. 4
The changes in the carrying value of acquired intangible assets for the three months ended March 31, 2020 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 January 1, 2020 | 1,661 | 642 | 1 | 126 | 84 | 2,514 |
Additions | – | 21 | – | – | – | 21 |
Acquisition through business combination (Refer note no. 2.1.1) | 152 | – | – | 111 | 325 | 588 |
Deletions | – | – | – | – | – | – |
Translation difference | 65 | 34 | – | 4 | 2 | 105 |
Gross carrying value as at March 31, 2020 | 1,878 | 697 | 1 | 241 | 411 | 3,228 |
Accumulated amortization as at January 1, 2020 | (685) | (402) | (1) | (59) | (46) | (1,193) |
Amortization expense | (40) | (23) | – | (5) | (10) | (78) |
Deletions | – | – | – | – | – | – |
Translation differences | (30) | (25) | – | (2) | – | (57) |
Accumulated amortization as at March 31, 2020 | (755) | (450) | (1) | (66) | (56) | (1,328) |
Carrying value as at January 1, 2020 | 976 | 240 | – | 67 | 38 | 1,321 |
Carrying value as at March 31, 2020 | 1,123 | 247 | – | 175 | 355 | 1,900 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-14 | 0-9 | – | 1-10 | 1-5 |
The changes in the carrying value of acquired intangible assets for the three months ended March 31, 2019 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 January 1, 2019 | 950 | 446 | 1 | 72 | 100 | 84 | 1,653 |
Acquisition through business combination (Refer note no. 2.1.1) | – | – | – | – | – | – | – |
Deletions | – | – | – | – | – | – | – |
Translation differences | (13) | (5) | – | 1 | (1) | (1) | (19) |
Gross carrying value as at March 31, 2019 | 937 | 441 | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at January 1, 2019 | (538) | (283) | (1) | (11) | (42) | (22) | (897) |
Amortization expense | (25) | (22) | – | (1) | (3) | (6) | (57) |
Deletions | – | – | – | – | – | – | – |
Translation differences | 6 | 3 | – | 1 | 1 | – | 11 |
Accumulated amortization as at March 31, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Carrying value as at January 1, 2019 | 412 | 163 | – | 61 | 58 | 62 | 756 |
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 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2020:
(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 | – | 86 | – | – | – | – | 86 |
Acquisition through business combination (Refer note no. 2.1.1) | 817 | 110 | – | – | 135 | 325 | 1,387 |
Reclassified on account of adoption of IndAS 116 | – | – | – | (73) | – | – | (73) |
Translation difference | 124 | 60 | – | – | 7 | 3 | 194 |
Gross carrying value as at March 31, 2020 | 1,878 | 697 | 1 | – | 241 | 411 | 3,228 |
Accumulated amortization as at April 1, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Amortization expense | (146) | (105) | – | – | (17) | (27) | (295) |
Reclassified on account of adoption of IndAS 116 | – | – | – | 11 | – | – | 11 |
Translation differences | (52) | (43) | – | – | (5) | (1) | (101) |
Accumulated amortization as at March 31, 2020 | (755) | (450) | (1) | – | (66) | (56) | (1,328) |
Carrying value as at April 1, 2019 | 380 | 139 | – | 62 | 55 | 55 | 691 |
Carrying value as at March 31, 2020 | 1,123 | 247 | – | – | 175 | 355 | 1,900 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-14 | 0-9 | – | – | 1-10 | 1-5 |
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 |
* Majorly includes intangibles related to salesforce relationships
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 the consolidated Statement of Profit and Loss for the three months ended March 31, 2020 and March 31, 2019 was 209 crore and 196 crore respectively, and for the year ended March 31, 2020 and March 31, 2019 was 829 crore and 769 crore respectively
2.4 INVESTMENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Unquoted | ||
Investments carried at fair value through other comprehensive income(refer note no. 2.4.1) | ||
Preference securities | 101 | 89 |
Equity instruments | 1 | 11 |
102 | 100 | |
Investments carried at fair value through profit and loss(refer note no. 2.4.1) | ||
Preference securities | 9 | 23 |
Others (1) | 54 | 16 |
63 | 39 | |
Quoted | ||
Investments carried at amortized cost(refer note no. 2.4.2) | ||
Tax free bonds | 1,825 | 1,893 |
Government Bonds | 21 | – |
1,846 | 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 | 1,462 | 1,420 |
Government securities | 664 | 724 |
2,126 | 2,144 | |
Total non-current investments | 4,137 | 4,634 |
Current | ||
Unquoted | ||
Investments carried at fair value through profit or loss(refer note no. 2.4.3) | ||
Liquid mutual fund units | 2,104 | 1,786 |
2,104 | 1,786 | |
Investments carried at fair value through other comprehensive income(refer note no 2.4.4) | ||
Commercial Paper | – | 495 |
Certificates of deposit | 1,126 | 2,482 |
1,126 | 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 | 489 | – |
489 | – | |
Investments carried at fair value through other comprehensive income(refer note no. 2.4.4) | ||
Non convertible debentures | 936 | 1,846 |
936 | 1,846 | |
Total current investments | 4,655 | 6,627 |
Total investments | 8,792 | 11,261 |
Aggregate amount of quoted investments | 5,397 | 6,359 |
Market value of quoted investments (including interest accrued), current | 1,425 | 1,862 |
Market value of quoted investments (including interest accrued), non current | 4,268 | 4,711 |
Aggregate amount of unquoted investments | 3,395 | 4,902 |
Aggregate amount of impairment on value of investments | – | – |
Investments carried at amortized cost | 1,846 | 1,911 |
Investments carried at fair value through other comprehensive income | 4,290 | 7,067 |
Investments carried at fair value through profit or loss | 2,656 | 2,283 |
(1) | Uncalled capital commitments outstanding as at March 31, 2020 and March 31, 2019 was 61 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)
Year ended March 31, 2020 | Year ended March 31, 2019 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 27 | (3) | 24 | 1 | – | 1 |
Certificates of deposit | (4) | 2 | (2) | (5) | 2 | (3) |
Government securities | – | – | – | 5 | (1) | 4 |
Equity and preference securities | (27) | (6) | (33) | 63 | 7 | 70 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2020 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 2,104 | 1,786 |
Fixed maturity plan securities | Market observable inputs | 489 | 458 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,144 | 2,125 |
Non-convertible debentures | Quoted price and market observable inputs | 2,398 | 3,266 |
Government securities | Quoted price | 664 | 724 |
Commercial Papers | Market observable inputs | – | 495 |
Certificate of deposits | Market observable inputs | 1,126 | 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. | 102 | 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. | 9 | 23 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 54 | 16 |
Total | 9,090 | 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 March 31, 2020 and March 31, 2019 are as follows:
(In crore, except otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Preference securities | ||
Airviz, Inc. | – | 3 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop, Inc. | 40 | 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 |
Nil (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Nil (13,35,707) Series C Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 42 | 27 |
31,40,181 (11,80,358) Series C-1 Preferred Stock | ||
Tidalscale, Inc. | 9 | 23 |
36,74,269 (36,74,269) Series B Preferred Stock | ||
Ideaforge Technology Private Limited | 9 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of 10 each, fully paid up | ||
Total investment in preference securities | 110 | 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 | – | 10 |
Nil (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 | 1 | 11 |
Others | ||
Stellaris Venture Partners India | 30 | 16 |
The House Fund II, L.P. | 24 | – |
Total investment in others | 54 | 16 |
Total | 165 | 139 |
2.4.2 Details of investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 |
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 | 341 | 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 |
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 |
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 | 68,05,416 | 1,825 | 7,455,416 | 1,893 |
The balances held in government bonds as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 |
As at March 31, 2019 | |||
Face Value PHP | Units | Amount | Units | Amount | |
Treasury Notes Philippines Govt. 29MAY2019 | 100 | – | – | 45,000 | 6 |
Treasury Notes Philippines Govt. 17APRIL2019 | 100 | – | – | 90,000 | 12 |
Treasury Notes Philippines Govt. 8MARCH2023 | 100 | 55,000 | 8 | – | – |
Treasury Notes Philippines Govt. 4DECEMBER2022 | 100 | 90,000 | 13 | – | – |
Total investments in government bonds | 145,000 | 21 | 135,000 | 18 |
2.4.3Details of investments in liquid mutual fund units and fixed maturity plans
The balances held in liquid mutual fund units as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 |
As at March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Liquid Fund -Growth -Direct Plan | 1,690,522 | 54 | 1,332,847 | 40 |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 26,697,315 | 211 | 19,600,407 | 141 |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | – | – | 7,975,385 | 201 |
Aditya Birla Sun Life Cash Manager - Growth | 168,237 | 8 | 111,344 | 5 |
Axis Treasury Advantage Fund -Growth | 865,146 | 201 | – | – |
HDFC Overnight Fund Direct Plan- Growth Option | 1,010,508 | 300 | – | – |
HDFC Money market Fund- Direct Plan- Growth Option | – | – | 772,637 | 303 |
HDFC Liquid fund-Direct Plan growth option | 555,555 | 217 | 68,035 | 25 |
ICICI Prudential Liquid Fund –Direct plan –Growth | 7,930,594 | 233 | – | – |
ICICI Prudential Savings Fund- Direct Plan-Growth | – | – | 8,340,260 | 301 |
IDFC Corporate Bond - Fund Direct Plan | 11,902,495 | 17 | 131,484,437 | 169 |
Kotak Liquid Fund- Direct Plan- Growth Option | 747,509 | 300 | – | – |
Kotak Money Market Fund- Direct Plan- Growth Option | – | – | 973,751 | 301 |
SBI Overnight Fund -Direct Plan -Growth | 922,151 | 300 | – | – |
SBI Premier Liquid Fund -Direct Plan -Growth | 331,803 | 103 | 1,025,678 | 300 |
HDFC Corporate Bond Fund -Growth -Direct Plan | – | – | – | – |
IDFC Banking and PSU fund Direct Plan- Growth Option | 88,849,927 | 160 | – | – |
Total investments in liquid mutual fund units | 14,16,71,762 | 2,104 | 171,684,781 | 1,786 |
The balances held in fixed maturity plans as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 |
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 | 74 | 60,000,000 | 70 |
Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 Days- GR Direct | 2,50,00,000 | 31 | 25,000,000 | 29 |
HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 | 3,80,00,000 | 47 | 38,000,000 | 44 |
HDFC FMP 1169D Feb 2017- Direct- Quarterly Dividend- Series 37 | 4,50,00,000 | 45 | 45,000,000 | 45 |
ICICI FMP Series 80-1194 D Plan F Div | 5,50,00,000 | 68 | 55,000,000 | 63 |
ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan | 4,20,00,000 | 52 | 42,000,000 | 49 |
ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan | 3,00,00,000 | 37 | 30,000,000 | 35 |
IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days | 1,00,00,000 | 12 | 10,000,000 | 12 |
IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days | 1,50,00,000 | 19 | 15,000,000 | 17 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 44 | 35,000,000 | 40 |
Nippon India Fixed Horizon Fund-XXXII Series 8-Dividend Plan | 5,00,00,000 | 60 | 50,000,000 | 54 |
Total investments in fixed maturity plan securities | 40,50,00,000 | 489 | 405,000,000 | 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 March 31, 2020 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | Face Value | As at March 31, 2020 |
As at March 31, 2019 | ||
Units | Amount | Units | Amount | ||
7.03% LIC Housing Finance Ltd 28DEC2021 | 10,00,000/- | 2,500 | 254 | – | – |
7.24% LIC Housing Finance Ltd 23AUG2021 | 10,00,000/- | 2,500 | 259 | – | – |
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 | 52 | 500 | 51 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 312 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 131 | 1,250 | 127 |
7.78% Housing Development Finance Corporation Ltd 24MAR2020 | 1,00,00,000/- | – | – | 100 | 100 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 53 | 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 | 215 | 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 | 49 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 106 | 100 | 105 |
8.50% LIC Housing Finance Ltd 20JUN2022 | 10,00,000/- | 2,950 | 323 | – | – |
8.58% Housing Development Finance Corporation Ltd 22MAR2022 | 10,00,000/- | 1,250 | 129 | – | – |
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 | 107 | 1,000 | 107 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,750 | 187 | 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/- | – | – | 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 | 101 | 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 | 22,350 | 2,398 | 28,295 | 3,266 |
The balances held in government securities as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | Face Value | As at March 31, 2020 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | ||
7.17% Government of India 8JAN2028 | 10,000/- | 1,25,000 | 132 | 675,000 | 672 |
7.26% Government of India 14JAN2029 | 10,000/- | 5,00,000 | 532 | – | – |
7.95% Government of India 28AUG2032 | 10,000/- | – | – | 50,000 | 52 |
Total investments in government securities | 6,25,000 | 664 | 725,000 | 724 |
The balances held in certificates of deposit as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2020 | As at March 31, 2019 | |||
Face Value | Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | 25,000 | 240 | 90,000 | 872 |
Bank of Baroda | 1,00,000/- | 65,000 | 638 | – | – |
ICICI Bank | 1,00,000/- | – | – | 75,000 | 738 |
Kotak Bank | 1,00,000/- | – | - | 77,000 | 747 |
Oriental Bank of Commerce | 1,00,000/- | 25,000 | 248 | – | – |
Vijaya Bank | 1,00,000/- | – | – | 12,500 | 125 |
Total investments in certificates of deposit | 1,15,000 | 1,126 | 254,500 | 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 | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 21 | 19 |
21 | 19 | |
Unsecured, considered doubtful | ||
Other loans | ||
Loans to employees | 30 | 24 |
51 | 43 | |
Less: Allowance for doubtful loans to employees | 30 | 24 |
Total non-current loans | 21 | 19 |
Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 239 | 241 |
Total current loans | 239 | 241 |
Total loans | 260 | 260 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Security deposits (1) | 50 | 52 |
Rental deposits (1) | 221 | 193 |
Net investment in sublease of right of use asset (refer to note 2.19) (1) | 398 | – |
Restricted deposits(1)* | 55 | 67 |
Others (1) | 13 | – |
Total non-current other financial assets | 737 | 312 |
Current | ||
Security deposits (1) | 8 | 4 |
Rental deposits (1) | 27 | 15 |
Restricted deposits (1)* | 1,795 | 1,671 |
Unbilled revenues (1)# | 2,796 | 2,093 |
Interest accrued but not due (1) | 474 | 905 |
Foreign currency forward and options contracts (2) (3) | 62 | 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) | 35 | – |
Others (1) | 260 | 224 |
Total current other financial assets | 5,457 | 5,505 |
Total other financial assets | 6,194 | 5,817 |
(1) Financial assets carried at amortized cost | 6,132 | 5,481 |
(2) Financial assets carried at fair value through other comprehensive income | 9 | 37 |
(3) Financial assets carried at fair value through profit or loss | 53 | 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 and is due only after a passage of time. |
2.7 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good (1) | 18,487 | 14,827 |
Considered doubtful | 557 | 483 |
19,044 | 15,310 | |
Less: Allowance for credit loss | 557 | 483 |
Total trade receivables | 18,487 | 14,827 |
(1) Includes dues from companies where directors are interested | – | – |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 12,288 | 14,197 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 6,361 | 5,371 |
Total cash and cash equivalents | 18,649 | 19,568 |
Balances with banks in unpaid dividend accounts | 30 | 29 |
Deposit with more than 12 months maturity | 6,895 | 6,582 |
Balances with banks held as margin money deposits against guarantees | 71 | 114 |
Cash and cash equivalents as at March 31, 2020 and March 31, 2019 include restricted cash and bank balances of 396 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 | |
March 31, 2020 | March 31, 2019 | |
Non Current | ||
Capital advances | 310 | 489 |
Advances other than capital advances | ||
Others | ||
Withholding taxes and others | 777 | 929 |
Prepaid gratuity (refer note no. 2.20.1) | 151 | 42 |
Prepaid expenses | 87 | 162 |
Deferred Contract Cost | 101 | 277 |
Advance for business acquisition (refer note no. 2.1.1) | – | 206 |
Total Non-Current other assets | 1,426 | 2,105 |
Current | ||
Advances other than capital advances | ||
Payment to vendors for supply of goods | 145 | 109 |
Others | ||
Unbilled revenues # | 4,325 | 3,281 |
Withholding taxes and others | 1,583 | 1,488 |
Prepaid expenses | 968 | 751 |
Deferred Contract Cost | 33 | 58 |
Other receivables | 28 | – |
Total Current other assets | 7,082 | 5,687 |
Total other assets | 8,508 | 7,792 |
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. As at March 31 2020, Cenvat recoverable includes 372 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 March 31, 2020 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) | 18,649 | – | – | – | – | 18,649 | 18,649 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | 9 | 102 | – | 111 | 111 |
Tax-free bonds and government bonds | 1,846 | – | – | – | – | 1,846 | 2,144(1) |
Liquid mutual fund units | – | – | 2,104 | – | – | 2,104 | 2,104 |
Non convertible debentures | – | – | – | – | 2,398 | 2,398 | 2,398 |
Government securities | – | – | – | – | 664 | 664 | 664 |
Certificates of deposit | – | – | – | – | 1,126 | 1,126 | 1,126 |
Other investments | – | – | 54 | – | – | 54 | 54 |
Fixed maturity plan securities | – | – | 489 | – | – | 489 | 489 |
Trade receivables (Refer Note no. 2.7) | 18,487 | – | – | – | – | 18,487 | 18,487 |
Loans (Refer Note no. 2.5) | 260 | – | – | – | – | 260 | 260 |
Other financials assets (Refer Note no. 2.6)(3) | 6,132 | – | 53 | – | 9 | 6,194 | 6,112(2) |
Total | 45,374 | – | 2,709 | 102 | 4,197 | 52,382 | 52,598 |
Liabilities: | |||||||
Trade payables | 2,852 | – | – | – | – | 2,852 | 2,852 |
Lease liabilities | 4,633 | – | – | – | – | 4,633 | 4,633 |
Financial Liability under option arrangements (refer to note 2.1.1) | – | – | 621 | – | – | 621 | 621 |
Other financial liabilities (Refer Note no. 2.12) | 7,966 | – | 811 | – | 20 | 8,797 | 8,797 |
Total | 15,451 | – | 1,432 | – | 20 | 16,903 | 16,903 |
(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 82 crore
(3) | Excludes unbilled revenue on contracts where the right to consideration is dependent on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories as at March 31, 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 | 2,125(1) |
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)(3) | 5,481 | – | 299 | – | 37 | 5,817 | 5,733(2) |
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 on contracts where the right to consideration is dependent on completion of contractual milestones |
Fair value hierarchy
Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 -Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3- Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as at March 31, 2020:
(In crore)
Particulars | As at March 31, 2020 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 2,104 | 2,104 | – | – |
Investments in tax-free bonds (Refer Note no. 2.4) | 2,122 | 1,960 | 162 | – |
Investments in government bonds (Refer Note no. 2.4) | 22 | 22 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.4) | 110 | – | – | 110 |
Investments in non convertible debentures (Refer Note no. 2.4) | 2,398 | 2,032 | 366 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 1,126 | – | 1,126 | – |
Investment in Government securities (Refer Note no. 2.4) | 664 | 664 | – | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 489 | – | 489 | – |
Other investments (Refer Note no. 2.4) | 54 | – | – | 54 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 62 | – | 62 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 491 | – | 491 | – |
Financial liability under option arrangements (refer to note 2.1.1) | 621 | – | – | 621 |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 340 | – | – | 340 |
(1) Discount rate pertaining to contingent consideration ranges from 8% to 14% .
During the year ended March 31, 2020, tax free bonds and non-convertible debentures of 662 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and 50 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 financial assets and liabilities as at March 31, 2020:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,228 | 507 | 163 | 208 | 1,242 | 3,348 |
Trade receivables | 11,565 | 2,331 | 1,064 | 652 | 2,200 | 17,812 |
Other financial assets , loans and other current assets | 6,125 | 1,166 | 381 | 330 | 761 | 8,763 |
Trade payables | (764) | (157) | (103) | (74) | (1,453) | (2,551) |
Lease liabilities | (1,681) | (988) | (355) | (59) | (496) | (3,579) |
Other financial liabilities | (5,086) | (1,013) | (197) | (472) | (1,560) | (8,328) |
Net assets / (liabilities) | 11,387 | 1,846 | 953 | 585 | 694 | 15,465 |
The following table analyses the foreign currency risk from financial 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 March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Impact on the Group's incremental operating margins | 0.44% | 0.45% | 0.45% | 0.47% |
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 | ||
March 31, 2020 | March 31, 2019 | |||
In million | In crore | In million | In crore | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 110 | 507 | 120 | 588 |
In Euro | 120 | 993 | 135 | 1,049 |
In United Kingdom Pound Sterling | 21 | 196 | 25 | 226 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 2 | 9 | 8 | 37 |
In Brazilian Real | 57 | 102 | – | – |
In Canadian dollars | 21 | 117 | 13 | 68 |
In Chinese Yuan | 210 | 226 | – | – |
In Euro | 191 | 1,581 | 176 | 1,367 |
In Japanese Yen | – | – | 550 | 34 |
In New Zealand dollars | 16 | 72 | 16 | 75 |
In Norwegian Krone | 40 | 29 | 40 | 32 |
In Philippine Peso | – | – | – | – |
In Poland Zloty | 92 | 165 | – | – |
In Romanian Leu | 20 | 33 | – | – |
In Singapore dollars | 177 | 954 | 140 | 716 |
In South African Rand | – | – | – | – |
In Swedish Krona | 50 | 37 | 50 | 37 |
In Swiss Franc | 1 | 9 | 25 | 172 |
In U.S. dollars | 1,048 | 7,925 | 955 | 6,608 |
In United Kingdom Pound Sterling | 50 | 469 | 80 | 724 |
Option Contracts | ||||
In Australian dollars | – | – | 10 | 49 |
In Canadian Dollars | – | – | 13 | 69 |
In Euro | – | – | 60 | 466 |
In Swiss Franc | – | – | 5 | 35 |
In U.S. dollars | 555 | 4,196 | 433 | 2,995 |
In United Kingdom Pound Sterling | – | – | 10 | 91 |
Total forwards and options contracts | 17,620 | 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 | |
March 31, 2020 | March 31, 2019 | |
Not later than one month | 5,687 | 4,432 |
Later than one month and not later than three months | 8,727 | 6,921 |
Later than three months and not later than one year | 3,206 | 4,085 |
17,620 | 15,438 |
During the year ended March 31, 2020, 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 March 31, 2020 are expected to occur and reclassified to the consolidated statement of profit and loss within 3 months.
The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of its forecasted cash flows. 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 following table provides reconciliation of cash flow hedge reserve for the three months and year ended March 31, 2020 and March 31, 2019:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Gain/(Loss) | ||||
Balance at the beginning of the period | (15) | 36 | 21 | – |
Gain / (Loss) recognised in other comprehensive income during the period | 30 | 25 | 25 | 118 |
Amount reclassified to profit or loss during the period | (32) | (45) | (73) | (90) |
Tax impact on above | 2 | 5 | 12 | (7) |
Balance at the end of the period | (15) | 21 | (15) | 21 |
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 | ||
March 31, 2020 | March 31, 2019 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 86 | (515) | 338 | (17) |
Amount set off | (24) | 24 | (2) | 2 |
Net amount presented in Balance Sheet | 62 | (491) | 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 18,487 crore and 14,827 crore as at March 31, 2020 and March 31, 2019, respectively and unbilled revenues amounting to 7,121 crore and 5,374 crore as at March 31, 2020 and March 31, 2019, respectively. Trade receivables and unbilled revenues are typically unsecured and are derived from revenues from customers primarily located in the United States of America. 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 the expected credit loss model to assess any required allowances; and uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. This matrix takes into account available external and internal credit risk information such as CDS spread quotes, ratings from international credit rating agencies and the Group's historical collection experience for customers.
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. Exposure to customers is diversified and there is no single customer contributing more than 10% of outstanding trade receivables and unbilled revenues.
The following table gives details in respect of percentage of revenues generated from top customer and top ten customers:
(In %)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue from top customer | 3.1 | 3.3 | 3.1 | 3.6 |
Revenue from top 10 customers | 18.7 | 19.7 | 19.2 | 19.0 |
Credit risk exposure
The allowance for lifetime ECL on customer balances for three months and year ended March 31, 2020 was 72 crore and 161 crore respectively and was 15 crore and 239 crore for the three months and year ended March 31, 2019, respectively
The movement in credit loss allowance on customer balance is as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Balance at the beginning | 653 | 615 | 627 | 449 |
Impairment loss recognized | 72 | 15 | 161 | 239 |
Write-offs | (28) | – | (100) | (73) |
Translation differences | 8 | (3) | 17 | 12 |
Balance at the end | 705 | 627 | 705 | 627 |
The gross carrying amount of a financial asset is written off (either partially or in full) when there is no realistic prospect of recovery.
Credit exposure
The Group’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Trade receivables | 18,487 | 14,827 |
Unbilled revenues | 7,121 | 5,374 |
Days sales outstanding was 69 days and 66 days as of March 31, 2020 and March 31, 2019, respectively
Credit risk on cash and cash equivalents is limited as the Group generally invests in deposits with banks and financial institutions with high ratings assigned by international and domestic credit rating agencies. Ratings are monitored periodically and the Group has considered the latest available credit ratings in view of COVID – 19 as at the date of approval of these consolidated financial statements. Majority of investments of the Group are fair valued based on Level 1 or Level 2 inputs. These investments primarily include investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, commercial papers, quoted bonds issued by government and quasi-government organizations and non convertible debentures. The Group invests after considering counterparty risks based on multiple criteria including Tier I Capital, Capital Adequacy Ratio, Credit Rating, Profitability, NPA levels and Deposit base of banks and financial institutions. These risks are monitored regularly as per its risk management program.
Liquidity risk
Liquidity risk is defined as the risk that the Group will not be able to settle or meet its obligations on time.
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 March 31, 2020, the Group had a working capital of 33,720 crore including cash and cash equivalents of 18,649 crore and current investments of 4,655 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 March 31, 2020 and March 31, 2019, the outstanding compensated absences were 1,870 crore and 1,663 crore, respectively, which have been substantially funded. Accordingly no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2020:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 2,852 | – | – | – | 2,852 |
Other financial liabilities (excluding liability towards contingent consideration) (Refer Note no. 2.12) | 7,939 | 22 | 5 | – | 7,966 |
Financial liability under option arrangements | – | – | 621 | – | 621 |
Liability towards contingent consideration on an undiscounted basis (Refer Note no. 2.12) | 225 | 75 | 67 | – | 367 |
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 contingent consideration) (Refer Note no. 2.12) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards contingent consideration on an undiscounted basis (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.
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.
Description of reserves
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.
Share Options Outstanding Account
The Share options outstanding account is used to record the fair value of equity-settled share based payment transactions with employees. The amounts recorded in share options outstanding account are transferred to securities premium upon exercise of stock options and transferred to general reserve on account of stock options not exercised by employees.
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.
Currency translation reserve
The exchange differences arising from the translation of financial statements of foreign subsidiaries with functional currency other than Indian rupees is recognised in other comprehensive income and is presented within equity.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the consolidated Statement of Profit and Loss upon the occurrence of the related forecasted transaction.
SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2020 | 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 |
4,24,07,53,210 (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 1,82,39,356 (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 March 31, 2020:
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 March 31, 2020 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 March 31, 2020, 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 Finance Act 2020 has repealed the Dividend Distribution Tax (DDT). Companies are now required to pay/distribute dividend after deducting applicable taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
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 | Quarter ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Final dividend for fiscal 2018* | – | – | – | 10.25 |
Special dividend for fiscal 2018* | – | – | – | 5.00 |
Interim dividend for fiscal 2019 | – | – | – | 7.00 |
Special dividend for fiscal 2019 | – | 4.00 | – | 4.00 |
Final dividend for fiscal 2019 | – | – | 10.50 | – |
Interim dividend for fiscal 2020 | – | – | 8.00 | – |
*Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
During the year ended March 31, 2020 on account of the final dividend for fiscal 2019 and interim dividend for fiscal 2020 the Company has incurred a net cash outflow of 9,517 crore (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.
The Board of Directors in their meeting on April 20, 2020 recommended a final dividend of 9.50/- per equity share for the financial year ended March 31, 2020. This payment is subject to the approval of shareholders in the Annual General Meeting of the Company. In view of COVID - 19 the Company is working on an Annual General Meeting date which will be announced by the Company in due course. This final dividend if approved by shareholders would result in a net cash outflow of approximately 4,029 crore (excluding dividend paid on treasury shares).
The details of shareholder holding more than 5% shares as at March 31, 2020 and March 31, 2019 are as follows :
Name of the shareholder | As at March 31, 2020 | As at March 31, 2019 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 73,93,01,182 | 17.36 | 74,62,54,648 | 17.11 |
Life Insurance Corporation of India | 28,20,08,863 | 6.62 | 25,43,32,376 | 5.83 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2020 and March 31, 2019 are as follows:
(In crore, except as stated otherwise)
Particulars | As at March 31, 2020 | As at March 31, 2019 | ||
Shares | Amount | Shares | Amount | |
As at the beginning of the period | 433,59,54,462 | 2,170 | 217,33,12,301 | 1,088 |
Add: Shares issued on exercise of employee stock options - before bonus issue | – | – | 3,92,528 | – |
Add: Bonus shares issued | – | – | 2,173,704,829 | 1,088 |
Add: Shares issued on exercise of employee stock options - after bonus issue | 2,666,014 | 1 | 1,196,804 | – |
Less: Shares bought back (1)(2) | 97,867,266 | 49 | 12,652,000 | 6 |
As at the end of the period | 424,07,53,210 | 2,122 | 433,59,54,462 | 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 50,000,000 equity shares. To implement the 2019 Plan, upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 Plan) :
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board 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 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue. The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.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 18,239,356 and 20,324,982 shares as at March 31, 2020 and March 31, 2019, respectively under the 2015 plan. Out of these shares 200,000 equity shares each have been earmarked for welfare activities of the employees as at March 31, 2020 and March 31, 2019.
The following is the summary of grants during the three months and year ended March 31, 2020 and March 31, 2019:
Particulars | 2019 Plan | 2015 Plan | ||||||
Three months ended March 31, | Year ended March 31, | Three months ended March 31, | Year ended March 31, | |||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019* | |
Equity Settled RSU | ||||||||
KMPs | 169,000 | – | 356,793 | – | 295,800 | 458,330 | 507,896 | 675,530 |
Employees other than KMP | 1,734,500 | – | 1,734,500 | – | 1,370,250 | 1,878,050 | 3,346,280 | 3,665,170 |
1,903,500 | – | 2,091,293 | – | 1,666,050 | 2,336,380 | 3,854,176 | 4,340,700 | |
Cash settled RSU | ||||||||
KMPs | – | – | – | – | 180,400 | – | 180,400 | – |
Employees other than KMP | – | – | – | – | 377,260 | 21,500 | 475,740 | 74,090 |
– | – | – | – | 557,660 | 21,500 | 656,140 | 74,090 | |
1,903,500 | – | 2,091,293 | – | 2,223,710 | 2,357,880 | 4,510,316 | 4,414,790 |
*Information is adjusted for September 2018 bonus issue.
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Accordingly, annual time-based grant of 41,782 RSUs was made effective February 27, 2020 for fiscal 2020. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2020, 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.
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.
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. 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
Under the 2015 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time-based grant of 58,650 RSUs granted effective February 27, 2020.
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 4 crore for financial year 2020 under the 2019 Plan. 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 KMPs
Under the 2015 plan:
On April 12, 2019, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, 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. The grants were made effective May 2, 2019. The time based RSUs will generally vest over four years and the performance based RSUs will vest over three years based on certain performance targets.On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved time based grant of 375,768 RSUs to other KMPs under the 2015 plan. The grants were made effective February 27, 2020. These RSUs will vest over four years.
Under the 2019 plan:
On February 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, the Board, approved performance based grants of 169,000 RSUs to other KMPs under the 2019 plan. The grants were made effective February 27, 2020. These RSUs will vest over three years based on achievement of certain performance targets.
Break-up of employee stock compensation expense:
(in crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Granted to: | ||||
KMP | 11 | 10 | 56 | 33 |
Employees other than KMP | 55 | 49 | 193 | 169 |
Total (1) | 66 | 59 | 249 | 202 |
(1) Cash-settled stock compensation expense included above | 7 | 1 | 11 | 5 |
Share based payment arrangements that were modified during the year ended March 31, 2020:
During the year ended March 31, 2020, 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 57 crore is recognized as financial liability with a corresponding adjustment to equity.
The activity in the 2015 and 2019 Plan for equity-settled share based payment transactions during the three months and year ended March 31, 2020 and March 31, 2019 is set out as follows:
Particulars | Three months ended March 31, 2020 | Three months ended March 31, 2019 | Year ended March 31, 2020 | Year ended March 31, 2019* | ||||
Shares arising out of options | Weighted average exercise price () | Shares arising out of options | Weighted average exercise price () | 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 | 8,679,944 | 3.77 | 7,659,466 | 2.50 | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Granted | 1,666,050 | 5.00 | 2,336,380 | 5.00 | 3,854,176 | 5.00 | 4,340,700 | 3.84 |
Exercised | 955,650 | 3.72 | 660,078 | 2.50 | 2,561,218 | 2.95 | 1,864,510 | 2.50 |
Modification to cash settled awards | 408,568 | – | – | – | 1,061,820 | – | – | – |
Forfeited and expired | 200,878 | 3.74 | 154,570 | 2.67 | 631,438 | 3.29 | 795,810 | 2.61 |
Outstanding at the end | 8,780,898 | 3.96 | 9,181,198 | 3.13 | 8,780,898 | 3.96 | 9,181,198 | 3.13 |
Exercisable at the end | 392,185 | 2.54 | 235,256 | 2.50 | 392,185 | 2.54 | 235,256 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||||||
Outstanding at the beginning | 1,146,354 | 520 | 1,641,600 | 519 | 1,623,176 | 516 | 1,933,826 | 493 |
Granted | – | – | – | – | – | – | – | – |
Exercised | 31,124 | 499 | 8,224 | 499 | 104,796 | 516 | 117,350 | 515 |
Modification to cash settled awards | – | – | – | – | 351,550 | – | – | – |
Forfeited and expired | 14,900 | 499 | 10,200 | 499 | 66,500 | 528 | 193,300 | 521 |
Outstanding at the end | 1,100,330 | 539 | 1,623,176 | 516 | 1,100,330 | 539 | 1,623,176 | 516 |
Exercisable at the end | 780,358 | 543 | 698,500 | 517 | 780,358 | 543 | 698,500 | 517 |
2019 Plan: RSU | ||||||||
Outstanding at the beginning | 187,793 | 5.00 | – | – | – | – | – | – |
Granted | 1,903,500 | 5.00 | – | – | 2,091,293 | 5.00 | – | – |
Exercised | – | – | – | – | – | – | – | – |
Forfeited and expired | – | – | – | – | – | – | – | – |
Outstanding at the end | 2,091,293 | 5.00 | – | – | 2,091,293 | 5.00 | – | – |
Exercisable at the end | – | – | – | – | – | – | – | – |
* Information is adjusted for September, 2018 bonus issue
During the three months ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 720 and 732 respectively.
During the year ended March 31, 2020 and March 31, 2019 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 751 and 701 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2020 is as follows:
2019 plan - Options outstanding | 2015 plan - Options outstanding | |||||
Range of exercise prices per share () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price () |
2015 Plan: | ||||||
0 - 5 (RSU) | 2,091,293 | 1.76 | 5.00 | 8,780,898 | 1.59 | 3.96 |
450 - 600 (ESOP) | – | – | – | 1,100,330 | 3.48 | 539 |
2,091,293 | 1.76 | 5.00 | 9,881,228 | 1.80 | 64 |
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 was as follows:
2015 Plan- 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) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
* Information is adjusted for September, 2018 bonus issue
As at March 31, 2020 and March 31, 2019, 1,812,895 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 48 crore and 9 crore as at March 31, 2020 and March 31, 2019 respectively.
The fair values of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options. The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.
The fair value of each equity settled award is estimated on the date of grant using the 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) | 728 | 10.52 | 696 | 10.77 |
Exercise price ()/ ($ADS)(1) | 5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-30 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date () / ($ADS)(1) | 607 | 7.84 | 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.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Accrued compensation to employees (1) | 22 | 15 |
Compensated absences | 38 | 44 |
Financial liability under option arrangements (refer to note 2.1.1)(2) | 621 | – |
Payable for acquisition of business (refer to note 2.1.1) (2) | ||
Contingent consideration | 121 | 88 |
Other Payables (1) | 5 | – |
Total non-current other financial liabilities | 807 | 147 |
Current | ||
Unpaid dividends (1) | 30 | 29 |
Others | ||
Accrued compensation to employees (1) | 2,958 | 2,572 |
Accrued expenses (1) | 3,921 | 3,319 |
Retention monies (1) | 72 | 112 |
Payable for acquisition of business | ||
Contingent consideration (refer note no. 2.1.1) (2) | 219 | 102 |
Payable by controlled trusts (1) | 188 | 168 |
Financial liability relating to buyback (refer to note 2.11)(1) (4) | – | 1,202 |
Compensated absences | 1,832 | 1,619 |
Foreign currency forward and options contracts (2)(3) | 491 | 15 |
Capital creditors (1) | 280 | 676 |
Other payables (1) | 490 | 638 |
Total current other financial liabilities | 10,481 | 10,452 |
Total other financial liabilities | 11,288 | 10,599 |
(1) Financial liability carried at amortized cost | 7,966 | 8,731 |
(2) Financial liability carried at fair value through profit or loss | 1,432 | 205 |
(3) Financial liability carried at fair value through other comprehensive income | 20 | – |
Contingent consideration on undiscounted basis | 367 | 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 | |
March 31, 2020 | March 31, 2019 | |
Non-current | ||
Others | ||
Deferred income - government grant on land use rights | 43 | 42 |
Accrued gratuity (refer to note 2.20.1) | 28 | 30 |
Accrued provident fund liability (refer to note 2.20.2) | 185 | – |
Deferred rent (refer to note 2.19) | – | 174 |
Deferred income | 21 | 29 |
Others | 2 | – |
Total non-current other liabilities | 279 | 275 |
Current | ||
Unearned revenue | 2,990 | 2,809 |
Client deposit | 18 | 26 |
Others | ||
Withholding taxes and others | 1,759 | 1,487 |
Accrued gratuity (refer to note 2.20.1) | 3 | 2 |
Accrued provident fund liability (refer to note 2.20.2) | 64 | – |
Deferred rent (refer to note 2.19) | – | 63 |
Deferred income - government grant on land use rights | 2 | 1 |
Others | 6 | – |
Total current other liabilities | 4,842 | 4,388 |
Total other liabilities | 5,121 | 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.
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
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 | |
March 31, 2020 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and other provisions | 572 | 576 |
Total provisions | 572 | 576 |
The movement in the provision for post-sales client support and other provisions is as follows :
(In crore)
Particulars | Three months ended | Year ended |
March 31, 2020 | March 31, 2020 | |
Balance at the beginning | 603 | 576 |
Provision recognized/(reversed) | 1 | 116 |
Provision utilized | (66) | (174) |
Exchange difference | 34 | 54 |
Balance at the end | 572 | 572 |
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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Current taxes | 1,335 | 1,193 | 5,775 | 5,727 |
Deferred taxes | (174) | 12 | (407) | (96) |
Income tax expense | 1,161 | 1,205 | 5,368 | 5,631 |
During the year ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore which pertained to prior periods.
Additionally, income tax expense for the three months ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 183 crore and 82 crore, respectively. Income tax expense for the year ended March 31, 2020 and March 31, 2019 includes reversal (net of provisions) of 379 crore and 129 crore, respectively. These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions and on account of changes to tax regulations.
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 March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Profit before income taxes | 5,496 | 5,283 | 22,007 | 21,041 |
Enacted tax rates in India | 34.94% | 34.94% | 34.94% | 34.94% |
Computed expected tax expense | 1,921 | 1,846 | 7,691 | 7,353 |
Tax effect due to non-taxable income for Indian tax purposes | (741) | (755) | (2,718) | (2,705) |
Overseas taxes | 125 | 122 | 728 | 719 |
Tax provision (reversals) | (183) | (176) | (379) | (176) |
Effect of exempt non-operating income | (16) | (13) | (41) | (58) |
Effect of unrecognized deferred tax assets | (9) | 17 | 53 | 92 |
Effect of differential tax rates | (7) | 2 | (81) | (1) |
Effect of non-deductible expenses | 13 | 47 | 120 | 353 |
Branch profit tax (net of credits) | 55 | 108 | (35) | 25 |
Others | 3 | 7 | 30 | 29 |
Income tax expense | 1,161 | 1,205 | 5,368 | 5,631 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2020 and March 31, 2019 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 year ended March 31, 2020 and March 31, 2019 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, 2020, Infosys' U.S. branch net assets amounted to approximately 5,474 crore. As at March 31, 2020, the Company has a deferred tax liability for branch profit tax of 178 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 8,447 crore and 6,007 crore as at March 31, 2020 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 3,187 crore and 2,624 crore as at March 31, 2020 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 March 31, 2020:
(In crore)
Year | As at |
March 31, 2020 | |
2021 | 83 |
2022 | 142 |
2023 | 209 |
2024 | 172 |
2025 | 121 |
Thereafter | 2,460 |
Total | 3,187 |
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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Income tax assets | 5,391 | 6,743 |
Current income tax liabilities | 1,490 | 1,567 |
Net current income tax asset / (liability) at the end | 3,901 | 5,176 |
The gross movement in the current income tax asset/ (liability) for the three months and year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Net current income tax asset/ (liability) at the beginning | 3,739 | 4,783 | 5,176 | 4,027 |
Translation differences | (1) | 2 | (4) | (1) |
Income tax paid | 1,586 | 1,573 | 4,550 | 6,832 |
Current income tax expense | (1,335) | (1,193) | (5,775) | (5,727) |
Reclassified under assets held for sale (refer note no. 2.1.2) | – | – | – | 23 |
Reclassified from held for sale (Refer note 2.1.2) | – | – | – | 13 |
Income tax benefit arising on exercise of stock options | 3 | 5 | 9 | 8 |
Additions through business combination | – | – | (40) | (9) |
Tax impact on buyback expenses | – | 4 | 4 | 4 |
Income tax on other comprehensive income | (91) | 2 | (19) | 6 |
Net current income tax asset/ (liability) at the end | 3,901 | 5,176 | 3,901 | 5,176 |
The movement in gross deferred income tax assets / liabilities (before set off) for the three months ended March 31, 2020 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2020 | 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 March 31, 2020 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 248 | (5) | – | – | – | – | 1 | 244 |
Lease liabilities | 79 | 57 | – | – | – | – | – | 136 |
Accrued compensation to employees | 36 | 16 | – | – | – | – | – | 52 |
Trade receivables | 185 | 12 | – | – | – | – | – | 197 |
Compensated absences | 439 | (6) | – | – | – | – | – | 433 |
Post sales client support | 108 | 2 | – | – | – | – | 1 | 111 |
Credits related to branch profits | 245 | 117 | – | – | – | – | 15 | 377 |
Derivative financial instruments | (8) | 168 | – | 2 | – | – | – | 162 |
Intangible assets | 18 | – | – | – | – | – | 2 | 20 |
Intangibles arising on business combinations | (277) | 14 | (150) | – | – | – | (13) | (426) |
Branch profit tax | (361) | (172) | – | – | – | – | (22) | (555) |
Others | 53 | (29) | – | – | – | – | 1 | 25 |
Total deferred income tax assets/(liabilities) | 765 | 174 | (150) | 2 | – | – | (15) | 776 |
The movement in gross deferred income tax assets / liabilities (before set off) for the three months ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2019 | 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 March 31, 2019 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 242 | 20 | – | – | – | – | – | 262 |
Accrued compensation to employees | 25 | 6 | – | – | – | – | – | 31 |
Trade receivables | 165 | 11 | – | – | – | – | – | 176 |
Compensated absences | 387 | 10 | – | – | – | – | – | 397 |
Post sales client support | 111 | (7) | – | – | – | – | – | 104 |
Credits related to branch profits | 261 | 81 | – | – | – | – | (2) | 340 |
Derivative financial instruments | (104) | (7) | – | 5 | – | – | – | (106) |
Intangible assets | 16 | – | – | – | – | – | – | 16 |
Intangibles arising on business combinations | (163) | 34 | – | – | – | – | 1 | (128) |
Branch profit tax | (355) | (189) | – | – | – | – | 3 | (541) |
Others | 100 | 29 | – | 17 | – | – | 3 | 149 |
Total deferred income tax assets/(liabilities) | 685 | (12) | – | 22 | – | – | 5 | 700 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2020 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 March 31, 2020 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 262 | (20) | 1 | – | – | – | 1 | 244 |
Lease liabilities | 52 | 76 | – | – | 6 | – | 2 | 136 |
Accrued compensation to employees | 31 | 23 | – | – | – | – | (2) | 52 |
Trade receivables | 176 | 21 | – | – | – | – | – | 197 |
Compensated absences | 397 | 35 | – | – | – | – | 1 | 433 |
Post sales client support | 104 | 7 | – | – | – | – | – | 111 |
Credits related to branch profits | 340 | 14 | – | – | – | – | 23 | 377 |
Derivative financial instruments | (106) | 255 | – | 12 | – | – | 1 | 162 |
Intangible assets | 16 | 1 | – | – | – | – | 3 | 20 |
Intangibles arising on business combinations | (128) | 44 | (326) | – | – | – | (16) | (426) |
Branch profit tax | (541) | 22 | – | – | – | – | (36) | (555) |
Others | 97 | (71) | 9 | (7) | – | – | (3) | 25 |
Total deferred income tax assets/(liabilities) | 700 | 407 | (316) | 5 | 6 | – | (26) | 776 |
The movement in gross deferred income tax assets / liabilities (before set off) for the year ended March 31, 2019 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 March 31, 2019 |
Deferred income tax assets/(liabilities) | ||||||||
Property, plant and equipment | 215 | 46 | – | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | – | 1 | 104 |
Credits related to branch profits | 341 | (22) | – | – | – | – | 21 | 340 |
Derivative financial instruments | 11 | (111) | – | (7) | – | – | 1 | (106) |
Intangible assets | 9 | 6 | – | – | – | – | 1 | 16 |
Intangibles arising on business combinations | (38) | 63 | (56) | – | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | – | (33) | (541) |
Others | 91 | 32 | (8) | 8 | – | 28 | (2) | 149 |
Total deferred income tax assets/(liabilities) | 741 | 96 | (64) | 1 | – | (53) | (21) | 700 |
The deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Deferred income tax assets after set off | 1,744 | 1,372 |
Deferred income tax liabilities after set off | (968) | (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 IT services comprising software development and related services, maintenance, consulting and package implementation, and from licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related services”). Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.
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.
Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.
The Group’s contracts may include variable consideration including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended have been used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the lives of the contracts and are recognized in profit or loss in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.
The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group 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).When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Group uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Group transfers the related goods or services to the customer.
The Group presents revenues net of indirect taxes in its consolidated statement of profit and loss.
Revenues for the three months and year ended March 31, 2020 and March 31, 2019 are as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Revenue from software services | 21,808 | 20,372 | 85,260 | 78,359 |
Revenue from products and platforms | 1,459 | 1,167 | 5,531 | 4,316 |
Total revenue from operations | 23,267 | 21,539 | 90,791 | 82,675 |
The Group has evaluated the impact of COVID – 19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts;(ii) onerous obligations;(iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Group has concluded that the impact of COVID – 19 is not material based on these estimates. Due to the nature of the pandemic, the Group will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
Disaggregated revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
For the three months ended March 31, 2020 and March 31, 2019
(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 | 4,276 | 2,433 | 1,796 | 1,619 | 1,322 | 1,700 | 1,015 | 170 | 14,331 |
4,093 | 2,206 | 1,763 | 1,513 | 1,150 | 1,575 | 767 | 126 | 13,193 | |
Europe | 1,540 | 993 | 555 | 1,110 | 937 | 54 | 435 | 58 | 5,682 |
1,255 | 987 | 464 | 975 | 918 | 35 | 492 | 41 | 5,167 | |
India | 342 | 10 | 38 | 5 | 25 | 65 | 11 | 113 | 609 |
296 | 6 | 23 | 1 | 21 | 32 | 4 | 110 | 493 | |
Rest of the world | 1,124 | 186 | 628 | 258 | 79 | 12 | 23 | 335 | 2,645 |
1,161 | 217 | 671 | 258 | 72 | 8 | 24 | 275 | 2,686 | |
Total | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 | |
Revenue by offerings | |||||||||
Digital | 3,164 | 1,683 | 1,314 | 1,248 | 949 | 682 | 508 | 217 | 9,765 |
2,288 | 1,297 | 1,023 | 925 | 716 | 593 | 333 | 107 | 7,282 | |
Core | 4,118 | 1,939 | 1,703 | 1,744 | 1,414 | 1,149 | 976 | 459 | 13,502 |
4,517 | 2,119 | 1,898 | 1,822 | 1,445 | 1,057 | 954 | 445 | 14,257 | |
Total | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
For the year ended March 31, 2020 and March 31, 2019
(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 | 16,749 | 9,222 | 7,332 | 6,456 | 5,131 | 6,537 | 3,816 | 564 | 55,807 |
16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 | |
Europe | 5,983 | 3,966 | 1,925 | 4,207 | 3,576 | 191 | 1,892 | 176 | 21,916 |
4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 | |
India | 1,311 | 48 | 192 | 12 | 88 | 207 | 39 | 468 | 2,365 |
1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 | |
Rest of the world | 4,582 | 799 | 2,535 | 1,061 | 336 | 37 | 90 | 1,263 | 10,703 |
4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Revenue by offerings | |||||||||
Digital | 11,562 | 6,165 | 4,843 | 4,485 | 3,481 | 2,541 | 1,850 | 690 | 35,617 |
8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 | |
Core | 17,063 | 7,870 | 7,141 | 7,251 | 5,650 | 4,431 | 3,987 | 1,781 | 55,174 |
18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 | |
Total | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
* Geographical revenues is based on the domicile of customer.
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning, Stater digital platform and Infosys McCamish- insurance platform.
The percentage of revenue from fixed price contracts for each of the three months and year ended March 31, 2020 and March 31, 2019 is approximately 55%.
Trade Receivables and Contract Balances
The timing of revenue recognition, billings and cash collections results in Receivables, Unbilled Revenue, and Unearned Revenue on the Group’s Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.
The Group’s Receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore Unbilled Revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivables and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.
During the year ended March 31, 2020 and March 31, 2019 , the company recognized revenue of 2,421 crore and 2,237 crore arising from opening unearned revenue as of April 1, 2019 and April 1, 2018 respectively.
During the year ended March 31, 2020 and March 31, 2019, 2,971 crore and 2,685 crore of unbilled revenue pertaining to other 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 and unit of work based contracts. 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 March 31, 2020, other than those meeting the exclusion criteria mentioned above, is 55,926 crore. Out of this, the Group expects to recognize revenue of around 51% 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. Generally, customers have not terminated contracts without cause.
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 recognized in the Consolidated Statement of Profit and Loss and reported within exchange gains/ (losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
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.
Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.
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 year ended March 31, 2020 and March 31, 2019 is as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Interest income on financial assets carried at amortized cost: | ||||
Tax free bonds and Government bonds | 35 | 35 | 143 | 143 |
Deposit with Bank and others | 292 | 320 | 1,146 | 1,261 |
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 | 65 | 142 | 322 | 646 |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | – | 1 | 2 | 2 |
Gain / (loss) on liquid mutual funds and other investments | 35 | 65 | 183 | 170 |
Income on investments carried at fair value through other comprehensive income | 4 | – | 41 | – |
Interest income on income tax refund | 8 | – | 259 | 51 |
Exchange gains/ (losses) on foreign currency forward and options contracts | (477) | 195 | (511) | 185 |
Exchange gains/ (losses) on translation of assets and liabilities | 594 | (139) | 1,023 | 133 |
Miscellaneous income, net | 58 | 46 | 195 | 291 |
Total other income | 614 | 665 | 2,803 | 2,882 |
2.18 EXPENSES
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Employee benefit expenses | ||||
Salaries including bonus | 12,489 | 11,701 | 49,252 | 43,894 |
Contribution to provident and other funds | 283 | 234 | 1,107 | 946 |
Share based payments to employees (Refer note no. 2.11) | 66 | 59 | 249 | 202 |
Staff welfare | 78 | 80 | 279 | 273 |
12,916 | 12,074 | 50,887 | 45,315 | |
Cost of software packages and others | ||||
For own use | 268 | 237 | 1,035 | 930 |
Third party items bought for service delivery to clients | 487 | 452 | 1,668 | 1,623 |
755 | 689 | 2,703 | 2,553 | |
Other expenses | ||||
Repairs and maintenance | 400 | 359 | 1,480 | 1,269 |
Power and fuel | 53 | 49 | 229 | 221 |
Brand and marketing | 143 | 135 | 528 | 489 |
Short-term leases (Refer to Note 2.19) | 24 | – | 89 | – |
Operating leases | – | 165 | – | 585 |
Rates and taxes | 64 | 52 | 193 | 184 |
Consumables | 33 | 15 | 100 | 47 |
Insurance | 23 | 19 | 90 | 67 |
Provision for post-sales client support and others | – | (24) | – | 1 |
Commission to non-whole time directors | 2 | 2 | 8 | 8 |
Impairment loss recognized / (reversed) under expected credit loss model | 74 | 18 | 172 | 248 |
Contributions towards Corporate Social responsibility | 130 | 66 | 385 | 266 |
Others | 125 | 76 | 382 | 270 |
1,071 | 932 | 3,656 | 3,655 |
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 March 31, 2020:
(In crore)
Particulars | Category of ROU asset | Total | ||||
Land | Buildings | Vehicles | Computers | |||
Balance as of January 1, 2020 | 625 | 3,169 | 18 | 42 | 3,854 | |
Additions* | 1 | 478 | – | 1 | 480 | |
Deletions | – | (23) | (1) | – | (24) | |
Depreciation | (1) | (149) | (2) | (2) | (154) | |
Translation difference | 1 | 10 | – | 1 | 12 | |
Balance as of March 31, 2020 | 626 | 3,485 | 15 | 42 | 4,168 |
*Net of lease incentives of 47 crore related to lease of buildings
Following are the changes in the carrying value of right of use assets for the year ended March 31, 2020:
(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* | 1 | 1,064 | 6 | 49 | 1,120 | |
Additions through business combination (Refer to note 2.1) | – | 177 | 10 | – | 187 | |
Deletions | (3) | (130) | (1) | – | (134) | |
Depreciation | (6) | (540) | (9) | (8) | (563) | |
Translation difference | – | 16 | – | 1 | 17 | |
Balance as of March 31, 2020 | 626 | 3,485 | 15 | 42 | 4,168 |
*Net of lease incentives of 115 crore related to lease of buildings
The following is the break-up of current and non-current lease liabilities as of March 31, 2020
(In crore)
Particulars | Amount |
Current lease liabilities | 619 |
Non-current lease liabilities | 4,014 |
Total | 4,633 |
The following is the movement in lease liabilities during the three months and year ended March 31, 2020:
(In crore)
Particulars | Three months ended March 31, 2020 | Year ended March 31, 2020 |
Balance at the beginning | 4,143 | 3,598 |
Additions | 575 | 1,241 |
Additions through business combination (Refer to note 2.1) | – | 224 |
Deletions | (29) | (145) |
Finance cost accrued during the period | 45 | 170 |
Payment of lease liabilities | (208) | (639) |
Translation difference | 107 | 184 |
Balance at the end | 4,633 | 4,633 |
The table below provides details regarding the contractual maturities of lease liabilities as of March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 796 |
One to five years | 2,599 |
More than five years | 2,075 |
Total | 5,470 |
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 recorded for short-term leases was 24 crore for the three months ended March 31,2020 and 89 crore for the year ended March 31,2020
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 year ended March 31, 2020:
(In crore)
Particulars | Three months ended March 31, 2020 |
Year ended March 31, 2020 |
Balance at the beginning | 417 | 430 |
Interest income accrued during the period | 4 | 15 |
Lease receipts | (12) | (46) |
Translation difference | 24 | 34 |
Balance at the end | 433 | 433 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as of March 31, 2020 on an undiscounted basis:
(In crore)
Particulars | Amount | |
Less than one year | 50 | |
One to five years | 217 | |
More than five years | 244 | |
Total | 511 | |
Leases not yet commenced to which Group is committed amounts to 655 crore for a lease term ranging from 2 years to 13 years.
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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,351 | 1,201 |
Service cost | 178 | 157 |
Interest expense | 90 | 85 |
Remeasurements - Actuarial (gains) / losses | (79) | 32 |
Benefits paid | (141) | (128) |
Translation difference | 3 | 2 |
Reclassified from held for sale (refer note no 2.1.2) | – | 2 |
Benefit obligations at the end | 1,402 | 1,351 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,361 | 1,216 |
Interest income | 97 | 90 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 9 | 4 |
Contributions | 191 | 174 |
Benefits paid | (136) | (123) |
Fair value of plan assets at the end | 1,522 | 1,361 |
Funded status | 120 | 10 |
Prepaid gratuity benefit (refer to note no 2.9) | 151 | 42 |
Accrued gratuity (refer to note no 2.13) | (31) | (32) |
Amount for the three months and year ended March 31, 2020 and March 31, 2019 recognized in the consolidated statement of Profit and Loss under employee benefit expense:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Service cost | 45 | 39 | 178 | 157 |
Net interest on the net defined benefit liability/(asset) | (3) | (2) | (7) | (5) |
Net gratuity cost | 42 | 37 | 171 | 152 |
Amount for the three months and year ended March 31, 2020 and March 31, 2019 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | (95) | 5 | (79) | 32 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 4 | 1 | (9) | (4) |
(91) | 6 | (88) | 28 |
(In crore)r
Particulars | Three months ended March 31, | Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
(Gain)/loss from change in demographic assumptions | 1 | – | 1 | (4) |
(Gain)/loss from change in financial assumptions | (85) | 9 | (57) | 30 |
(Gain)/loss from experience adjustment | (11) | (4) | (23) | 6 |
(95) | 5 | (79) | 32 |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2020 and March 31, 2019 are set out below:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Discount rate (1) | 6.2% | 7.1% |
Weighted average rate of increase in compensation levels (2) | 6.0% | 8.0% |
Weighted average duration of defined benefit obligation (3) | 5.9 years | 5.9 years |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and year ended March 31, 2020 and March 31, 2019 are set out below:
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Discount rate (%) | 7.1 | 7.5 | 7.1 | 7.5 |
Weighted average rate of increase in compensation levels (%) | 8.0 | 8.0 | 8.0 | 8.0 |
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 March 31, 2020 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
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 March 31, 2020 and March 31, 2019, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months ended March 31, 2020 and March 31, 2019 were 20 crore and 23 crore, respectively.
Actual return on assets for the year ended March 31, 2020 and March 31, 2019 were 106 crore and 95 crore, respectively.
The Group expects to contribute 145 crore to the gratuity trusts during fiscal 2021.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 215 |
1-2 year | 218 |
2-3 year | 220 |
3-4 year | 231 |
4-5 year | 148 |
5-10 years | 1,183 |
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 March 31, 2020:
(In crore)
Particulars | As at |
March 31, 2020 | |
Change in benefit obligations | |
Benefit obligations at the beginning | 5,989 |
Service cost - employer contribution | 407 |
Employee contribution | 857 |
Interest expense | 561 |
Actuarial (gains) / loss | 216 |
Benefits paid | (664) |
Benefit obligations at the end | 7,366 |
Change in plan assets | |
Fair value of plan assets at the beginning | 5,989 |
Interest income | 561 |
Remeasurements- Return on plan assets excluding amounts included in interest income (1) | (33) |
Contributions | 1,264 |
Benefits paid | (664) |
Fair value of plan assets at the end | 7,117 |
Net liability (refer to note 2.13) | (249) |
(1) Includes unrealized losses on certain investments in bonds
Amount for the three months and year ended March 31, 2020 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, 2020 | Year ended March 31, 2020 |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 69 | 216 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (48) | 33 |
21 | 249 |
Assumptions used in determining the present value obligation of the defined benefit plan under the Deterministic Approach:
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Government of India (GOI) bond yield (1) | 6.20% | 7.10% |
Expected rate of return on plan assets | 8.00% | 9.20% |
Remaining term to maturity of portfolio | 6 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.50% | 8.65% |
Thereafter | 8.50% | 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. |
The breakup of the plan assets into various categories as at March 31, 2020 is as follows:
Particulars | As at |
March 31, 2020 | |
Central and State government bonds | 49% |
Public sector undertakings and Private sector bonds | 48% |
Others | 3% |
The asset allocation for plan assets is determined based on investment criteria prescribed under the relevant regulations.
As at March 31, 2020 the defined benefit obligation would be affected by approximately 72 crore and 108 crore on account of a 0.25% increase / decrease, respectively, in the expected rate of return on plan assets.
The Group contributed 167 crore and 142 crore to the provident fund during the three months ended March 31, 2020 and March 31, 2019, respectively. The Group contributed 639 crore and 543 crore to the provident fund during the year ended March 31, 2020 and March 31, 2019, respectively. The same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
In February 2019, the Hon’ble Supreme Court of India vide its judgment and subsequent review petition of August 2019 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 of the judgement, 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 60 crore and 57 crore during the three months ended March 31, 2020 and March 31, 2019, respectively. The Group contributed 240 crore and 215 crore during the year ended March 31, 2020 and March 31, 2019, respectively and the 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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Salaries and bonus(1) | 12,647 | 11,838 | 49,837 | 44,405 |
Defined contribution plans | 85 | 81 | 338 | 307 |
Defined benefit plans | 184 | 155 | 712 | 603 |
12,916 | 12,074 | 50,887 | 45,315 |
(1) | Includes employee stock compensation expense of 66 crore and 59 crore for the three months ended March 31, 2020 and March 31, 2019, respectively. Similarly, includes employee stock compensation expense of 249 crore and 202 crore for the year ended March 31, 2020 and March 31, 2019 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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,240,181,854 | 4,347,129,592 | 4,257,754,522 | 4,347,130,157 |
Effect of dilutive common equivalent shares - share options outstanding | 5,799,532 | 5,894,271 | 7,389,706 | 6,290,615 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,245,981,386 | 4,353,023,863 | 4,265,144,228 | 4,353,420,772 |
Information in the table above is adjusted for September 2018 bonus issue where ever applicable (Refer note no 2.11)
(1) Excludes treasury shares
For the three months ended March 31, 2020 and March 31, 2019, 54,275 and Nil number of option to purchase equity shares had an anti-dilutive effect, respectively.For the year ended March 31, 2020 and March 31, 2019, 13,093 and Nil number of options to purchase equity shares had an anti-dilutive effect, respectively.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | |
March 31, 2020 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Group, not acknowledged as debts(1) | 3,583 | 3,081 |
[Amount paid to statutory authorities 5,353 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)(2) | 1,365 | 1,724 |
Other commitments* | 61 | 86 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2020, claims against the Group not acknowledged as debts in respect of income tax matters amounted to 3,353 crore. The claims against the group majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes. These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.Amount paid to statutory authorities against the above tax claims amounted to 5,352 crore. |
(2) Capital contracts primarily comprises of commitments for infrastructure facilities and computer equipment’s.
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 and Exchange Commission (SEC) on Form 6-K on the same date. As previously disclosed on January 10, 2020 the outcome of the investigation has not resulted in restatement of previously issued financial statements. The Company cooperated with an investigation by the SEC regarding the same matters. In March 2020, the Company received notification from the SEC that the SEC has concluded its investigation and the Company does not anticipate any further action by the SEC on this matter. The Company is responding to all the inquires received from the Indian regulatory authorities and will continue to cooperate with the authorities for any additional requests for information. Additionally, in October 2019, a shareholder 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 alleged 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 reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’s results of operations or financial condition.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2020 | 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 | 100% | 99.99% |
Infosys CIS LLC(1) (18) (26) | 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 | 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(32) | Poland | 99.99% | 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(7)(31) | Japan | – | 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% | – |
Outbox systems Inc. dba Simplus (US)(27) | U.S. | 100% | – |
Simplus Australia Pty Ltd(30) | Australia | 100% | – |
Sqware Peg Digital Pty Ltd(30) | Australia | 100% | – |
Simplus Philippines, Inc.(28) | Philippines | 100% | – |
Simplus Europe, Ltd.(28) | U.K. | 100% | – |
Simplus U.K., Ltd.(29) | U.K. | 100% | – |
Simplus Ireland, Ltd.(29) | Ireland | 100% | – |
(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 subsidiary of Infosys Consulting Holding AG (formerly Lodestone Holding AG) | |
(6) | Majority owned and controlled subsidiary 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 of 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 subsidiary of Stater N.V | |
(23) | Majority owned and controlled subsidiary of Stater Duitsland B. V. | |
(24) | Majority owned and controlled subsidiary of Stater Participations B. V. | |
(25) | Effective October 1, 2019, merged into Infosys Consulting Ltda, a majority owned and controlled subsidiary of Infosys Ltd. | |
(26) | Under Liquidation | |
(27) | On March 13, 2020, Infosys Nova Holdings LLC, acquired 100% of the voting interests in Outbox Systems Inc. | |
(28) | Wholly-owned subsidiary of Outbox Systems Inc. | |
(29) | Wholly-owned subsidiary of Simplus Europe, Ltd. | |
(30) | Wholly-owned subsidiary of Simplus ANZ Pty Ltd. | |
(31) | Liquidated effective October 31, 2019 | |
(32) | On February 20, 2020, Infosys Poland, Sp z.o.o, acquired 100% of the voting interests in Infosys Consulting Sp. z.o.o from Infosys Consulting Holding AG (formerly Lodestone Holding AG). |
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 | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM 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 as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva (retired as member of the Board effective February 3, 2020)
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 March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3) | 29 | 29 | 118 | 96 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 8 | 8 |
Total | 31 | 31 | 126 | 104 |
(1) | Total employee stock compensation expense for the three months ended March 31, 2020 and March 31, 2019 includes a charge of 11 crore and 10 crore, respectively, towards key managerial personnel. For the year ended March 31, 2020 and March 31, 2019, includes a charge of 56 crore and 33 crore respectively, towards key managerial personnel. (Refer to note 2.11) |
(2) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(3) | Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole. |
2.24 SEGMENT 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 centers 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 March 31, 2020 and March 31, 2019:
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 7,282 | 3,622 | 3,017 | 2,992 | 2,363 | 1,831 | 1,484 | 676 | 23,267 |
6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 | |
Identifiable operating expenses | 3,808 | 1,790 | 1,769 | 1,481 | 1,246 | 1,056 | 827 | 422 | 12,399 |
3,614 | 1,705 | 1,731 | 1,500 | 1,190 | 984 | 694 | 348 | 11,766 | |
Allocated expenses | 1,611 | 774 | 688 | 655 | 560 | 344 | 313 | 217 | 5,162 |
1,470 | 694 | 612 | 613 | 500 | 290 | 270 | 167 | 4,616 | |
Segmental operating income | 1,863 | 1,058 | 560 | 856 | 557 | 431 | 344 | 37 | 5,706 |
1,721 | 1,017 | 578 | 634 | 471 | 376 | 323 | 37 | 5,157 | |
Unallocable expenses* | 779 | ||||||||
539 | |||||||||
Other income, net (Refer to note 2.17) | 614 | ||||||||
665 | |||||||||
Finance costs (Refer to note 2.19) | (45) | ||||||||
– | |||||||||
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) | – | ||||||||
– | |||||||||
Profit before tax | 5,496 | ||||||||
5,283 | |||||||||
Income Tax Expense | 1,161 | ||||||||
1,205 | |||||||||
Net Profit | 4,335 | ||||||||
4,078 | |||||||||
Depreciation and amortization expense | 749 | ||||||||
531 | |||||||||
Non-cash expenses other than depreciation and amortization | 30 | ||||||||
8 |
*Unallocable expenses for the three months ended March 31, 2020 includes amortization on ROU assets consequent to adoption of Ind AS 116 - Leases effective April 1, 2019
Year ended March 31, 2020 and March 31, 2019:
(In crore)
Particulars |
Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 28,625 | 14,035 | 11,984 | 11,736 | 9,131 | 6,972 | 5,837 | 2,471 | 90,791 |
26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 | |
Identifiable operating expenses | 14,977 | 6,989 | 7,084 | 6,104 | 4,991 | 4,125 | 3,212 | 1,486 | 48,968 |
14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 | |
Allocated expenses | 6,342 | 2,834 | 2,476 | 2,416 | 2,081 | 1,243 | 1,194 | 921 | 19,507 |
5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 | |
Segmental operating income | 7,306 | 4,212 | 2,424 | 3,216 | 2,059 | 1,604 | 1,431 | 64 | 22,316 |
6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 | |
Unallocable expenses* | 2,942 | ||||||||
2,027 | |||||||||
Other income, net (Refer to note 2.17) | 2,803 | ||||||||
2,882 | |||||||||
Finance costs (Refer to note 2.19) | (170) | ||||||||
– | |||||||||
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 | 22,007 | ||||||||
21,041 | |||||||||
Income Tax Expense | 5,368 | ||||||||
5,631 | |||||||||
Net Profit | 16,639 | ||||||||
15,410 | |||||||||
Depreciation and amortization expense | 2,893 | ||||||||
2,011 | |||||||||
Non-cash expenses other than depreciation and amortization | 49 | ||||||||
740 | |||||||||
* | Unallocable expenses for the year ended March 31, 2020 includes amortization on ROU assets consequent to adoption of Ind AS 116 - Leases effective April 1, 2019 |
Significant clients
No client individually accounted for more than 10% of the revenues in the three months and year ended March 31, 2020 and March 31, 2019
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note no | Three months ended March 31, |
Year ended March 31, | ||
2020 | 2019 | 2020 | 2019 | ||
Revenue from operations | 2.16 | 23,267 | 21,539 | 90,791 | 82,675 |
Cost of Sales | 15,501 | 14,283 | 60,732 | 53,867 | |
Gross profit | 7,766 | 7,256 | 30,059 | 28,808 | |
Operating expenses | |||||
Selling and marketing expenses | 1,172 | 1,226 | 4,711 | 4,473 | |
General and administration expenses | 1,667 | 1,412 | 5,974 | 5,455 | |
Total operating expenses | 2,839 | 2,638 | 10,685 | 9,928 | |
Operating profit | 4,927 | 4,618 | 19,374 | 18,880 | |
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 |
Other income, net | 2.17 | 614 | 665 | 2,803 | 2,882 |
Finance cost | 2.19 | 45 | – | 170 | – |
Profit before tax | 5,496 | 5,283 | 22,007 | 21,041 | |
Tax expense: | |||||
Current tax | 2.15 | 1,335 | 1,193 | 5,775 | 5,727 |
Deferred tax | 2.15 | (174) | 12 | (407) | (96) |
Profit for the period | 4,335 | 4,078 | 16,639 | 15,410 | |
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 | (21) | (3) | (180) | (22) |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | (2) | 1 | (33) | 70 |
(23) | (2) | (213) | 48 | ||
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 | – | (15) | (36) | 21 |
Exchange differences on translation of foreign operations, net | 237 | (70) | 378 | 63 | |
Fair value changes on investments, net | 2.4 and 2.15 | 15 | 25 | 22 | 2 |
252 | (60) | 364 | 86 | ||
Total other comprehensive income / (loss), net of tax | 229 | (62) | 151 | 134 | |
Total comprehensive income for the period | 4,564 | 4,016 | 16,790 | 15,544 | |
Profit attributable to: | |||||
Owners of the Company | 4,321 | 4,074 | 16,594 | 15,404 | |
Non-controlling interests | 14 | 4 | 45 | 6 | |
4,335 | 4,078 | 16,639 | 15,410 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,545 | 4,012 | 16,732 | 15,538 | |
Non-controlling interests | 19 | 4 | 58 | 6 | |
4,564 | 4,016 | 16,790 | 15,544 |
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 |
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