A n n u a l R e p o r t 1996-97

INFOSYS TECHNOLOGIES LIMITED

 Infosys
NOTICE
Notice is hereby given that the Sixteenth Annual General Meeting of the members of Infosys Technologies
Limited will be held on Saturday, June 7, 1997, at 3.00 p.m. at Hotel Taj Residency, No. 41/3. M. G. Road,
Bangalore - 560 001, to transact the following business:

ORDINARY BUSINESS
1. To receive, consider and adopt the Balance Sheet as at March 31, 1997 and the Profit and Loss Account
for the year ended on that date and the Report of Directors and Auditor thereon.
2. To declare a final dividend.
3. To appoint a Director in place of Mr. Nandan M. Nilekani who retires by rotation, and is eligible for
re-election.
4. To appoint Messrs. Bharat S. Raut & Co., Chartered Accountants, as the Auditors of the company in place
of the retiring Auditor Mr. A. M. Bhatkal who has not offered himself for reappointment and fix their
remuneration.

SPECIAL BUSINESS
5. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT the Authorized Share Capital of the company be and is hereby increased from
Rs. 10,00,00,000 (Rupees ten crores only) divided into 1,00,00,000 (One crore only) equity shares of
Rs. 10 each (Rupees ten only) to Rs. 20,00,00,000 (Rupees twenty crores only) divided into 2,00,00.000
(Two crores only) equity shares of Rs. 10 each (Rupees ten only), and consequently the existing clause V of
the Memorandum of Association of the company be and is hereby altered by deleting the same and
substituting in place and stead thereof, the following as new clause V
"The Authorized Share Capital of the company is Rs. 20,00,00,000 (Rupees twenty crores only) divided into
2,00,00,000 (two crores only) equity shares of Rs. 10 each (Rupees ten only) with power to increase and reduce
the capital of the company and to divide the shares in the capital for the time being into several classes and
attach thereto respectively such preferential, deferred, qualified or special rights, privileges or conditions as
may be determined by or in accordance with the Articles of Association of the company for the time being and
to vary, modify or abrogate any such rights, privileges or conditions in such manner as may be permitted by the
Act or by the Articles of Association of the company for the time being."
6. To consider and, if thought fit, to pass, with or without modifications, as a special resolution, the following:
RESOLVED THAT the Articles of Association of the company be and is hereby altered by deleting the
existing article '3' and substituting in place and stead thereof the following new article '3':
"The Authorized Share Capital of the company is Rs. 20,00,00,000 (Rupees twenty crores only) divided
into 2,00,00,000 (Two crores only) equity shares of Rs. 10 each (Rupees ten only)".
7. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in accordance with the relevant provisions of the company's Articles of Association, and
subject to the necessary approvals from Regulatory Bodies if required, and upon recommendation of the
Board of Directors, asumofRs. 7,25,96,000 (Rupees seven crores, twenty five lakhs and ninety six thousand
only), standing to the credit of the company's General Reserve Account, be and the same is hereby
capitalized by issuing therefrom 72,59,600 new equity shares of Rs; 10 each credited as fully paid up as
and by way of bonus shares in the proportion of one equity shar 3 for every one equity share held by the
members on a date to be determined by the Board.
RESOLVED FURTHER that the Board of Directors be and they are hereby authorized to capitalize a sum
not exceeding Rs. 74,90,000 (Rupees seventy four lakhs and ninety thousand only) standing to the credit
of the company's General Reserve Account, appropriately to provide for issue and allotment of bonus
shares in respect of warrants that are currently held by the trustee of Infosys Technologies Limited
Employees Welfare Trust and by eligible employees under the Employees Stock Offer Plan Scheme, in the
ratio of one equity share for every equity share held, after conversion of warrants into shares of the
company at any time on or before the record date set by the Board for the issue and allotment of bonus
shares to all shareholders of the company as provided hereinabove.
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RESOLVED FURTHER that the aforesaid bonus shares shall rank pan passuin all respects with the existing
equity shares save and except such shares shall be entitled to dividend commencing from the year in
which such shares are allotted but pro-rata for the year of allotment from the date of allotment.
RESOLVED FURTHER that the Board is hereby authorized to take all other steps as may be necessary to
give effect to the aforesaid resolution and determine all other terms and conditions of the issue of bonus
shares as the Board may in its absolute discretion deern fit.
8. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT Mr. S. D. Shibulal, who was co-opted as an Additional Director of the company by the
Board of Directors and who holds office under Section 260 of the Companies Act, 1956, until the date of
the Annual General Meeting and in respect of whom the company has received a notice in writing proposing
his candidature for the office of a Director, be arid is hereby appointed as a Director of the company, liable
.to retire by rotation.
9. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT pursuant to Sections 198, 269, 309 and Schedule XIII and other applicable provisions,
if any, of the Companies Act, 1956, the company hereby approves the appointment of Mr. S. D. Shibulal as
a Whole-time Director, for a period of five years with effect from January 10, 1997 on the terms and
conditions as set out in the agreement executed by Mr. S. D. Shibulal, (including the remuneration to be
paid in the event of loss or inadequacy of profits in any financial year during the aforesaid period), submitted
to this meeting and for identification initialed by the Company Secretary with liberty to the Board of
Directors, to alter, vary and modify the said appointment/remuneration including salary, allowances and
perquisites in such manner as may be agreed to between the Board of Directors and Mr. S. D. Shibulal
within and in accordance with and subject to the limits prescribed in Schedule XIII to the Companies Act,
1956, or any amendment or any statutory modifications thereto and if necessary as may be stipulated by
the Central Government and as may be agreed to accordingly between the Board of Directors and
Mr. S. D. Shibulal. ' ' ' .
RESOLVED FURTHER THAT notwithstanding anything hereinabove stated where in any financial year
during the currency of tenure of Mr. S. D. Shibulal, the company incurs a loss or its profits are inadequate,
; the company shall pay to Mr. S. D. Shibulal, remuneration by way of salary, allowances and perquisites
not exceeding the limits specified in Part II of Section II of Schedule XIII to the Companies Act, 1956, or
such other limits as may be prescribed by the Government from time to time as minimum remuneration.
10. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in accordance with the provisions of Section 198, 269, 309 and Schedule XIII and other
applicable provisions, if any, of the Companies Act 1956, the company hereby approves the reappointment
of Mr. N. R. Narayana Murthy, as Managing Director for a further period of five years with effect from
May 1, 1997, on the terms and conditions as set out in the draft agreement to be executed by
Mr. N. R. Narayana Murthy, (including the remuneration to be paid in the event of loss or inadequacy of
profits in any financial year during the aforesaid period), submitted to this meeting and for identification
initialed by the Company Secretary with liberty to the Board of Directors, to alter, vary and modify the
said reappointment/remuneration including salary, performance bonus, allowances and perquisites in
such manner as may be agreed to between the Board of Directors and Mr. N. R. Narayana Murthy, within
and in accordance with and subject to the limits prescribed in Schedule XIII to the Companies Act, 1956,
or any amendment or any statutory modifications thereto and if necessary, as may be stipulated by the
Central Government and as may be agreed to accordingly between the Board of Directors and
Mr. N. R. Narayana Murthy.
RESOLVED FURTHER THAT notwithstanding anything hereinabove stated where in any financial year
closing on and after April 1, 1997, the company incurs a loss or its profits are inadequate, the company
shall pay to Mr. N. R. Narayana Murthy, remuneration by way of salary, performance bonus and other
allowances not exceeding a sum of Rs. 9,69,000 per annum or Rs. 80,750 per month and in addition
thereto the perquisites not exceeding the limits specified under Para 2 of Section II, Part II of Schedule XIII
to the Companies Act, 1956, or such other limits as may be prescribed by the Government from time to
time as minimum remuneration.
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11. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in accordance with the provisions of Section 198, 269, 309 and Schedule XIII and other
applicable provisions, if any, of the Companies Act, 1956, the company hereby approves the reappointment
of Mr. N. S. Raghavan, as Joint Managing Director for a further period of five years with effect from May 1,
1997, on the terms and conditions as set out in the draft agreement to be executed by Mr. N. S. Raghavan,
(including the remuneration to be paid in the event of loss or inadequacy of profits in any financial year
during the aforesaid period), submitted to this meeting and for identification initialed by the Company
Secretary with liberty to the Board of Directors, to alter, vary and modify the said reappointment/
remuneration including salary, performance bonus, allowances and perquisites in such manner as may be
agreed to between the Board of Directors and Mr. N. S. Raghavan within and in accordance with and
subject to the limits prescribed in Schedule XIII to the Companies Act, 1956, or any amendment or any
statutory modifications thereto and if necessary, as may be stipulated by the Central Government and as
may be agreed to accordingly between the Board of Directors and Mr. N. S. Raghavan.
RESOLVED FURTHER THAT notwithstanding anything hereinabove stated where in any financial year
closing on and after April 1, 1997, the company incurs a loss or its profits are inadequate, the company
shall pay to Mr. N. S. Raghavan remuneration by way of salary, performance bonus and other allowances
not exceeding a sum of Rs. 9,46,200 or Rs. 78,850 per month and in addition thereto the perquisites not
exceeding the limits specified under Para 2 of Section II, Part II of Schedule XIII to the Companies Act,
1956, or such other limits as may be prescribed by the Government from time to time as minimum
remuneration.
12. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in accordance with the provisions of Section 198, 269, 309 and Schedule XIII and other
applicable provisions, if any, of the Companies Act, 1956, the company hereby approves the reappointment of
Mr. Nandan M. Nilekani as Deputy Managing Director for a further period of five years with effect from May 1.
1997, on the terms and conditions as set out in the draft agreement to be executed by Mr. Nandan M. Nilekani,
(including the remuneration to be paid in the event of loss or inadequacy of profits in any financial year during
the aforesaid period), submitted to this meeting and for identification initialed by the Company Secretary with
liberty to the Board of Directors, to alter, vary and modify the said reappointment/remuneration including
salary, performance bonus, allowances and perquisites in such manner as may be agreed to between the Board
of Directors and Mr. Nandan M. Nilekani within and in accordance with and subject to the limits prescribed in
Schedule XIII to the Companies Act, 1956, or any amendment or any statutory modifications thereto and if
necessary, as may be stipulated by the Central Government and as may be agreed to accordingly between the
Board of Directors and Mr. Nandan M. Nilekani.
RESOLVED FURTHER THAT notwithstanding anything hereinabove stated where in any financial year
closing on and after April 1, 1997, the company incurs a loss or its profits are inadequate, the company
shall pay to Mr. Nandan M. Nilekani remuneration by way of salary, performance bonus and other allowances
not exceeding a sum of Rs. 9,23,400 per annum or Rs. 76,950 per month and in addition thereto the
perquisites not exceeding the limits specified under Para 2 of Section II, Part II of Schedule XIII to the
Companies Act 1956, or such other limits as may be prescribed by the Government from time to time as
minimum remuneration.
13. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in accordance with the provisions of Section 198, 269, 309 and Schedule XIII and other
applicable provisions, if any, of the Companies Act, 1956, the company hereby approves the reappointment
of Mr. K. Dinesh as a Whole-time Director for a further period of five years with effect from May 1, 1997,
on the terms and conditions as set out in the draft agreement to be executed by Mr. K. Dinesh, (including
the remuneration to be paid in the event of loss or inadequacy of profits in any financial year during the
aforesaid period), submitted to this meeting and for identification initialed by the Company Secretary
with liberty to the Board of Directors, to alter, vary and modify the said reappointment/remuneration
including salary, performance bonus, allowances and perquisites in such manner as may be agreed to
between the Board of Directors and Mr. K. Dinesh within and in accordance with and subject to the limits
prescribed in Schedule XIII to the Companies Act, 1956, or any amendment or any statutory modifications
thereto and if necessary, as may be stipulated by the Central Government and as may be agreed to
accordingly between the Board of Directors and Mr. K. Dinesh.
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RESOLVED FURTHER THAT notwithstanding anything hereinabove stated where in any financial year
closing on and after April 1, 1997, the company incurs a loss or its profits are inadequate, the company
shall pay to Mr. K. Dinesh remuneration by way of salary, performance bonus and other allowances not
exceeding a sum of Rs. 8,77,800 per annum or Rs. 73,150 per month and in addition thereto the perquisites
not exceeding the limits specified under Para 2 of Section II, Part II of Schedule XIII to the Companies Act,
1956, or such other limits as may be prescribed by the Government from time to time as minimum
remuneration.
14. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT the revision in the remuneration for the month of April, 1997, payable to the Managing
Director/Whole-time Directors of the company viz., Mr. N. R. Narayana Murthy, Mr. N. S. Raghavan,
Mr. Nandan M. Nilekani and Mr. K. Dinesh, as explained in the Explanatory Statement annexed to the
Notice, be and is hereby approved.
FURTHER RESOLVED THAT a revision in the remuneration with effect from April 1, 1997, payable to
Mr. S. Gopalakrishnan, Deputy Managing Director and Mr. S. D. Shibulal, Director, for the remeiining part
of their respective tenure, as stated in the Explanatory Statement annexed to the Notice, be and is hereby
approved.
15. To consider and, if thought fit, to pass, with or without modifications, as especial resolution, the following:
RESOLVED THAT subject to the approval of the Central Government, Reserve Bank of India and other
Regulatory Bodies if required, the consent of the company be and is hereby accorded for investment by
Foreign Institutional Investors/Non Resident Indians/Overseas Bodies Corporate, in the equity share capital
of the company, either by direct investment or by purchase or otherwise by acquiring from the market
under portfolio investment scheme on repatriation basis, subject to the condition that such investment
together with their existing holdings shall not exceed in aggregate 30% of the paid up equity share capital
of the company or such other limit as may be prescribed from time to time by the Central Government
and/or Reserve Bank of India or any other related authority.
16. To consider and, if thought fit, to pass, with or without modifications, as an ordinary resolution, the following:
RESOLVED THAT in modification of the resolution passed at the Annual General Meeting held on June
25, 1994, and pursuant to Section 372(4) of the Companies Act, 1956, and subject to all other approvals
if any, the consent of the company be and is hereby accorded to the Board of Directors of the company to
invest a sum not exceeding US$ 4 Million (US$ Four Million Only), in Yantra Corporation a wholly-owned
subsidiary company established in the USA.
FURTHER RESOLVED that the Board of Directors be and is hereby authorized to decide all issues arising
out of and incidental to the investment, to be made and to do such other acts, matters and things as may
be necessary or expedient in relation there to.

Registered Office: By Order of the Board

Electronics City,
Hosur Road,
Bangalore - 561 229. V. Viswanathan
April 8, 1997 Company Secretary
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NOTES:
1. An Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956. is annexed hereto.
2. The instrument appointing the proxy should be deposited at the Registered Office of the company not less
than 48 hours before the commencement of the meeting.
3. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote
instead of himself and the proxy need not be a member of the company.
4. Members/Proxies are requested to bring the Attendance Slip sent herewith duly filled in for attending the
meeting.
5. The Register of Directors' shareholdings, maintained under Section 307 of the Companies Act, 1956, is
available for inspection by the members at the Annual General Meeting.
6. The Register of Contracts, maintained under Section 301 of the Companies Act, 1956, is available for
inspection by the members at the Registered Office of the company.
7. The Register of Members and Share Transfer Books will remain closed from May 23, 1997 to June 7,
1997, both days inclusive.
8. Subject to the provisions of Section 206 A of the Companies Act. 1956, dividend, as recommended by the
Board of Directors, if declared at the meeting, will be payable on or after June 8,1997, to those Members
whose names appear in the Register of Members as on June 7, 1997.
9. Members are requested to correspond regarding change of address, dividend mandates, etc. to the Registrar
and Share Transfer Agents - Karvy Consultants Limited, No. 145/9, Girija Towers, 6th A-C Main, 30th
Cross, Jayanagar 4th Block, Bangalore - 560 Oil, India.
10. The members are informed that the dividends declared for the year ended March 31, 1993 and Interim
Dividend paid during December 1993, which remained unencashed/unclaimed for more than three years,
have been transferred by the company to the General Revenue Account of the Central Government,
pursuant to Section 205A of the Companies Act. 1956.
11. The final dividend, if approved by the members, is expected to be tax-free in the hands of members, if the
Finance bill 1997, is passed by Parliament.

EXPLANATORY STATEMENT UNDER SECTION 173(2) OF THE COMPANIES ACT, 1956

ITEM 4
The members of the company had, at their fifteenth Annual General Meeting held on May 25, 1996, appointed
Mr, A. M. Bhatkal, as the Auditor of the company from the conclusion of that meeting until the conclusion of
the next Annual General Meeting.
The retiring auditor, Mr. A. M. Bhatkal, has informed the company of his inability to seek reappointment as
auditor of the company due to his prior professional commitments, at the forthcoming Annual General Meeting.
It is proposed to appoint Messrs. Bharat S. Raut & Co., Chartered Accountants, as the Auditors of the company
in place of the outgoing Auditor, Mr. A. M. Bhatkal.
Special notice in terms of Section 190 of the Companies Act. 1956 has been received under Section 224(6)
read with Section 225(1) of the Act from a member of the company proposing the appointment of Messrs. Bharat
S. Raut & Co., Chartered Accountants, as Auditors of the company, in place of Mr. A. M. Bhatkal, the retiring
Auditor. The Board of Directors recommend the aforesaid appointment for approval by members.
None of the Directors of the company is concerned or interested in this resolution.
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ITEM 5 AND 6
In view of the proposal contained in this notice, to issue bonus shares, it is necessary to increase the Authorized
Share Capital of the company. Accordingly, the resolution at item 5, seeks to increase the Authorized Share
Capital and amend the capital clause contained in the company's Memorandum of Association. Likewise, the
resolution at item 6 seeks to amend the capital clause in the company's Articles of Association.
A copy of the company's Memorandum and Articles of Association is open for inspection during business hours
on any working day.

ITEM 7
The Board of Directors, at their meeting held on April 8, 1997, recommended an issue of bonus shares in the
proportion of one share for every one share held by the members on a date to be fixed by the Board by capitalizing
a part of the General Reserve Account. Under the Articles of Association of the company and the guidelines framed
by SEBI for issue of bonus shares, it is necessary for the members to approve the issue of bonus shares.
Further, in terms of the Employees Stock Offer Plan Scheme (ESOP), in the event of any bonus issue to the
existing shareholders, the company shall offer an opportunity to the warrant holders for exercising the conversion
option before the record date of the issue of bonus shares to enable the warrant holders to exercise their option
to convert the warrants into equity shares so as to be eligible for the issue of bonus shares in the same ratio as
offered to the existing members of the company.
Accordingly, the resolution'at item 7 seeks the approval of the members to issue bonus shares on the terms
and conditions set out in the resolution. The purpose of issuing the bonus shares is to bring the Issued and paid
up Share Capital of the company closer to the actual capital employed in the business;
All the Directors of the company hold shares in the company and would therefore be interested in this resolution
to the extent of the bonus shares that would be allotted to them.

ITEMS 8 A N D 9
Mr. S. D. Shibulal was co-opted by the Board with effect from January 10, 1997 in terms of Section 260 of the
Companies Act, 1956, and holds office until the date of the ensuing Annual General Meeting. Subsequent to
his co-option, he was appointed as a Whole-time Director of the company with effect from January 10, 1997,
subject to the approval of members at the Annual General Meeting, on the following terms and conditions:-
1. Period of appointment: 5 Years with effect from January 10, 1997.
2. Details of remuneration:
a) Basic salary. In the scale of Rs. 24,000 - Rs. 34,000
b) Perquisites:
i) House rent allowance as may be paid by the company up to a maximum of 50% of basic salary,
ii) Medical reimbursement: Expenses incurred for self and family as per the rules of the company,
iii) Leave travel concession/assistance: For self and family once a year as per the rules of the company,
iv) Club fees: Fees payable to a club subject to a maximum of two clubs,
v) Personal accident insurance: As per the rules of the company.
c) Earned/privilege leave: As per the rules of the company.
d) Company's contribution to provident fund and superannuation fund. :
These contributions will not be included as perquisites to the extent that these, either singly or put
together, are not taxable under the Income Tax Act.
e) Gratuity payable as per the rules of the company, and encashment of leave at the end of the tenure
will not be included in the computation of the ceiling on perquisites to the extent the same are not
taxable under the Income Tax Act.
f) Use of company's car for official purposes and telephone at residence (including payment for local
calls and long distance official calls) shall not be included in the computation of perquisites.
 Infosys
g) The aggregate of the salary, perquisites and allowances, contribution towards provident fund and
superannuation fund taken together in respect of payment to Mr. S. D. Shibulal, Whole-time Director,
shall always be subject to the overall ceilings laid down in Sections 198 and 309 of the Companies
Act, 1956.

MINIMUM REMUNERATION
Where in any financial year, during the currency of tenure of Mr. S. D. Shibulal, the company incurs a loss
or its profits are inadequate, it may pay him remuneration by way of salary and perquisites not exceeding
the limits specified in Part II of Section II of Schedule XIII to the Companies Act, 1956, or such other
limits as may be prescribed by the Government from time to time as minimum remuneration.
3. The Agreement may be terminated by either party by giving six months notice in writing, of such
termination.
4. If, at any time, Mr. S. D. Shibulal ceases to be a Director of the company for any cause whatsoever, he
shall cease to be the Whole-time Director, and the agreement shall forthwith be terminated.
Mr. S. D. Shibulal shall perform such duties as may from time to time be entrusted to him subject to the
superintendence and control of the Board of Directors.
Mr. S. D. Shibulal, an M.Sc. from Kerala University with a MS in Computer Science from Boston. USA, has 18
years working experience in the field of Software Engineering. Mr. S. D. Shibulal. was one of the promoters of
the company and was a member of the Board till July, 1991. The Board was of the unanimous opinion that his
qualification and experience would immensely benefit the organization.
A notice under Section 257 of the Companies Act, 1956 has been received from a member proposing his
candidature, for the office of Director.
In compliance with the provisions of Section 198, 269, 309 and Schedule XIII of the Companies Act, 1956, the
appointment and payment of remuneration of Mr. S. D. Shibulal, Whole-time Director of the company, require
to be approved by the members in General Meeting. The Board recommends the resolutions as set out in item
Nos. 8 and 9 for acceptance by the members.
Mr. S. D. Shibulal, Whole-time Director, is concerned or interested in the resolution.
An abstract of the terms and conditions regarding the appointment of Mr. S. D. Shibulal as a Whole-time
Director under Section 302 of the Companies Act, 1956 has been circulated to the members.
A copy of the agreement entered into between the company and Mr. S. D. Shibulal is open for inspection by the
members during office hours at the Registered Office of the company.

ITEM 10 TO 13
The Board of Directors of the company, at its meeting held on April 8, 1997, reappointed Mr. N. R. Narayana
Murthy as Managing Director, Mr. N. S. Raghavan as Joint Managing Director, Mr. NandanM. Nilekani as Deputy
Managing Director and Mr. K. Dinesh as a Whole-time Director of the company, for a period of five years with
effect from May 1, 1997, subject to the approval of the company in General Meeting on the following terms and
conditions:-
1. Period of appointment: 5 years with effect from May 1, 1997.
2. Details of remuneration:
a) Salary per month (Rs.)
N. R. Narayana Murthy 42.500 ~
N. S. Raghavan 41,500 in the scale of Rs. 30,000 - Rs. 80,000
Nandan M. Nilekani 40,500
K. Dinesh 38.500 _
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b) Performance bonus
The Managing Director/Whole-time Directors shall be entitled to performance bonus based on their
performance or based on their value addition to the company, up to a maximum of 25% of salary,
payable quarterly or at other intervals as may be decided by the Board.
c) Perquisites and allowances:
i) Housing: Furnished/unfurnished residential accommodation or house rent allowance at 45% of
salary in lieu thereof. The expenditure incurred by the company on gas, electricity, water and
furnishings shall be valued as per Income Tax Rules, 1962.
ii) Medical reimbursement/allowance: Reimbursement of actual expenses for self and family and/
or allowances will be paid as per the rules of the company,
iii) Leave travel concession/allowance: For self and family, once in a year, in accordance with the
rules of the company. . ''.
iv) Club fees: Fees payable subject to a maximum of two clubs. .
v) Personal accident insurance: As per the rules of the company ;

d) Earned/privilege leave: As per the rules of the company. ;>

e) Company's contribution to provident fund and superannuation fund. ,

These contributions will not be included as perquisites tb the extent that these, either singly or put
together, are not taxable under the Income Tax Act. . ,
f) Gratuity payable as per the rules of the company.
g) Encashment of leave, at the end of the tenure, will not be included in the computation of the ceiling
on perquisites to the extent the same are not taxable under the Income Tax Act.
h) Use of company's car for official purposes and telephone at residence (including payment for local
calls and long distance official calls) shall not be included in the computation of perquisites.
i) The aggregate of the salary, performance bonus, perquisites and allowances, contribution towards
provident fund and superannuation fund taken together in respect of payment to Managing Director/
Whole-time Directors, shall always be subject to the overall ceilings laid down in Sections 198 and
309 of the Companies Act, 1956.

MINIMUM REMUNERATION
Where, in any financial year, during the currency of tenure of Managing Director/Whole-time Directors,
the company incurs a loss or its profits are inadequate, the company may pay them remuneration by way
of salary, performance bonus, perquisites and allowances not exceeding the limits as specified below: -
Name Minimum remuneration
Mr. N. R. Narayana Murthy Rs. 9,69,000 p.a. or Rs. 80,750 p:m.
Mr. N. S. Raghavan Rs. 9,46,200 p.a. or Rs. 78,850 p.m.
Mr. Nandan M. Nilekani Rs. 9,23,400 p.a. or Rs. 76,950 p.m.
Mr. K. Dinesh Rs. 8,77,800 p.a. or Rs. 73,150 p.m.

and in addition the perquisites not exceeding the limits specified under Para 2 of Section II, Part II of
Schedule XIII to the Companies Act, 1956, or such other limits as may be prescribed by the Government
from time to time as minimum remuneration.
3. The Agreement may be terminated, by either party by giving six months notice in writing of such termination.
4. If, at any time, the Managing Director/Whole-time Directors cease to be Directors of the company for any
cause whatsoever, the agreement shall forthwith be terminated.
5. Managing Director/Whole-time Directors shall perform such duties as may from time to time be entrusted
to him/them subject to the superintendence and control of the Board of Directors.
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In compliance with the provisions of Sections 198, 269, 309 and Schedule XIII of the Companies Act, 1956, the
reappointment and payment of remuneration to the Managing Director/Whole-time Directors of the company
requires to be approved by the members in General Meeting. The Board recommends the resolutions as set
out in item nos. 10 to 13 for acceptance by the members.
Mr, N. R. Narayana Murthy, Mr. N. S. Raghavan. Mr. Nandan M. Nilekani and Mr. K. Dinesh are concerned
or interested in their respective resolutions.
The terms of reappointment and payment of remuneration to the Managing Director/Whole-time Directors as
stated in this notice may be treated as an abstract under Section 302 of the Companies Act, 1956.
The copies of the draft agreements to be entered into between the company and the respective Managing
Director/Whole-time Directors are open for inspection by the members during office hours at the Registered
Office of the company.

ITEM 14
The Board of Directors of the company at its meeting held on April 8, 1997 revised the remuneration of all the
Directors from April 1, 1997 in line with the policy of the company. In respect of the Managing Director/Whole-
time Directors of the company viz., Mr. N. R. Narayana Murthy, Mr. N. S. Raghavan, Mr. Nandan M. Nilekani
and Mr. K. Dinesh, the remuneration for the month of April, 1997 is the same as stated in Item no. 10 to 13 of
the Explanatory Statement.
The revision of remuneration in respect of Mr. S. Gopalakrishnan and Mr. S. D. Shibulal is as follows:-
1. Details of remuneration
a) Salary Period Salary pier month
S. Gopalakrishnan 01-04-1997 to 17-10-1999 Rs. 40,500~~| in the scale of
S. D. Shibulal 01-04-1997 to 09-01-2002 Rs. 37,500J Rs. 30,000 - Rs. 80,000

b) Performance bonus
Mr. S. Gopalakrishnan and Mr. S. D. Shibulal, Whole-time Directors shall be entitled to performance
bonus based on their performance or based on their value addition to the company up to a maximum
of 25% of salary, payable quarterly or at other intervals as may be decided by the Board.
c) Perquisites and allowances:
i) Housing: Furnished/unfurnished residential accommodation or house rent allowance at 45% of
salary in lieu thereof. The expenditure incurred by the compiany on gas, electricity, water and
furnishings shall be valued as per Income Tax Rules, 1962.
ii) Medical reimbursement/allowance: Reimbursement of actual expenses for self and family and/
or allowances will be p>aid as p>er the rules of the company,
iii) Leave travel concession/allowance: For self and family once in a year in accordance with the
rules of the company.
iv) Club fees: Fees payable subject to a maximum of two clubs,
v) Personal accident insurance: As p>er the rules of the company
c) Earned/privilege leave: As per the rules of the company.
d) Company's contribution to provident fund and superannuation fund.
These contributions will not be included as perquisites to the extent that these, either singly or put
together, are not taxable under the Income Tax Act.
e) Gratuity payable as pier the rules of the company.
f) Encashment of leave, at the end of the tenure, will not be included in the computation of the ceiling
on perquisites to the extent the same are not taxable under the Income Tax Act.
g) Use of company's car for official purposes and telephone at residence (including payment for local
calls and long distance official calls) shall not be included in the computation of perquisites.
 h) The aggregate of the salary, performance bonus, perquisites and allowances, contribution towards
provident fund and superannuation fund taken together in respect of payment to the above Whole-
time Directors shall always be subject to the overall ceilings laid down in Sections 198 and 309 of the
Companies Act, 1956.

MINIMUM REMUNERATION .
Where, in any financial year, during the currency of tenure of the above Whole-time Directors, the company
incurs a loss or its profits are inadequate, the company may pay them remuneration by way of salary,
performance bonus, perquisites and allowances not exceeding the limits as specified below:-

Name Minimum remuneration

Mr. S. Gopalakrishnan Rs. 9,23,400 p.a., or Rs. 76,950 p.m.
Mr. S. D. Shibulal Rs. 8,55,000 p.a., or Rs. 71,250 p.m.

and in. addition the perquisites not exceeding the limits specified under -Para 2 of Section II, Part II of
Schedule XIII to the Companies Act, 1956, or such other limits as may be prescribed by the Government
from time to time as minimum remuneration.
All other terms and conditions of appointment of the said persons remain unchanged.
In compliance with the provisions of Sections 198, 309, 310 and Schedule XIII of the Companies Act, 1956, the
revision in remuneration of the said persons requires to be approved by the members in the General Meeting.
The Board recommends the resolution as set out in item no. 14 for acceptance by the members.
Mr. N. R. Narayana Murthy, Mr. N. S. Raghavan, Mr. Nandan M. Nilekani, Mr. S. Gopalakrishnan, Mr. K. Dinesh
and Mr. S. D. Shibulal, the Managing Director/Whole-time Directors are concerned or interested in the resolution.
The variations in the contracts with the above said persons, in respect of revision in their remuneration as
stated in this notice, may be treated as an abstract under Section 302 of the Companies Act, 1956.

ITEM 15
The investment by Foreign Institutional Investors (FIIs)/Non Resident Indians (NRIs)/Overseas Corporate Bodies
(OCBs) in the equity of Indian companies was permitted to the extent of 24% of the paid up equity capital of
such companies. Recently the Government of India has raised the limit of such investments to 30% of the paid
up equity capital of such companies, subject to approval of the Board of Directors of the investee company and
approval of members of the investee company by way of a special resolution. Since the increased investment
by FIIs/NRIs/OCBs is considered to be in the interest of the company, the Board recommends the resolution for
approval of the members.
None of the Directors of the company is concerned or interested in the resolution.

ITEM 16
The members, at the Annual General Meeting held on June 25, 1994, had given consent to the Board to make
an investment in the wholly-owned subsidiary company (Yantra Corporation) up to a limit of US$ 2 million.
The company has already invested US$ 1.5 million, (US$ 0.5 million by way of cash remittance and US$ 1.0
million by way of sale of software product). In view of the expansion of business activities by the subsidiary
company, in the USA, it is proposed to enhance the investments in the subsidiary from US$ 2 million to US$ 4
million. Approval of the members is sought for making this investment up to US$ 4 million.
The Board recommends this resolution for the approval of members.
None of the Directors of the company is concerned or interested in the resolution.

Registered office: By Order of the Board

Electronics City
Hosur Road
Bangalore - 561 229 V. Viswanathan
Aprils, 1997. • Company Secretary

10
 Infasys
INFOSYS TECHNOLOGIES LIMITED
Registered Office
ELECTRONICS CITY. HOSUR ROAD, BANGALORE - 561 229
PROXY FORM
Regd. Folio No.
I/We of
in the district of being a member/members of Infosys Technologies Limited
hereby appoint of
in the district of or failing him/her
of in the district of
as my/our proxy to vote for me/us on my/our behalf at the SIXTEENTH ANNUAL GENERAL MEETING of the company to be
held at 3.00 p.m. on Saturday, June 7, 1997 and at any adjournment(s) thereof.

Signed this day of 199'?.

Rupee one
Signature Revenue
Stamp

Notes: This form, in order to be effective, should be duly stamped, completed and signed and must be deposited at the
Registered Office of the company, not less than 48 hours before the meeting.

:
- Please tear here

INFOSYS TECHNOLOGIES LIMITED

Infasys
Registered Office
ELECTRONICS CITY, HOSUR ROAD, BANGALORE - 561 229

ATTENDANCE SLIP
Sixteenth Annual General Meeting - June 7, 1997

Regd. Folio No. No. of shares held

I certify that I am a registered shareholder/proxy for the registered shareholder of the company.
I hereby record my presence at the SIXTEENTH ANNUAL GENERAL MEETING of the company at Hotel Taj Residency,
No. 41/3, M.G. Road, Bangalore - 560 001 at 3.00 p.m. on Saturday, June 7, 1997.

Member's/Proxy's name in Signature of Member/Proxy

BLOCK Letters

Note: Plow3 fill up this anendance slip and hand it OVT at the en: lanro of t h - - HU-'I-SUIKJ luill.
M'-'inbors arc rpqii'-siod to bnncj ilioir '''ipjos ol' 'ho Annual K»pon >'.• '.':• • mwinq.
 resoon: es
o

/f a free society cannot heip the -many who are poor,

it cannot save the few who are rich.
John F. Kennedy
1&17-1953

Ms. Kaviihii Kadambi, an Infoscion. at r/or): and with a spnsiic child.

World-clnss ontorprisos should not opointo as islands in any community.

Admiration for romp;>nios cannoi h« bas-'ii solnly :. monotary paramolors.
Abilily to pilau; an<i ••oiiiribut" in i he i-nvi: • mi;lent is : :\':cpssily for tho success
ol' any c n i i i n u H c i r u cniity, p.tr.i, u l t i i ly i i i > i i •vdop;:. ; «'ounirie.s. fjiJuj'o io
consKici • i i i • siici'-iy-.ii-laiii" .^ .1 ^ ,i.<i > : . . . . : . • ; m ' , : . - jin|iany will londiH :;s
success ''phciin''!;!!, ;i:id may ''• • " i ' : ) V ; i h ' ~ - lus" !'•>: - i il nni'osi.
Contents

Managerial awards 3
The year at a glance 5
Letter to the shareholders 6
Social responsibilities of the corporate body 8
Articles by Management Council members 14
Adieu, CRN 26
Directors' report 28
Management statement 34
Auditor's report 35
Balance Sheet 38
Profit and Loss Account 39
Schedules 40
Statement of cash flows 54
Statement pursuant to section 212 of the
Companies Act, 1956 relating to subsidiary company 60
Yantra Corporation (a wholly-owned subsidiary
of Inl'osys Technologies Limited)
F i l H I I U ' U l l Si,Ml Ol MOHl S 1)1
Financial Statements prepared in compliance with the
Generally Accepted Accounting Principles (GAAP) of the US
and the SEC Disclosure norms 71
Information in Form 10-K of United States
Securities and Exchange Commission 83
Selected five-year financial data . 100
Management structure 101
Shareholders' information 102
Additional information to shareholders
Share performance graph 104
The strength of the invisible 105
Brand valuation 105
Human Resources Accounting 107
Balance Sheet (including the intangible assets) 108
Economic-Value-Added (EVA) statement 109
Ratio Analysis 110
Statutory obligations 113
A historical perspective 115
 Managerial awards for 1996-97

The In2000 t e a m
D. N. Prahlad, Senior Vice President and Head - SBU-1
S. Hariliaran Murthy. Business Development Manager (Boston)
K. Eiangovan, Assistant Project Manager - SBU-1

The B A N G S 2000 t e a m

Ashwani K. Khurana. Executive Director and Hepd - BBU *

Sharad K. Hegde. Senior Vice President and Head - SBU-4
Sudheer Krishnaswamy, Associate Vice President and Head
(Product Management and Marketing Group - BBU)
H. R. Binod, Manager (Customer Support - BBU)
C. Ravi. Project Manager (Development - BBU) I

The A n n u a l R e p o r t 96 t e a m

T. V Mohandas Pai. Senior Vice Presiden

and Head - Finance and Administration
V. Balakrishnan. Manauei - Finance
13. M. Rao, Mana'pr - Coir.rr.uniratiop D Group

(All names correspond \vi(h photographs in tho rloci;\'*~:s-j direction)

 Managerial awards for 1996-97

The Multi-locational development center

e n a b l i n g team

N. S. Raghavan, Joint Managing Director and Head - H u m a n Resources and E&R)

T. V. Mohandas IJai, Senior Vice President and Head - Finance and Administration
S. Sanjeev Joshi, Manager - Commercial and Special Projects
C. Vijay Kumar, Manager - Resource Coordination
Sudha Kumar, Manager - Corporate Planning
U. Ramdas Kamath, Manager - Accounts and Administration
Ashok V. Arunachalam, Manager - CCS

The A c c o u n t s R e c e i v a b l e 96
B u s t e r Team
Naiulan M. Nilokani, Deputy Managing Director
and Head - Marketing and Sales
Phaneesh Murthy, Vice President and Head - Worldwide Sales

L i f e t i m e a c h i e v e m e n t award

G, R. Nayak, Director (Retired) - Finance and Administration

4
(All names correspond witli photographs in the clockwise direction)
 The year at a glance

in millions except for Earnings per share

March 31, IP!)'/ March 31, 1996
Rs. USS Rs. USS

For the year

Total revenue 1,438.08 40.90 934.13 28.07
Exports 1,252.82 35.27 803.39 24.14
Operating profit (PBIDT) 500.58 14.09 339.54 10.20
Profit after tax (PAT)
from ordinary activities 333.90 9.40 210.09 6.31
PBIDT as a percentage of
total revenue 34.81 % 34.81 % 36.35% 36.35%
PAT as a percentage of
total revenue 23.22% 23.22% 22.49% 22.49%
Earnings per share 46.00 1.30 28.94 0.87
Dividend percentage 55.00% 55.00% 50.00% 50.00%
Dividend amount 39.92 1.13 36.29 1.09
Capital investment 273.10 7.73 155.55 4.67
PAT as a percentage of
average net worth 34.66% 34.66% 29.53% 29.53%

At the end of the year

Total assets 1,128.36 31.47 840.99 25.27
Fixed assets 533.11 14.87 366.33 11.01
Working capital 541.98 15.11 411.72 12.37
Total debt - - 42.61 1.28
Net worth 1,128.36 31.47 798.38 23.98
Equity 72.60 2.02 72.59 2.18
Market capitalization 7,310.42 203.86 3,556.71 104.61

Figures in USS were arrived at by converting Rupee figures at the

average conversion rate for all revenue items and at closing rate for all
Balance Sheet items to facilitate comparison.

Total revenue
'JSS in T7;'';cws

Exports

Net profit
 iDear Shareholder,

Another successful year lias conio to an end. The focused and goal-oriented band of Infoscions
"
achieved and exceeded eveiy target they had set for themselves. Sales, exports, domestic product
sales, PBIDT and PAT (from ordinary activities) grew from Rs. 93.41 crores, Rs. 80.34 crores, "
Rs. H . X X croms, Us. 33,9!> croros and Rs. 21.01 rmm.s rospocl ivoly in 10013-00 to Rs. 143.81
crores, Rs. 12S.28 crores, Rs. 13.94 crores, Rs. bO.Ou' crores and Rs. 33.39 crores respectively
in 1996-97. Achieving growth without impacting quality, delivery schedule and cost is a rare *
phenomenon. Eveiy Infoscion deserves your applause.

Skilled resources are in short supply at any given place in the country. Infosys believes that
productivity is high when professionals operate from their own milieu. Thus, instead of
transplanting professionals from their home towns to Bangalore and adding to the; problems of •*
j
the city, Infosys decided last year to start development _
Achieving growth without impacting quality, delivery schedule centers in
)
and cost is a rare phenomenon different parts of the country. In addition to ^'
the Mangaloro center that was enabled last, year, the hi no, X
Chennai and Bhubaneshwar centers have been operationalized this year. These centers have ^T"
up-to-date physical and technological infrastructure. The decision has been taken for starting
two new development centers at Bangalore. <-*
- \
InSOOO, the Infosys solution to the millennium problem, has received wide use." acceptance. ^
The order booking from the Year 2000 practice is healthy. j~

During the recent visit of Mr. William Heniy Gates I I I , CEO, Microsoft, to India, Infosys announced
BankAway!, an electronic banking product on the web. This is expected to be operationalized "
during the year. The success of BANGS 2000 has continued and the revenue from this product
has increased by 83% over the previous year. 'v

PorteNT, the Infosys solution to porting applications from platforms like OS/2 to WINDOWS NT, ^j1/^
will be introduced during 1 the: coming year. ^

Infosys became the first Indian software company to demonstrate an Internet suite of products ^J,
abroad. Websetu, a suite of software products for implementing web-enabled, on-line transaction •' -
processing (OLTP) systems was unveiled at the Fall Internetworld 'St5exhibition at New York in
December 1996. This is available for free downloading by Internet users. >—-

The Infosys A n n u a l Report for 1994-95 was voted the best in India by the Institute of Chartered •**•
Ac'con i H a u l s "I I n d i a . The relations of A*i\'iMon<<y ina;|a/ino veil CM I Infosys as I ho host i n i i i K i ; | n c l : \§
company in I n d i a and among the best in Asia.
•*•«*•
Ours is a country with a wide chasm between the haves and the have-nots. Most employees
with finality jobs form a minority of haves, while most, people in our society are have-nots. The j *""'
only hope for a stable society is for the corporations and the haves to realize their social i ^
responsibilities towards the less fortunate ones. The Management Council has chosen Social < ,
responsibilities of the Corporate body as the theme for this year's annual report. Wo have
invited throe woll-known personalities to give their views on this topic. We are grateful to >—
Mr. Deepak S. Parekh, Chairman, 1-IDFC, Prof. M. N. Srinivas, the world-famous anthropologist
 N. S. Raghavan and N. R. Narayana Murthy

and Prof. Paul Shrivastava, a well-known professor in business, for taking time off from their
busy schedules to write for this annual report. The Infoscion is well aware of his/her responsibility
and is an enthusiast in this effort. In addition to their individual contribution towards social
causes, we are glad to report three social programs that Infosys has initiated this year. These
are: Catch them young - a program aimed at teaching algorithmic thinking and programming
to school children at various centers operated by Infosys, Train the Trainer- an attempt to
bridge the gap between the local academia and the software industry and finally. Reach the
rural - a program to disseminate computer knowledge in Kannada to the rural folks.
Marketplace, customer, competition, collaboration,
The on
enabling, technology and employee aspiration are priority 'y h°Pe for a stable sodety is for the
Corporations and
the haves to realize their social responsibilities
issues for the members of the Management Council (MQ. towards the ,ess fortunate ones
We are grateful to five members of the MC who have
reviewed these issues for your benefit - Mr. D. N. Prahlad on employee aspirations, Mr. Ashwani
K. Khurana on customer orientation, Dr. P. Balasubramanian on technology and productivity,
Mr. Phaneesh Murthy on concurrent collaboration and competition, and Dr. S. Yegneshwar on
enabling strategies.
Mr. G. R. Nayak, Director (Rnance and Administration), has resigned from the Board on reaching
the age of superannuation, in keeping with the policy of the company. Mr. Nayak has symbolized
hard work, commitment, teamwork and solidarity in everything that he did at Infosys. Mr. Nayak
has been a key player in the success that Infosys has achieved so far. We, at Infosys, bid him
farewell and wish him the best of everything.
Infoscions are men and women of high discipline, integrity, quality, productivity, creativity and
commitment. On your behalf, on behalf of the Board of Directors and the Management Council,
we place on record our appreciation and gratitude to these high achievers.

Bangalore N. S. Raghavan N. R. Narayana Murthy

April 8. 1997 Joint Managing Director Chairman and Managing Director
 No man is an island

>
s~

In an increasingly competitive world, firms are constantly stretched to compete for market
sluiro and improve profitability in their respective markets. In this struggle, the situationnl
context in which firms find themselves is often overlooked. To allocate resources for objectives
that, are perceived to be peripheral to a single valued objective, are often perceived to be
unworthy of valuable management time.

Sensitivity to the social, cultural and environmental context in which we live and work, in fact,
provides important clues to business success. The closer a firm is aligned to this context, the
more likely it is that the firm will have developed an internal vision that will provide a sense of
direction that is needed for corporate success.

What are a firm's key concerns? An important concern is the way the firm is perceived by its
current and potential investors and customers. This perception is likely to be a holistic one and
not one derived simply from the product and services
Sensitivity" to the social, cultural and environmental context „,the rfirm provides
•, f
at •
any given • , of
point c -•
time.^It would
1,4
in which we live and work, in fact, provides
important clues to business success encompass how the firm relates to the environment, the
labor practices it adopts, its response to concerns of the
city or town in which it operates, its support for sports or cultural events, rosearch to improve
the quality of life and so on. The choices the firm makes will be driven by the clarity of its core
value system.

The social responsibility of a company is to comprehend the holistic connectivities to its situation,
and the connection of this situation to its business, The rest follows automatically. The greatest
and most long standing charitable foundations were created by companies that -understood
this, very clearly, in the heyday of competitive markets of the late nineteenth and early twentieth
centuries. Today, at the very least, profitable companies need to set aside a certain percentage
o f - t h e i r a n n u a l profits to be utilized in a manner that strencjthnns those connectivities. Hy
doin<| so, 1 he How of resources combined w i l h quality intellectual i n ] H i t s into the social realm,
will have visible and beneficial impacts far exceeding the resources applied. We have done
precisely this at HDFC for years, and will continue to do so.
 Deepak Parekh

Leaving a cushy, lucrative and glamorous job in a multinational bank in favor of a gruelling
one in a socially-oriented corporation, is not something that an ambitious young man would
do. But then, Deepak Parekh, 52 - Executive Chairman, Housing Development Hnance
Corporation Ltd. (HDFC) - is a rare visionary. Under hi:, dynamic leadership, HDFC has earned
almost every laurel in the corporate world including India's best-managed company, and has
become the benchmark for customer-on'entat/on, not just in India, but all over the world. A
Chartered Accountant by profession, Mr. Parekh has won several awards including The
Businessman of the Year '96 from Business India and The J R D Tata Corporate Leadership Award
 Ecocentering corporations

As we enter the third millennium, the human race faces a new set of challenges. Within a few
years, the world population will double to 11 billion people and production will increase twenty-
fold. Global ecological changes brought about by this explosive growth will become the source
of major risks and business opportunities. Environmental risks posed by global wanning, ozone
depletion, declining biodiversity, environmental pollution, and resource depletion will force us
to fundamentally rethink our perceived notions of economic progress and growth.

Private and government corporations, as the key engines of economic production, will be
challenged to simultaneously increase productivity by innovative use of information and
technologies, and decrease environmental losses by creative and efficient use of natural
resources. They will need to learn to make profits, while they conserve nature and improve
their ecological performance.

Corporations can meet this challenge by ecocentering their visions, inputs, outputs, and
tin xmghput systems. Making ecology the central concern of corporate management and practices,
requires us te re-evaluate nature and reassess human-
Environmental risks... will force us to fundamentally rethink n a t u r e
our perceived notions of economic progress and growth '^tions. It requires managers to form new
| n i r l . n i ! i ' s l i i | ) s wil.h l l i c i i r sl.nkulioldors cusi i n i i n r s ,
suppliers, government agencies, and the public. Corporations need to develop ecologically safe
products and production systems, practice recycling, reuse and renewal of resources, eliminate
wnsto, find encourage responsible; consumption. They must expand their scope of activities to
address the social and ecological problems underlying poverty and deprivation at a global level.
This, in my view, is the collective social responsibility of the corporate body.

10
 Dr. Paul Shrivastava

Probably best known for his seminal work, Bhopal : Anatomv of a Crisi'., Dr. Paul Shnvastava is
The HOW.-T-H i ^cott Professor of Miinoaement, Bucknell University, Lewisburg, USA "T'-.e author/
editor of el°ven books and over a hundred articles in professional journals. Dr. Shrivastava has
speci.Ti^e" |0 s T r ^tegic mananem^ra ^ - " i s t s and ^nvironrn^ni.ii niancig^ntr".;, and marogeinent
paradigr^*; in the globa' e c o n o m y He has consulted with several major, i n t e r n a t t o n a i
corporations and received numerous awards.
I 11
 Social responsibilities of the corporate sector

That the corporate sector has a responsibility to the society in which it functions, is now part of
accepted wisdom, but, how widely and effectively it is practised in India is far from clear. It is
necessaty to restate a few obvious truths here. First, it is in the long-term interest of the
It is in the long term interest of the corporate sector to take corporate sector to.take an active part in improving the
an active part in improving the quality of life in its immediate quality of life in its immediate environment, and in the
environment, and in the wider society' wider
• , society.„Secondly,,, a company must , be proluable
, - , , - , il.
it has to contribute to the community. However, profiteering must be shunned.

Tho horrors of the industrial revolution, the linkage between capitalism and colonialism in the
n i l ) < ! ! . < > ( m l 11 century, and llie propaganda of Utopian socialism luivo (jivon l.liu corporate.) world a
bad image. Correcting this image requires a sharp focus on the public good by the business
leaders.

Growth of the economy is a must if the corporate world has to be an enthusiastic partner in
promoting the public good. To achieve growth, the politicians and bureaucrats have to initiate
policies based on honosly, efficiency, transparency, merit, and the larger public good. The
corpi>rai(,> world, in turn, must contributo to I.ho reduction, if not the elimination, of mass
poverty. They should initiate schemes to provide basic amenities in villages, and improve slums
in urban areas. The corporate world should play a major role in building a poverty-free and
clean I n d i a .

12
 Prof. M.N. Srinivas

X*"

It is unlikely that any other contemporary Indian academic can speak more authoritatively on
sociology and anthropology than Prof. Srinivas. He has taught at we'l-known universities !'ke
Oxford, Cornell and Delhi. He has received numerous awards including Padma Bhushan, Rivers
Memorial meaal and Dadabhai Naoroji Prize. He ,< the recipient of honorary doctorates fr-jrn
Chicago. Nice. Mysore and Imphal universities, and is currently the J. R D. Tata Visiting Professor
at the National Institute of Advanced Studies, Bangalore, India. Prof. Srinivas is a Fellow of "ne
British Academy, and Foreign Member of the American Philosophica 1 Society, Philadelphia, USA. 13
 Aspirations of a software professional

Aspirations build civilizations and take them to new heights. New inventions, conquests, birth
of nations and oven the man-made wonders of the world have resulted from the high aspirations
of individuals, teams and countries. Aspirations vary from time to time, from country to country
and milieu, to milieu as, indeed, they should. Just as industrial revolution brought about a
paradigm shift in the mindset of agricultural workers, the information revolution has ushered
in new parameters that define the aspirations of the knowledge professionals.

Large-scale software development is metamorphosing from an art to a semi-science. The main

asset of a software company is its peopleware. The success of a software company hinges on
the stretch of imagination, creativity, hard work and commitment of its primary asset —
professionals. Every evening, this asset walks out of the
Aspirations build civilizations and take them to new heights
office, tired after a long-day of physical and intellectual
drain. To ensure that the asset returns to the company, energetic and enthusiastic, the next
morning, the company must understand the aspirations of its people and fulfill them.

The aspirations of the present-day software professional are of two types — professional and
personal. The professional aspirations are generally uniform in nature across the globe. The
professionals are in a hurry to create tomorrow's world today itself. They realize that knowledge
is power and want to use this power to add value to the organization. They aspire for leadership
dcrivod from value addition, in an environment, of rapid decision making, m u l t i c u l t u r a l teams
and technology. Their adrenaline flows when they receive recognition from peers and they fear
being loft behind in the race for creating and harnessing new technology. Thus, they revel in
workim) on lati(ling-io-l:>lecfting-o(.lge\.v(Snivj\o{w. They know that ihis adventure is risky, are
prepared to accept any possible failures philosophically, and move on.

14
Respect and dignity are valued beyond any pecuniary benefit by the present-day professional.
Recognition by the society is an important stimulant for them. Any organization that tends to
take its professionals for granted, will disappear like dew on a sunny morning.
While it is fair to say that professional aspirations matter more to a software professional than
personal aspirations, the latter does matter a'lot more today than in the past. Our professionals
have globally-valuable skills, global opportunities and, consequently, global monetary
expectations. The expectation on returns to the professionals as well as on the timing of such
returns have become higher. The software professionals of today, are well aware of the value
they bring to the organization and are not shy of demanding a fair compensation. The abundance
of information available via the Internet has only reinforced their belief that they are a chosen
lot and that they deserve to be counted as such. Instant gratification, now and here, seems to
have taken precedence over long-term monetary benefits.
The software professionals from India are enthusiastic partners in building the new India, and
they are proud of the role they play in transforming this society.

. J)

Bangalore D. N. Prahlad
April 8, 1997 Senior Vice President and
Head - Strategic Business Unit-1

15
 Creating customer champions within the company

Globalization, sophistication of customer demands, heavy competition in the marketplace and

shrinking margins have increased the mortality of companies. Gaining competitive advantage
through better customer service has been accepted as the corporate mantra for survival and
success. Creating a positive spiral of customer orientation within the organization is a kernel
requirement for such success.
Customer orientation transcends any monochromatic definition and synthesizes multiple
objectives, all of which aim to enhance the value delivered by the organization to its customers.
In a customer-oriented organization, every day, every
Gainino competitive advantage through better customer , , , ,• , . ,, , ,
" . , , * employee works towards making higher customer look
service has been accepted as the corporate mantra
for survival and success 9OOC' '" front his/her customer's customer. This is
achieved by exceeding the customer's expectation of the
products/services received, with respect to quality, deliveiy time and cost.
Since customer orientation is best achieved by creating and fostering a customer-driven climate
in the organization, it is natural that the senior management of the organization discusses,
debates and enunciates the company's policy on dealing with its customers. Such a policy
includiw issues liko pricing of its products and soivices, dolivoiy schedules, defects, compensation
for defects, liabilities, maintenance, and response time for each escalation level for responding
to customer needs. Defining a clear policy and communicating it to evei-ybody in the organization
is p.n absolute necessity. There can be no better way to make the software professionals
enthusiastic about this, than the senior management's setting an example by keeping up to the
commitments made to the customer.

16
The task of creating a customer-oriented climate requires a customer champion — an internal
person who personifies the customer's expectations and needs. Such personification comes
from: constant interaction with the customer, the ability to empathize with the customer and a
firm belief in the prerogative of the customer to set high expectations from the organization.
Such a person will become the customer's ambassador, gently nudging everybody in the
organization — from the telephone operator to the chief executive — towards customer
orientation. Highly customer-focused organizations never have any dearth of champions
volunteering to enhance customer satisfaction. Like any other important function in the
organization, such champions need regular feedback, encouragement and recognition within
the organization as well as from the customers.
We, at Infosys, are preparing for an era when: customers and suppliers operate seamlessly, our
business goals and those of our customers would be fully aligned, and joint teams from Infosys
and our customers would be championing the success of common objectives.

Bangalore Ashwani K. Khurana

April 8, 1997 Executive Director and
Head - Banking Business Unit

17
 Investing in technology for higher productivity

Imperatives for productivity enhancement at Infosys are: commoditization of our seivice offerings
by our competitors, acceleration towards fixed-price, turnkey projects, intense competition for
the scarco and skilled human resource in the industry, and the partitioning of development
activity among several centers spread across India.
'I'ho major, internal challenges at Infosys are: communication among staff members at locations
spanning continents and time zones, optimal distribution of software life cycle activities between
customer and Infosys locations, forming efficient workgroups bringing together delivery,
marketing and support seivices, aligning staff skill sets to ever-changing market needs, and
establishing systems to track quality, productivity, cost, cycle times, and customer satisfaction.
The primary instruments for improving productivity at Infosys are: enhancing reuse, reducing
cycle timus, and improving quality. It is our belief that investments in technology provide a
great leverage in helping Infosys achieve quantum leaps
The primary instruments for improving productivity in quality/ productivity, cycle time reduction, quick
at Infosys are: enhancing reuse, reducing cycle times,
and improving quality response and cost containment. As a company committed
to client/server and network computing, it is our policy
to provide high-powered, heterogeneous workstations with: a full complement of hardware
and software, network access to powerful application servers and mainframes supporting
multiple operating systems, software engineering platforms, database management systems
and office productivity systems. The mission statement for networking is to connect every
Infoscion with every other Infoscion, as well as with his/her customers by way of e-mail,
videoconferencing and remote access to spatially distributed computers.

18
i
I

Cycle time reduction is very critical in all our operations. As an organization that has leveraged
productivity from office automation and e-mail connectivity, our current focus is on workflow
automation and groupware like Lotus Notes to take workgroup productivity to the next orbit.

Internet access from the desktop helps our employees compress cycle times in retrieving the
latest business and technological information. The intranet is all pervasive at Infosys, and has
proved to be a veritable productivity tool. The electronic body-of-knowledge on this network
holps in enhancing reuse. Most operational and strategic information systems have been put
on the intranet.

Some of the software tools that are being used at Infosys are for defect data collection, estimation
and enhancing reuse. These are being constantly upgraded.
At the end of the day, if we learn to leverage technology and enhance our productivity, we will
survive and succeed in this game. Looking at the mindset of my professionals towards technology,
I am confident that Infosys will succeed.

Bangalore P. Balasubramanian
April 8, 1997 Senior Vice President and
Head - Strategic Business Unit 2

19
 Can concurrent competition and collaboration survive in the technology world?

Today, very few companies can create the future single-handedly. Competing for the future is
a serious business and is not for dilettantes. Success in the marketplace requires focus on
identifying core competencies and leveraging them. Such focus translates to webbing the market
with symbiotic relationships, crafting strategies for shaping the future of the industry and co-
opting the resources of competing firms in pursuing common objectives. Thus, there is a place
in the mind of the corporate strategist for co-opetition — concurrent collaboration and
competition.
Competition is about enhancing marketshare. Collaboration aims at creating new opportunities
and expanding the market. Collaboration takes place at two levels — horizontal and vertical. In
the horizontal collaboration model, companies which are in head-to-head, tactical competition
come together on a platform of mutualism to create new, expanded markets. In hi-tech industries,
this is best done by creating and evolving new standards on which the companies can compete.
The coming together of VISA and MasterCard to develop SET (Secure Electronic Transaction)
standard for financial transactions on the Internet, is an
The competitive mind set has to go from a militaristic view of
competition to an ecosystems view, example. The opportunity cost of not coalescing with the
nmurcjiiuj industry standard is host, illustrated by Sony's
"home-stretch tumble" in promoting the Betamaxvideo recording format in competition with
the much-accepted I///5format. Such collaboration requires deep and visceral commitment to
defining stniulfirds. A critical succoss (Victor in such situations is I.ho ability, of n company to
convince its competitors that they have a stake in what apparently looks only like the success of
UK; company, but is, in fad., the cmat.ion ol'an ontiro now mnrkotspace. ,
An easier platform for hori/onuil collaboration is in addressing pan-industry issues with
academia, government and other industries. India's NASSCOM is a good example ol' such
collaboration.
20
The vertical collaboration takes place in situations where two companies competing in one
technology area collaborate in another technology area at a different level in the product
spoctrum. Such collaborations are possible among players who have pre-eminent positions in
their chosen areas of operations and use symbiotic relationships to exploit, market niches. A
good example is Microsoft/Intel's WINTEL standard on PCs which is in dog-eat-dog competition
with Apple's Macintosh/MacOS standard while Microsoft Office products from Microsoft are the
preferred office automation platform on MacOS.
Such co-opetition is possible when the competitive motivation is positive — to grow their own
business while increasing the overall market size. The competitive mind set has to go from a
militaristic view of competition to an ecosystems view. The business leaders have to transcend
the shackles of win-lose and zero-sum syndromes. Collaboration is about creating options for
the future and enhancing speed-to-market strategies. Persuasive information in collegial
environments, rather than strong-arm tactics among jingoists, should be the basis for any
collaboration.
In the end, let me say that only those of us that understand these concepts and implement
them will survive and succeed. I have no doubt that Infosys is a good learner and implementor
of such ideas.

Fremont, CA, USA Phaneesh Murthy

Aon! 8, 1997 Vice President and
Head Worldwide Sales
21
 New paradigms for quick enabling of software professionals

It is apt to say that the only constant in our industry is change. We go through frequent cycles
of changes in technology, customer preferences and business practices. New professionals join
us in large numbers each quarter, thus bringing about a distinct change in our cultural milieu.
We operate in different cultures and countries. Hence, an environment and a paradigm for
continuous learning is an absolute necessity for our survival and success.
The key ingredients for success in such environments are generic learning, reusability of such
learning in specific instances, an adaptive mind set and
Our environment calls for a model that ensures quick . . „, . „ ,. . ,
, ,, ,. , . , . . creativity. The instruments for success are non-traditional
and effective learning of generic concepts '
methods of teaching to reduce response times, cycle times
and effort in frequent training of professionals at multiple development locations.
Our environment calls for a model that ensures quick and effective learning of generic concepts.
Quality time of the best trainers is utilized in packaging this effort. Teaching any new product
features and functionality is viewed as a specific instance of the generic knowledge in the
product area.
Computer-based tutorials (CBT) technology enables quick response to the unplanned training
needs of small groups of professionals. Videoconferencing helps in concurrent delivery of training
to professionals at multiple locations.

22
4

Asynchronous methods of knowledge transfer by way of many-to-many interactions between

technology experts and solution seekers, using e-mail and Internet, will help in enhancing the
productivity of trainers. Electronic bodies-of-knowledge will improve reusability and increase
productivity of professionals.
Use of case studies and participation by outside trainers and internal managers help in quick
and effective enabling of our professionals in project and general management areas.
Productizaticn requires that we transcend mere technical competence issues and get to
understand the requirements of the marketplace, business and proouct support. These issues
aro currently the focus of our work at Infosys.
Finally, it is important to realize that a sustainable enabling model for a multi-locational
organization requires learning of fundamentals, sharing of -experiential knowledge by all and
appropriate use of technology. The process of institutionali"ing such an enabling environment
has begun at Infosys. We expect this to be a major aspect of our organizational culture in the
noxt few years, helping us to retain the competitive edge in all our markets.

Bangalore 5. Yegneshwar
April 8, 1997 Associate Vice President and
Head - Education and Research

23
 The Board of Directors The Management Council
Narayana Murthy N. R. \. Narayana Murthy N. R.
Chairman nnd Matiai/incf Chairman. Manat/cmcm C'ounciJ
Raghavan N. S. 2. Mohandas Pai T. V.
.lii'inl. Mtin/Kjitifi Uiroctor
Senior Vice /'t'(:!.'iit:l<!//l. mid
Nandan M. Nilekani fff.'i'id - f-'irii'incu & Adiiiiiiisti'tilio/i find
Deputy Manaffiih; Dii'pa.or f>i>i:n>uiry, Mrin/iijumnnl C'fiunril
Gopalakrishnan S.
3. Ashwani K. Khurana
Deputy Managing Director
ExucuiivL' Dit'oclor and
Dinesh K. Head - Bunking Jiiixiness Unit
Director
4. Balasubramanian P. Dr.
Shibulal S. D. fiemior Vice j'rasidei/t nnd
Director I load - Sinney'ic llusiness (lnit-2

5. Dinesh K.
Head -^Quality; Productivity ana MIS

6. Gopalakrishnmi S.
Ik'ncl - Customer Do/ivory and 'Ibchnolof/y

7. Nandan M. Nilekani
Head - Marketing find Sales

8. Phaneesh Murthy
Vice President and Head - Worldwide Sales

9. PrahladD. N.
Senior Vice President, and
Head - St.nn.egic Business Unit-1

10. Raghavan N. S.
Hand - Human Resources, Education & Research
The Audit Committee 11. Sharad K. Hegde
Senior Vice Pi'osidetn and
PrahladD. N. Head - Technology Advancement Unit. (SBU-4)
Chairman
Ashwani K. Khurana 12. Shibulal S. D.
Hoad - Internet Consulting Grou/> (Sttll-t'JJ
Member
Balasubramanian P. 13. Srinath Batni
Member Vice President, and
Head - Strategic Business Unit-3
Sharad K. Hegde
Member 14. Yegneshwar S. Dr.
Srinath Batni Associate Vice President and
24 Head - Education and Research
 Raghavan N. S.
Srinath Batni
Yegneshwar S.
Nandan M. Nilekani
videoconferencing with
Phaneesh Murthy in the US
(/mm Is/I'to right)

Prahlad D. N.
Mohandas Pai T. V
Ashwani K. Khurana
Narayana Murthy N. R.
Balasubramanian P.
(Hm ten to right)

Dinesh K.
Gopalakrishnan S.
Sharad K. Hegde
Shibulal S. D.
25
(from lell to right)
 Adieu, GRN

In the normal scheme of things, people retiring from a company is a routine affair. But it is not
so when it is a young organization, where for most people the distant future is defined as the
weekend after next. Even less so when the person retiring is the first person to do so. And least
of all when the person is Mr. G. R. Nayak (fondly known as GRN), Director (Finance and
Administration), exiting after a glorious decade of service.
GRN joined Infosys in 1987 when it was a small company of about 100 employees. When he
came on board, he was already 50 - an age when people are set in their ways and ideas. The
last, decade in Infosys has seen an incredible transformation from those humble beginnings
into one of India's most admired companies. GRN was there, a key player at every step of the
transformation. His learnability was there for all to see, whether it was grappling with technology,
understanding the aspirations of people half his age, or building systems in an organization
that disdained formality. He fully imbibed and was a key proponent of Ihe Infosys value system
and ideals, and proved that adaptability is not about age but about attitude.
Too often the accolades of success go to those who occupy centre stage. The contribution of all
those behind the scenes, who make sure that the organization walks the talk, often goes
unnoticed. GRN was one of those pillars, a rock of stability. "Leave it to Mr. Nayak" was the
rallying cry whenever we faced a particularly knotty problem. And 1 cannot think of a single
situation when he did not deliver, coming up with magical solutions when lesser mortals may
have been in the throes of despair.

Most of all, GRN is a very contented man. He has often said that life - and Infosys - have dealt
him more than his fair share of cards. In terms of status, power and money, he feels he has
achieved it all. This realization spawned a spectacular burst of energy, focused on doing things

26
 G. R. Nayak

for others. There is not a soul in Infosys whose life he has not touched, be it a Homes 2000
applicant, a person who has met with an accident, or someone in personal trouble. He has
made sure that as Infosys grew, the Infoscion is not just another statistic, but a flesh and blood
person who needs to get married, own a car and house, and carve out a decent life - that will be
his enduring legacy.
Good-bye CRN, we will miss you in Infosys.

Nandan M. Nilekani
Deputy Managing Director
27
 Directors' report

To the Members,

Your directors have pleasure in presenting their report on the business and operations of your company for the year
ended March 31, 1997.

Financial results fls. in crores

Year ending March 31, 1997 1996
Gross revenue \ 143.81 93.41
Operating profit (PBIDT) 50.06 33.95
Interest O.Cil
Depreciation 10.52 8.63
Profit before tax from ordinary activities 38.93 25.32
Provision for tax 5.54 4.31
Profit after tax from ordinary activities 33.39 21.01
Extraordinary income 3.59
Net profit 36.98 21.01

Appropriation
Interim dividend paid 1.09 1.09
Dividend recommended - final 2.90 2.54
Total dividend 3.99 3.63
Transferred to capital reserve 3.59
Transferred to general reserve 29.40 17.38
* Rs. One crore is equal to Rs. Ten million.

Results ot operations
Your company continued its impressive performance this year as well. The gross revenue has grown from Rs. 93.41
crores in 1995-96 to Rs. 143.81 crores during the current year, registering a growth rate of 53.95%. The operating
profit has grown to Rs. 50.06 crores from Rs. 33.95 crores in the previous year, registering a growth rate of 47.43%.
During the year, your company has absorbed the large initial costs involved in operationalizing several software
development centers in various parts of India. I
f:
Bonus issue of shares
Your Directors recommend a bonus issue of shares in the ratio of 1:1. The warrants issued and outstanding under the
Employees Stock Offer Plan (ESOP) are also eligible for the bonus issue. The necessary resolutions are being placed
before the shareholders in the ensuing Annual General Meeting.

Dividend
An interim dividend of Rs. 1.50 per share (subject to deduction of tax at source) was paid in November, 1996. Your
directors now recommend a final dividend of Rs. 4.00 per share (subject to deduction of tax at source, if applicable),
making in all, a total dividend of Rs. 5.50 per share for the year ended March 31, 1997. The total amount of dividend
for the current year is Rs. 3.99 crores as against Rs. 3.63 crores for the previous year. The final dividend is expected to
be tax free in the hands of the shareholders if the Finance Bill, 1997, is passed by the Parliament.

Increase in share capital

During the year, the issued, subscribed and paid up capital increased by Rs. 10,000 consequent to the issue of 1000
shares of Rs. 10 each, fully paid, to an employee of your company under the Employees Stock Offer Plan. The share
premium also increased by Rs. 90,000 upon receipt of Rs. 90 per share towards the same.
Exports
'8 The export revenue grew from Rs. 80.34 crores in 1995-96 to Rs. 125.28 crores this year, registering a growth rate
of 55.94%. Your company continues to emphasize its focus on offshore software development, maintenance and
products. Entark (Enterprise architecture, formerly known us INLEGOE) has been used successfully in several software
development projects. During the year, there were 6 new installations of BANGS 2000 in Africa and Asia.

rT""3
1:
Organizational changes
A new Strategic Business Unit (SBU) - 5 was added during the year to concentrate on Internet and intranet consulting.

Productization initiatives
In2000
We ara approaching the next millennium. A large part of the software developed in the world, so far, cannot handle
dates beyond December 31, 1999. This lacuna has created a software refurbishing opportunity estimated by analysts
at around US$ 300 billion. InZOOO is your company's solution to this problem. In2000was created last year and has
been used extensively in providing the solution to the millennium problem. To ensure balanced growth, and insulate
the company from any major changes in the marketplace, your company has taken steps to minimize its dependence on
any single customer, technology or application area. As a part of this strategy, your company has decided to limit the
contribution from InZOOO to 25% to 30% of total sales.

PorteNT
Your company has developed a methodology and a tool kit to port applications from OS/2 to WINDOWS NT. The industry
trends indicate that this is an emerging area.
Websetu
Websetu is a suite of products for enabling Internet-based electronic commerce using traditional, On-Line Transaction
Processing (OLTP) application engines. Your company demonstrated this suite of products at the Fall Internetworld '96
at New York in December 1996. It is available for free download from our web page on the Internet.

Domestic market
The BANGS 2000 software has performed exceedingly well in the domestic market. The unprecedented reception that
it has received from the new, highly competitive private banks has reinforced the premier position of BANGS 2000 in
the Indian market. There were 165 installations of BANGS 2000 as on March 31, 1997. the revenue from BANGS 2000
increased by more than 83% over the last year, and your directors are optimistic that this trend will continue in the
future. BankAway! provides an Internet-aMabled front-end to BANGS 2000 functions.

Overseas branches
The Cincinnati branch office was moved to Chicago to bring the sales force nearer the center of gravity of our
Midwestern US business. Sales offices were opened at London in the UK and Los Angeles in the US. In addition, during
the coming year, the San Francisco, New York and Boston offices will be strengthened. A sales office will be opened at
Tokyo and another one in Canada.

New development centers and infrastructure

In keeping with our strategy of helping software professionals function from their own milieu, your company
operationalized development centers at Pune, Chennai (Madras) and Bhubaneshwar. The erstwhile corporate office at
the prestigious Manipal Center in Bangalore has become the development center for the Internet consulting group. The
development center at Mangalore has been expanded. Your company has also signed the lease for a new 55,900 square
feet development centre at Bangalore which is expected to become operational during June 1997.
Effective testing of the date-converted software by InZOOOrequires an in-house mainframe. The demand for software
development on mainframes has also received a boost since the mainframe market has had a revival during the last two
years. Hence, an IBM 9672-RA4 mainframe has been purchased for our Electronics City development centre.
Quality
After completing three years as an ISO 9001/Tick IT certified company, your company went through a successful
recertification audit in November 1996. Work towards Level 3/4 of the Capability Maturity Model of the Software
Engineering Institute of Carnegie Mellon University, Pittsburgh, USA, is in full progress.

India's best-managed company and the Silver shield for the Best-Presented-Accounts
Your directors are happy to report on the several recognitions that have been bestowed on your company during the
year. The readers of the well-known AsiaMoney magazine have voted your company as India's best-managed company 29
for the year 1996. The Institute of Chartered Accountants of India awarded the Silver shield for the Best-Presented-
Accounts, amongst the entries received from the non-financial, private sector companies for the year 1995, to your
company. Your company also won several awards for export performance.
 Continuation of presentation of Infosys accounts according to US GAAP and providing information in the
format of Form 10-K of SEC and Human Resource Accounting
Last year, your company had voluntarily recast its Balance Sheet in compliance with the US GAAP and also provided, I
f:
on a voluntary basis, the information mandated in Form 10-K by the Securities and Exchange Commission of USA.
This exercise has been continued for the current year. These are, however, not audited. A model for the accounting of
human resources was used and the resulting value of the human resources of your company was disclosed in the last V
year's annual report. Your company has continued this practice.

Brand valuation JV

It is increasingly accepted that modern business succbss is largely dependent on intangible assets. The quantum of
value added to a business is becoming a function of the intangible assets in the business. Last year, your company had
valued its most valuable asset - its human resources. This year, your company has made an attempt to value another %
of its valuable assets - the "Infosys" brand. The necessaiy information about brand valuation is provided as additional
information i.o tlio .shareholders.

Employees Stock Offer Plan (ESOP)

The Employee Stock Offer Plan, initiated in 1994-95 by your company, has been a great success. Several key employees
are now covered by this scheme. This year, 1,20,900 warrants were awarded to 184 employees.

Subsidiary in USA and extraordinary income due to the sale of EAGLE to the subsidiary
Your company's subsidiary in the USA, Yantra Corporation (Yantra), has completed a full year of operations. Development
effort to enrich EAGLE (the product, now known as WMSYantra, transferred by your company to Yantra) functionally
to keep up with the changing needs of the warehouse customers has been initiated by Yantra, and is expected to yield t
:j..
rich dividends in the future. During the year, Yantra released WebYantra, an Internet framework for electronic
commerce for the OTR segment. The first installation of phase I of WebYantra was completed for a world-famous £
footwear manufacturer.
The necessary approvals for transferring the rights of ownership of WMSYantralo Yantra have been received from the
Reserve Bank of India, and the transfer has been completed. This sale is worth US$ 1 million and has been paid for as
5 million common stocks in Yantra each worth US$ 0.20. The shareholders are cautioned that this income is a onetime
extraordinary income.

Software Sourcing Company (SSC)

During the year, your directors completed the relinquishment of your company's interest in Software Sourcing Company
(SSC), a joint venture with Kurt Salmon Associates, USA, after obtaining the necessary approvals from the Reserve
Bank of India.

JASDIC
JASDIC Pai'k Company is an Indo-Japanese consortium founded by Mr. Kenichi Ohmae, the world famous management
strategist and author, along with a few Japanese companies and five Indian companies including your company. The
purpose of JASDIC is to provide high-quality software engineering services from India to the Japanese market. This is
in line with your company's strutogy to diversify its geographic customer base.

Overseas subsidiaries
Last year, your directors obtained your approval for setting-up wholly-owned subsidiaries in USA, Europe and Asia-Pacific.
Your directors are evaluating various proposals to identify operations which meet and align with the overall corporate
vision of your company.

Investments
In line with our commitment to our shareholders, your directors have, during the year, continued with the disinvestment
of the company's investments in equities of other companies. Currently, the surplus funds of your company are being
invested only in short-term instruments and inter-corporate deposits of rated, financially sound companies.
30 NSDL
We are glad to inform you that the Board of Directors of your company have entered into an agreement with National
Securities Depository Limited (NSDL) to facilitate the holding and trading of the company's shares in electronic form.
Fll investment Limit
Recently, the Government of India has raised the investment limit in an Indian company for Foreign Institutional
!nvestors/Non Resident Indians/Overseas Corporate Bodies, from 24% to 30%, subject to the approval of the Board of
t he invastee company, and a special resolution of the shareholders of such a company. Your directors are of the opinion
that it would be in the interest of the company to increase the limit of such investment to 30%. The necessary
resolutions are being placed before the shareholders in the ensuing Annual General Meeting.

Social contribution
During the year, your company contributed an amount of Rs. 8.78 lakhs to the Bangalore Traffic Police, for the
purchase of an ambulance and six motorcycles for better traffic management on Hosur Road, Bangalore. Your company
lias promoted Infosys Foundation, a not-for-profit trust, in furtherance of your company's commitment to the social
causes of our milieu. The focus of this foundation will be to help organizations devoted to destitutes, disadvantaged
people, spastics and senior citizens, and to further the cause of education and similar activities of social importance.

Fixed deposits
Your company has not accepted any deposits and, as such, no amount of principal or interest was outstanding on the
date of the Balance Sheet.

Directors
According to the terms of Article 122 of the Articles of Association, Mr. Nandan M. Nilekani, retires by rotation in the
forthcoming Annual General Meeting and is eligible for reappointment. Being so, he offers himself for reappointment.
During the year, Mr. S. D. Shibulal was co-opted as an additional director of the company. The necessary resolution
seeking his appointment as whole-time director of the company is being placed before the shareholders for approval.
Mr. G. R. Nayak, a whole-time Director of the company in charge of Finance and Administration, resigned from
directorship on March 6, 1997 on attaining superannuation. Mr. G. R. Nayak was a key player in the success of your
company. On behalf of all of you, I bid him farewell and wish him a happy, healthy and prosperous retired life.
Auditor
The auditor, Mr. A. M. B hacked, retires at the forthcoming Annual General Meeting and has informed his inability to
offer himself for reappointment due to his prior professional commitments. Hence, your company has proposed
M/s. Bharat S. Raut and Company, Chartered Accountants, as the auditors for the next year and the Directors seek your
approval.

Particulars of employees
As required under the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars
of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the annexure
included in this report.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed under subsection (l)(e) of section 217 of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in the annexure
included in this report.

Acknowledgments
Your directors thank the customers, vendors, investors and bankers for their continued support to your company's
growth. Your directors place on record their appreciation of the contribution made by the employees at all levels, who,
through their competence, hard work, solidarity, cooperation and support, have enabled the company to achieve
phenomenal growth during the year.
Your directors thank the Government of India, particularly the Department of Electronics, the Customs department.
Software Technology Park, Bangalore, Ministry of Commerce, RBI, VSNL, the Department of Telecommunications, the
:>'.ate government and other governmental agencies for their support during the year, and look forward to their
"Hinntjed support.
For and on behalf of the Board of Directors

31
Bangalore N. R. Narayana Murthy
April 8, 1397 Chairman and Managing Director
 Annexure to the Directors' report

a) Particulars pursuant to Companies (Disclosure of particulars in the, report of Board of Directors) Rules, 1988
1. Conservation of energy
The operations of your company involve only low energy consumption. Adequate measures have, however, been
taken to reduce energy consumption by using energy efficient computer terminals and by purchase of equipment
of latest technology. Your company plans to replace the existing lamps with 11 watt CFL fittings and is shifting to
the use of "Electronic Ballast" to reduce the power consumption of tube lights. Your company evaluates, on an
ongoing basis, new technologies and techniques to make infrastructure more energy efficient. Air-conditioners
are used only in computer control center and conference rooms as a measure of energy conservation. The impact
of these measures have been to enhance energy efficiency. As energy cost forms a very small part of total costs,
the impact on costs is negligible.

2. Research and Development (R & D)

Research and Development is very crucial to the success of an enterprise operating in the world market. R & D in
software development is a key instrument in retaining margins in these days of lingering recession and aggressive
competition.
a. Specific areas for R& Datlnfosys
The company carries out research in the following three areas:
• General software development: This includes issues related to improving productivity, implementing
metrics, improving estimation techniques, adoption of new technologies, process improvement and tool
development.
• Software maintenance, re-engineering and revitalization: These are techniques that help in extending
the business value and usability of existing applications.
• Development of technologies related to the Internet: The company is looking specifically at how the
Internet paradigm has changed the computing business, and how we can exploit it in our services,
applications and tools.

b. Benefits derived as a result of the aboveR&D

The improvements in productivity of our projects and better estimates of our proposals can be directly
attributed to the research undertaken in this area. The research in software re-engineering has provided the
basis for the highly successful InSOOOservice that has been developed by your company for the Year 2000
problem. This research has also contributed to the PorteNT service that luxs been created to port existing
applications to the WINDOWS NT platform.
The Internet initiatives of Infosys, like high-value Internet consulting, the Websetu tools and BankAway!
application, are due to the R& D efforts related to the Internet. The roadmap of BANGS 2000 is being decided
bused on the rosenrch into the Internal computing paradigm.
The company has developed the Websetu suite of products, which allow the development and deployment of •
mission-critical applications over the Internet. The company has developed tools that aid in the automation
of the !n2000 and PoiteNT services. The company has developed new products in the banking area, liko
BaakAwiiy! - an electronic banking product on the web, and a module for treasuiy management. In addition,
BANGS 2000 has undergone significant enhancements to enable multi-currency and flexi-centralization.
c. Future plan of action
The Uiruo aruus in which K & D uro boiiuj cun'ku.1 DUI., cuulmuo to l)t> U\o most hitjli luvunujo nrotis lor Inl'osys.
More comprehensive and sustained efforts will be made in these areas in the coming years.
d. Expenditure on R & D for the year ending March 31, /te. in crores

If) 9 7 1996
Revenue expenditure 4.10 2.61
Capital expenditure :nr.i 0.5V
32
Total R & D expenditure 7 A3 3.18
R & D expenditure as a percentage of total revenue 5.17% 3.40%
 3. Technology absorption, adaptation and innovation
Your company uses the latest technology available across the world for its operations. These technologies are
adapted to meet its specific needs. Your company has created a Year 2000 tools qroup which will develop tools
specifically to address the millennium problem. This enables your company to increase productivity for this type
of work. The quality of the deliverables also increases, since part of the work is automated. The team currently
consists of 10 people.
The Technology Advancement Unit (TAU) has enhanced Entark (originally called INLEGOE), with additional
products, to create a complete suite of products called Websetu. The Websetu suite allows legacy applications to be
connected to new delivery channels like Internet and intranet, creating network computing applications by reuse
of existing legacy code. It also allows new, very high performance OLTP applications to be developed over Internet
and intranet. Your company is one of the few companies in the world which is positioned to take advantage of the
migration of legacy applications to Internet with this suite of products.
Your company is anticipating the move to workflow-based business applications in the future. In order to be ready
for this move, your company is converting some of its internal MIS applications to be workflow-enabled. This
requires re-engineering of business propesses and use of workflow tools like InConcert, Flowmark, and Notes.
Your Company has increased the use of software testing tools in its projects to increase the efficiency of the testing
process. This will improve the quality of deliverables and enhance productivity by reducing rework.

4. Foreign exchange earnings and outgo

a. Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and
services and export plans
The company has always had a predominant export focus. In 1996-97, 87.12% of the revenue came from
exports. The company has, over the years, built up a substantial direct office network all over the world.
These offices are in the US, Europe and Asia, and are staffed with sales and marketing people, who directty
sell the company's products and services to large international customers. The export thrust of the company
will continue in the future. In 1997-98, the company plans to open additional offices in Canada and Japan.
In addition to the customers they have in Africa, Nepal and Sri Lanka, the Banking Business Unit is planning
to enter new markets in Asia.
The company has launched a plan to increase the awareness of Infosys brand and its products and services.
Several Press and Public Relations exercises have been launched in the US, which will raise the awareness
about the company. The company plans to take pan in at least 4 international expositions on a worldwide
basis to promote its products and services.
The long-term goal of the company is to be a well-respected name in the global market for its products and
services, and continue to get a predominant portion of.its revenue from exports.
b. Foreign exchange used and earned for the year ending March 31, fts. in crores
1997 1996
Foreign exchange earnings 114.03 74.46
Foreign exchange outgo 56.17 33.34
(including capital goods and imported software packages)

For and on behalf of the Board of Directors

Bangalore N. R. Narayana Munhy 33

April 8, 1997 Chairman and Managing Director
Management statement

The financial statements are in full conformity with the requirements of the Companies Act, 1956 and the Generally
Accepted Accounting Principles (GAAP) of India. These financial statements have also been reformatted to comply with
the requirements of GAAP of the US and the SEC disclosure norms. The management of Infosys Technologies Limited
accepts responsibility for the integrity and objectivity of these financial statements, as well as for estimates and
judgements relating to matters not concluded by the year end. The management believes that the financial statements
reflect fairly the form and substance of transactions and reasonably present the company's financial condition and
results of operations. To ensure this, the company has installed a system of internal controls which is reviewed,
evaluated and updated on an ongoing basis. Our internal auditors have conducted periodic audits to provide reasonable
assurance that the company's established policies and procedures have been followed. However, there are inherent
limitations that should be recognized in weighing the assurances provided by any system of internal controls.
These financial statements have been audited by Mr. A. M. Bhatkal, Chartered Accountant, the independent auditor.
The Audit Committee, at Infosys Technologies Limited, meets periodically with the Board of Directors, the internal
auditors and the independent auditor to review the manner in which they are performing their responsibilities, and to
discuss auditing, internal controls and financial reporting issues. To ensure complete independence, Mr. A. M. Bhatkal
and the internal auditors have full and free access to members of the Audit Committee to discuss any matter of
substance.
The Audit Committee for 1996-97 was :
Prahlad D. N. - Chairman
Ashwani K. Khurana - Member
Balasubramanian P. - Member
Shared K. Hegde - Member
Srinath Batni - Member

Bangalore N. R. Narayana Murthy

April 8, 1997 Chairman and Managing Director
Auditor's report

To
The shareholders.
Infosys Technologies Limited

I have audited the attached Balance Sheet of Infosys Technologies Limited, Bangalore, as at March 31, 1997 and the
Profit and Loss Account of the company for the year ended on that date annexed thereto and repon that in accordance
with the provisions of section 227 of the Companies Act, 1956 :

1. I have obtained all the information and explanations which, to the best of my knowledge and belief, were necessary
for the purpose of my audit.

2. In my opinion, proper books of accounts, as required by law, have been kept by the company so far as appears from
my examination of those books.

3. The said Balance Sheet and Profit and Loss Account are in agreement with the books of account.

4. In my opinion, and to the best of my information and according to the explanations given to me. the said accounts
read together with the notes thereon, give the information as required by the Companies Act, 1956, in the
manner so required, and give a true and fair view :

a) in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 1997, and
b) in the case of the Profit and Loss Account, of the profit for the year ended on that date.

The required report, under the Manufacturing and Other Companies (Auditor's report) Order, 1988, is annexed
herewith.

Bangalore A. M. Bhatkal
April 8, 1997 Chartered Accountant

35
Annexure to Auditor's report

As required by the Manufacturing and Other Companies (Auditor's report) Order, 1988, issued by the Central Government
under section 227(4A) of the Companies Act, 1956, and in terms of the information and explanations given to me, and
on the basis of such checks as I considered appropriate, I report as under:
1. The company has maintained proper records showing full particulars, including quantitative details and situation
of fixed assets. These fixed assets have been physically verified by the management and, in my opinion, the
program of verification carried out is reasonable with regard to the size of the company and the nature of its
assets, and no discrepancies have been noticed on such verification.
2. None of the fixed assets of the company have been revalued during the year.
3. a. During the year, the principal activity of the company has been that of development and production of
computer software for its clients. Stocks of computer stationery, ribbons, floppies, magnetic tapes and disks,
required for this activity, have been physically verified by the management at reasonable intervals during the
period. Stocks of imported software, a commodity that the company trades in, have also been physically
verified by the management at reasonable intervals during the year.
b. As explained to mo, tlui procedures for physical verification of the above referred slocks followed by the
management are, in my opinion, reasonable and adequate in relation to the size of the company.
c. No material discrepancies were noticed on physical verification of stocks as compared to book records and the
same have been properly dealt with in the books of accounts..
d. On the basis of my examination of the stock records, 1 am of the opinion that the valuation of stock is fair and
propei' and is in accordance with the normally accepted accounting principles, and is on the same basis as in
the preceding year.
4. The company has not accepted any loan from companies, firms or other parties listed in the register maintained
under sections 301 and 370(I-C) of the Companies Act, 1956.
5. The parties (including employees) to whom loans or advances in the nature of loans have bean given by the
company are repaying the principal amounts as stipulated, and are also regular in payment of interest, where
applicable.
6. In my opinion, and according to the information and explanations given to me, there are adequate internal control
procedures commensurate with the size of the company and the nature of its business, with regard to the
purchase of components, plant and machinery, equipment and other assets.
7. During the year, the company has not purchased any stores or components exceeding Rs. 50,000 in value for each
type thereof, from subsidiaries, firms, or companies, or other parties in which the directors are interested, as listed
in the register maintained under section 301 of the Companies Act, 1956.
8. As explained to me, there have been no unserviceable and damaged materials during the year.
9. The company has not accepted any deposits from the public.
10. I have been given to understand that the operations in which the company is engaged do not result in any
realizable scrap or by-product.
11. .In my opinion, the company's present internal audit system is commensurate with its size and nature of business.
12. The Central Government has not prescribed maintenance of cost records under section 209(1 )(d) of the Companies
Act, 1956, for the products of the company.

13. According to the records of the company, the Provident Fund and the Employees State Insurance dues, wherever
applicable, have been regularly deposited during the year with the appropriate authorities.

14. According to the information and explanations given to me, no undisputed amounts payable in respect of income
tax, wealth tax, sales tax, customs duty and excise duty were outstanding as at March 31, 1997, for a period of
more than six months from the date they became payable.

15. According to the information and explanations given to me and on the basis of books and records of the company
examined by me, no personal expenses of employees or directors have been charged to revenue account, other
than those payable under contractual obligations or in accordance with.generally accepted business practices.

16. The company does not fall within the purview of clause(O) of section 3(1) of the Sick Industrial Companies (Special
Provisions) Act, 1985.

17. In respect of the trading activities, there were no damaged goods in the possession of the company at the end of
the year.

18. In respect of services rendered :

a. The nature of service rendered is such that it does not involve consumption of material and stores.

b. The company has a reasonable system of allocating man-hours utilized to the relative jobs, commensurate
with its size and nature of its business.

c. In my opinion, there is a reasonable system of authorization at proper levels and the related system of
internal control is commensurate with the size of the company and nature of its business, on allocation of
manpower to jobs.

Bangalore A. M. Bhatkal
Aprils, 1997 Chartered Accountant

37
Balance Sheet as at March 31.

in Rs.
Schedule 15)07 1996

SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 1 7,25,97,1300 7,25/87,500
Reserves and surplus 2 105,57,63,097 72,57,93,728

LOAN FUNDS
Secured loans 3 - 4,26,06,235
Unsecured loans - -
112,83,60,597 84,09,87,463

APPLICATION OF FUNDS
FIXED ASSETS 4
Gross block 71,29,16,621 46,85,74,921
Less : Depreciation 25,02,44,587 , 14,66,06,677

Net block 46,26,72,034 32,19,68,244

Add : Capital work-in-progress 7,04,41,980 4,43,65,797
53,31,14,014 36,63,34,041

INVESTMENTS 5 5,32,61,960 6,29,36,812

CURRENT ASSETS, LOANS AND ADVANCES

Inventories 6 4,10,878 16,97,058
Sundry debtors 7 18,08,89,934 . 11,24,96,905
Cash and bank balances 8 15,02,35,621 13,25,22,822
Loans and advances 9 38,44,14,669 29,49,38,681
71,59,51,102 54,16,55,466
Less : Current liabilities 10 5,12,31,334 4,51,13,756
Provisions 11 12,27,35,145 8,48,25,100
NET CURRENT ASSETS 54,19,84,623 41,17,16,610
112,83,60,597 84,09,87,463

SIGNIFICANT ACCOUNTING POLICIES

NOTES ON ACCOUNTS 15
The Schedules referred to above and the notes thereon form an integral part of the Balance Sheet.
This is the Balance
Sheet referred 10 in my
report of even date,

A. M. Bhatkal N. R. Narayana Murthy N. S. Raghavan Nandan M. Nilekani S. Gopalakrishnan

Chartered Chairman and Jt. Managing Director Dy, Managing Director Dy. Managing Director
Accountant Managing Director

Bangalore K. Dinesh S. D. Shibulal T. V. Mohandas Pai V. Viswanathan

April 8, 1997 Director Director Sr, Vice-President Company Secretary
(Finance and Administration)
Profit and Loss Account for the year ending March 31,

infis.
Schedule 1997 1996

INCOME
Software development services and products
Overseas 125, 28.18.659 80,33,94,508
Domestic 13,33,74,035 6,52,00,690
Sale of imported software packages 59,53,940 1.69,54,164
Other income 12 4,59,30,153 4,85.84,343
143,80,76,787 93,41,33.705

EXPENDITURE
Cost of imported software packages sold 37,14,984 87,36.350
Software development expenses 13 76,35,57,398 48,35,99,332
Administration and other expenses 14 15,70,33,835 • 7,95,01,855
Loss on sale of investments/ Provision for investments 1,31,92,752 2,27,60,000

93,74,98,969 59,45.97,537
Operating profit (PBIDT) 50,05,77,818 33,95,36,168
Interest 61.09,715 -
Depreciation 10,51,64.884 8,63,41,651

Profit before tax 38,93,03,219 25,31,94,517

Provision for tax - earlier years 1,08,00,805 68,80,000
- current year 4,46,00,000 3,62,20,000
Profit after tax from ordinary activities 33,39,02,414 21,00,94,517
Extraordinary income 3,59,00.000 -
Net profit 36,98,02,414 21,00,94,517

AMOUNT AVAILABLE FOR APPROPRIATION 36,98,02,414 21,00,94,517

Dividend (Subject to deduction of tax

at source where applicable)
Interim :, 08,87, 900 1,08,87,900
Final (proposed) 2,90,35,145 2,54,05,100
Amount transferred - capital reserve 3,59,00,000 -
- general reserve 29,39,79,369 17,38,01,517
36,98,02,414 21,00,94,517

SIGNIFICANT ACCOUNTING POLICIES AND

NOTES ON ACCOUNTS 15

The Schedules referred to above and the notes thereon form an integral part of the Profit and Loss Account.
This is the Profit and Loss
Account referred to in my
report of even date.
A. M. Bhatkal N. R. Narayana Murthy N. S. Raghavan Nandan M. Nilekani S. Gopalakrishnan
Chartered Chairman and Jt. Managing Director Oy. Managing Director Dy. Managing Director
Accountant Managing Director
Bangalore K. Dinesh S. D. Shibulal T. V. Mohandas Pai V. Viswanathan
April 8. 1997 Director Director 5r. Vice-President Company Secretary 39
(Finance and Administration)
 Schedules to the Balance Sheet as at March 31,

in Ra.
1997 1996

1. S H A R E CAPITAL

AUTHORIZED
1,00,00,000 equity shares of Rs. 10 each. 10,00,00,000 10,00,00,000

ISSUED, S U B S C R I B E D AND PAID UP

72,59,600 (previous year - 72,58,600)
equity shares of Rs. 10 each fully paid up. 7,25,96,000 7,25,86,000
(Of the above, 49,18,300 equity shares of Rs. 10 each,
fully paid up, have been issued as bonus shares by
capitalization of general reserve)
Add : Forfeited shares 1,500 1,500
7,25,97,500 7,25,87,500

2.. RESERVES AND SURPLUS

Capital reseive
transferred from Profit and loss account 3,59,00,000
Share premium account
as per last Balance Sheet 34,74,51,460 34,74,51,460
Add : Received during the year on conversion of warrants 90,000
34,75,41,460 34,74,51,460
Investment allowance reseive (utilized)
as per last Balance Sheet 9,55,800 9,55,800
Less : Transferred to general reserve 2,90,800
6,65,000 9,55,800
General reseive
as per last Balance Sheet 37,73,86,468 20,35,84,951
Add : Transferred during the year from
Investment allowance reseive (utilized) 2,90,800
Add : Transferred from Profit and Loss Account 29,39,79,369 17,38,01,517
67,16,56,637 37,73,86,468
1,05,57,63,097 72,57,93,728

3. SECURED LOANS
I'Voin I lousiiu) Ijcjvolopmc.'iil. Fiimnco Corpunition I.Id.
towards purchase of staff quarters. (Secured by equitable
mortgage by deposit of title deeds of staff quarters)
4,26,06,235

40
 •) )

Schedules to the Balance Sheet as at March 31,

4. FIX l-D ASSETS

Gross block Depreciation Net block

a. Cost as Additions Deductions Cost As on For Deductions As on As on As on

No. Assets on 1.4. 96 during during as on 1.4.96 the during 313.97 31.397 31.3.96
the year the year 31.3.97 year the year

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Us. Rs.

i. Land - free-hold 1,89,83,650 - 1,89,83,650 - 1,89,83.650

2. Land - tease-hold 48,51,170 5,13,590 6,51,170 47,13,590 - 47.13, MO 48,51,170

2. Buildings 16,74.89,430 1,76,93.961 40,000 18,51,43.391 29,16,464 41,60,035 365 70.76,134 17.80.67,257 16,45,72,966

3. 1'lnnt nnd Machinery 5,63.22,571 5,60,44,266 - 11,23,00,837 1,69,96,316 1,48,93,048 - 3, 18.8!),3(y1 8,04. 77. 473 3,93,26,255

4. Computer systems 19,98,01.825 11,32.04,870 14,21,620 31.15,85.075 10,13,60,526 7,63,73,589 13,24,212 17,64,09,903 13,51,75,172 9,84,41,299

5. Furniture and fixtures 3.86,29.517 4,02,26,749 - 7,88,56,266 2,48.54.009 95.54,657 - 3,44,08,660 4, 44, 47,000 1,37,75,508

0. Vehicles 14,80,408 3,61,125 5,73,721 12,67.812 4,79,362 1.83.555 2,02,397 4,60,!i20 8,07,29?. 10,01,046

46,85,74.921 24,70,28,211 26,86,511 71,29,16.621 14,66,06,677 10,51,64,884 15,26.974 25,02,44, b8V 4fa.26,72.034 32,19,68,244

IVcjviousyeur 25.32,01.097 21.06.31.126 42.57,302 46,85,74,921 6,14,51,082 8,63,41.651 11.86,056 14,66,06.677 32,19,08,244 19, 17,b0.01 5

Buildings include Rs. 250 being the value of 5 shares of Rs. 50 each in Mittal Towels Premises Co-operative Society Ltd.
 Schedules to the Balance Sheet as at March 31,

inRs.
1997 1996

5. INVESTMENTS - at cost

TRADE (UNQUOTED) No of Units/

Long-term investments Debentures/
Shares
Software Sourcing Company, Atlanta, USA, 13,30,016
a partnership with Kurt Salmon Associates, USA
Wholly-owned subsidiary - Yantra Corporation 5,32,51,600 1,73,51,600
a company incorporated in the USA -
75,00,000 (previous year - 25,00,000) common stock
at US$ 0.20 each, fully paid, par value US$ 0.01 each
Software Services Support Education Center Ltd. 1 10 10
The Saraswat Co-operative Bank Ltd. 1,035 10,350 10,350
5,32,61,960 1,86,91,976

NON-TRADE (QUOTED)
Current investments
Mutual Funds
Centurion Quantum Growth Fund 1993 20,00,000
Morgan Stanley Mutual Fund 43,51,350
The Alliance '95 Fund 24,37,500
87,88,850
Debentures
Bharat Earth Movers Ltd. 1,53,000
Shaw Wallace Gelatines Ltd. 48,000
The Simbhaoli Sugar Mills Ltd. 2,75,000
Torrent Pharmaceuticals Ltd. 22,500
4,98,500

Equity shares
Absolute Aromatics Ltd. 11,70,000
Akai Impex Ltd. 4,98,000
Bal Pharma Ltd. 1,86,000
Bharat Earth Movers Ltd. 8,41,500
Binani Zinc Ltd. (partly paid) 19,57,500
Cals Ltd. 5,90,580
Centum Electronics Ltd. 73,000
Cholamandalam Investment & Finance Co. Ltd. 33,45,000
CRB Capital Markets Ltd. 51,00,000
Dai-Ichi Karkaria Ltd. 16,80,000
DCM Financial Services Ltd. 2,66,000
Dewas Metal Sections Ltd. 10,98,000
Dugar Housing Development Finance India Ltd. 37,000
Escorts Financial Soivicos Ltd. 5,58,000
Ganesh Benzoplast Ltd. 4,83,000
GIG Housing Finance Ltd. 4,10,000
12 HB Portfolio Leasing Ltd. 15,99,000
Hindustan Organic Chemicals Ltd. 4,15,000
 Schedules to the Balance Sheet as at March 31,

Jnfts.
1997 1996

5. INVESTMENTS - at cost (contd.)

Hindustan Petroleum Corporation Ltd. 75,48,000
India Lease Development Ltd. 15.00,000
Indian Dyestuff Industries Ltd. 14,40,000
Indo-Dutch Proteins Ltd. 1,19,000
Industrial Development Bank of India 12,74,000
Jain Plastics & Chemicals Ltd. 3,70,500
Jindal Photo Films Ltd. 2,73.000
Kandagiri Spinning Mills Ltd. 2,50,000
Kongarar Textiles Ltd. 1,17,000
Lloyds Metals & Engineers Ltd. 22,35.000
LML Ltd. 11,07.391
Noel Agritech Ltd. 1,55,000
Mafatlal Finance Company Ltd. 5,55,000
Mardia Steel Ltd. 22,55,000
Onward Technologies Ltd. 65,000
Oriental Bank of Commerce 1,44,000
Peerless Shipping & Oilfield Services Ltd. 22,52,000
Pressman Ltd. 4,29,000
Punjab Communications Ltd. 50,000
Punjab Woolcombers Ltd. 1,08.000
Recon Ltd. 3,40,000
Reliance Capital Ltd. 27,44,000
Reliance Chemotex Industries Ltd. 11,84,750
Sambandam Spinning Mills Ltd. 3,50,000
Samrat Ashoka Exports Ltd. 60,000
Samtel Electron Devices Ltd. 15,48,000
Sree Uma Parameswari Mills Ltd. 3,57,000
Sri Nachammai Cotton Mills Ltd. 2,38,000
Sterling Guaranty & Finance Ltd. 1,51,500
Sterlite Communications Ltd. 2,90,000
Stiefel Und Schuh (India) Ltd. 6,000
Suashish Diamonds Ltd. 6,43,500
Thambbi Modem Spinning Mills Ltd. 1,55,000
The Lakshmi Vilas Bank Ltd. 9,77,265
The Morarjee Goculdas Spinning & Weaving Co. Ltd. 30,16,000
The Sandesh Ltd. 2,10,000
The Simbhaoli Sugar Mills Ltd. 2,20,000
The Sri Ganapathy Mills Company Ltd. 2,70.000
Twentyfirst Century Mgmt. Services Ltd. 22.38,000
WS Telesystems Limited 1,64,000
5,77,17,486

5,32,61,960 8,56,96,812
Less : Provision for diminution in the value of investments 2,27,60.000
5,32,01,960 6,29,36.812

Aggregate of quoted investments - cost 5.70.04,836

- market value 4,42,49,055 43
Aggregate of unquoted investments - cost 5,32,61,960 1,73,61,960
 Schedules to the Balance Sheet as at March 31,

in Rs.
1997 1996

6. INVENTORIES
(at lower of historic cost or net realizable
value, as certified by u director of the company)
Stock of software packages 4,10,878 16,97,058
4,10,878 16,97,058

7. SUNDRY DEBTORS
Debts outstanding for a period exceeding six months.
Unsecured, considered good 1,37,21,193 16,47,132
Considered doubtful 60,51,160
Other debts - unsecured, considered good * 16,71,68,741 11,08,49,773
18,69,41,094 11,24,96,905
Less : Provision for doubtful debts 60,51,160
18,08,89,934 11,24,96,905

* Due by wholly-owned subsidiary - Yantra Corporation 5 2,09,78 2 1,81,390

8. CASH AND B A N K BALANCES

Cash on hand 3,71,793 2,26,892
Balances with scheduled banks - in current accounts 7,61,80,212 3,31,53,515
- in deposit accounts 13,80,788 6,88,32,541
Balances with non-scheduled banks - in current accounts
ABN Amro Bank, Heerlen, Netherlands 2,69,688 5,01,508
Bank of America, Milpitas, USA 2,61,51,379 8,26,102
Bank of America, Los Angeles, USA 1,20,314
Bank of Boston, Boston, USA 4,41,11,215 2,80,77,975
Bank of New York, New York, USA 4,55,479 4,20,672
Barclays Bank, London, UK 1,18,568
Fifth Third Bank, Cincinnati, USA 4,83,617
First Chicago Bank, Chicago, USA 6,97,786
Nations Bank, Dallas, USA 3,78,399
15,02,35,621 13,25,22,822
Maximum balance held during the year
ABN Amro Bank, Heerlen, Netherlands 23,09,854 15,71,780
Bank of America, Milpitas, USA 2,61,51,379 15,09,285
Bank of America, Los Angeles, USA 5,50,160
Bank of Boston, Boston, USA 9,54,01,211 3,36,96,659
Bank of New York, New York, USA 14,71,366 10,70,109
Barclays Bank, London, UK 9,10,642
Fifth Third Bank, Cincinnati, USA 10,06,347 11,56,715
First Chicago Bank, Chicago, USA 13,15,990
Nations Bank, Dallas, USA 9,55,531
 Schedules to the Balance Sheet as at March 31,

in Us.

1997 1996

LOANS AND ADVANCES

(Unsecured, considered good)
Bills receivable 1,71,20,461
Advances recoverable in cash or
in kind or for value to be received 3,24,73,113 2,16,71,423
Advance income tax 12,88,19,814 7,27,72,193
Deposit with companies 13,75,46,350 12,38,32,573
Loans to employees * 3,18,48,790 1,59,57,955
Other advances 1,00,06,040 3,01,83,156
Rent and maintenance deposit 4,37,20,562 1,34,00,920
38,44,14,669 29,49,38,681
' Due by non-director officers of the company 33,41,983 16,36.546
* Maximum amount due at any time during the year 40,97,109 17,85,113

10. CURRENT LIABILITIES

Sundry creditors - for goods 39,23,181 21,52,071
- for accrued salaries and benefits 2,83,36,413 1,89,78,453
- for other liabilities 1,18,47,519 1,46,33.554
Advances received from clients 64,26,520 89,08,492
Unclaimed dividend 6,97,701 4,41.186
5,12,31,334 4,51,13,756

11. PROVISIONS
Provision for taxation 9,37,00,000 5,94,20,000
Proposed dividend 2,90,35,145 2,54,05,100
12,27,35,145 8,48,25,100

45
 Schedules to the Profit and Loss Account for the year ending March 31,

jnfts.
\ 1997 1996

12. OTHER INCOME

Income from investments
Non-trade: Current investments
Dividends and interest 9,23,782 53,29,922
Interest received on deposits with banks and others 3,38,56,746 3,65,01,187
Tax deducted at source Rs. 63,45,868
(previous year Rs. 81,62,670)
Profit on sale of investments - 15,67,876
Sale of special import licenses 99,82,153 40,81,698
Miscellaneous income 11,67 ; 472 10,43,660
4,59,30,153 4,85,84,343

13. SOFTWARE DEVELOPMENT EXPENSES

Salaries and bonus including overseas staff expenses 48,11,04,148 32,02,69,250
Staff welfare 1,86,48,239 1,39,03,438
Contribution to provident and other funds 1,65,55,699 99,41,929
Foreign tour and travel 14,18,94,247 7,31,55,589
Consumables 49,60,231 29,80,677
Cost of software packages
- for own use 3,91,24,965 2,91,59,814
- for domestic software development 3,42.92,427 x 1,79,98,677
Computer maintenance 83,23, 927 X 54,31,248
Communication expenses 1,27,18,666 1,00,55,374
Consultancy charges 59,34,849 7,03,336
76,35,57,398 48,35,99,332

14. ADMINISTRATION AND OTHER EXPENSES

Travelling and conveyance 1,71,10,697 1,61,18,355
Rent 2,41,97,b05 62,40,279
Telephone charges 1,46,36,037 82,84,347
Legal and professional charges 1,55,15,046 80,68,812
Printing and stationery 1,07,86,844 69,89,257
Advertisements 88,85,080 40,63,458
Office maintenance 77,43,618 64,96,121
Repairs to building 75,45,336 26,24,982
Repairs to plant and machinery 20,76,775 2,91,033
Power and fuel 75,79,823 38,94,684
Insurance charges 16,26,528 18,65,119
Rates and taxes 41,93,982 9,11,101
Donations 13,95,132 14,17,820
Auditor's remuneration - audit fees 1,00,000 72,000
- tax audit 40,000 36,000
- other services 1,08,000 1,08,000
- out-of-pocket expenses 3,06,514 2,34,859
Bad debts written off - 5,94,887_
Provision for bad and doubtful debts 60,51,160
Bank charges and commission 36,42,054 14,47,780_
Commission charges 4,67,850
46 Obsolete stock Written off 13,05,916 _
Miscellaneous expenses 2,17,10,938 97,42,961
15,70,33,835 7,95,01,855
Schedules to the Balance Sheet and Profit and Loss Account

15. SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

15.1 Significant accounting policies
15.1.1 Basis for preparation of financial statements
The financial statements have been prepared under the historical cost convention in accordance with the Generally
Accepted Accounting Principles (G AAP) and the provisions of the Companies Act, 1956, as adopted consistently by
the company. All income and expenditure having a material bearing on the financial statements are recognized on
accrual basis.
15.1.2 Revenue recognition
Revenue from software development is recognized based on software developed and billed to the clients as per the
tarms of specific contracts. Revenue from the sale of software products is recognized when the sale has been
completed with the passing of title. In case of fixed price contracts, revenue is recognized based on the specific
terms of the contract. Contractual terms with clients preclude recognition of work-in-progress. Interest on
deployment of surplus funds is recognized using the time-proportion method based on interest rates implicit in the
transaction. Dividend income is recognized when the right to receive dividend is established. Revenue from sale of
Special Import Licenses is recognized when the licenses are actually sold.
15.1.3 Expenditure
Expenses are accounted on accrual basis and provision is made for all known losses and liabilities. Expenses
incurred on development of software are charged to revenue in the same year. The cost of software purchased for
use in software development is charged to revenue in the same year. The leave encashment liability of the
company is provided on the basis of actuarial valuation
15.1.4 Fixed assets
Fixed assets are stated at cost of acquisition minus the accumulated depreciation. Direct costs are capitalized till
the assets are ready to be put to use. These costs include financing costs relating to specific borrowing, attributable
to fixed assets.
15.1.5 Capital work-in-progress
Advances paid towards acquisition of fixed assets which have not been installed or put to use, and the cost of assets
not put to use, before the year end, are disclosed under capital work-in-progress.

15.1.6 Depreciation
Depreciation on fixed assets is provided using the straight-line method, based on the useful life as estimated by the
management. Depreciation is charged on a pro-rata basis for assets purchased/sold during the year. Individual
assets costing less than Rs. 5,000 are depreciated in full, in the year of purchase. The management's estimate of
useful life for various fixed assets is given below.
Building - Software center 28 years
- Others 58 years
Furniture and fixtures 6 years
Computer equipment 2-5 years
Plant and machinery 6 years
Vehicles 6 years

15.1.7 Inventories
Inventories are valued at the lower of historic cost or the net realizable value. A periodic review is made of slow-
moving stock, and appropriate provisions are made for anticipated losses, if any. Cost is determined using the first-
in, first-out (FIFO) method.

15.1.8 Retirement benefits to employees 47

The company's liability towards retirement benefits in the form of provident fund, gratuity and superannuation is
fully funded and charged to expenditure. Till July 1996, the company was contributing to the Employees' Provident
Fund maintained under the Employees Provident Fund Scheme by the Central Government. Effective August
 1996, the company has established a provident fund trust to which part of the contributions were made thereafter
and the balance of the contribution is funded to the pension scheme managed by the Government. The company
had a gratuity fund, maintained by the Life Insurance Corporation of India (LIC), to which contributions were
made every year based upon actuarial valuation. Effective March 31, 1997, the company has contributed, on an
actuarial basis, to its own gratuity fund trust in full discharge of its liabilities. The company also contributed to a
superannuation fund, maintained by LIC, for its managerial staff. Effective March 31, 1997, the company has
contributed to its own superannuation fund trust in full discharge of its liabilities.
15.1.9 Research and development
Expenses incurred on research and development are charged to revenue in the same year. Fixed assets purchased
for research and development purposes are capitalized and depreciated as per the company's policy.
15.1.10 Foreign currency transactions
In the case of sales,made to clients outside India, income is accounted on the basis of the exchange rate as on the
date of transaction. Adjustments are made for any variations in the sale proceeds on conversion into Indian
currency upon actual receipt. Expenditure in foreign currency is accounted at the conversion rate prevalent when
such expenditure is incurred. Where realizations are deposited into and disbursements made out of a foreign
currency bank account, all the transactions during the month are reported at a rate which approximates the
actual rate daring the poriod.
In the case of current assets and current liabilities expressed in foreign currency, the exchange rate prevalent at
the end of the period is taken for the purposes of translation and accounting in the books. Fixed assets purchased
at overseas offices are accounted on the basis of actual cost incurred at the exchange rate prevalent at the time of
purchase. Depreciation is charged as per company policy. Exchange differences arising on foreign currency
transactions are being recognized as income or expense in the period in which they arise. In case of toward
contracts, the difference between the foiward rate and the exchange rate on the date of transaction is recognized
as income or expense over the life of the contract.
15.1.11 Investments
Investments are classified into current investments and long-term investments. Current investments are carried
at lower of cost or fair value and provision is made to recognize any decline in the carrying value. Long-term
investments are carried at cost and provision is made to recognize any decline, other than temporary, in the value
of such investment. Overseas investment is carried at the original rupee cost.
15.1.12 Investment in subsidiary
The investment in the subsidiary is accounted on the cost method, whereby the company recognizes only dividends
received from the subsidiary as income. In case of losses made by the subsidiary, other than temporary, adequate
provision is made to recognize any decline in the value of such investment.
15.1.13 Income tax
Provision is made for income tax on a yearly basis, under the tax-payable method, based on tax liability, as
computed after taking credit for allowances and exemptions. Incase of matters under appeal, due to disallowances
or otherwise, full provision is made when the said liabilities are accepted.

15.2 Notes on accounts

Previous ycvir's ficjui us: The previous year's figures have been recast/restated, wherever necessaiy to conform to
current year classification.
15.2.1 Contingent liabilities ,'
a. Estimated amount of contracts remaining to be executed on capital account and not provided for is
Rs. 9,95,31,303. The amount of such contracts for the previous year was Rs. 2,95,50,060.
b. The company has outstanding guarantees for various statutoiy purposes amounting to Rs. 1,99,52,251. The
amount of such guarantees during the previous year was Rs. 66,03,208.
48 c. The company has various letters of credit outstanding issued to various vendors amounting to Rs. 3,40,16,200
(previous year - Rs. 1,17,29,014).
d. Claims against the company, not acknowledged as debts, amounted to Rs. 5,80,623. Such claims for the
previous year was Rs. 78,87,891.
15.2.2 Commentary on the financial statements
15.2.2.3 Share capital
The company, has at present, only one class of shares. During the year. 1,000 shares have been issued on
conversion of warrants issued under the Employees Stock Offer Plan (ESOP) to an employee. The said shares have
been issued on the payment of Rs. 100 per share, with Rs. 90 per share being the share premium and are subject
to a lock-in period. The company has 7,49,000 warrants outstanding under the ESOP which are liable to be
converted into equivalent equity shares upon a payment of Rs. 100 per share, with Rs. 90 per share being the
premium payable. The terms of the ESOP provide for a lock-in period. During an earlier year, the company had
forfeited a sum of Rs. 1,500 received on 300 shares issued during the public offer, due to non-payment of caJIs.
15.2.2.b Reserves and surplus
The company has transferred to the Capital Reserve the entire profit of Rs. 3,59,00.000 earned on sale of a
product to its subsidiary Yantra Corporation. The addition to the share premium account of Rs. 90,000 is due to the
premium of Rs. 90 per share received upon conversion of 1000 warrants under the ESOP. As allowed under the
provisions of the Income Tax Act 1961, a sum of Rs. 2,90,800 has been transferred from the Investment
Allowance (Utilized) Reserve to the General reserve upon completion of the conditions oT the deduction. Ttje
company has transferred the balance profit of Rs. 29,39,79,369 to the General reserve after providing for a
dividend payment of Rs. 3,99,23,045.
15.2.2.C Secured loans
The company's secured loans consisted of amount borrowed from Housing Development Finance Corporation
Limited for purchase of quarters for its sraff. The borrowing was for a tenure of three years with a coupon rate of
13.50% per annum. During the year, the company prepaid the loan in full, and also paid a prepayment penalty of
Rs. 3,57,877. The company has no debt as on the Balance Sheet date. However, the company has cash credit limits
of Rs. 5,00,00,000 from two of its bankers which it can draw upon in case of any requirement. During the year,
the company applied to the Government of India for an external commercial borrowing of USS 5 million to meet
its requirements. The approval has since been received. The company has also received commitments for this
funding from the bankers. The borrowing limits would be accessed only in case of need.
15.2.2.d Fixed assets
During the year, the company added Rs 27,31,04,394 to its gross block consisting of Rs. 24,70,28,211 upon
capitalization of assets and Rs. 2,60,76,183 as capital work-in-progress against Rs. 15,55,48,627 for the previous
year. The company donated computer systems having a cost of Rs. 9,94,800 (book value Nil) to an educational
institution and the same is disclosed under the heading Deductions during the year, under both the Cross block
and Depreciation.
The capital expenditure for 1997-98 is estimated at Rs. 58 crores. The company estimates that it would be able to
fund its capital acquisition program from its internal accruals and liquid funds. The company may also lake
recourse to borrowings to meet its capital acquisition program in case of neea.
15.2.2.e Investments
The company had established its wholly-owned subsidiary, Yantra Corporation in the USA. The company had
made an investment of USS 5,00,000 (Rs. 1,73,51,600) by a cash remittance, after obtaining necessary approvals,
during the previous year, towards the issue of 25,00,000 common stock at USS 0.20 per share with a par value
of USS 0.01 per share. During the current year, the company sold a software product to Yantra Corporation for a
sum of USS 10,00,000 (Rs. 3,59,00,000). The sale was paid for by issue of 50,00,000 common stock at USS 0-20
per share with a par value of USS 0.01 per share. The financial statements of the subsidiary are attached herewith.
The company's investment in Software Sourcing Company, the joint venture with Kurt Salmon Associates, USA,
had been relinquished during the year and the net proceeds received.
During the year, the company has made a complete disinvestment in equity instruments of other companies er.d
a loss of Rs. 1,31,92,752 has been accounted in the Profit and Loss account, net of provisions made in the earlier
years. During the previous year, a provision of Rs. 2,27,60,000 was made towards the decline in value of investments
held by the company.
15.2.2J Inventories 49
The company's stock of inventoiy consists of software products purchased for sale. A periodic review is made of
slow-moving stock and appropriate provisions are made for anticipated losses, if any. During the year, obsols:e
stocks amounting to Rs. 13.05,915 has been written oft in the profit and loss account (Previous year - Nil).
 15.2.2.g Sundry debtors
The sundry debtors is Rs. 18,08,89,934 (net of provisions for bad and doubtful debts) on the Balance Sheet date
as against Rs. 11,24,96,905 for the previous year. The debtors are considered good and realizable. The level of
sundry debtors is normal and is in tune with business trends. Necessary provisions had been made for debts
considered to be bad and doubtful. The age profile is as given below:
in %
Period in days March 31, 1997 •March 31, 1996
0 - 30 68.82% 65.50%
31 - 60 22.86% 16.61%
61 - 90 0.04% 15.41%
More than 90 8.28% 2.48%
. 100.00% 100.00%
The management believes that the overall condition of sundiy debtors is satisfactory. As a measure of asset
utilization, debtors, as a percentage of total revenue, is 12.57% as at March 31; 1997 as compared to 12.04% as
at March 31, 1996. . ' .
15.2.2.h Cash and bank balances inRs.
March 31, 1997 March 31, 1996
Cash balance 3,71,793 2,26,892
Bank balances - in India 7,61,80,212 3,31,53,515
Bank balances - overseas 7,23,02,828 3,03,09,874
Fixed deposits 13,80,788 6,88,32,541
15,02,35,621 13,25,22,822
The bank balances in India includes both rupee accounts and foreign currency accounts. It also includes Rs. 6,97,701
(previous year - Rs. 4,41,186) being the amount in the unclaimed.dividend account. The bank accounts overseas
are utilized to meet the overseas expenditure in foreign currency and for remittances into India. Fixed deposits of
Rs, 13,80,788 for the current year are given as security towards the issue of bank guarantees. •

15.2,2.1 • Loans and advances '

Advances recoverable in cash, kind or value to be received, are primarily towards prepayments for value to be
received. Advance income tax represents payments made towards tax liability pending assessment and refunds
due. The company's liability towards income tax has been fully paid. Deposits with companies of Rs. 13,75,46,350
represent amounts kept with various companies as IGDs. Loans to employees are made to enable the purchase of
assets by employees and to meet any emergency requirements. Other advances represent electricity deposits,
telephone deposits and advances of like nature. The company has taken on lease several buildings for its software
development centers in various cities and also for housing its staff upon payment of Rs. 4,37,20,562 as rental and
maintenance deposit.
15.2.2.J Current liabilities
Sundry creditors for goods represent amount payable to vendors for supply of goods. Sundry creditors for accrued
salaries and benefits include provision for bonus payable to the staff, and towards the company's liability for leave
encashment valued on an actuarial basis. Sundry creditors for other liabilities of Rs. 1,18,47,519 represent
accrual made for operational expenses. Advances received from clients denote monies received for delivery of
future services. Unclaimed dividends represent dividend paid but not encashed by shareholders, and are represented
by a bank balance of equivalent value.
15.2.2.k Provisions
Provisions for taxation denote estimated income tax liabilities, both in India and abroad, pending assessment. They
50 are represented by advance tax payments towards meeting such liabilities. The provisions and the advance tax
payments would be set-off upon assessment. The proposed dividend represents the final dividend recommended
to the shareholders by the Board and would be paid after the Annual General Meeting.
15.2.2.1 Income
The company derives its income from software services and the sale of software products. 87.12% Of the company's
income is from export of software services and products to various countries around the globe. Details of the
geographical segmentation of income and business segment is given elsewhere in this report. The domestic
software income is from sale of BANGS 2000, a software product. The company has a small trading division which
deals in imported software packages. Other income, is income derived from investments of surplus funds and sale
of special import licenses arising out of exports. The total income of the company grew by 53.95% during the year
compared to 61.88% in the previous year.
I5.2.2.m Expenditure
Employee costs constitute 35.90% of the total income during the year as compared to 36.84% in the previous
year. The company spent Rs. 14,18,94,247 towards meeting the cost of travel abroad for software development
and marketing. The software development cycle involves travel to meet clients abroad. As the company's business
is primarily abroad, considerable expenditure is incurred towards periodic visits to clients.
The company spent a sum of Rs. 3,91,24,965 towards the cost of software packages and tools to enhance the
quality of its services and to meet the needs of software development for its clients. The company's policy is to
Charge such purchases to revenue, in the year of purchase. The company also spent Rs. 3,42,92,427 towards the
purchase of software products used in BANGS 2000 product. The company's business involves large scale use of
satellite connectivity in order to be on line with its customers and a sum of Rs. 1,27,18,666 was incurred towards
meeting this expenditure.
The company incurred administration and other expenses at 10.92% of its total income during the year as
compared to 8.51% during the previous year. During the year, the company operationalized new centers at
Chennai (Madras), Bhubaneshwar and Bangalore, and expanded the existing centers at Pune, Mangalore and
Bangalore. As a result, rental costs have gone up by 287.76% from Rs. 62,40,279 to Rs. 2,41,97,505. Telephone
charges and other overheads have also increased. Such heavy expenditure is expected to result in considerable
benefits in future years as these development centers achieve economies of scale.
15.2.2.D Operating profits
During the year, the company earned an operating profit (profit before interest, depreciation and tax) of
Rs. 50,05,77,818 being 34.81% of total income as against Rs. 33,95,36,168 at 36.35% during the previous year.
The reduction in the operating profit is due to increased expenditure incurred in operationalization of several
new development centers. The operating profit grew by 47.43% as against a growth of 53.95% in the total
income.
15.2.2.0 Interest
The company incurred an expenditure of Rs. 61,09,715 towards servicing the costs of the loan borrowed from
HDFC. The loan was, however, prepaid during the year. During the previous year, the interest costs on the loan of
Rs. 75,55,542 was capitalized as per the company's accounting policy.
15.2.2.p Depreciation
The company provided a sum of Rs. 10,51,64,884 towards depreciation on its assets as perils accounting policy.

15.2.2.q Provision for tax

The company has provided for its tax liability both in India and abroad. The company is entitled to exemptions
under Sec. SOHHEandSec. 10B of the Income tax Act 1961. The company has provided a sum of Rs. 1,08,00,805
towards tax liability of earlier years consequent to the finalization of tax assessments. The additional liability has
arisen due to certain disallowances in India which is contested in appeal and additional payments abroad.
15.2.2.r Extraordinary income
During the year, the company sold the product EAGLE (now known as WMSfantra} to its wholly-owned subsidiary,
Yantra Corporation for a consideration of Rs. 3,59,00,000 (USS 10,00,000) and the consideration was received in
the form of 50,00,000 equity shares of Yantra Corporation, at a price of USS 0.20 each (par value USS 0.01 each).
The income arising out of the same is shown as an "Extraordinary income" in the Profit and Loss account as it -,
represents income arising on the sale of an asset and is non-recurring in nature. ^ -*•
 15.2.2.S Net profit
The net profit of the company from ordinary activities amounted to Rs. 33,39,02,414 as against Rs. 21,00,94,517
during the previous year. The company earned a net profit of 23.22% of total income as against 22.49% during
the previous year. The net profit margin grew by 58.93% as against a growth of 53.95% in total income, mainly
due to a slower growth in depreciation and tax. Extraordinary income, being a non-recurring income, has not
been considered for the calculation of the above percentages.

15.2.3 Foreign exchange differences

An amount of Rs. 1,40,51,456 is included in the profit and loss account during the current year, on account of
foreign exchange differences arising due to timing differences between accrual of income and receipt of the same.
Exchange differences amounting to Rs. 27,34,000 pertaining to forward exchange contracts will be recognized in
the next year. The company hedges its forex exposure by means of forward sales purely as a risk-containment
-«*•<
measure.
15.2.4 Depreciation on assets costing less than Rs. 5,000 each
During the year, the company charged depreciation at one hundred percent in respect of assets costing less than
Rs. 5,000 each, amounting to Rs. 74,88,017, For the previous year, this amounted to Rs. 45,55,784.

15.2.5 Employees Stock Offer Plan (ESOP)

The company had instituted an Employees Stock Offer Plan for all eligible employees. Under the plan, warrants
are issued to employees deemed eligible by the advisoiy board constituted for the purpose. Accordingly, 7,50,000
warrants were issued by the company to the Infosys Technologies Limited Employees Welfare Trust, to be held in
trust and transferred to selected employees from time to time. The warrants are issued at Re. 1 each and entitles
the holder thereof to apply for and be issued one share of the company at a price of Rs. 100 after a period of 5 years
from the date of issue. The warrants and the shares to be issued thereon are subject, to a lock-in period of 5 years
from the date of issue. The warrants expire on September 30, 1999. The amount received on issue of warrants,
amounting to Rs. 7,49,000, has been included under Current liabilities.
The number of warrants issued and outstanding is given below:

Year No. of . No. of warrants

employees issued and outstanding
1994 83 1,18,700
1995 117 1,39,800
1996 184 1,20,900
3,79,400
Less - warrants converted during the year 1 1,000
Add - balance outstanding held by the trust 3,71,600
7,50,000
15,2.6 Registration of lease-hold land
During the year, the registration of lease-hold land at Electronics City, Bangalore was completed.

15.2.7 Quantitative details

The company is engaged in the business of development of computer software. The production and sn'u of such
software is not capable of being expressed in any generic unit. Hence, it is not possible to give the quantitative
details of such sale and the information required under paragraphs 3, 4C and 4D of part II of Schedule VI of the
Companies Act, 1956.

52
 in Rs.
1997 1996
Managerial remuneration
The managerial remuneration paid to the Managing Directors
and other whole-time directors during the last two years was :
Salary 26,10,271 19,56,856
Contribution to provident fund and other funds 7,77,726 5,83,339
Perquisites 2-1,79,801 25,44,778
Imports on GIF basis
Capital goods 13,20,37,800 5,65.38,346
Imported software packages 37,73,864 87,45,315
Expenditure in foreign currency
Travel expenses 8,41,55.604 7,69,47,120
Professional charges 54,71.083 22,39,985
Other expenditure incurred overseas for software development 33,62,64.733 18,89,81,075
Earnings in foreign exchange
Income from software development services
and products on receipt basis 114,03,40.512 74,46,12,288
Particulars in respect of traded items
(imported and other software packages)
Qty Rs. Qty Rs.
Opening stock 307 16,97,058 282 17,19,138
Purchases 957 37,73,864 2,678 87,45,315
Closingstock 118 4,10.878 307 16,97,058
Turnover 1,146 50,60.044 2,653 87,67,395

53
 Statement of cash flows for the year ending March 31,

in fls.
1 997 1996 1995

Cash flows from operation

Profit before tax from ordinary activities 38,93,03,219 25,31,94,517 15,26,44,266
Other income (3,47,80,528) (4,34,58,985) (1,68,08,475)
Depreciation, depletion and amortization 10,51,64,884 8,63,41,651 . ,4,59,52,861
Decrease (increase) in sundry debtors (6,83,93,029) ' (3,94,05,645) (2,97,60,515)
Decrease (increase) in inventories 12,86,180 22,080 .27,71,698
Decrease (increase) in loans and advances (11,72,37,411) (7,27,71,164) (2,33,14,948)
Increase (decrease) in sundry creditors 2,12,67,623 9,23,04,965' .2,80,57,226
Income taxes (5,54,00,805) (4,31,00,000) (1,94,00,000)
Net cash from operations 24,12,10,133 23,31,27,419 14,01,42,113

Cash flows from financing

Cash received from issuance of share capital (net) 1,00,000 • . ' ' -' 24,23,36,500
Proceeds of long-term borrowing (net) (4,26,06,235) (2,07,84,936) 6,33,91,171
Dividends paid (3,99,23,045) (3,62,93,000) (2,31,39,314)
Preliminary expenses - • (1,80,000)
Net cash from financing (8,24,29,280) (5,70,77,936) .28,24,08,357
'
Cash flows from investing
Income from investments 3,47,80,528 4,34,58,985 1,68,08,475
Proceeds of sale of fixed assets 11,59,537 30,71,249 12,52,056
Purchase of fixed assets (27,31,04,394) (15,55,48,627) (25,23,04,640)
Decrease (increase) in investments 6,83,34,852 (2,26,18,766) (2,52,92.800)
Net cash from investing (16,88,29,477) (13,16,37,159) (25,95,36,909)

Total increase (decrease)

in cash and equivalents during the year (1,00,48,624) 4,44,12,324 16,30,13,561
Cash and equivalents at the
beginning of the year- 29,78,30,595 25,34,18,271 9,04,04,710
Cash and equivalents at the end of the year 28,77,81,971 29,78,30,595 25,34,18,271

Note : During the year the company sold the software product EAGLE (now known as WMSYaiurci) to its wholly-owned
subsidiary Yantra Corporation for a sum of US$ 10,00,000.(Rs. 3,59,00,000) paid for by issue of 50,00,000
common stock of Yantra Corporation. The same being a non-cash transaction, is not reflected in the cash flow
statement.
I have examined the attached Cash flow statement, and the same
is in accordance with the SEE I requirements and is based on and
in agreement with the corresponding Profit and Loss account
find Balance Shoot covered by our report of even date
For and on behalf of the Board of Directors

54
Bangalore A. M. Bhatkal N. R. Narayana Murthy
April 8, 1997 Chartered Accountant Chairman and Managing Director

~f? '**/
Statement of cash flows for the year ending March 31,

inRs.
1997 1996 1995

Reconciliation of Balance Sheet items with cash flow items

1 . Loans and advances
As per Balance Sheet - Schedule 9 38,44,14.669 29,49,38,681 25,23,34,937
Less : Deposits with companies and
others, included in cash equivalents (13,75,46,350) (16,53,07,773) (19,54,75,193)
Balance considered for preparing
the Cash flow statement 24,68,68,319 12,96.30,908 5,68,59,744

2. Investments
As per Balance Sheet - Schedule 5 5,32,61,960 6,29.36,812 6,30,78,049
Add : Provision for investments 2,27,60,000
Less : Investment acquired for
consideration other than cash (3,59,00,000)
Balance considered for preparing
the Cash flow statement 1,73,61,960 8,56,96,812 6,30,78,049

3. Additions to fixed assets .

As per Balance Sheet - Schedule 4 24,70,28,211 21,96,31,126 17,61,22,667
Add : Closing capital work-in-progress 7,04,41,980 4,43,65,797 10,84,48,296
Less : Opening capital work-in progress (4,43,65,797) (10,84,48,296) (3,22,66,323)
Balance considered for preparing
the Cash flow statement 27,31,04,394 15,55,48,627 25,23,04,640

4. Cash and cash equivalents

As per Balance Sheet - Schedule 8 15,02,35,621 13,25,22,822 5,79,43,078
Add : Deposits with companies and others 13.75,46,350 16,53,07,773 19,54,75,193
Gash and equivalents considered
for preparing the Cash flow statement 28,77,81,971 . 29,78,30,595 25,34,18,271

5. Current liabilities
As per Balance Sheet - Schedules 10 and 11 17,39,66,479 12,99,38,856 6,03,93,891
Add : Provision for investments 2,27,60,000
Balance considered for preparing
the Cash flow statement 17,39.66,479 15,26,98,856 6,03,93,891

I have examined the attached Cash flow statement, and the same
is in accordance with the SEE I requirements and is based on and
in agreement with the corresponding Profit and Loss account
and Balance Sheet covered by our report of even date
For and on behalf of the Board of Directors

55
Bangalore A. M. Bhatkal N. R. Narayana Murthy
April 8, 1997 Chattered Accountant Chairman and Managing Director
 Balance sheet abstract and company's general business profile

Registration details
Registration No. 13115
State Code 08
Balance Sheet date 31.03.1997
in Rs.

Capital raised during the year

Public issue
Rights issue
Bonus issue
Private placement

Position of mobilization and deployment of funds

Total liabilities 112,83,60,597
Total assets 112,83,60,597

Sources of funds
Paid-up capital 7,25,97,500
Reserves and surplus 105,57,63,097
Secured loans
Unsecured loans

Application of funds
Net fixed assets ' 53,31,14,014
Investments 5,32,61,960
Net current assets 54,19,84,1)23
Miscellaneous expenditure
Accumulated losses

Performance of company
Turnover 143,80,76,787
Total expenditure 104,87,73,568
Profit/ Loss bol'oro inx 38,93,03,21 9
Extraordinary income 3,L><),OO,(JUO
Profit/ Loss after tax 36,98,02,414
Earnings per share from ordinary activities 46.00
Earnings per share including extraordinary income 50.94
Dividend rate (%) 55.00

Generic names of three principal products/ services of company

Item code no. (1TC i.'odu) 8!>24!K)()0.1 0
Product description Computer software

N. R. Narayana Murthy N. S. Raghavan Nandan M. Nilekani S. Gopalakrishnan

. Chairman and It. Managing Director Dy. Managing Director Dy. Managing Director
Managing Director

eg Bangalore K. Dinesh S. D. Shibulal T. V. Mohandas Pni V. Viswanulhan

April 8, 1997 Director Director Sr. Vice-President Company Secretary
(Finance and Administration)
 ) ) )

Annexure to Directors' report

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, and forming part of
the Directors' Report for the year ended March 31,1997
SI. Name Designation Qualification Age Date of Experience Gross Previous employment - Designation
No. joining (Years) remuneration
(Rs.)

1 Ajay Dubey Associate Vice President B.Tech. (IITK) 39 07.06.1993 15 5,12.040.00 ANZ Bank. New Zealand - Technical Team Leader
2. ' A m i t N i g a m Assistant Project Manager B.E., M.Tech. (IITKG) 30 20.01.1997 5 51,562.00 Duet Technologies Pvt. Ltd.
Member of Technical Staff
3 ' Aseem Purohit Associate Regional MMS 29 17.06.1996 2,22.59000 DatalineS Research Tech. India
Sales Manager Territory Manager
4 Ashok V Arunachalam Manager-CCS B.Tech.. MS (New Jersey) 34 17.08.1993 8 3,58,186.00 NewJersey Inst. of Technology- Teaching Assistant
5. Ashwani Kumar Khurana Executive Director B.Tech. (IITD) 46 01.02.1994 24 6,96,360.00 Infosys Digital Systems Pvt. Ltd. - Managing Director
6. ' AtulMathur Associate Project Manager B.Tech. Computer Science 31 01.02.1996 8 3,22,532.00 Sprint Intl. Corp USA
Senior UserLiaison& Business Development Manager
7. Balakrishnan V. Manager - Finance B.Sc., ACA, ACS, AICWA 32 02.09.1991 9 3,44,766.00 AMCO Batteries - Senior Accounts Executive
8 Balasubramanian P. Dr. Senior Vice President M.Tech. (IITM). 47 01.10.1995 24 7,38,481.00 HITEK S/W Engineers Ltd.
Ph.D (Purdue) Technical Director
9 Bhamll R. G. Associate Vice President B.E., MTech (ITTK) 36 07.07.1988 13 5,37,642.00 Wipro Infotech Ltd. - Systems Engineer
10. BhashyamM. R. Manager - Quality M.E. 46 07.07.1995 23 4,22,661.40 Aeronautical Development Agency -Scientist
11. • Bhasl-.ar Ghosh Project Manager B.Sc., MBA 37 03.02.1997 15 43,054.00 Philips India Ltd.
12. BinodH.R. Manager-BBU B.E. 34 02.08.1993 11 3,79,674.00 Motor Industries Company Ltd.
Senior Engineer - Technical Sales
13 Cliandraniouli J. Project Manager B.E. 29 15.06.1988 9 3,58,954.00
M ' DoQ|MkN HoshilU) Projoct Manager B.Toch. (IITB) 34 10.10.1996 12 1,66,498.00 Unisys Distributor in Duhai - Sonior Systems Annl}-st
15 ' Devashish C S Associate Projoct Manager B.Tech, PGDM(IIMA) 32 01.08.1994 7 1,49,123.40 1TW SignoctG India Ltd. - Marketing Manayor
16 Dhenvhjith V G Project Manager M.E. (IISc) 33 14.09.1987 9 3,62,670.00
17 DineshK. Director M.Sc. 43 01.09.1981 21 7,90,273.00 Patni Computer Systems Pvt. Ltd.
Senior Software Engineer
1M ' Kfjwnnm K.ily.imir.-iMun Prnjiti:! Managnr M.Com. 40 13.on innn 11 3,12,803.00 mil., Bombay- Consultant
I1) Kkiiiiih Iroolh.i Kannan Mimayor O.Coin.. MBA 32 Ol O4 1393 8 3,11,003 GO NUT, ColmlMtorn
- Corporate Marketing Business Manager
20 ' Ganosh Bahga M. Senior Manager - E&R M.Tech. (IITM) 37 03.12.1992 13 95.884.00 Bhoruka Steel Ltd - Assistant Manager - Systems
21 Gopalakrishnan S. Deputy Managing Director M.Tech. (IITM) 41 18.10.1994 17 8. 04, 840 CIO Software Sou re ing Company, Atlanta, USA
Vice President - Technical
22 IIar.ii|n|wlM Associate I*rnjnctMnnngnr ll.Sc , I.LB. PGDM 31 08.12.1993 10 3.18,48800 Cnnnra flank - Officer
'?.'! ' i.m lias.in Asstxriato Vicu Prosklcnt B.A. (lion ). 42 01 03 innn 18 2. 02.375.OO Dkjiial Ecfuipmnni (India) Ltd
-mm PGDIR.W (XLRI) Cbr/iorati* Managi*r - IfKD
24 ' Kanthimalhinalhan S. Associate Vice President BTech (IITM), 44 18.05.1990 20 2,38,315.00 PS1 Data Systems Ltd.
- Finance Systems PGDBM (IFMB) Industry Manager - Banking
25 ' Kishore R S. Associate Project Manager B.Tech (HTM), 33 1607.1993 8 1.40,139.00 Crompton Greaves Ltd , Ahmednagar
M.Tech. (IITM) Systems Executive
Xll k'lKhliiiiii'MMlhy A S II Ibrli (irlW), M Sr :u> inni inan Urlwn TrnnRiK»rl hov (Virp , Ouiatla
 en
00

Annexure to Directors' report -

SI. Name Designation Qualification Age Date of Experience Gross Previous employment - Designation
No. joining (Years) remuneration
(Rs.)

27. Mallya P D. Associate Vice President M.Tech. (IITM) 42 15.12 1986 19 4.48.067.00 • Bharat Heavy Electricals Ltd.
Senior Departmen t Engineer
28. • Mani R. V S. Associate Vice President B Tech.. MS •44 22 11 1996 18 1.85.326OO Hindustan CIBA-GEIGY - Head - IT
29 Manoj Kumar K. Assistant Project Manager B.Tech. (IITM) 29 Ol 08.1990 7 3.20,637.20 Computer Electronics Pvt. Ltd. - Trainee Engineer
30. ' Miliiid H. Ramekar Project Manager B.E., M.Tech. (IITK) 37 05.02.1997 14 53.902.00 Professional Computers
31. Mohan M. M. • Senior Manager -HRD B.Com . PGDBM 51 11 07.1992 27 3,94,878.00 Motor Industries Company Ltd. - Assistant Officer - HRD
32 Mohandas FaiT.V. Senior Vice President B.Com.. LLB. FCA 38 17 10.1994 17 6,48.927.00 Fiakash Leasing Ltd.
- Finance & Administration - Executive Director
33. Nagaraj R.N. Banking Customer M.A.. LLB 42 O6O3.199S 21 4.21.854.00 State Bank of Hyderabad
Support Manager Manager - Credit
34 Nandan M. Nilekar.i Deputy Managing Director B.Tech- (HTB) 41 01 09 1981 19 8.12.665.00 Patni Computer Systems Pvt. Ltd.
Assistant Project Manager
35. Narayana Murthy N. R. Chairman and M.Tech. (HTK) 51 01.04.1982 28 9.09.720.0O Patni Computer Systems Pvt. Ltd.
Managing Director Head - Software Group
36. Narendran K. Associate Project Manager B.Sc. ; . 30 08.03.1993 9 3.32,666.00 PSI Data Systems - Senior Software Engineer
37. ' NayakG. R. Director - Finance B.Com.. Dip. in Costings 60 16.10.1987 41 . 7.03,858.00 Dubon Project Engineering Pvt. Ltd
& Administration Personnel Management Manager - Finance^ Administration
38. Padmanabhan D. Project Manager B.Sc. 34 02 11.1992 13 4.21.026.00 PSI Data Systems - Product Support Manager
39. ' Panto] Jalote Dr. Vice President B.Tech. (DTK). M.Sc.. - 37 01.08.1996 12 3,73.992.00 DT. Kanpur
Ph.D (Univ. of Illinois. Urbana) Professor
40. ' Parameswar Y. Head - Switching Group B.E.. M.Tech. (UTK) 41 14.1O.1996 17 2,03.417.00 C-DOT - Divisional Manager
41. Prahlad D. N.. Senior Vice President BE. (HSc) 41 01.04.1989 14 8.17.610.00 Datacons Pvt. Ltd. - Project Leader
42. PravinRaoU. B. Senior Project Manager BE 35 04.08.1986 11 3,62.52900 Indian Institute of Science - Programmer Trainee
43. ' Radhakrishnan V. Project Manager B.Sc.. MMS 37 04.06.1996 16 3. 13,760 OO Gulf Agency Company - Project Manager
44. Raghavan N. S. . Joint Managing Director BE. 54 01.09.1981 33 8.58,81900 Patni Computer Systems Pvt. Ltd. - Assistant Manager
45. Raghavan S. Project Manager B.E. 35 16.O4.1987 13 4.26.696.OO Bharat Heavy Electricals Ltd. - Maintenance Engineer
46. ' BajasekharD. Assistant Project Manager B.E. 33 27.07.1992 12 84.878.00 PSI Data Systems - Systems Analyst -.
47. ' RajanN. V. Associate Vice President B.Sc., PGDPM (XLRI) 38 20.01.1997 14 88.413.00 Maxworth Home Ltd.
-HRD Associate Vice President (HRD & Legal)
48. Rajasekaran K. S. Associate Project Manager M.Sc. 38 08.11.1983 13 3,84.064.00 Teaching
49. Rajiv Kuchhal Senior Project Manager B.Tech. (HTD) 31 05.02.1990 10 4,21.828.00 Telecommunications Consultants (I) Ltd.
Assistant Manager
50. • Ramaa Sivaram Project Manager B.Tech (HTM) 38 27.01.1997 15 67,109.00 ITC Ltd.
51. • Ramanand Jha Project Manager B.Tech.. PGDBM (XLRI) 39 05.02.1997 15 50.1R9.OO TTSCO, Jamshedpur
52. Ramadas Kamath U. Manager- Accounts BBM. ACA 36 01.07.1994 12 3.44.766.OO Manipal Printers & Publ. Ltd.
and Administration Accountant
53. BaoB.M. Manager - Communication GCD 58 12.04.1993 29 3.48.414.00 Office Management Services,
Design Group Proprietor
54. KaviC. Project Manager B.E. 31 02.05.1988 9 3.94.948.00 -
55 Sanjeev Joshi Manager - Commercial B.E. 35 01.12.1994 12 4.00,798.00 Infosys Digital Systems Pvt. Ltd.
and Special Projects Manager - Marketing
56. Satish Bableshwar Project Manager B.E. 30 22 07 1988 9 3,52,02200 - •

C l < f ( ( ! < ( . ( I l l
 > ) ) J ) ) - ) • ) ) }

Annexure to Directois' report

1 I
!
SI.
No.
Name Designation Qualification Age Date oi
joining
Experience
(Years)
Gross
remuneration
(Rs.)
Previous employment - Designation

57. Seshan P. Project Manager B.E. (Hon.) 35 01.06.1993 13 3,82,730.00 Infosys Manufacturing Systems Pvt. Ltd.
i Assistant Project Manager
* 58 Sharad K. Hegde Senior Vice President B.Tech. (HTM), 39 01.07.1983 16 8,27,513.00 Patni Computer Systems Pvt. Ltd.
PGDIE (NITIE) Software Engineer Trainee
59. ' SheshadriB.C. Business Analyst B.Sc., LLB, MBA 33 05.06.1996 11 2,08,378.00 The Oriental Insurance Company
< ' - Insurance Branch Manager
60. ' Shibtilal S. D. Director M.Sc., MS (Boston Univ.) 42 01.09.1981 21 1,69,897.00 Sun Express, USA - [RManager
61. ' SSivaprasad K. G. Senior Project Manager B.Sc.(H), M.Sc. 41 10.06.1996 20 3,38,374.00 Oman Computer Services - Software Dev. Manager
62. ' Sivaraman R. Associate Project Manager B.Tech. (IITM), PGDM (IMA) 41 01.04.1993 17 1,06,059.00 Mascon Tech.. Services - Systems Manager
63. Sridhara N. R Assistant Project Manager M.Sc. 41 01.01.1984 16 3,13,865.00 Bangalore Telephones - Technical Assistant
64. Srinatlt Batni Vice President M.E. (IISc) . 42 15.06.1992 19 5,11,536.00 PSI Bull Limited
Sir. Manager - Mktg. Technl. Support
65. Srinivns SastryN. Associate Project Manager B.E., PGDM (DMA) 31 01.06.1992 10 ' 3,19,278.00 TCS - Systems Analyst
66. ' Srinivasan V. Project Manager B.Tech. (ITTD) 35 03.03.1997 11 32,834.00 Deutsche Software -Assistant Systems Manager
67. • Sriram V. Marketing Manager B.E., PGDM(IIMA) 32 03.01.1997 9 79,259.00 Wipro - Regional Business Manager
68. Subbaraya SastryM. Manager - MIS B.Tech., PGDBM (1MB) 38 13.05.1995 14 3,78,042.00 Verifone - Manager - MIS
en. • Siilihash B Dhar Projoct Manager B.E., PGDBM (1MB) 30 24.02.1997 7 31.822.00 Ravi Database Consultants (Pvt ) Ltd.
Vice President
70 Subramanyam G. V. Project Manager B.E. 30 15.06.1988 9 3,56,089.00 -
71. Sudlia Kumar Manager B.E., PGDBM (IIMB) 32 14.03.1994 6 3,14,215.00 AF Ferguson & Company
- Corporate Planning Consultant
72 Sudhoer K Associate Vice President B.Tech. (IITM) 36 14.11.1986 12 5,46,383.00 SONATA - Programmer Analyst
73. Suneel K. Senior Project Manager B.E. 33 01.05.1988 11 4,04,782.60 Software Division of SICGIL - Software Engineer
74 ' Suresh Eajwn Mathen Associate Project Manager B.E., 33 02.08.1996 10 1.63,648.00 Bharat Forge Ltd., Pune
PGDBM (Symbiosis, Pune) Manager - Systems
75. Surya Prakash K. Associate Project Manager B.E 28 23.07.1990 7 3,18,078.00 -
76. ' Umesh Singh Sikka Senior Project Manager B.Tech. (HTM), PGDBM (XLRI) 39 10.11.1993 16 1,12,64900 UBICS, Bangalore -Manager- Systems
77. Vasudova Iteo L. Associate Vice President B.E. 35 01.08.1994 12 4.63.087.00 Software Sourcing Company, USA - Project Manager
7B VonkataramananT. S. Projoct Ma linger B.E. 32 27.11.1993 11 3,38,394.00 Tatn Engineering^ Locomotive Co. Ltd
Senior Systems Officer
79. ' Vijay Arvind Joshi Project Manager B.E. 37 27.05.1996 13 1,73,982.00 Mahindra British Telecom Ltd. - Senior Consultant
80. Vijay Kumar C. Manager B.E. 35 03.11.1987 16 3,83,814.00 Self employed
• Resource Coordination
81. Yegneshwar S. Dr. Associate Vice President B.E. (Hon.) 36 06.04.1993 9 4,05,735.00 IIM, Ahmodabnd
-ESR Ph.D (IITB) Assistant Professor

NOTE : 1. Remuneration comprises basic salary, allowances and taxable valua of perquisites. For and on behalf of the Board
' 2. Employed for part of the year.
3. None of the employees is related to any Director of the company. * ""jSk- \ / \ ^ /

•!
j Bangalore N. R. Narayana Murthy
Aprils. 1097 Chairman and Managing Director

cn
ID

J
*
 Statement pursuant to section 212 of the Companies Act, 1956 relating to subsidiary company

1. Name of the subsidiary Yantra Corporation

2. Financial year ended December 31, 1996
3. Holding company's interest 100%
4. Shares held by the holding company in the subsidiary 75,00,000 nos. of common stock at US$ 0.20
each, fully paid, par value US$ 0.01 each
amounting to US$ 15,00,000 (Rs. 5,32,51,600)
5. The net aggregate of profits or losses for the current
financial year of the subsidiary so for (is it concerns
the members of the holding company
a. dealt with or provided for in the accounts
of the holding company Nil
b. not dealt with or provided for in the accounts •
of the holding company Loss : USS 163,599 (Rs. 57,99,584)

5. The net aggregate of profits or losses for previous

financial years of the subsidiary so far as it concerns
the members of the holding company
a. dealt with or provided for in the accounts
of the holding company Nil
b. not dealt with or provided for in the accounts
of the holding company : Loss : US$ 62,311 (Rs. 21,75,900)

Statement pursuant to section 212(5) of the Companies Act, 1956, relating to subsidiary company
1. There has been no change in the holding company's interest in i.h« subsidiary belwoen the end of the financial
year of the subsidiaiy and that of the holding company.
2, There has been no material change which has occurred in respect of the following in the case of the subsidiary,
. between the end of the financial year of the subsidiary and that of the holding company:
a. Fixed assets of the subsidiary
b. Investments of the subsidiary
c. Moneys lent by the subsidiary
d. Moneys borrowed by the subsidiaiy for any purpose other than that of meeting current liabilities.

N. R. Narayana Murthy N. S. Raghavan Nandan M. Nilekani S. Gopalakrishnan

Chairman ,ind Jt. Managing Director Dy. Managing Director Dy. Managing Director
Managing Director
Bangalore K. Dinesh S. D. Shibulal T. V. Mohandas Pai V. Viswanathan
April 8, 1997 Director Director Sr. Vice-President Company Secretary
(Finance and Administration)

60
 Yantra Corporation
(a wholly-owned subsidiary of Infosys Technologies Limited)

Financial statements
for the year ended December 31,1996
and the period from September 22,1995 (date of inception)
to December 31,1995

Registered office
1209, Orange Street, City of Wilmington, New Castle County, Delaware 19801, USA

Board of Directors
Narayana Murthy N. R. - Chairman
Gopalakrishnan S. - Vice Chairman
Devdutt Yellurkar - Chief Executive Officer
Mohandas Pai T. V. - Director
Nandan M. Nilekani - Director
Prahlad D. N. - Director
RaghavanN.S. - Director

Auditors
EDO Seidman. LLP
Accountants and Consultants

61
 Dear Shareholder,

Your company completed its first full year of operation. In 1996, we aligned all
the teams within Yantra to focus on a single goal - become a known player in
the supply chain management software market.
Products: In 1996, the ownership of WMSYantra (formerly known as EAGLE)
was transferred from Infosys to your company. The release of the new version
of WMSYanCravias delayed to early 1997 because we broadened the scope to
appeal to a wider market. WMSYantraw'M. now be available in early 1997. This
impacted our license revenue stream in the short-term, but we believe it was
necessary. Thomson Consumer Electronics, a world leader in consumer
electronics, is currently implementing the new version of WMSYantra in all
their warehouses in North America. The impact of the Internet on supply chain
management has been considerable. We leveraged our domain expertise in
supply chain management to launch a suite of Internet applications called
WebYantra, WebYantrais currently under its beta implementation at The Rockport Company, a well-known footwear
brand.
Services: We continue to invest in the services infrastructure required to ensure the highest levels of customer
satisfaction. In 1996, we increased our investments in the Acton-based product support center, both in terms of
manpower as well as hardware. We also designed a rapid product implementation methodology that will reduce
product implementation time frame.
Sales and Marketing: In 1996, our goal was to establish Yantra as a known player in the market. Our marketing efforts
were focused on building strong relationships with consultants, hardware and database vendors and complementary
software providers. On the sales front, our efforts were focused on establishing a direct sales force in the US.
Management: Mr. K. Dinesh, Director, resigned,from the board due to his busy schedule. Mr. N. R. Narayana Murthy,
Chairman and Managing Director of Infosys Technologies Limited replaced'him on the board and took over as the
Chairman of the board from Mr. N. S. Raghavan.
In summary, 1996 was a year in which we laid the foundation for Yantra by enhancing our product suite to meet
market demands, as well as establishing a robust support and implementation services infrastructure for our products.
We have set the direction and will now focus on building the momentum. With the talent and commitment of every
Yantrik, we are confident that we will achieve our goals for 1997.
Thank you for your continued support.

Acton, Massachusetts, USA Devdutt Yellurkar

February 6, 1997 Chief Executive Officer

62
Independent auditors' report

To the Board of Directors and Stockholders of

Yantra Corporation

Acton, Massachusetts

We have audited the accompanying Balance Sheets of Yantra Corporation (a wholly-owned subsidiary of Infosys
Technologies Limited) as of December 31, 1996 and 1995, and the related statement of operations, stockholder's
equity and cash flows for the year ended December 31, 1996 and for the period from September 22, 1995 (date of
inception) to December 31, 1995. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether th'e financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of Yantra Corporation at December 31,1996 and 1995, and the results of its operations and its cash flows for the year
ended December 31, 1996 and for the period from September 22, 1995 (date of inception) to December 31, 1995 in
conformity with generally accepted accounting principles.

Boston BDO Seidman, LLP

January 31, 1997 Accountants and Consultants

63
 Yantra Corporation
Balance Sheet as at December 31,

;/) us$
1 996 1905

ASSETS
Current
Cash and cash equivalents (Note 1) 314,773 389,607
Accounts receivable 138,616 25,650
Inventories (Notes 1 nnd 2) 1,567
Prepaid expenses 15,490 41,135
Total current assets • 468,879 " 457,959

Property and equipment - net (Notes 1 and 3) • • 66,142 18,284

Other assets
Organizational costs, net of accumulated amortization
of US$ 2,235 and US$ 559, respectively (Note 1) 6,146 7,822
License (Note 4) 1,000,000
Total assets 1,541,167 484,065

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Accounts payable 16,281 2,598
Accounts payable - affiliate (Note 5} 191,736 33,010
Sales tax payable 598
Accrued expenses 23,680
Accrued income lax (Notes 1 and 7) 2,907 456
Deferred revenue (Note 1) 31,875 10,312
Total liabilities 267,077 46,376

Commitments and contingencies (Note 6)

Stockholders' equity
Common stock, US$ 0.01 par value;
15,000,000 and 3,000,000 shares authorized;
7,500,000 and 2,500,000 shares issued and outstanding (Note 4} 75,000 25,000
Additional paid-in capital 1,425,000 475,000
Retained earnings (225,910) (62,311)
Total stockholders' equity 1,274,090 437,689

1,541,107 484,065

See accompanying notes to financial statements

64
Yantra Corporation
Statement of operations

in USS
December 31, Year Ended Three Months
1996 Ended 1995

Net revenue 984,68? 25.338

Cost of sales subcontract (Note 5) 403,846 33,010
Gross profit 580,84! (7,672)

Operating expense
General and administrative expenses 509,97: 54.183
Research and development (Note 5) 243,152
Total operating expenses 753,124 54.183

Net loss from operations (172,282; (61,855)

Other income 15,525 -

Net loss before income taxes (156,758. (61,855)

Income taxes (Notes 1 and 7) 6,84: 456

Net loss (163,599 (62,311)

See accompanyingno:es tofinancialstatements

Statement of stockholders' equity

in USS
Common stock Additional Retained
Shares (No.) Amount paid-in capital earnings Total

Issuance of 2,500.000 shares

on September 22, 1995
(date of inception) 2,500,000 25,000 475,000 500,000
Net loss - - - (62,311) (62,311)
Balance, December 31, 1995 2,500,000 25,000 475,000 (62,311) 437.689
Issuance of 5,000,000 shares
(Note 4) 5,000,000 50,000 950,000. „
1,000,000
Net loss - - - (163,599) (163,599)
Balance, December 31, 1996 7,500,000 75.000 1.425,000 (225,910) 1,274,090
See accompanying nc~.es to financial statements.

65
Yantra Corporation
Statement of cash flows (Note 1)
' . , . in US$
December 31, Year ended ' Three months
1996 : ended 1995

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss (163,599) . (62,311)
Adjustments to reconcile net loss to net cash
used by operating activities
,- Depreciation and amortization , 16,045 .3,493 ;
Changes in operating assets and liabilities
Accounts receivable (112,966) , (25,650)
Inventories 1,567 (1,567).
Prepaid expenses . . . . 25,645 ; .(41,135)
Accrued expenses 23,680 • • . ' ' -
Accounts payable ' ' . . . . . 13,683 2,598
Accounts payable - affiliate 158,726 33,010
Sales tax payable 598 -
Accrued income tax 2,451 456
Deferred revenue , . 21,'563 . 10,312
Net cash used by operating activities (12,607) (80,794)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (62,227) (21,218)
Payments for organization cost - (8,381)
:
Net cash used by investing activities (62,227) (29,599)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock : • 500,000
Net cash provided by financing activities - 500,000
Increase (decrease) in cash and cash equivalents (74,834) 389,607.
Cash and cash equivalents, beginning of year 389,607 .
Cash and cash equivalents, end of year 314,773 389,607

SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION

Cash paid during the year for
Interest
Income taxes

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITY

Certain non-cash activities were excluded from the statement of cash flows. During 1996, the Company acquired all
the rights, title and interest in and to the WMSYanlra (formerly known as EAGLE) Software License in exchange for
5,000,000 shares of its common stock, US$ 0.01 par value per share, with a fair value ol'USS 0.20 per share fora total
of US$ 1,000,000, to Infosys Technologies Limited.

See accompanying notes to financial statements.

Yantra Corporation
Notes to financial statements

1. Summary of accounting policies

Business operations
Yantra Corporation (the "Company") is a Delaware Corporation formed for the purposes of developing, providing
and implementing support for software products. The Company is a wholly-owned subsidiary of Infosys Technologies
Limited, an Indian corporation.

Method of accounting
The company prepares the financial statement and tax returns on the accrual basis of accounting, which is the
generally accepted accounting principles.

Assumptions and estimates

The preparation of financial statements is in conformity with Generally Accepted Accounting Principles (GAAP)
and requires Company management to make estimates and assumptions that affect the reported accounts of
assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Certain company estimates and
assumptions used in the preparation of the financial statements relate to accounts receivable and license. The
accounts receivable reserves are reviewed by management throughout the year to assess the probability of
changes in recorded estimates and assumptions. The parent company has developed a model to determine the fair
value of the license, which is based on future earnings potential of the product. Actual results could differ from
those estimates and assumptions.

Revenue recognition
Revenue from software development is recognized based on software developed and billed to the clients as per the
terms of specific contracts. Revenue from the sale of software products is recognized when the sale has been
completed with the passing of title.

Cash equivalents
All highly liquid investments with a maturity of three months or less when purchased, are considered to be cash
equivalents.

Inventories
Inventories are stated at the lower of cost or market price. Cost is determined using the first-in, first-out (FIFO)
method.

Property and equipment

Property and equipment is carried at cost. Depreciation is computed using the straight-line method over the
following estimated useful lives:
Classification Years
Furniture and fixtures • 6
Computers 3

Organization costs
Organization costs are being amortized over 60 months using the straight-line method.

Income taxes
The company follows the liability method of accounting for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income taxes are recorded based on the
temporary differences between the book and tax basis of assets and liabilities, with certain restrictive conditions
for the recognition of deferred tax assets. D/
2. Inventories
Inventories consist of US$ 1,567 of software purchased for resale at December 31, 1995.

3 . ' Property and equipment

Property and equipment consist of the following: in US$
As at December 31, 1996 1995
Furniture and fixtures 16,656 7,230
Computers 66,789 13,988
83,445 21,318
Less accumulated depreciation (17,303) (2,934)
Net property and equipment 66,142 18,284

4. Licenses ,
During 1996, Infosys Technologies Limited (the "patent company") transferred all the rights, titles and interest in
and to the WMSYantratformp.rty known as EAGLE) software, to Yantra Corporation. The parent company developed
. a model to determine the fair value based on future earnings potential of the product. The fair value wns
determined to be US$ 1,000,000 which Yantra paid in the form of 5.0 million common shares, US$ 0.1 par value
per share, with a fair value of US$ 0.20 per share.

5. Related parties • . . .
The parent company set up a Software Center ("the center"), in Infosys, Bangalore, to cater to Yantra's exclusive
needs. This center is completely managed and staffed by Infosys and is located within the Infosys software
development facility. The center has a number of employees, trained in Yantra's best practices and exposed to
Yantra's standards, working exclusively on Yantra's products and projects. This center will be viewed as an
extension to Yantra's product development facility Eind all prioritization of work will be decided by Yantra.
It is anticipated that the following work may be done from the offshore center :
• Product development, enhancement, upgrades, version control, etc.
• Product support including Beeper support operations
• Implementation and implementation consulting
• Documentation
• Training services
Yantra will pay Infosys a flat rate per person per month for the number of people committed and this flat rate will
be calculated on the basis of the number of working clays per month. The costs incurred under this contract for the
year ended December 31, 1996, and the period from September 22, 1995 (date of inception) to December 31,
1995, are USS 637,411 and USS 33,010 respectively. In addition, during 1996, US$ 11,000 was paid to Infosys
as consultancy fee.

6. Commitments and contingencies

The company leases its operating facilities under an operating lease which expires on October 14, 1998. Total
rent expenses for the year ended December 31, 1996, and for the period from. September 22, 1995 (date of
inception) to December 31, 1995, were USS 23,785 end USS 2,251, respectively. Future non-cancelable operating
leases with initial or remaining terms of one year or more consist of the following:
In USS

Year ending December 31, Operating leases

1997 52,501
1998 41,667
94,168
7. Income taxes
Deferred income tax assets and liabilities are computed annually, for differences between financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the years in which the differences are expected to affect taxable income.
The depreciation differences between financial reporting and income tax reporting purposes, and the benefit of
net operating loss cany forwards, are the only components of the company's deferred income tax asset (liability).
Deferred tax amounts of approximately USS 82,000 result from utilizing the deferred depreciation differences
between financial reporting and income tax reporting purposes, and benefits of net operating loss carry forwards.
]n recognition of the uncertainty regarding the ultimate amount of income tax benefit to be derived from the
company's net operating loss carry forward, the company has provided a deferred tax asset valuation allowance.
As of December 31, 1996, the company has a net operating loss carry forward of approximately USS 234,000
available to offset future taxable income for income tax purposes that expires through 2011.

69
 Independent auditors' report on supplemental material

Our audit of the 1996 and 1995 basic financial statements, included in the preceding section of this report, were
performed for the purpose of forming an opinion on those statements taken as a whole. The supplemental material
presented in the following section of this report is presented for purposes of additional analysis and is not a required
part of the basic financial statements, Such information lias been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the
1996 and 1995 basic financial statements taken as a whole.

Boston BDO Seidman, LLP

January 31, 1997 Accountants and Consultants

Schedule of general and administrative expenses

in US$
As at December 31, 1996 1995

Professional salaries 128,360 15,000

Outside seivices 92,345 20,550
Travel, entertainment and vehicle expense 73,182 3,355
Reseller sublicense fees 50,715 '
Legal and professional 28,689 -
Rent 23,785 2,251
Depreciation and amortization 16,045 3,493
Advertising 14,799 -
Telephone 14,600 2,174
Payroll taxes 9,431 1,527
Insurance 8,361 936'
Postage and delivery 7,142 472
Office salaries 6,250 -
Printing 5,744 -
Equipment rental 4,645 260
Office supplies and expense ' • • 4,385 1,789
Other operating expenses 3,845 988
Repairs and maintenance 3,824 320
Reseller support fees 3,144 -
:
Dues and subscriptions 2,802 10
Reseller inventory expense 2,367 -
Computer expenses 1,836 462
Education - training 1,339 -
Bank service charges and filing fees 1,220 371
Payroll processing '762 225
Contributions 200 -
Utilities 145 :
Total general and administrative expenses 509,971 54,183

70
 Financial Statements

prepared in compliance with the

Generally Accepted Accounting Principles (GAAP) of the US

and the SEC Disclosure norms

Let him who expects one class of society to prosper into

hi ihest degree, while the other is in distress, try whether one
side of his face can smile while the other is pinched.
Thomas Fuller

71
 Consolidated Balance Sheet as at March 31,

in US$
1 997 1996

ASSETS
C U R R E N T ASSETS
Cash and short-term investments 8,320,331 10,080,513
Accounts receivables •1,994,607 3,459,876
Inventories 1 1.4!iH 51,180
Others •1,31 17,! M ( i 2,351,415
Total current assets 17,(J34,34<! 15,943,284
Property, plant and equipment - net 1fj, MA, 036 11,165,018
Other assets 3H^,,3!)!j 441,104
Investments 302 79,181
Total assets 33,841,135 27,628,587

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable 125,579 63,376
Accrued compensation - employees 790,196 558,190
Current portion of long-term debt 726,836
Other liabilities 1,367,455 1,461,416
Total current liabilities 2,283,230 2,809,818

Deferred income mx _ 456

Long-term loans • 526,289
STOCKHOLDERS' EQUITY
Common stock, par value; US$ 0.32 2,310,270 2,309,991
Shares authorized 10,000,000;
Issued and outstanding 7,259,600
Additional paid-in-capital 11,526,688 11,524,178
Retained earnings 17,720,947 10,457,855
24,292,024
Total liabilities and stockholders' equity 33,841,135 27,628,587

The accompanying notes to consolidated financial statements are an integral part of these statements.

Assets - 1997 Liabilities and Stockholders' Equity - 1997

Cash & short-term investments - 25% Current liabilities- 7%

Stockholders' equity - 93%

72

Property, plant and equipment - 47%

Consolidated Income statement for the year ending March 31.

in USS
\ « ( , '/ 1996 1995

REVENUES
Net revenues .' :•.:.' ! . ; • ' : • 26,607,009 18,105,010
Cost Of revenues 's , • , ' . : . • ' . • 13,918,888 10,509,917
Gross profit *.i.,:>7' >•'..' 12,688,121 7,595,093

OPERATING EXPENSES
Selling, general and administrative '/,()')!:,?; 1 4,350,710 3,354,787
Total operating expenses '/ ,•")';( , / 1 ". 4,350,710 3,354,787
Operating income < j , i ' t M '.IJ^.H 8,337,411 4,240,306
Non-operating income '•.,'',':'.'<•' u 1,460,329 746,439
Interest charges '~>7'/>',H',
Other non-operating expenses ; 3 '/ 'i , "?' « ' • )
Income from continuing operations
before income tax and accounting changes 1 0.73' ', 1 ! J cS 9,797.740 4,986,745
Provision for income tax ( " ,0 1 1 ., 1 <u ' ] (1,324,580) (892,593)
Income from continuing operations
before accounting changes ! j ,71 4, r .'! '/ 8,473,160 4,094,152
Prior period items (304,080) (214,118)
Cumulative effect of accounting changes (net of tax) (1,074,552) (581,720)
Net income '.',10<t,'12X 7,184,490 3,512,432
1
Weighted average common stock outstanding 7,^'_)! ,(;r;0 7,258,750 5,305,050*
EARNINGS PER SHARE
Earnings before accounting changes 1 .1:4 1.16 0.77
Cumulative effect of accounting changes (0.15) (0.11)
Prior period items ; < ) . • /".; (0.03)
Net earnings per share 1 3: 0.98 0.66
Fully diluted earnings per share 1 . '. 0 0.91 0.45
Dividend ctoclan'd per sha:'o 0.'. b 0.15 0.15
The accompanying notes to consolidated financial statements are an integral part of these statements.
* Includes increase in weighted average stock due to stock split of 1 :1 .

';et revenue
~-)«JS8EezaaEUK53KaK23I L ;5 in mil/icr-.

73
 Consolidated statement of stockholders' equity as at March 31,

in US$
1 9;-)Y 1996

COMMON STOCK
Balance, beginning of the year 2,309,991 2,309,991
Increase due to stock splits
Common stock issued xvn
Forfeited shares
Balance, end of the year 2, 310, ?,7o • 2,309,991

ADDITIONAL PAID IN CAPITAL ll,!32U,e>88 11,524,178

RETAINED E A R N I N G S
Balance, beginning of the year 1 0,45V, 8i")IJ 5,961,914
Net income 9,409,928 7,184,490
Decrease due to stock split
Dividends paid (1,131,427) (1,068,955)
Unrealized gains (loss) on investments - net 361,482 (420,876)
Translation adjustment (1,376,891) (1,198.718)
Balance, end of the year 17,720,947 10,457,855

Total st.ockhok.lurs' equity 31,557,905 24,292,024

The accompanying noles to consolidated financial statements are an integral part of these statements.

Stockholders' Equity
E3BU-3 US$ in millions

74
 Consolidated statement of cash flows for the year ending March 31,

inUSS
1 <>!)'/ 1996 1995

CASH FLOWS FROM OPERATIONS

Net income before current income taxes iiu;7:>,329 8,900,602 4,146,212
Non-operating income (net) (P41.82H) (1,460,329) (746,439)
Reconciliation ot net income to
net cash provided by operating activities
Depreciation, depletion and amortization 3,034,984 2,679.577 1,501,237
Current income taxes (1.2t>b,401) (1,716,112) (633,780)
Charge of intangible assets - - 496,820
Decrease (increase) in accounts receivables (i,b:M,7:-n) (1,129,150) (938,124)
Decrease (increase) in inventories 40,022 • 3,104 88,710
Decrease (increase) in other current assets (I,9bti,b31) (1,403.336) (361,008)
Increase (decrease) in current liabilities (L>2o,b88) 1,134.502 1,126,793
Decrease (increase) in deferred tax b«,2b3 (750,056) 309,408
Net cash from operations V.b83,b09 6,248.802 4,989,829

CASH FLOWS FROM FINANCING

Net cash received from issuance of common stock 2,789 - 7,694.698
Net proceeds of long-term borrowing (52o,289) (871,425) 1,397,714
Dividends paid (1,131,427) (1,068,955) (755,940)
Not cash from financing (I,6b4,927) (1,940,380) 8,336,472

CASH FLOWS FROM INVESTING

Decrease (increase) in investments 78,819 - 102,742
Non-operating income 941,828 1,460.329 739,262
Proceeds of sale of property, plant and ecjuipment 33,453 57.599 48.081
Purchase of property, plant and equipment (7,727,455) (4,242,772) (8,010.577)
Not cash from investing (0.673,355) (2,724.844) (7,120,492)

Total increase (decrease) in

cash and equivalents during the year . (744,773) 1,583.578 6,205,809
Cash and equivalents at the beginning .of the year 10,080,513 10,116,529 3,914,354
Unrealized gains on short-term investments 361,482 (420,876) 59,394
Effect of translation difference (1,370,891) (1,198,718) (63.028)
Cash and equivalents at the end of the year 8,320,331 10,080,513 10,116,529

75

^m
'*«*
 Notes to financial statements

1. Significant accounting policies

1.1 Basis of preparation of financial statements
The financial suiiomonts huvo been prepared undor the historical cost convention in compliance with the Generally
Accepted Accounting Principles (GAAP) of the US and SEC disclosure norms. All income and expenditure having
a material bearing on the financial statements are recognized on accrual basis.
1.2 Principles ot consolidation
The financial statements include the accounts of Infosys Technologies Limited and its wholly-owned subsidiary,
Yantra Corporation. Significant inter-company transactions and balances have been eliminated.
1.3 Estimates and assumptions
Preparing financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Examples include provisions for bad debts, useful life of the
assets, etc. Actual results may differ from these estimates.
\A Revenue recognition
Revenue from software development is recognized based on software developed and billed to the clients as per the
terms of specific contracts. Revenue from the sale of software products is recognized when the sale has been
completed with the passing of title. In case of fixed price contracts, revenue is recognized based on the specific
terms of the contract. Contractual terms with clients preclude recognition of work-in-progress. Interest on
deployment of surplus funds is recognized using the time-proportion method based on interest rates implicit in the
transaction. Dividend income is recognized when the right to receive dividend is established. Revenue from sale of
Special Import Licenses is recognized when the licenses are actually sold.
1.5 Expenditure
Expenses are accounted on accrual basis and provisions are made for all known losses and liabilities. Expenses
incurred on development of software are charged to revenue expenditure in the same year. Software for own use
is also charged to revenue in the same year. The leave encashment liability of the company is provided on the basis
of actuarial valuation.
1.6 Earnings per share
Earnings per share arecompu ted on the basis of weigh ted average number of common stock outstanding as on the
Balance Sheet date plus the effect of outstanding stock options, using the treasury stock method.
1.7 Cash and short-term investments
The company considers short-term investments and financial assets with a maturity of three months or less, on
the date of purchase, to be cash equivalents. Short-term investments are readily marketable securities, acquired
through the use of temporarily idle cash and are marked to market as on the Balance Sheet date. The resulting
gains and losses are accounted in the financial statements.
1.8 Property, plant and equipment
Property, plant and equipment are stated at the cost of acquisition minus the accumulated depreciation. Direct
costs are capitalized till the assets are ready to be put to use. These costs include financing costs related to specific
borrowing attributable to fixed assets. Advances paid towards acquisition of plant, property and equipment which
have not been installed or put to use and the cost of property, plant and equipment not put to use, before the year
end are disclosed under Capital work-in-progress.
1.9 Depreciation
Depreciation on fixed assets is provided using the straight-line method based on the useful life as estimated by the
management. Depreciation is charged on a pro-rata basis for assets purchased/sold during the year. The
management's estimate of useful life ofvarious fixed assets is given below.
Building - Software center 28 years
- Others 58 years
Furniture and fixtures 6 years
/D Compuiorequipment 2-5 years
I'liiiit ciiicl niiichineiY (i years '
Vehicles 6 years
Individual assets costing less than USS 163 are depreciated in full, in the year of purchase.
1.10 Inventories
Inventories are stated at the lower of historic cost or net realizable vaJue. A periodic review is made of slow-
moving stock and appropriate provisions are made for anticipated losses, if any. Cost is determined using the first-
in, first-out (FIFO) method.

1.11 Retirement benefits to employees

The company's liability towards retirement benefits in the form of provident fund, gratuity and superannuation is
fully funded and charged to expenditure. Till July 1996, the company was contributing to the Employees' Provident
Fund maintained under the Employees Provident Fund Scheme by the Central Government. Effective August
1996, the company has established a provident fund trust to which pan of the contributions were made thereafter
and the balance of the contribution is funded to the pension scheme managed by the Government. The company
had a gratuity fund, maintained by the Life Insurance Corporation of India (LIC), to which contributions were
made every year based upon actuarial valuation. Effective March 31, 1997, the company has contributed, on an
actuarial basis, to its own gratuity fund trust in full discharge of its liabilities. The company also contributed to a
superannuation fund, maintained by LIC, for its managerial staff. Effective March 31, 1997, the company has
contributed to its own superannuation fund trust in full discharge of its liabilities.

1.12 Research and Development

Research and Development costs are expensed as incurred.

1.13 Foreign currency transactions

In the case of sales made to clients outside India, income is accounted on the basis of the exchange rate as on the
date of transaction. Adjustments are made for any change in the sales proceeds on conversion into Indian
currency, upon actual receipt. Expenditure in foreign currency is accounted at the conversion rate prevalent
when such expenditure is incurred. Where realizations are deposited into and disbursements made out of a
foreign currency bank account, all the transactions during the month are reported at a rate which approximates
the actual rate during the period.
In the case of current assets and liabilities, as well as receivables and payables denominated in foreign currency,
the exchange rate prevalent at the end of the period is taken for purposes of translation and accounting in the
books. Any overall gain or loss upon such conversion is recognized in the same period. Fixed assets purchased at
overseas offices are accounted on the basis of actual cost incurred, at the exchange rate prevalent at the time of
purchase. Depreciation is charged as per the company's policy. Exchange differences arising on foreign currency
transactions are being recognized as income or expense in the period in which they arise. In case of forward
contracts, the difference between the far-ward rate and the exchange rate on the date of transaction is recognized
as income or expense over the life of the contract.

1.14 Foreign currency translation

The company's financial statements are prepared in Indian rupees, the reporting currency. These financial
statements have been prepared by translating income and expenditure at the average rate during the year;
current assets, current liabilities, long-term loans and accretions to the stockholders' equity at the year-end rate;
fixed assets at the rate prevalent at the time of acc[uisition and long-term investments at the rate prevalent at the
time of investment. Depreciation is calculated on the translated value of the assets, using the useful life of the
assets as estimated by the management. The difference arising on translation is disclosed as a part of Retained
earnings.

1.15 Long-term investments

Long-term investments are carried at cost. In case of any decline, other than temporary, in the value of investments,
appropriate provision is made to recognize such a decline.

'.1C Income lax

Provision is made for income tax on a yearly basis, under the tax-deferral method, based on tax liability, as
computed after taking credit for allowances and exemptions. In case of manors under appeal, due to disallowances 77
or otherwise, full provision is made when the said liabilities are accepted. Certain items of income and expenses
are not reported in tax returns and financial statements in the same year. The tax effect of this difference is
reported as Deferred income tax.
 2. Notes on accounts
2.1 [^classification
Certain items in the financial statements have been reclassified for better presentation.

2.2 Consolidation
The financial year end of the wholly-owned subsidiary, Yantra Corporation is December 31, 1996. The consolidated
reports are prepared with the subsidiary's audited figures till December 31, 1996, and unaudited figures for the
period January to March 1997. All the inter-company items were eliminated on consolidation.
2.3 Cash and short-term investments in US$
1997 1996
Cash and equivalents
Cash and bank deposits 4 ,4K4,b84 2,141,961
Certificates of deposit 2,024,488
/
Cash and equivalents 1,/18/1,08/1 4,166,449
Shorl.-l.f n'lii i/iV<;.sini"JH.s
Short-term investments in debentures, units of rnuluul funds and
common stock of other companies 1,301,318
Deposits in limited companies 3, 8 3 f), 04 7 3,602,941
Short-term advances 1,009,805
Short-term investments ,3,83!.>,ti'17 5,914,064
Cash and short-term investments 8,320,331 10,080,513'

2.4 Unrealized gains on short-term investments

The short-term investments of the company is marked to market on the Balance Sheet date. The cumulative
unrealized gain or loss arising out of this is'adjusted against Retained earnings and necessary provisions made for
deferred taxes. An unrealized loss of USS 420,876 (net of deferred tax), has been reduced from the retained
earnings and deferred tax asset increased by US$ 358,524, during the previous year.
2.5 Accounts receivable
The accounts receivable is USS 4.99 million on the Balance Sheet date as against USS 3.46 million for the
previous year. The receivables are considered good and realizable. The level of accounts receivables is normal and
is in tune with business trends. The age profile is as given below:
in %
Period in days 19<J7 1996
0-30 0!.).r>r> 65.64
31 - 60 22.01 16.64
61 - 90 0.04 15.62
More than 90 8.37 2.10
100. Of) 100.00
The management believes that the overall condition of accounts receivable is satisfactory. As a measure of asset
utilization, receivables, as a percentage of net revenue, is 12.62% for 1997 as compared to 1 3.00% in 1996.

2.6 Inventories
The company's stock of inventory consists of software products purchased for sale. A periodic review is made of
slow-moving stock and appropriate provisions are made for anticipated losses, if any.
78
2.7 Other current assets
The other current assets represent advances paid to staff, advances paid to vendors for goods and services,
deposits with various government organizations towards provision of telephones, electricity, etc.
^.o Property, plant and equipment in uss
1 HP7 1996
Land 7()t),03^- 167,683
Building !),t>01,P4f< 5,092,550
Computers ! J ,tt<14,:)l« 6,443,381
Vehicles 40.KHP 49,203
Plant and machinery 3,391,603 1,809,490
Furniture and fixtures 7. 400,875 1,245,028
Property, plant and equipment - at cost 21,785,866 14,807,335
Less : Accumulated depreciation 7,026,190 4,947,193
Add : Capital work-in-progress 1,964,360 1,304,876
Property, plant and equipment - net 15,824,036 11,165,018
The capital expenditure for 1996-97 is approximately USS 16.10 million. The company estimates that it would
be able to fund its capital acquisition program from its internal accruals and its liquid funds. The company may
also take recourse to borrowings to meet its capital acquisition program in case of need.
2.9 Interest on loans
During the last year, the company capitalized an amount of USS 287,772, being the interest paid on the amount
borrowed from the Housing Development Finance Corporation Limited, India, for construction of quarters for its
staff. The same was added to Buildings and shown under Property, plant and equipment in the Balance Sheet,
during the previous year. During the current year, the loan was prepaid in full.
2.10 Depreciation on assets costing less than USS 163 each
The company charged depreciation at one hundred percent in respect of assets costing less than US$ 163 each.
The depreciation on such assets for the period 1997 and 1996 amounts to USS 211,087 and US$ 140,732
respectively.
2.11 Investments
The company established its wholly-owned subsidiary, Yantra Corporation, in 1995, in USA. The investments for
the same, amounting to USS 500,000 in cash remittance was made during the previous year. During the current
year an investment of USS 1,000,000 was made by way of sale of the product EAGLE (now known as WMSYantra).
This has been netted off on consolidation.
The company's investment in Software Sourcing Company, the joint venture with Kurt Salmon Associates, USA
was relinquished during the year and the net proceeds received.
2.12 Accounts payable
Accounts payable represent the amounts payable to various vendors towards purchase of services and goods in
the normal course of business.
2.13 Accrued compensation
Accrued compensation represents the compensation payable to the employees and paid subsequent to the Balance
Sheet date. It also includes provision for leave compensation to employees.
2.14 Other current liabilities
Other current liabilities include dividend payable by the company to its stockholders, amount received in advance
from clients, amount received for issue of stock options and other current liabilities.
2.15 Long-term borrowings
The company's long-term borrowings consisted of amount borrowed from Housing Development Finance
Corporation Limited towards purchase of quarters for its staff. The borrowing has a tenure of three years with a
coupon rate of 13.50% per annum. During the year, the company prepaid the loan in full. 79
2.16 Stockholders' equity
The company, has at present, only one class of common stock.
 During the year, 1,000 stocks have been issued on conversion of options issued under the company's Employees
Stock Offer Plan (ESOP) to an employee. The said stocks have been issued on the payment of US$ 2.94 per stock,
with USS 0.32 being the par value per stock and are subject to restrictions up to full vesting.

2.17 Contingent liabilities

In the normal course of its business, the company entered into various contracts with vendors, on capital account.
Moreover, there were certain claims against the company which may crystallize. The contingent liability due to
this amounts to US$ 2,791,744 and US$ 1,170,792 for the periods 1997 and 1996 respectively.

2.18 Prior period items

Prior period item consists of income taxes paid for earlier years.

2.19 Financial instruments

2.19.1 Foreign exchange forward contracts '
The company enters into foreign exchange forward contracts to hedge its foreign currency receivables. The gains
or losses are recognized in the financial statements. These contracts are entered into in the normal course of
business and the company does not hold any trading positions. The company does not use derivative financial
instruments for speculative purposes.
in US$
1997 1996
Total foreign exchange forward contracts outstanding 2,400,000 800,000

2.19.2 tellers of credit

The company has various letters of credit outstanding, issued to different vendors, amounting to US$ 948,583
and USS 344,971 for the periods 1997 and 1996 respectively.
2.19.3 Guarantees
The company has outstanding guarantees for various statutory purposes amounting to US$ 556,393 and
USS 194,212 for the periods 1997 and 1996 respectively. These guarantees are in the nature of performance
guarantees, and are subject to the risk of performance by the company.
2.20 Credit risk
Financial assets which potentially subject the company to concentrations of credit risk consist, principally of cash
investments and receivables. The company's cash resources are invested in a manner so as to enhance yields
keeping in mind the safely of such investments and the company's requirements of funds.
The company's cash investments are with companies with good credit ratings, financial institutions and banks.
Limitations have been established us to the maximum amount of cash that may bo invested will) any single
agency.
Credit risk with respect to trade receivables is limited due to larger customer base and quality of receivables.
Accordingly, the company has no significant concentration of credit risk.
With respect to the foreign exchange forward contracts, the company's exposure is on the full amount of the
foreign currency receivable on settlement. The company does not expect to incur any losses under these contracts.
2.21 Employees Stock Offer Plan (ESOP)
The company instituted an Employees Stock Offer Plan for all eligible employees. Under the plan, warrants will be
issued to employees deemed eligible by the Advisory Board constituted for the purpose. Accordingly, 750,000
warrants were issued by the company to the Infosys Technologies Limited Employees Welfare Trust, to be held in
trust and transferred to the selected employees from time to time. The warrants,are issued at USS 0.03 each, and
entitles the holder thereof to apply for and be issued one share of the company at a price of USS 2.94, after a
period of 5 years from the date of issue. The shares vest in the employee fully 5 years after the dale of issue of the
warrants. During the year, 120,900 warrants were allotted to eligible employees by the trusi. The warrants
expire on September 30, 1999.
oU Financial Accounting Standard Board (FASB) had issued FASB statement no. 123 on "Accounting for stock-based
compensation". If the standard had been adopted, then the compensation expense (not, of deferred lax) to be
charged to income statement would be USS 746,379, USS 367,632 and USS 174,410 for 1997, 1996 and 1995
respectively.
2.22 Related Parties
The company entered into an agreement for software development and support with its wholly-owned subsidiary,
Yantra Corporation, beginning November 1, 1995. Under this agreement, Infosys will set up an off shore software
development center for Yantra Corporation, which will act as an extension of Yantra Corporation's product
development facility. Yantra will pay Infosys a flat rate per person per month based on the actual efforts put in by
the Infosys employees.
2.23 Leases
The company has operating leases for office buildings used by a part of its Delivery Systems and Marketing groups.
Rental expense for operating leases for the periods 1997, 1996 and 1995 is USS 679,705, USS 186,165 and
USS 147,110 respectively. These are cancelable leases.
2.24 Non-operating income
N on-operating income consists of income derived by the company out of its treasury operations and sale of special
import licences.
2.25 Income tax
The provision for income tax was composed of: in USS
IE-:-'/ 1996
Current income tax 965.4'.'. 1,636,112
Foreign taxes 300, C 80.000
Deferred tax (219,2?', (391,532)
Provision for income taxes 1,016.:''. 1,324,580

The deferred tax consists of the following:

Cumulative effect of the timing differences in capital assets (249,??:) (391.988)
Deferred tax for subsidiary 456
(249,2? V; (391,532)

Differences between the Indian statutory tax rate and effective tax rates were: in 96
1996
Indian statutory rate 46.00
Tax exempt income (32.93)
Effective tax rate 13.07

2.26 Research and development expenses

An amount of US$ 1,239,088 was incurred during the year for research and development expenses and the same
is included in Selling, general and administrative expenses in the Income statement.
2.27 Segment reporting
The geographical segment information given below is on the basis of markets and not on the source of revenue.
2.27.1 By geographical area inus$
1P97 1996 1995
Net revenues
Americas 20,099,240 13.753.779
Europe 3,616,272 2,457.360
Rest of the world (ROW) 423,087 436.102
India 3,928,739 2,204.208
28,067,338 18,851.449 81
 //; US$

Incomu before lax

Americas
luiropn
Rest of the world (ROW)
India

More than 76% of Infosys' revenue comes from'the American market and the balance predominantly from India
and Europe among other markets. The dependency on a single market for substantial part of the revenue is
prone to risk. Infosys has a corporate strategy of increasing its share of business from the European, Japanese
and other markets, thereby reducing its predominant dependency on the American market. The company's goal
is to reduce the contribution to the revenue from the Americas, to 60% (from the current 76%), by the year 2000.
2.27.2 By business segments in US$
1 997 1996 1995

Net revenues
Software products and productized services <,),M!>.(i20 3,699,946 2,406,282
Software services 29,872,720 22,397,623 15,326,536
Software trading 167,b 8 9 509,440 372,192
Treasury i,:mu9« 1,460,329 746,439
10,902,127 28,067,338 18,851,449

Income before tax

Software products and productized seivices
Software services
Software trading
Treasury

Today, a substantial part of the company's revenue comes from software services. The company aims to move up
the value chain, by becoming a predominant player in the software product market. The vision of Infosys is to
derive 40% of its revenue from Products andProductizedservices, by year 2000. The strategy is to use service-
based skills and cash accruals to build products to suit specific needs of various market segments.
The assets are not identifiable to particular segments and can be used interchangeably between segments. Hence,
the identifiable assets for each segment are not provided.
By geographical area - 1997 By business segment - 1997

ROW - 2% Treasury - 3%

India-14%

Europe - 8%

82 Americas - 76%
The Infosys' management is committed to global levels of transparency and disclosure. In pursuance of this, an attempt
has been made to provide voluntarily, hereunder, the information, as required under Form 10-K filing requirements of
the Securities and Exchange Commission of the USA. The management cautions the users that Infosys is not registered
with the SEC, nor legally required to file Form 10-K and this is provided for information only.

United Stales
Securities and Exchange Commission
Washington, DC 20549

FORM 10-K

(Mark One)
H Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1997
D Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition period from — to —
Commission file number - Not applicable

Infosys Technologies Limited

(Exact name of registrant as specified in its charter)

State or other jurisdiction of incorporation Karnataka, India

or organization
IRS Employer identification No. Not applicable
Address of the principal executive office Electronics City, Hosur Road,
Bangalore - 561 229, India.
Registrant's telephone number, including area code 91-80-8520261 (100 lines)
Securities registered pursuant to Section 12(b) of the Act None
Securities registered pursuant to Section 12(g) of the Act Not applicable. The equity consists of common stock which
was issued in accordance with the laws of the Republic
of India.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
D Yes D No - Not applicable, as Infosys is not required to file any such forms with SEC, at present.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part. Ill of this Form 10-K or any amendment to this Form 10-K.
D Yes D N o - Not applicable
I'lio aggregate market value of the common stock held by non-affiliates of the registrant as of March 31,1997 was USS
203,859,933. 83
I he number of shares outstanding of the registrant's common stock as of March 31, 1997, was 7,259,600.
 Parti
I t e m l . Business
1.1 General
Infosys Consultants Private Limited (the "Company" or "Infosys") was incorporated in 1981 as a private limited
company under The Companies Act, 1956, of the Republic of India. The name of the company was changed to
Infosys Technologies Limited (the "Company" or "Infosys") in 1992 when it became a public limited company.
Infosys and its subsidiary Ynntra Corporation (Yantra), collectively called the "Company" or "Infosys", specialize in
customized sofiwnra development, software maiiHeimnc'e, mid in developing, .selling find supporting their own
products.
The vision of Infosys is to be a globally-respected software corporation employing the best-of-class people to
provide the best-of-breed solutions. The business strategy is focused on :
• Establishing offshore software development centers in cost competitive economies.
• Competing on quality and productivity rather than just on cost in the domain of fixed-price, turnkey projects
and maintenance of software
• Moving up the value chain by getting into products and productized services.
Today, Infosys operates in USA, Europe, Japan, the Far East, Africa and the Indian subcontinent.
Towards the end of 1992, liberalisation had taken firm roots in India and the Indian software industiv saw the
entry of several well-known international software and IT houses. This meant the possibility of a shakeout.
Further, it was clear, by then, that the only sceilable model for the Indian software houses would be to establish
world-class software factories with state-of-the-art technology, and software development processes, methods
and tools. Thus, this period saw a transition from capital-light, on-site oriented activities to capital-heavy, India-
based software development centers. Infosys was one of the first software companies to recognize this trend and
formulate a business plan to establish a large software factory to address the needs of international clients. This
activity required considerable capital and Infosys decided to have its IPO (Initial Public Offer) in February, 1993 for
funding this project. The scope of this project was expanded based on the positive response received from the
existing and the potential clients of Infosys. Subsequently, to further fund its capital programs, Infosys had a
private placement of shares in October, 1994, and these shares were subscribed by Foreign Institutional Investors,
Mutual Funds, Domestic Financial Institutions and Corporates. There was no participation from the public till the
initial public offer in 1993.

1.2 Infosys service offerings and products

During the financial year 1996-97, Infosys derived 73% of its revenue from bespoke software development and
maintenance, and 23% from software products and productized services. The remaining 4% formed non-operating
revenue.
1.2.1 Infosys service offerings
Infosys has six seivice offerings and these are:
1.2.1.3 Fixed-price, turnkey project:;
In this modol, <i usor oi'jiani'/.otion soMds out a Roquost-For-Proposal (RFP) nnd asks the vendor to bid n fixed price
for the entire task which generally comprises of the lull software development life cycle. Activities like requirement
definition and the associated customer sign-off, design presentation, installation and rapid-reaction warranty are
performed at the customer site. Design review, programming, code walkthrough, program testing, module testing,
integration testing nnd volume testing are performed at the development center. The objective of this model is to
maximize the value added by the development centers in low-cost economies.
l.2.1.b Maintenance of software
In this model, the vendor accepts complete responsibility for maintaining a suite of software on behalf of the
customer. The maintenance opportunity worldwide is at least US$ 75 to US$ 90 billion dollars (Source: NASSCOM).
This is also a win-win model for the client and the vendor since the client staff can transition to new development
pA while the vendor staff functions as a virtual maintenance facility for the customer. This model is an ideal candidate
for transitioning to low-cost economies, since maintenance is an area for cost reduction. Infosys was the pioneer
in leveraging the time-zone difference between India and USA to provide a near-24-hour productivity in the
maintenance of software for the US customers. Such time-zone differences also allow the customer team and

f : ,**i
tha vendor team to run relays in maintaining the software. Generally, the customer and the vendor work on a
productivity standard (expressed as the number of function points a programmer/analyst/project leader can
maintain in a month) to create a fixed-price, turnkey framework for this activity.

1.2.1.C Offshore Software Development Centers

Infosys has popularized the concept of Offshore Software Development Centers (OSDCs). An OSDC is a dedicated
software development team at Infosys, using the technology, tools, processes and methodologies unique to a
customer. This results in bringing economies of scale and maximizing the residual knowledge of the customer's
business. Thus, an OSDC operates like a virtual extension of the customer's software team. An OSDC is an ideal
model for extending the size of a customer's software team at reduced costs and increased productivity.

1.2.1.d In2000
Most of the currently running software systems cannot handle dates beyond December 31, 1999. In2000'is the
Infosys solution to handle this problem. Infosys has developed a methodology and a suite of tools to effect the
remedial re-engineering task with high productivity and quality. The current estimate for the worldwide market
opportunity for correcting this software problem is about US$ 300 billion (Source: Gartner Group). Infosys has
already started working with several customers in this area.

1.2.1.6 PorteNT
PorteNT'iz the Infosys solution to port programs from the OS/2 platform to WINDOWS NT platform. Soon, this
solution will be enhanced to include UNIX-to-WINDOWS NT porting. Industry analysts predict a huge demand for
this service in the coming years.

1.2.1 .f Internet, intranet and electronic commerce

Internet and intranet technologies are expected to become major opportunities in the coming years. Hence,
Infosys has started a focused initiative in these areas. A strategic business unit is dedicated to this emerging
opportunity area.

1.2.2 Product development

Today, most Indian software houses leverage per-hour productivity rather than Intellectual-Property-Rights (IPR)-
based productivity. Per-hour productivity syndrome refers to bidding for a project based on the number of hours
required to complete the project. Per-hour productivity is limited by the number of professional-hours available in
the company, and the revenue is directly proportional to the number of professionals on the rolls of the company.
Increase of revenue comes with the concomitant problems of growth. Thus, this is not the best method for moving
up the value chain. On the other hand, IPR-based productivity is based on developing and selling products. Here,
the revenue comes from the sale of licenses to users, and is therefore, not directly related to the number of
development professionals employed. The average, per-capita revenue productivity from products is much higher
than that from projects (per-hour productivity). The Management Council of Infosys has recognized this problem
and has mounted a program to enhance the contribution from products and productized services to total sales
from the current 23% to 30-40% by March 31, 2000.
The probability of success of Indian companies leveraging sales of off-the-shelf, office automation type of products
is low since the success of such products is heavily marketing-and-sales-oriented, an area where India does not
as yet have any competitive advantage. Thus, Infosys believes that the best route for the success of Indian
software companies is to leverage the competitive advantages of India in software development and support
activities. This implies that Indian software companies should acquire a critical mass of domain knowledge and
leverage such knowledge to develop large, application products in niche application areas.
Infosys offers three business application packages and a technology tool - EAGLE (now known as WMSYantra),
DMAP, BANGS 2000 and Websetu.

1,2.2.a EAGLE (now known as WMSYwtra)

This is an on-line, flexible and scalable software package for managing warehouses. It is designed to run on open
systems, with interfaces to state-of-the-art warehouse equipment. This package has already been installed at
several locations in the US and Europe. The Intellectual Property Rights (IPR) of this package was transferred to
the subsidiary Yamra, for USS 1,000,000 and was paid in the form of common stocks in Yantra. The valuation for nc
this transfer is based on the net present value of the future revenues from the product, over its product life cycle.
This product also requires a substantial investment in terms of marketing and R&D, which the subsidiary will
undertake in future.
 1.2.2.b DMAP (Distiibuliuii Management Applicalion Package)
This package handles the complete MIS requirements of the country distributor of a consumer product. It integrates
sales forecasting, customer seivice, purchasing, inventory management, sales management and receivables. The
package has over 600 programs and runs on an IBM AS/400. DMAP is currently installed at several customer sites
in Europe. The life of this package is almost over since the market demands Internet and Client/Seiver-based
solutions rather than midrange-system-based solutions.
1.2.2.C BANGS 2000
This is an on-line, retail and corporate banking system that offers rich functionality, portability, scalability, and
flexibility for complete automation of banking operations. This package has been successfully installed at more
than 168 bank branches in India, Nepal, Sri Lanka and the African continent. An Internet banking application,
called BankAway!, has been added to the BANGS 2000 suite.
1.2.2.d Websetu
Websetu is a suite of tools from Infosys for enabling Internet-based electronic commerce using traditional,
On-Line Transaction Processing (OLT'P) application engines. In addition, an Internet consulting group has been
started to focus on developing Internet and intranet solutions for our customers.

1.2.3 R & D investment

During the financial year ending March 31,1997, the company spent US$ 2,092,368 on research and development
activities on both capital and revenue account. This represents around 5.17% of the total revenues during the
year. The corresponding spending on research and development activities for the previous two fiscal years were
3.40% and 3.50% respectively.

1.2.4 Segmental analysis of revenue

The segmental analysis of revenue is provided in pages 81 and 82 of this report.

1.3 Trademark
Infosys has applied for registering INFOSYS as a trademark in India. The company has also applied for registering
ITL INFOSYS as a trademark in USA, and has initiated steps to register the trademark of its products.

1.4 Marketing channels

The company generates its sales from the following channels: the company's sales offices around the world,
strategic sales partners and the Corporate Marketing group at Bangalore, India.
The worldwide sales headquarters is located at Fremont, California, USA. The branch sales offices are located at
Chicago, New York, Dallas, San Francisco, Boston and Los Angeles in USA, at Maastricht in Netherlands and at
London in United Kingdom. During the coming year, Infosys proposes to open two more branch offices - one each
in Canada and Tokyo, Japan. Infosys is also part of JASDIC Park company - a Japanese consortium for Indian
companies to enter the Japanese market.
Today, sales from Switzerland are handled by our strategic partner - Teksels S. A. In future, there are plans to
leverage this channel for other territories also.
The Corporate Marketing group is responsible for starting the dialogue with prospective customers who come to
Bangalore, India, for .short-listing potential vendors. At the appropriate tuns', the customur-eoiiUicts lira pussud on
to the relevant branch office.

1.5 Joint Ventures and Subsidiaries

1.5.1 Yantra Corporation
To increase the revenue contribution from products, Infosys established, in 1995, Yantra Corporation, a wholly-
owned subsidiaiy, in USA. Yantra's objectives are to develop, sell and support software products in the retail and
distribution areas.
Infosys has transferred the intellectual property rights in EAGLE (now known as WMSYantra}. the Infosys
software product solution for warehouse management, to Yantra for a consideration of US$ 1,000,000. This
Ctr amount was received in the form of common stock of the subsidiary.
1.5.2 KSA-lnfosys
Infosys started Software Sourcing Company (SSC), as a joint venture with Kurt Salmon Associates (KSA), a leading
management consultancy company in USA, in 1987. This was intended to provide a one-stop shop for the delivery
Of full software life cycle services for the consumer products industry.
Since the Infosys board foresaw the possibility of conflict of interest between Yantra and SSC, the company
decided to relinquish its stake in the joint venture in favor of the joint venture partner, KSA. The Company has
received necessary statutory approvals and the relinquishment was completed during the year.

1.6 Environmental matters

Software development, being a pollution-free industry, is not subject to any environmental regulations in India.

1.7 Functional Groups within the company

The company is divided into ten functional groups - Delivery Systems, Marketing and Sales, Banking Business
Unit, Human Resources Development (HRD), Education and Research, Quality and Productivity, Technology
Infrastructure Group, Management Information Systems, Corporate Planning, and Finance and Administration
(F&A). The management tree is provided on page 101 of this report.

1.7.1 The Delivery Systems Group

The Delivery Systems group is responsible for software development and maintenance as well as for operating
Offshore Software Development Centers (OSDCs) for our customers. The group is organized in to five Strategic
Business Units (SBUs), each with focused application domain(s), as well as service offering(s).

1.7.1.a Produclized services

The Delivery Systems group has championed productizing several service offerings. Productizing involves: creating
tools and reusability components for enhancing quality and productivity for each service, training material for
quick enabling of programmers and analysts, and producing marketing and sales collateral for efficiency in selling.
fn2000and PorteNT are the two services that Infosys has productized.

1.7.1.b Strategic Business Units (SBU)

The SBU structure has been adopted to decentralize the operations for quick response to customers, to focus on
developing domain expertise, and to develop the next generation of business leaders.
The following table describes the focus areas of each SBU:
SBU1 Manufacturing, Distribution, OTR, InZOOOchampion
SBU2 Banking, Finance and Insurance, /torreATchampion
SBU3 Retailing, Telecommunication
SBU4 Middleware Technology, Websetu product and Technology Advancement
SBUS Internet and intranet consulting and products

1.7.1.C Multi-locational development centers

A vast country like India has a sizable pool of professionals in almost every region. These professionals like to
work in or near their home towns. Hence, Infosys has established new development centers at Mangalore, Chennai
(South India), Pune (Western India) and Bhubaneshwar (Eastern India), in addition to the four existing development
centers and the proposed one at Bangalore.

1.7.2 International Marketing and Sales group

The Marketing group handles export sales, and marketing functions. There are six sales offices in the USA and
two in Europe. Infosys is also part of JASDIC, a consortium started by Mr. Kenichi Ohmae, the former head of
McKinsey and Company in Japan. The worldwide sales activity is coordinated from the US headquarters. Corporate
marketing has the responsibility of providing marketing support to sales staff as well as handling all potential
customers who visit the corporate headquarters at Bangalore, India.
The Communication Design group is also a part of Corporate Marketing and produces all corporate, business and
technical documentation, and publicity material for- the company
87
 1.7.3 Banking Business Unit
This group develops, sells and supports products worldwide in the banking area. BANGS 2000, the Infosys solution
to bank automation in India and the emerging world, has become the premier product in this genre.

1.7.4 Quality and Productivity group

Infosys received immediate certification to ISO GOOl/TickIT in 1993 and was recertified during the year. In
addition, the quality subgroup evaluates new models of quality like Capability Maturity Model (CMM), conducts
pilot exercises in implementing such models and then transfers the process knowledge to the Delivei-y Systems
group for mass implementation. The productivity subgroup develops metrics and productivity benchmarks for
measuring the productivity of professionals for different activities of the software life cycle. '
1.7.5 Education and Research group t
The Education and Research group handles the training needs of the company. Employee productivity, technology,
enabling and motivation are the focus areas of research for this subgroup.
1.7.6 Technology Infrastructure group /
The Technology Infrastructure group is responsible for planning, purchasing, installing and maintaining the
technology including computer hardware, software and communications equipment for the company.
1.7.7 Management Information Systems group
The MIS group develops and maintains the management information systems required internally by Infosys.
1.7.8 Human Resources Development group
The Human Resource Development (HRD) group forecasts the human resource needs of the company and
recruits the needed manpower. They also have the responsibility for innovation in development, appraisal and
retention schemes for the employees of the company.
1.7.9 Corporate Planning group
The Corporate Planning group has framed the Infosys vision and conducts the annual strategy sessions. They are
also responsible for producing the business plan for any new initiative at Infosys. They update the five-year
enterprise model for any financial implication due to new policies. They also produce simulation models and
handle What-if analyses.
1.7.10 Finance and Administration group
The Finance and Administration group includes Corporate Finance, Facilities and General Administration subgroups.
The Corporate Finance subgroup is responsible for financial aspects of the.operations, financial planning, financing,
investment and treasury functions of Infosys. The Facilities subgroup takes up construction and maintenance of
the various Infosys office facilities. The General Administration subgroup is responsible for handling administrative
and personnel-related functions.

1.8 Customers
Infosys has an array of Fortune 500companies on its customer list. The aim of the company is to have a portfolio
of customers spread widely across application, geographical and technology areas so that Infosys has a stable
revenue stream and is not affected by recession, changes in geopolitical equations, in customer preferences and
technology. However, the major market for software services vendors will continue to be the Americas, which is
expected to contribute about 60% to 70% of sales of Infosys in tho near future.

1.9 Competition
Infosys is primarily in bespoke software development and maintenance. The competition to Infosys comes from
Indian software companies, and from local software and consulting companies. Infosys believes that high learnability,
constant innovation, focus on customer satisfaction, retention of employees, leveraging technology, and continuous
improvement of quality and productivity are necessary to survive and succeed in the highly competitive export
market. Infosys believes that a company must operate within the international bandwidth of quality and productivity
before it can use cost as a competitive advantage. Thus, in the area of software products and services, Infosys has
successfully competed with well-known software/consulting companies in USA, France, Switzerland, UK and
OO Canada. However, it must be noted that Infosys operates in a high technology area, prone to rapid changes in the
portfolio of players.
 The Indian software industry is export-focused and there are essentially three categories of software export
companies. They are :
" Top-tier Indian companies with financial strength, established international market presence, and investment
in state-of-the-art technology. These companies have become attractive to potential customers and
employees. Infosys belongs to this category. The Indian competition to Infosys comes mainly from this
category of companies.
* Captive units of multinational companies whose objective is to provide a cost-competitive development
center to the parent.
• Upcoming and promising Indian software companies that will become well-known in the years to come.
In the area of products in India, BANGS 2000 has become the package-of-choice for bank automation. However,
there is tremendous competition from multinational software companies in this area.

1.10 Employees
The company had 1,705 employees on its rolls on March 31, 1997. Of this, 1,261 were revenue-earning software
engineers, 32 were software engineer-trainees, the rest being the marketing, sales and support staff. Infosys
intends to recruit another 700 employees in the coming year. The success of Infosys is highly dependent on its
ability to recruit, enable, empower and retain its employees. The company has, so far, been largely successful in
recruiting and retaining qualified employees. The company will continue to provide top priority to this task.
Today, the company operates in an area of rapid changes in customer business practices, preferences and technology.
For companies like Infosys, the only constant factor is change. Thus, the emphasis on recruitment at Infosys is
more on learnability than on experience. In addition to India's first Employee Stock Offer Plan (ESOP), the
company provides competitive salaries, congenial working environment, latest technology, full independence in
operations, informal culture, and continuous training. All these translate to high retention of employees.

Item 2. Properties
The company's corporate office consists of 220,000 sq.ft. of land with 150,000 sq.ft. of landscaped area, a
160,000 sq.ft. office with 32 conference rooms and leisure infrastructure including canteen, sports facilities, and
gymnasium situated at Electronic city. Bangalore, India. This facility is owned by Infosys. The technological
infrastructure at the corporate office includes over a thousand networked workstations, several Netware, UNIX
and WINDOWS NT servers, systems from HP, IBM, SUN, DEC, COMPAQ, ACER and AST, videoconferencing facility,
and multiple 64 kbps data communication links. A large part of the delivery systems group, corporate sales and
marketing, and the corporate support services are located in this building.
The company has taken, on lease, three premises in Bangalore, India, measuring 55,900 sq.ft., 11,251 sq.ft. and
18,733 sq.ft., which are used for software development by the strategic business units. The company has also
taken on lease, a premise each at Mangalore, Pune, Chennai (Madras) and Bhubaneshwar, (all these facilities are
in India), measuring 14,134 sq.ft., 43,715 sq.ft., 26,626 sq.ft. and 20,600 sq.ft. respectively. These premises are
used for software development.
The company owns 6,966 sq.ft. of office space situated in the business district of Bangalore, India, and this is used
by the Internet consulting group. The company owns an area of 1,160 sq.ft. of office space in South Bombay
(Mumbai), India, and rents a premise measuring 2,500 sq.ft. at New Delhi, India, both of which are used by the
Banking Business Unit. The worldwide sales headquarters at San Francisco, USA, and sales offices at various
locations in USA and Europe are rented.
The total area of operational space available for the company is around 3,61,585 sq.ft. During the year, the
Company has also purchased land measuring 16,500 sq.ft. in Bangalore which can be used for its future expansion
activities.

Item 3. Legal proceedings

There are no material legal proceedings pending against the company in the ordinary course of business.

Item 4. Submission- of matters to a vote of security holders

oq
The necessary information is included in the notice of Annual General Meeting to shareholders. O-7
 Part I!
Item 5. Market for registrant's common stock and related stockholder matters
The company's common stock is traded on the Bombay, Bangalore and National Stock Exchanges in India. As of
March 31, 1997, there were 6,414 shareholders as per the records of the company. The company paid/will pay
cash dividends amounting to US$ 1,131,427 to the shareholders this year. The corresponding figure for last year
was USS 1,068,955.

Quarterly financial and market information (unaudited) in US$

Quarter ending, June 30 Sept. 30 Dec. 31 Mar. 31 Total

1996-97
Net revenues 7 ,442,914 9,515,206 10,326,195 12,301,604 39,585,919
Operating income 1 ,256,265 2,766,951 2,325,208 3,612,214 9,960,638
Net income 1 ,153,560 2,556,025 2,497,819 3,202,524 9,409,928
Earnings per share 0.16 0.35 0.34 0.45 1.30
Common stock price per share
High 21 21 20 33 33
Low :,4 18 17 22 14

1995-96
Net revenues 5 ,994,424 5,628,202 7,995,684 6,988,699 26,607,009
Operating income 1 ,741,605 1,153,430 3,074,712 2,367,664 8,337,411
Net income 1 ,672,857 1,149,032 2,534,945 1,827,656 7,184,490
Earnings per share 0.23 0.16 0.35 0.24 0.98
Common stock price per share
High 15 14 14 15 15
Low 13 12 10 11 10

1994-95
Net revenues 3 ,615,794 3,901,029 4,890,050 5,698,137 18,105,010
Operating income 584,749 310,136 1,603,216 1,742,205 4,240,306
Net income 974,263 829,486 1,112,848 595,835 3,512,432
Earnings per share 0.18 0.16 0.21 0.11 0.66
Common stock price per share
High 27 40 19* 17 40
Low 19 19 15 13 13
' There was a 2-for-l stock-split in Octobei• 1994.

Item 6. Selected financial data

Financial Highlights in US$
Year ending March 31, 1993 1994 1995 1996 1 DPY

Net revenues 5, 232,967 9,534,321 18,105,010 26,607,009 3 i ) , ! > . S ! > , ! > 1 1)

• Net income 1, 298,582 2,669,727 3,512,432 7,184,490 0,409,028
Earnings per share 0.68 0.80 0.66* 0.98 1 .30
Return on net revenues (%) 25 28 19 27 'M
Cash and short-term investments 580,770 3,914,354 10,116,529 10,080,513 8,320,331
90 Total assets 3, 731,997 9,897,050 23,178,521 27,628,587 33,841,1 3 S3
Stockholders' equity 2, 505,670 9,348,527 19,796,083 24,292,024 31, !">!•) 7, 905
* Adjusted for a 2-for-l stock-split in October 1994.
Item 7. Management's discussion and analysis of financial condition and results of operations
7.1 Financial review - Overview
The financial statements have been prepared in compliance with the Generally Accepted Accounting Principles
(GAAP) of the US and the SEC disclosure norms for listed companies. The company's stocks are listed only in India.
Thus, this analysis is provided on a voluntary basis for information only. The company's financial statements have
been audited in India as per the applicable Indian laws. The financial statements, given here, are based on the
audited accounts and have been prepared by the management, using the available information, and applying such
judgment to estimates, as deemed necessary. These have not been separately audited. The responsibility for the
objectivity and integrity of the financial statements rests solely with the management.
7.1 1 Revenue
Year ending March 31, 1997 Change 1996 Change 1995
Net revenues in US$ 39,58^,919 40% 26,607,009 47% 18,105,010
The growth is consistent with the industry average. The predominant portion of the company's revenue is from
markets outside India. The segment-wise revenue is provided on pages 81 and 82 of this report.
7.1.2 Cost of revenues
Year ending March 31, 1997 Change 1996 Change 1995
Cost of revenues in US$ 22,615,070 02% 13,918,888 32% 10,509,917
Cost as a percentage of revenues 57% 52% 58%
Cost as a percentage of revenues was 57% in 1997 as against 52% during 1996. Cost of revenue has increased
due to operationalization of new software development centers during the year.
7.1.3 Operating expenses
Year ending March 31, 1997 Change 1996 Change 1995
Operating expenses in US$ 7,010,211 fil% 4,350,710 30% 3.354,787
Operating expenses as a percentage
of revenues 17% 16% 19%
The operating expenses as a percentage of revenues have increased due to operat.ionalization of new software
development centers during the year and higher R & D expenses.
7.1.4 Non-operating income
Year ending March 31, 1997 Change 1996 Change 1995
Non-operating income in US$ 1,316,208 (10%) 1,460,329 96% 746,439
The primary component of non-operating income is the income derived from deployment of short-term surplus funds
and income from sale of special import licenses.
7.1.5 Provision for income tax
Year ending March 31, 1997 CliangH 1996 Change 1995
Provision for income tax in US$ 1,01(3,181 (23%) 1,324,580 48% 892,593
The normal Indian corporate income tax rate is 43%. In India, income from exports enjoy deduction from income
tax. However, income from local sales and non-operating income is subject to normal income tax rates.
7.1.6 Net income and earnings per snare
Year ending March 31, '.\V/ Miaiuie 1996 Change 1995
Net income in US$ :>/-. .'..vrf :-:•, 7,184,490 105% 3,512,432
Earnings per share in US$ 1.30 0.98 0.6C
Percentage of net income to revenues ?'!% 27% 19% 91
The percentage of net income to revenues has reduced due to operationalization of new software development
centers during the year.
 7.2 Financial condition
Cash and cash equivalents of the company totaled USS 8.32 million on March 31, 1997. The portfolio is
predominantly deployed in inter-corporate deposits and other short-term money-market instruments. The
investments are so structured as to minimize risk and also facilitate rapid recovery in the event of immediate cash
needs.
During 1994-95, Infosys invested some of its short-term surpluses in equities of other companies and mutual
funds. The investments were made after evaluating the risk and return involved in the investment. But, due to
market conditions, iho invust.monUs had partly lost thoir valuo. In lino with tho commitmant made by tho
management, the invostnients in equities of compcmios and in mutual funds were disinvosled in full, during the
year. •
An amount of US$ 2,012,738 was borrowed from the Mousing Development Finance Corporation Limited for
constructing staff quai'lors. Tho dobt was to ho fully ropaid by 1008. Howovor, in view of l.ho strong liquidity
position of the company, the management has prepaid the debt in full during tho year.
The company has credit lines worth USS 1.38 million available from its bankers for working capital requirements.
The company has also received a " PI + " rating for its commercial paper and an "AA" rating for ir.s non-convertible
debenture issue program, from CRISIL, India's premier credit rating agency.
Historically, cash generated from operations has been sufficient to fund all investments of the company in R&D
activities and facilities expansion. As Infosys grows, investments will continue to be made in R&D for existing and
advanced areas of technology. Part of the retained earnings will also be used to acquire technology and to fund
ventures and other strategic opportunities. Additions to property, plant and equipment are expected to continue,
including facilities and computer systems for R&D, sales and marketing, support and administrative staff.
The company intends to fund all its capital requirements out of its own internal generation and adhere to debt as
a short-term, bridging mechanism only. The management of Infosys believes that the existing cash and cash
equivalents together with funds generated from operations will be sufficient to meet operating requirements in
1997-98. The capital expenditure for 1997-98 is approximately USS 16.10 million. The company will have
adequate cash reserves to meet this requirement.
During the year, the company applied to the Government of India for an External Commercial Borrowing (ECB) of
USS 5 million to meet its requirements. The approval has since been received. The company has also received
commitments for this funding from the bankers. The borrowing limits would be assessed only in case of need.
During the year, the company declared a total dividend of USS 1.13 million. The company will pay the dividend out
of its cash surpluses after meeting its capital requirements.

7.3 Reconciliation between the US and Indian GAAP

Infosys is registered in India and, as such, needs to comply with the Indian GAAP and provisions of the Indian
Companies Act. Infosys has voluntarily decided to present its financial statement based on US GAAP. There are
material differences between the two financial statements due to differences in accounting.
The material differences arise due to provision for deferred taxes and valuation of short-term investments, which
are marked to market and adjusted against retained earnings and consolidation of accounts of subsidiary, as
required by US GAAP. Indian GAAP does not require provision for deferred taxes, consolidation of accounts of
subsidiaries and only requires a provision for diminution in the value of current investments.

7.4 Reconciliation of net income in US$

1996 1995

Net profit as per Indian GAAP

(excluding extraordinary income) 6,290,255 4,352,965

Adjustments
Cost of raising common stock (485,905)
Provision for investments 681,437
Translation difference in depreciation (151,424) (95,815)
Deferred tax 391,988 (258,813)
Net income of subsidiary
92 included on consolidation (27,766)
Net income profit as per US GAAP 7,184,490 3,512,432
7.5 Outlook: issues and risks
Except for fulfilling the mandatory requirements of the Initial Public Offer (IPO), and the private placement, in
the past, Infosys does not provide a forecast of future financial performance. The management is optimistic
about its long-term growth prospects and the following issues and risks should be considered in evaluating its
growth outlook.
7.5.1 Rapid technological change
The computer software industry is characterized by rapid technological change and uncertainty in the success of
new products. Infosys is committed to adapting to new technologies quickly, by redefining its investment priorities
and rapidly enabling its staff to meet the new demand. The company has created expertise on various technical
platforms to meet dynamic changes in technology.
7.5.2 Prices
Infosys has been able to increase its average per-capita revenue productivity by 12% during 1996-97 over the
previous year. However, the future prices that the company is able to obtain for its products/services may decrease
from historic levels, depending upon market and other factors. The long-term inflation in India is expected to be
slightly more than 8% whereas it is substantially lower in countries from where Infosys derives its revenue. This
differential in inflation has the potential to create pressure on the margins of the company. The strategy of the
company for protecting the margins is to enhance the productivity of-the professionals and to move up the value
chain by increasing the contribution to sales from products and producdzed services. The company has initiated an
action plan to achieve both these objectives.
7.5.3 Opportunities and risks including those resulting from key trends
The following key trends are likely to influence the business of Infosys:
1. The Year ZOOO problem (addressed by InZOOO) has become a major revenue opportunity. Infosys is well
positioned to use this opportunity. However, Infosys does not want the InZOOO practice to contribute more
than 25% to 30% of the total sales revenue since Infosys' strategy does not permit dependence — on one
product or service, or on one market which will disappear by 2000 AD — or deployment of all its manpower
in one ai ea which is not seen by employees as an emerging technology area. The emphasis on the year 2000
problem is also reducing budget allocation for new software development by our customers but this reduction
does not seem to be material to Infosys.
2. Fierce competition, eroding margins, emergence of promising software and hardware technology have
compelled user organizations worldwide to re-engineer their IT systems (despite the allocation of funds to
solve the year 2000 problem). This has resulted in backlogs in software development. Such backlogs offer a
big opportunity for Indian software companies. Most user organizations have moved part of their IT staff
from maintenance tasks to development tasks. Thus, the maintenance opportunity has also increased for the
Indian software companies.
3. Consequent to the emergence of India as the country-of-choice for bespoke software development and
maintenance, the number of North American and European companies wanting to work with Indian software
companies has increased five to six times in the last three years. Of late, several Japanese companies have
shown interest in Indian software companies. This implies greater opportunity for the Indian software
companies.
4. The commoditization of our service offeringsas a consequence of price-based competition by major players
in the segment, will result in eroded margins and inability of the Indian software companies to invest in
updating their infrastructure and technology. The Indian software companies must constantly innovate to
retain their competitive advantage.
5. Tremendous competition forskilledresourceshas resulted in unsustainable salary increases. New models of
compensation must be used. Productivity must be enhanced.
6. Mcve towards more interactive methods of software development has resulted in reduced opportunities for
India-based software development. Methodologies and tools which enhance interaction between the customer
and the India-based development staff must be employed to provide better customer service.
7. Emergence of lower-cost competitors like China, which in our opinion, are still a long way from becoming
serious competitors due to their inadequacy in English Critical mass of data to substantiate the perception
that China is less expensive than India in software development is still not available
8. The fast emerging Intemethas become the most important paradigm shift of the decade. It has the potential
to both change the way we do our business, as well as the way our customers conduct their business. In
addition the Internet computing model is likely to be the new model of application software development. We 93
will need to keep abreast and ahead of this phenomenon.
9. A lot of companies are now moving towards products and are lookina for software products that meet their
needs, rather than at custom development projects. This could potentially shrink the market for new software
development opportunities. We have to respond by offering products as a way to hedge this trend.
 7.5.4 Foreign exchange revenues
A large percentage of the company's revenues is in currencies other than the Indian rupee. As a result, the
company's revenues are subject to foreign exchange rate fluctuations. The Indian rupee has slightly depreciated
against the US dollar during 1997 as against its heavy depreciation (by 15% to 17%) during 1995. The Reserve
- Bank of India is proactively intervening both in the forward market and the spot market to keep the Indian rupee
below a manageable level. Predicting the future exchange rate of the Indian rupee against the US dollar is a
difficult task. This depends largely on the macro-economic policies of the Government of India. The company
covers part of tho risk duo lo uxdimt[)u ratu fluctuations through foiward contnict, covers. Sinco a significant
portion of the operating cost of the company is paid for directly in foreign exchange from, its bank accounts abroad,
the risk due to exchange rate fluctuation is reduced.
7.5.5 Accounting standards
Accounting standards promulgated by the Financial Accounting Standards Board change periodically. These changes
may have an impact on the company's future reported earnings. Infosys has complied with the US GAAP
requirements. It has also fully complied with the accounting standards promulgated by the Institute of Chartered
Accountants of India.
7.5.6 Growth rates
The company has grown rapidly in the recent past. The growth rate in future may be less than that achieved
earlier. Operating expenses may grow faster than the growth in operating income. Operating expenses are
subjected to strict control to retain margins.
7.5.7 Statutory obligations
The company has established Software Technology Parks - 100% exported-oriented units - for the development
of software at Electronics City, Koramangala and Manipal Center at Bangalore as well as at Mangalore, Pune,
Chennai and Bhubaneshwar (all in India). AH capital items purchased for these centers are eligible for 100%
customs and excise duty exemption, subject to fulfillment of stipulated export obligations, namely, one and a half
time the value of duty-free imports of capital goods overs period of four years and one and a half times the wage
bill, on a yearly basis. The non-fulfillment of export obligations may result in penalties as stipulated by the
Government which may have an impact on future profitability. The chart showing the export obligation, and the
export obligation fulfilled by the company for all its; STP units year-wise is given here under:
in US$
As at March 31, Export obligation Export obligation Excess/ Cumulative excess/
fulfilled (shortfall) (shortfall)
1993 101,5.78 98,762 (2,816) (2,816)
1994 1,446,607 2,654,483 1,207,876 1,205,060
1995 5,318,870 5,108,028 (210,842) 994,218
1996 10,295,442 14/142,209 3,846,767 4,840,985
1997 13,984,042 19,413,034 5,428,992 10,269,977
Total 31,146,539 41,416,516 10,269,977 -
The company has completely fulfilled its export obligations as on the Balance Sheet date and is confident of
fulfilling its export obligations in future. It may be noted that in the above statement, the export obligation on the
import of capital goods, were considered in the year of purchase as against a period of four years allowed under the
scheme.
7.5.8 Marketing investments
New investments will be made in sales and marketing initiatives to have a large portfolio of customers indifferent
geographical regions and'technologies. This may have an impact on future profitability. However, these investments
will reduce risks in business.
7.5.9 Counliy ol busings
Infosys dorivus a .sul.xsianl.ial part of its revenue from USA. Changes in tho governmental regulations in USA may
adversely nffecl. the business of Infosys. Infosys has envisaged a corporate strategy of increasing its share of
business from liuropoan, Japanese and other markets, thereby reducing its predominant dependency on the
American market. The company's goal is to reduce the contribution to the revenue, from the Americas, to 60%
(from the current. 70%) by tho year 2000. Tho geographical area-wise sogmunt reportincj is provided in pages 81
nA and 82 of this report.
7.5.10 Clients
Infosys derives more than 10% of its revenue from two of its customers. This may cause a pressure on the
margins, since such customers may demand reduction in prices based on volumes.
The Company has initiated plans to broad-base its revenue by creating a large portfolio of customers, technologies
and geographical regions, to minimize the risk of dependency on only a few of its customers, for material pan of
its business. The company policy is to add new customers every year and develop them into million-dollar customers.
During the year, the company added 33 new customers, of which 8 are BANGS 2000 customers.
7.5.11 Multiple Locations
Infosys believes in producing where it is most cost-effective to produce and selling where it is most profitable to
sell. A key requirement for setting up a development centre is the availability of skilled professionals at competitive
salaries. The company has already established software development centres at various places in India, and it is
quite likely that such development centres may come up in other low-cost economies in the future. This implies
that the company must have a plan to handle all issues arising out of operating in different states, countries and
cultures.
The management is committed to providing a uniform work environment and being flexible to the cultural needs
of the employees in different states and countries. The management is confident that such cultural variations can
be used for the benefit of the organization by creating synergy between the organizational aspirations and the
distinctive advantages of such variations.
7.5.12 Taxation
The economic reforms program of the Government of India has enhanced the velocity of business for companies
in India. Being one of the signatories to the World Trade Organization, India is committed to reducing the import
tariff levels, thereby exposing the Indian entrepreneurs to global competition.
At present, the export profits are deductible from income subject to tax in India. The government may reduce or
eliminate the tax exemptions provided to Indian exporters in the near future. This may result in the export profits
of the company being fully taxed, and may adversely affect the post-tax profits of the company in the future. This
is expected to be tackled by increasing the per-capita revenue productivity and moving up the value chain. This
is possible by increasing the contribution to revenue from products and productized services.
On a full-tax-paid basis, without any duty concessions on import of hardware and software for its operations, the
company's post-tax profits for the relevant years would be,
in US$
1997 1996 1995
Net income as per the Income statement 9,40C1,C>28 7,184,490 3,512,432
Less - Software for own use (duty concession) 31,b3b 55,535 286,085
- Additional depreciation on computer
systems on duty concessions l,41b,076 977,962 513,304
- Reduction in non-operating income
due to payment of duty 62f-,PX3 631,570 276,510
- Additional income tax to be provided
on full tax basis 2,587, V(i2 898,615 1,425,694
Adjusted net income 4,74! J ,032 4,620,808 1,010.839
Weighted average common stock outstanding 7,?;-", 000 7,258,750 5,305,050
Adjusted Earnings Per Share 0.65 0.64 0.19
However, it may be noted that the above is an academic exercise only and the company has provided for income
tax in full in the respective years and there is no carried forward liability on this account.

7.5.13 Litigation
Litigation regarding intellectual property rights, patents and copyrights is increasing in the software industry. In
addition, there i re other general corporate legal risks. To date, the company has no material litigation pending
against it in any •ourt in India or abroad. The company has formulated a comprehensive risk policy to protect itself
against any future litigation.
75:4 Contractual obligations
In the course of the business, the company enters into contracts with different customers and is obliged to
perform and act according to the contractual terms and regulations. Failure to fulfill the contractual obligations
arising out of such contracts may expose company to financial and other risks.
The management has taken sufficient measures to cover all of its contractual risks and does not foresee any major nC
liability due to its non-fulfillment of any contractual terms and conditions.
 7.5,15 Human Resources
The success of Infosys is dependent on its ability to recruit, enable, empower and retain its employees. The
higher-than-normal retention of employees at Infosys has been possible due to the HR practices being followed
by the company like employee stock options, providing competitive salaries, congenial working environment,
latest technology, full independence in operations, informal culture and continuous training. However, the company
may not be able to retain employees in future due to increased opportunities available to software engineers and
their increased expectations.
The management is committed to continue its best HR practices and is confident of attracting, recruiting and
retaining the best brains in the country for its operations.
7.5.16' Focusing on products
Software-product-based business is a high-growth and high-risk business. Infosys' strategy of focusing more on
product segment may have an impact on its profitability, as the risks are quite high in this segment of business.
Infosys' product strategy is to acquire domain knowledge by working with Fortune 500companies and leverage
such knowledge to develop large, application products in niche application areas.

Item 8. Financial statements and supplementary data

Consolidated Income statement for the three years ended March 31, 1997 Page 73
Consolidated statement of cash flows for the three years ended March 31, 1997 Page 75
Consolidated Balance Sheet as of March 31, 1997 and March 31, 1996 Page 72
Consolidated Stockholders' equity statement as of March 31, 1997 and March 31, 1996 Page 74
Notes to financial statements Page 76-82

Item 9. Changes in and disagreements with accountants on accounting and financial disclosures
The independent auditor, Mr. A . M . Bhatkal, retires at the forthcoming Annual General Meeting and has informed
the company of his inability to offer himself for reappointment due to his prior professional commitments. Hence,
your company has proposed Bharat S. Raut and Company, a full member firm of KPMG, as the independent
auditors for the next year.
The independent auditor's report for the current year, as well as for the previous two years, contained no
qualification or an adverse opinion. Mr. A. M. Bhatkal has retired voluntarily due to his prior professional
commitments and the change has not been necesisitated due to decision by either the Audit Committee or the
Board of Directors.

Part III
item 10. Directors and executive officers of the registrant
Executive officers as of March 31, 1997
Name Age Position with the company
Narayana Murthy N. R. 51 Chairman and Managing Director
Ashwani K. Khurana 46 Executive Director and Head - Banking Business Unit
Balasubramanian P. Dr. 47 Senior Vice President and Head - Strategic Business Unit-2
Dinesh K. 43 Director and Head - Quality, Productivity and MIS
Gopalakrishnan S. 41 Deputy Managing Director and Head-Customer Delivery and Technology
Mohandas Pai T. V. 38 Senior Vice President and Head - Finance and Administration
Nandan M. Nilekani 41 Deputy Managing Director and Head - Marketing and Sales
Phiinoush Murtliy 33 Vice Prosidonl. m i d 1 lead - Worldwide Sales
Prahlad D. N. 41 Senior Vice President and Head - Strategic Business Unit-1
Raghavan N. S. 54 Joint Managing Director and Head - Human Resources and Education
Shared K. Hegde 39 Senior Vice President and Head-Technology Advancement Unit (SBU-4)
ShibulalS.D. 42 Director and Head.-Strategic Business Unit-5 ]
Srinath Batni • 42 Vice President and Head - Strategic Business Unit-3
Yegneshwar S. Dr. 36 Associate Vice President and Head - Education and Research
yD The exporioncu and iho piuvUni.s employment of l.ho ubovo uniployoos is provided on pagos 57-59 of this report.
Information with respect to Election of Directors is provided in the notice to the Annual General Meeting attached
to this report.
Item 11. Executive compensation
11.1 Cash compensation - Table 1
inUS$
Annual compensation Long-term compensation
Awards Payouts

Name Year Salary Bonus Oiher ' Restricted Securities LTIP All
and Principal position annual stock underlying Payouts other
comp. award(s) options/ components
SAR's (#)

Narayana Murthy N. R. 1997 29,159 - - -

Chairman & Managing Director 1996 32,403
1995 25.793 - - -
_
Ashwani K. Khurana 1997 22,566 45,242 1,800
Executive Director 1996 19,497 . - -
1995 15,776 76,447 6,000 -
_
Balasubramanian P. Dr. 1997 23,835 45.242 1,800
Senior Vice President 1996 12,001 35,801 3,000 -
1995 - - - -
_ _
Dinesh K. 1997 25,429 -
Director 1996 31,088 - - -
1995 23,169 - - -
Copalakrishnan S. 1997 25,965 . - -
Deputy Managing Director 1996 25,370 - - -
1995 10,401 - - -
Mohandas Pai T. V. 1997 21,290 60,323 2,400 -
Senior Vice President 1996 18,711 59,669 5,000 -
1995 6,394 76,447 6,000 -
Nandan M. Nilekani 1997 26,183 - - -
Deputy Managing Director 1996 28,422 - - -
1995 24,016 - - -
Phaneesh Murthy 1997 1,10,000 45.242 1,800 -
Vice President 1996 77,000 59,669 5,000 -
1995 66,028 50,965 4,000 -
Prahlad D. N. 1997 26,092 45,242 1,800 -
Senior Vice President 1996 24,898 - - -
1995 18,127 - - -
Raghavan N. S. 1997 27,600 - . - -
Joint Managing Director 1996 30,326 - - -
1995 24,924 - - - -
Shared K. Hegde 1997 26,230 45,242 1,800 -
Senior Vice President 1996 22,899 - - -
1995 19,608 - - -
_
Shibulal S. D. 1997 5,481 - -
Director 1996 - . - -
1995 - - - -
Srinath Batni 199,' 16,457 60,323 2,400 -
Vice President 1996 15,601 47,735 4,000 -
1995 8,714 50,965 4,000 -

Yegneshwar S. Dr. 1997 12,500 30,161 1,200 -

Associate Vice President 1996 11,137 23,868 2,000 -
1995 5,647 25,482 2,000 -
97

<ETTir
 11.2 Compensation pursuant to stock options
11.2.1 Option grants in the las! fiscal year - Table 2
The following table sets forth certain information on option grants in the fiscal year 1997 to the named executive
officers.
Individual grants Potential realized value at
assumed annual rates
of stock price appreciation
for option lorni (USS)

Name Number of securities % of toial Exorcise Expiration 0% 5% 10%

underlying options/ options/ or base date
securities granted SARs granted price
to employees ($/sharo)
in fiscal your

Narayana Murthy N. R. - - - - - - -
Ashwani K. Khurana 1,800 1.39% 2.94 2001 45,242 56,132 68,695
Balasubramanian P. Dr. 1,800 1.39% 2.94 2001 45,242 56,132 68,695
Dinesh K. - - - - - -
Gopalakrishnan S. - - - - - -
Mohandas Pai T. V. 2,400 1.86% 2.94 2001 60,323 74,843 91,593
Nandan M. Nilekani - - - - - -
Phaneesh Murthy 1,800 1.39% 2.94 2001 45,242 56,132 68,695
Prahlad D. N. 1,800 1.39% 2.94 2001 45,242 56,132 68,695
Raghavan N. S. - - - - - -
Sharad K. Hegde 1,800 1.39% 2.94 2001 45,242 56,132 68,695
Shibulal S.D. - - - - - -
Srinarh Batni 2,400 1.86% 2.94 2001 60,323 74,843 91,593
Yegneshwar S. Dr. 1,200 0.93% 2.94 2001 30,161 37,422 45,797

The options were issued in pursuance to the formation of the Employees Stock Offer Plan (ESOP) of Infosys. The
options cany a vesting period of 5 years from the date of issue and can be converted into stock within a period of
5 years from the date of allotment of options. On conversion, such stocks will also cany restrictive covenants until
the expiry of 5 years from the date of allotment of option. The exercise price can be fixed by the Board of Directors
from time to time subject to the condition that the minimum exercise price should not be less than Rs. 100
(USS 2.94). The potential realizable value at assumed annual growth rates of stock price appreciation is calculated
at the minimum exercise price of Rs. 100 (USS 2.94).
It may please be noted that the potential realizable values are based on annual rates of return specified by the
Securities and Exchange Commission. Infosys management has consistently cautioned shareholders and option
holders that such increases in values are based on speculative assumptions, and should not inflate expectations of
the future value of their holdings.

98
 11.2.2 Aggregated option exercises :i the last fiscal yea- and the f.sca 1 year ?p(J option v£ ^s - Tab'e 3
The following table provides information on options exercised during 1997 by the named executive officers
and the value of such officers' unexercised options at March '31,1997 :
inUSS
Name Shares acquired Value Number of securities Value of unexercised
on exercise realized underlying unexorcised In-the-money options
options tit the fiscal year-end at the fiscal year-end
Exercisable Unexercisable Exercisable Unexercisable

Narayana Murthy N. R. -
Ashwani K. Khurana - 7,800 - 1,96,049
Balasubramanian P. Dr. - 4,800 - 1,20.645
Dinesh K. -
Gopalakrishnan S. - - -
Mohandas Pai T. V. - 13,400 - 3,36,802
Nandan M. Nilekani - - '' -
Phaneesh Murthy . . . 10,800 - 2,71,452
Prahlad D. N. - 1,800 - 45,242
RaghavanN.S. - - -
Shared K. Hegde - 1,800 - 45,242
Shibulal S.D. - -
SrinathBatni - 10,400 - 2,61,398
YegneshwarS. Dr. - 5,200 - 1,30,699

11.3. Compensation committee

The company does not have a compensation committee. The company's compensation policy is decided by the
Human Resources Development group in consultation with the heads of various groups within the organization,
and is approved by the chairman of the Board of Directors. The company's compensation policy is to offer a salary
package which is quite competitive and employee-friendly. Tho company encourages employee participation in the
company's growth through an Employee Stock Offer Plan (ESOP) in which all eligible employees participate.

11.4 Performance graph

The performance graph is provided on page 104 of this report.

Item 12. Certain relationships and related transactions

This information is provided in Notes to accounts on page 81.

Part IV
Item 13. Exhibits, financial statement schedules and reports on Form 8-K
Not applicable.

Signatures
Infosys has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Bangalore, State of Karnataka, India on April 8, 1H97.

For Infosys Technologies Limited

N. R. Narayana Murthy on
Chairman and Managing Director
 Selected five-year financial data
in US$
Year ending March 31, 1993 1994 1995 1996 1 997

For the year

Revenues 5,232,967 9,534,321 18,105,010 26,607,009 39,5815,919
Total expenses 3,846,851 6,935,937 13,864,704 18,269,598 29,625,281
Operating income 1,386,116 2,598,384 4,240,306 8,337,411 9,960,638
Interest charges 36,184 15,321 - - 172,268
Non-operating income 72,224 391,362 746,439 1,460,329 1,310,208
Non-operating expenses 443 53,956 - - 371,380
Income before taxes 1,421,713 2,920,469 4,986,745 9,797,740 10,730,198
Provision for taxes 123,131 250,742 892,593 1,324,580 1,016,181
Prior period items - - - 214,118 304,089
Cumulative effect of
changes in accounting policies - - 581,720 1,074,552 -
Net income 1,298,582 2,669,727 3,512,432 7,184,490 9,109,928

At the year
Working capital 1,806,558 5,478,798 11,764,602 13,133,466 15,351,112
Total assets 3,731,997 9,897,050 23,178,521 27,628,587 33,841,135--
Stockholders' equity 2,505,670 9,348,527 19,796,083 24,292,024 31,131)7,005

Common stock data

Earnings per share 0.68 0.80 0.66 0.98 1 .3D
Cash and short-term
investments per share 0.30 1.16 1.91 1.39 1.15
Weighted average common
stock outstanding 1,912,767 3,352,100 5,305,050 7,258,750 7,2b!),0()0

Key ratios
Cu rront ratio 4.32 10.99 8.02 15.67
Return on revenues 25 % 28% 19% 27%
Return on average total assets 42% 39% 21% 28%

Figures have been regrouped wherever necessary.

LOO
) ) ) ) ) ) ) ) ) ) ) ) >

Management structure

N. R. Narayana Murthy
Chairman & Managing Director

N. S. Raghavan N. M. Nilekani S. Gopalakrishnan T.V. Mohandas Pai • K.Oinesh Sudha Kumar

Joint Managing Director and Deputy Managing Director and Deputy Managing Director and Senior Vice President and Director and Manager - Corporate
Head - Human Resources, Head • Sales and Marketing Head - Customer Delivery and Technology Head - Finance and Head - Quality, Productivity Planning
Education and Research Administration and MIS

N. V. Rajan
Associate Vice President and
Head - Human Resource
I Development
I
Ashwani K. Khurana '•
Executive Director and
Head - Banking Business Unit (SBU-6)
ISudheer K. - Associate Vice President
D. N. Prahlad
Senior Vice President and Head - SBU-1
R. G. Bhandi - Associale Vice President and Head - Mangalore center
L Vasudeva Rao - Associale Vice President
IV. Balakrishnan
I Manager - Finance
IPankaj Jalote
Vice President and
Head • Quality

Bhaskar Ghosh - Project Manager and Head - Bhubaneshwar center U. Ramadas Kamath . Subbaraya Sastry
S. Yegneshwar I Phaneesh Murthy . x'
I Manager - Accounts and •Manager - Management
Associate Vice President and I Vice President and P. Balasubramanlan'• '.',-.' I Administration Information Systems
Head • Education and I Head - Worldwide Sales
I Research Senior Vice President and Head - SBU-2
I Ajay Dubey - Associale Vice Presidenl and Head - Pune center Sanjeev Joshi

I
B.M.Rao
Manager - Commercial and
Manager • Communication Srinath Batnl • I Special Projects
Design Group
Vice President and Head - SBU-3
A. S. Krishnamurtriy - Associale Vice Presidenl
R. V. S. Mani - Associate Vice Presidenl and Head - Chennai center
Rajiv Kuchhal - Senior Project Managct and Head - Koramangala center
1 C. Vijay Kumar
Manager • Resource
Coordination

J Sharad K. Hegde
Senior Vice President and Head - Technology Advancement Unit (SBU-4).

I S. D.Shlbulal •
Director and Head - Internet Consulting (SBU-5)
I V, Vlswanathan
Company Secretary

I Ashok V. Arunachalam
I Manager - Computers and Communication Services

|?0. Mallya~' •-••••r:;rT^

I Associate Vice President • Networking Services SBU - Strategic Business Unit
 Shareholders' information

Dates of book closure May 23, 1997 to June 7, 1997 (both days inclusive)
Date and venue of the annual general meeting At 3.00 p. m. on June 7, 1997,
at Hotel Taj Residency,
41/3, M.G. Road,
Bangalore - 560 001
3. Dividend payment On or after June 8, 1997, but within the statutory time limit.
4. Listing on stock exchanges at Bangalore, Bombay and National Stock Exchanges
5. Registered office Electronics City, Hosur Road, Bangalore - 561 229, India.
6. Stock market data
a. The Stock market data of the company is included in the computation of the BSE 2001 Index and the BSE Dollex
Index.
b. Monthly high and low Quotations as well as the volume of shares traded a.t Bangalore, Bombay and National
Stock Exchanges are:

Bangalore Bombay NSE

1996-97 Highest Lowest Volume Highest Lowest Volume Highest Lowest Volume
Rs. Rs. Nos. Rs. Rs. Nos. Rs. Rs. Nos.
April 625.00 468.00 200 670.00 495.00 56,900 674 .90 499.00 65,600
May 625 .00 625.00 - 700.00 625.00 31,400 704 .50 530.50 54,500
June 695 .00 625,00 100 722.00 660,00 65,800 721 .00 658.50 61,100
July 715, ,00 715.00 200 725.00 654.50 60,000 720 .00 642.05 61,700
August 715, ,00 655.00 800 710.00 632.00 9,200 704 .00 536.00 19,600
September 690, ,00 660.00 700 676.00 650.00 13,100 681 .05 655.00 21,400
October 700, ,00 660.00 1,100 705.00 600.00 57,700 720 .00 621.00 38,900
November 700. 00 620,00 3,300 705,00 678.00 9,000 706 ,00 670.00 14,300
December 705. ,00 640.00 15,500 765.00 672.50 18,400 770, .00 675.00 23,900
Januaiy 840, ,00 800.00 1,000 890.00 783.00 21,600 885 .00 790.00 37,500
February 925 ,00 840.00 800 1,050.00 828.00 55,700 1,02.7 ,50 827.00 50,700
March 1,170. 00 980.00 1,100 1,176.25 995.00 120,400 1,200,,00 965.10 118,700
7. Share transfers and other communication Karvy Consultants Limited
regarding share certificates, dividends, Registrars and Share Transfer Agents
and change of address, etc., No. 145/9, Girija Towers, 6th A-C Main, 30th Cross,
may be addressed to Jayanagar 4th Block, Bangalore - 560 Oil
Share transfer system
Share transfers would be registered and returned within a period of 15 days from the date of receipt, if the
documents are clear in all respects. The Share Transfer Committee meets eight times a month.
The total number of shares transferred during ths year 1996-97 was 6,49,761 (previous year - 11,34,065).
62.57% of transfers (previous year - 87.02%) were completed within 15 days.
1 996-97 1995-96
Transfer No. of No. of No. of No. of
period transferees (folios) shares Percentage transferees (folios) shares Percentage
in days New Existing New Existing

1 - 10 245 679 2,95,059 45.41% 485 1,041 6,96,734 61.44%

11 - 15 113 329 1,11,507 • 17.16% 189 497 2,90,146 25.58%
16- 20 . 98 208 91,695 14.1 1% 194 228 1,47,185 12.98%
* 21 - 25 36 39 1,51,500 23.32% - - - -
L02 492 1,255 6,49,761 100.00% 868 1,766 11,34,065 100.00 %
The delay beyond 20 days was due to the payment procedure for Interim Dividend 1996-97 and postal strike
during the month of October 1996.
 Investors' services - Complaints received during the year
Nature of complaints 1996-97 1995-96
Received Cleared Received Cleared
1. Non-receipt of share certificates 75 75 68 68
2. Non-receipt of bonus shares ?. 2 24 24
3. Letters from Stock Exchange, SEBI, etc. 8 8 10 10
4. Non-receipt of dividend warrants 96 96 48 48
181 181 150 150
The company has attended to most of the investors' grievances/correspondence within a period of 10 days
from the date of receipt of same, during the year 1996-97.
10. Distribution of shareholding as on March 31,
1997 1996
No. of equity No. of % of No. of % of . No. of % of No. of % of
shares held share- share- shares share- Share- share- shares share-
holders holders holdings holders holders holdings
1 100 2,08b 32.51 2,04,990 2.82 1,807 26.15 1.77,466 2.44
101 200 3,025 47.16 6,04,654 8.33 3,701 53.57 7,40,070 10.20
201 500 80-1 12.54 3,10,358 4.28 871 12.61 3,37,366 4.65
501 1000 251 3.96 1,90,178 2.62 282 4.08 2,09,878 2.89
1001 5000 150 2.34 3,38,836 4.67 158 2.29 3,48,836 4.81
5001 - 1 0000 22 0.34 1,74,100 2.40 18 0.26 1,44,200 1.99
10001 and above 74 1.15 54,36,484 74.88 72 1.04 53,00,784 73.02
6,414 100.00 72,59,600 100.00 6,909 100.00 72,58.600 1 00.00

11, Categories of shareholders as on March 31,

1997 1996
Category No. of Voting strength No. of shares No. of Voting strength No. of shares
shareholders (percentage) hold shareholders (percentage) held
Individuals 6,186 25.24 18,32,750 6,715 28.20 20,47,300
Companies 118 3.74 2,71,300 107 3.08 2,23,300
FIIs, NRIs, OCBs 60 23.44 17,01,950 40 22.56 16,37,900
Promoters/Directors
and their families 19 34.68 25,17,300 19 34.91 25,33,700
Mutual Fund, Banks, FIs 31 12.90 9,36,300 28 11.25 8,16,400
6,414 100.00 72,59.600 6,909 100.00 72,58.600

12. Depository information

With a view to provide better service to our investors, the company became a member of the NSDL effective
January 1 1 , 1 997 . A detailed letter explaining the methodology of using the depository has already been sent to
all the shareholders.
> Shareholders desirious of getting further information on the depository may please write to the Company
Secretary for a booklet - An investor's guide to depositories. The approximate cost of dematerialization of 1 ,000
shares, based on market value of Rs. 1 ,200 per share, would be Rs. 3,600. This includes an annual custodial fee
and a onetime transaction fee. Investors are advised to verify these costs before dematerializing their shareholding.
13. Financial calendar
Annual General Meeting June 1997
Half-yearly financial reporting for 1997-98 October 1997
Interim dividend payment (if any) November 1997
Financial results for 1997-98 April 1998
14. Investors' complaints may be addressed to :
Mr. V. Viswanathan (e-mail address: viswav@inf.com), Company Secretary, Investors' Service Cell, Infosys
Technologies Ltd., Electronics City, Hosur Road, Bangalore 561 229, India.
Any queries with respect to the financial statements of the company may be addressed to :
Mr. T. V. Mohandas Pai, Sr. Vice President -Finance and Administration (e-mail address: mdpai@inf.com), Infosys
Technologies Limited, Electronics City, Hosur Road, Bangalore - 561229. 103
15. Reuters code - INFO. BO (Bombay Stock Exchange)
- INFO.NS (National Stock Exchange)
 O

Additional information to shareholders

Share performance graph

Infosys management consistently cautions that the stock price performance shown in the graph below should not be considered indicative of Infosys stock
price performance in the future.

17800 1274

15183 1074

CD
12566 874 O

Q_

O
O
— 9949 674
UJ
CO
C3 CO
O

7332 TV.. 474 —

4715 274

2098 74
T T T T T I I I I I I 1 I
Jun-93 Sep-93 Dec-93 Mar-94 Jun-94 Sep-94 Dec-94 Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96 Sep-96 Dec-96 Mar-97

BSE Index
Infosys stock price

The share price has been adjusted for a bonus issue of 1:1 during October 1994.

< < 1 <- < i 1. I ( < < A 1 < ( I. t < < < < ( < < I I f I f «. (.
Additional information to shareholders (contd.)

The strength of the invisible

A Balance Sheet discloses the financial strength of a company. The financial positicn of an enterprise is influenced by
the economic resources it controls, the financial structure, liquidity and solvency, and its capacity to adapt to changes
in the environment. However, it is becoming increasingly clear that intangible assets have a significant role in defining
the growth of a hi-tech company. So, quite often, the search for the added value leads us invariably back to understanding,
evaluating and enhancing the intangible assets of the business.
From tirne to time, Infosys has used various models for evaluating assets off The Balance Sheet to bring certain
advances in financial reporting from the realm of research and practices in advanced nations, to the notice of the
shareholders. Such an exercise also helps the Infosys management in understanding the components that make up
goodwill. The aim of such modeling is to lead the debate on the Balance Sheet of the next millennium, and to evoke
the corporate interest in India. The Infosys management cautions the investors that these models are still the subject
of debate among researchers, and using such models and data in predicting the future of Infosys, or any other company,
is risky, and that the Infosys management is not responsible for any direct, indirect or consequential losses suffered by
any person using these models or data.
Last year, the management valued its most valuable off Balance Sheet asset - Human Resources. This year, the
management has attempted to determine the value of another of the company's important off Balance Sheet assets -
the Infosys brand.
Brand Valuation
A brand is much more than a trademark or a logo. It is a Trustmark - a promise of quality and authenticity that
customers can rely on. Brand equity is the value addition provided to a product or company by its brand name. It is the
financial premium that a buyer is willing to pay for the brand over a generic or less worthy brand. Brand equity is not
created overnight. It is the result of relentless pursuit of quality in manufacturing, selling, service, advertising and
marketing. It is the integral of customer experiences in dealing with the company and its products over a sustained
period.
Corporate-branding and Service-brands are often perceived to be interchangeable. Both types of brands aim at the
enhancement of confidence and the reduction of uncertainty in the quality of what the company offers. Therefore,
companies rely heavily on the image and personality they create for their brands, to communicate these qualities to the
marketplace.
The task of measuring the brand value is a complex one. Several models are available for accomplishing this. The most
widely used is the B rand-earnings-multiple model. There are several variants of this model. For example, the Financial
World magazine has used a variant of this model in the July 1996 issue and valued the Microsoft brand at US$ 5.63
billion, while the market capitalization of the company was around USS 60 billion on the date of brand valuation.
Goodwill is a nebulous accounting concept that is defined as the premium paid to tangible assets of a company. It is an
umbrella concept that transcends components like brand equity and human resources, and is the result of many
corporate attributes including core competency, market leadership, copyrights, trademarks, brands, superior earning
power, excellence in management, outstanding workforce, competition, longevity and so on.
The management has adapted the generic Brand-earnings-multiple model (given in the article on Valuation of
Trademarks and Brand names by Michael Birkin in the book Brand Valuation edited by John Murphyand published by
Business Books Limited, London] to value its corporate brand - Infosys. The methodology followed for valuing the brand
is as given below :
1. Determine Brand earnings
To do this,
' Determine brand profits by eliminating the non-brand profits from the total profits of the company
• Restate the historical profits at present-day values
• Provide for the cost of capital employed to produce the product
• Adjust for taxas

2. Determine the brand-strength or brand-earning multiple

Brand-strength-multiple is arrived at by a multitude of factors like leadership, stability, internationality, support
and so on. The factors have been evaluated on a scale of 100, internally by the Infosys management, based on the lUb
information available within the company.
 3. Compute the brand value by multiplying the brand earnings with the multiple derived in step 2 above.
• The workings are as follows : in Rs.

1994-95 1995-96 1996-97

PBIT 15,26,44,266 25,31,94,517 39,54,12,934
Less - non-brand income 2,05,63,654 4,37,25,909 4;i3,37,138

Adjusted profit after tax 13,20,80,612 20,94,68,608 35,40,715,796

Inflation compound factor @ 8% 1.181 1.087 1.000
Present value of profits for the brand 15,60,49,873 22,76,83,270. 35,40,75,796
Weightage factor 1 2 3
Weighted profits 15,60,49,873 45,53,66,540 1,06,22,27,389
Three-year aggregate weightage profits 27,89,40,634
Remuneration of capital
(5% of average capital employed) 4,92,33,702
Brand-related profits • 22,97,06,932
Tax at 43% 9,87,73,981
Brand earnings 13,09,32,951
Multiple-applied 13.20
Brand value 1,72,83,14,957

Assumptions
1. Total revenue excluding the other income is brand revenue, since this is an exercise to determine the brand
value of Infosys as a company and not for any of its products or services.
2. Inflation is at 8% per annum.
3. 5% of the average capital employed is used for purposes other than promotion of the brand.
4. Tax rate is at 43%.
5. The earnings multiple is based on the ranking of Infosys against the industry average based on certain
parameters (exercise undertaken internally and based on available information)
Thus, it is interesting to note that while Infosys has a market capitalization of Rs. 731.04 crores on March 31,
1997, the value of the brand "Infosys" is estimated at Rs. 172.83 crores.

106
Additional information to shareholders (contd.)

Human Resources Accounting

The dichotomy in accounting between human and non-human capital is fundamental. The latter is recognized as an
asset and is therefore recorded in the books and reported in the financial statements, whereas, the former is totally
ignored by accountants. The definition of wealth as a source of income, inevitably leads to the recognition of human
capital as one of several forms of wealth such as money, securities and physical capital. The basis of computing the same
is as follows:
The Lev& Schwartz model has been used to compute the value of the human resources as at March 31, 1997. The
evaluation is based on the present value of the future earnings of the employees and on the following assumptions:
1. Employee compensation includes all direct and indirect benefits earned both in India and abroad.
2. The incremental earnings based on group/age are considered.
3. The future earnings have been discounted at 27.97% (previous year - 27.36%) being the cost of capital. Beta has
been assumed at 1.48 based on worldwide beta for software stocks.
.Rs. in /<a/t/Js
As of March 31, 1997 1996
No. of Value of No. of Value of
employees human resources employees human resources
(Rs. in lakhs) (Rs. in lakhs)
Production 1,293 227,31.10 957 161,69.93
Support - Technical 157 33,80.23 42 12.83.56
- Others 255 17,44.50 173 12.32.48
1,705 278,55.83 1,172 186.85.97

Number of employees 1,705 1.172

Value of human resources 278,55.23 186,85.97
Total earnings 143,80.77 93,41.34
Software revenue 139.21.47 88,55.50
Total employee cost 51,63.08 34,41.15
Valua added 99,41.26 70,64.12
Net profits excluding extraordinary income 33,39.02 21.00.95
Key Ratios
Total earnings/Human resources 0.52 0.50
Total software revenue/Human resources 0.50 0.47
Value added/Human resources 0.36 0.37
Value of human resources per employee 16.34 15.94
Employee cost/Human resources 18.54% 18.42%
Return on human resources 11.99% 11.24%
Value Added statement Us. in lakhs
Year ending March 31, '.997 1996
Total income 143.80.76 93,41.34
Less : Cost of imported software packages sold 37.14 87.36
Software development expenses 24,72.49 13,45.11
Administration expenses 15,70.34 8,44.75
Loss on sale of investments 3,59.53 -
Subtotal 44.39.50 22,77.22
Total value added 9,9-11.26 70,64.12
Applied 10 meet:
Personnel costs :j;.r:3.08 34,41.15
Income tax :;,:i4.00 4,31.00
Provision for investments - 2,27.60
Dividends •;. 'p.. 23 3,62.93 107
Interest payments • : 1.10 -
Retained in business 37, -3.85 26,01.44
^•Jvil.26 70,64.12
 Additional information to shareholders (contd.)

Balance Sheet (including the intangible assets) as at March 31,1997

in Hs.

SOURCES OF FUNDS
' SHAREHOLDERS' FUNDS
Share capital ,7,25,97,500
Reserves and surplus
- Share premium account ' 34,75,41,460
- Capital reserves 454,97,97,957
- Other reserves 67,23,21,637
LOAN FUNDS '
Secured loans . -
564,22,58,554

APPLICATION OF FUNDS
FIXED ASSETS •
Tangible assets
-at cost . . .71,29,16,621
Less : Depreciation 25,02,44,587
Net block 46,26,72,034
Add : Capital work-in-progress 7,04,41,980
53,31,14,014
Intangible assets
- Brand Equity ' 172,83,14,957
- Human Resources 278,55,83,000

INVESTMENTS - 5,32,61,960
CURRENT ASSETS, LOANS AND ADVANCES
Inventories 4,10,878
Accounts receivables 18,08,89,934
Cash and bank balances 15,02,35,621
Loans and advances 38,44,14,669
71,59,51,102
Less : Current liabilities . 5,12,31,334
Provisions 12,27,35,145
Net current assets 54,19,84,623

564,22,58,554

Note: 1. This Balance Sheet is provided for purpose of information only. The management accepts no responsibility
for any direct, or indirect or consequential losses or damages suffered by any person relying on the same.
2. Capital reserves include value of brand equity and human resources.
08 '
Additional information to shareholders (contd.)

Economic-Value-Added (EVA) statement

The Economic-Value-Added, commonly called EVA, is a measure of the real profits of a company. It is computed by
taking the spread between the rate of return on capital and the cost of capital, and then multiplying the economic book
value of the capital committed to the business. Thus, it is perhaps the best measure of the performance of the company.

Economic Value Added analysis

Year ending March 31, 1994 1995 1996 1997
1. Average capital employed (Rs. in lakhs) 17,86.87 48,01.44 76.44.80 98.46.75
2. Average debt/ total capital (%) 1.12 6.60 6.93 2.16
3. Beta variant 1.42 1.48 1.48 1.48
4. Risk free debt cost (%) 13.40 14.00 14.00 13.60
5. Market premium 10.00 10.00 10.00 10.00
6. Cost of equity (%) 27.60 28.80 28.80 28.40
7. Cost of debt (post tax) (%) 8.48 6.75 7.70 7.70
8. Weighted Average Cost of Capital (WACC) (%) 27.36 27.36 27.36 27.97
9. PAT as a percentage of average capital employed (%) 45.29 27.75 27.48 33.91
10. Economic Value Added (EVA) Rs. in lakhs
Operating profit
(PBT excluding extraordinary income) 8,85.19 15,26.44 25,32.00 38,93.03
Less: Tax 76.00 1,94.00 4,31.00 5,54.00
Less: Cost of capital 4,88.88 13,13.66 20,91.59 27,54,34
Economic Value Added 3,20.31 18.78 9.41 5,84.69
11. Enterprise Value (Rs. in lakhs)
Market value of equity 191,01.50 348,42.00 355,67.10 731,04.17
Add: Debt 6,33.91 4,26.06
Enterprise Value 191,01.50 354,75.91 359,93.16 731,04.17
12. Ratios:
EVA as a percentage of year-end capital employed 11.76% 0.27% 0.11% 5.18%
PAT as a percentage of average capital employed
- weighted average cost of capital (%) 17.93 0.39 0.13 5.94
Enterprise value/Year-end capital employed 7.01 5.10 4.28 6.48

Note ! The cost of equity is calculated by using the following formula :

Return on risk free investment + expected risk premium on equity investment
adjusted for the beta variant of Infosys.

•1 584.69

500 - I - 50%
.45.29%

"ST
j= 400 - x^ - 40%
PAT in %

* 33.91% EVA (Rs. in lakhs)

S --380.31 \ -— ""
300 - \ 27.75% ^^^ - 30% PAT as a percentage of
•• i 27.48% average capital employed
$ 200 - - 20%
UJ
109
100 - - 10% Relationship between PAT as a percentage of average
capital employed and Economic Value Added (EVA)
,•- 18.78 9.41
0 - - c%
1 £94-95 1995-96 '1996-9?
 Additional information to shareholders (eontd.)

Ratio analysis for the year ending March 31 ,

, 1995 1996 1997 ' .

Ratios - Financial performance

Export turnover/total turnover (%) 88.31 86.00 87.12
Domestic turnover/total turnover (%) 5.76 6.98 9.27
Trading turnover/total turnover (%} 1.97 1.81 0.41
Other income/total turnover (%) 3.96 5.20 3.19
Manpower costs/total turnover (%) 38.48 36.84 35.90
Administration expenses/total turnover (%) 10.45 8.51 10.92
Operating expenses/total turnover (%) 65.58 61.22 64.27
Interest/total turnover (%) 0.00 0.00 0.42
Depreciation/Total turnover(%) 7.96 9.24 7.31
Tax/total turnover (%) 3.36 4.61 3.85
Tax (Current)/PBT {%) 12.71 14.31 11.46
PBIDT from ordinary activities/Total turnover (%) 34.42 36.35 34.81
PAT from ordinary activities/Total turnover (%) 23.09 22.49 23.22
PAT from ordinary activities/Average net worth (%) 29.71 29.53 34.66
ROCE (PBIT/Average capital employed) (%) 31.79 33.12 40.16
Capital output ratio 1.15 1.16 1.41

Ratios - Balance sheet

Debt-equity ratio 0.10 0.05 0.00
Debtors turnover (days) 48 46 47
Current ratio 6.38 4.17 4.12
Cash and equivalents/Total assets (%) 36.84 35.41 25.50
Depreciation for the year/Gross Block (%) 18.15 18.43 14.75
Asset turnover 0.84 1.11 1.27
Technology investment/Billable manpower (Rs.) 1,48,051 95,395 1,33,975
Technology investment/Total revenue (%) 16.73 9.81 10.59

Ratios - Growth
Growth in export turnover {%) 85.86 57.66 55.0-1
Growth in total turnover (%) 91.81 61.88 !i:i. !.)!")
Operating expenses growth (%) 88.36 51.88 03. 4U
Operating profit growth (%) 104.59 70.97 47.43
Net profit (from ordinary activities) growth (%) 64.66 57.68 58.93

Per-share data
Earnings (from ordinary activities) (Rs.) 18.36* 28.94 46.00
Dividend (%) 45 50 I")!")
Book value (Rs.) 86 110 lliS
Dividend payout (%) 17.37 17.27 10.80
Price/Earnings 26.15 16.93 21.89
Dividend/Adjusted public offer price (%) 9 11 12
Market price/Adjusted public offer price (%) 911 932 2,020

' After bonus issue of 1:1

Capital output ratio = Revenue i'rom operations/Average capilul employed
]_ 20 Asset turnover = Total revenue/Total assets
Ratio analysis
Ratio analysis is the best tool available to analyze and appreciate the financial results of a company. It enables and
allows inter-company and intra-company comparison and analysis. The ratios also provide a bird's eye view of the
financial condition of the company, which can be easily understood and appreciated by all.

Growth
The exports have grown by 56% during the current year f*f£\,tmt tmimamn mmijiJBKlSrrn R-venue i
as compared to 58% during the previous year. The exports maa*m*^^^J£aiibxn & exports
are predominantly to USA, Europe, African and other mSttamJ&imEsis
South-Asian countries. "J
The total revenue has grown by 54% as compared to 62% during the previous year. The growth in total turnover is in
line with the industry growth.
While the operating expenses have grown by 63% as compared to 52% during the previous year, the operating profits
have grown by 47% as compared to 71 % during the previous year. During the year, the operating profits have dropped
due to operationalization of various software development centres, the benefits of which would be felt in the future.
However, the net profits have grown by 59% as compared to 58% growth during the previous year mainly due to lower
depreciation and taxes.

Financial indicators
1. Return on average net worth
The return on average net worth is 34.66% during Return on
the year as compared to 29.53% during the previous average net worth
year. This was possible due to strict cost control tje'--"!3gs
measures adopted by the company, and also due to
benefits of economies of scale.
Since the company is maintaining around 25% of its assets in liquid cash funds, where the returns are less, the
above figures get distorted. If the liquid funds are adjusted against the net worth; and the revenue earned from
liquid funds after tax, adjusted against the net profit, the return on average net worth stands at 44.49% during
the current year.

2. Debt-equity ratio
The Debt-equity ratio has declined to Nil during the year as compared to 0.05 during the previous year. During
the year, the company prepaid its existing loan with HDFC in full. This is in line with the company's policy of
adhering to debt only as a short-term arrangement and to fund all its long-term needs out of its own funds
generated from operations.

3. Net profit ratio

The Net profit ratio is 23.22% during the year as
Net profit ratio
compared to 22.49% during the previous year. It has
MKEE3
slightly increased due to lower charge of depreciation
and taxes.

4. Current ratio
The Current ratio is 4.12 as compared to 4.17 during the previous year. The current ratio is healthy and primarily
high due to maintenance of liquid funds in tune with the company policy.

5. Capital output ratio

The Capital output ratio is 1.41 during the year as
compared to 1.16 during the previous year. This ^^ Capital Cuipui
IBH(
increase is due to better utilization of productive 1MMS mnfi
assets by the company.

111
 Investments
Technology investments
The technology investment to billable manpower has increased to Rs. 1,33,975 per person fromRs. 95,395 during the
previous year. The technology investment to total revenue has increased to 10.59% during the year from 9.81%
during the previous year.

Shareholder data-
Earnings per share
The earnings per share have increased to Rs. 46.00 from
Rs. 28.94 during the previous year. This is mainly due to Rs.
59% growth in the net profits of the company, during the
year. The book v a l u e of the company has also
correspondingly increased to Rs. 155 per share as against
Rs. 110 per share during the previous year. Dividend
The dividend payout ratio has declined to 11 % of the PAT. Percentage
The Infosys' share has surpassed the market and has
benefited the shareholders as a whole. The appreciation
in stock price (adjusted for a bonus issue during 1994),
over the IPO issue price, is more than 2020%. The overall Book value
market capitalization of the company has grown from
Rs. 53,63 crores during June 1993 to Rs. 731.04 crores,
as of March 1997. The dividend payout on the adjusted
IPO issue price is 12% as compared to 11% during the
earlier year.
Price earnings multiple
The price earnings multiple, as on March 31, 1997, is
around"21.89 and is well above the industry average. Nc\

112
Additional information to shareholders (contd.)

Statutory obligations
The company has established Software Technology Parks - 100% exported-oriented units - for the development of
software at Electronics City, Koramangala and Manipal Center at Bangalore as well as at Mangalore, Pune, Chennai and
Bhubaneshwar (all in India). All capital items purchased for these centers are eligible for 100% customs and excise duty
exemption, subject to fulfillment of stipulated export obligations, namely, one and a half time the value of duty-free
imports of capital goods over a period of four years and one and a half times the wage bill, on a yearly basis. The non-
fulfillment of export obligations may result in penalties as stipulated by the Government which may have an impact on
future profitability. The chart showing the export obligation, and the export obligation fulfilled by the company for all
its STP units year-wise is given here under:
in Rs.
As at March 31, Export obligation Export obligation Excess/ Cumulative excess/
fulfilled (shortfall) (shortfall)
1993 29,06,157 28,25,575 (80,582) (80.582)
1994 4,38,46,673 8,04,57,379 3,66.10,707 3,65,30.125
1995 16,28,10,598 15,63,56,751 (64.53,847) 3,00,76.278
1996 34,32,50,026 47,15,01,260 12,82,51,234 15,83,27.512
1997 49,65,73,321 68,93,56,837 19.27,83,516 35,11,11,028
104,93,86,774 140,04,97,802 35.11.11,028

The total customs duty waived on both computer software and hardware imported by the company since 1993 amounts
to Rs. 18.71 crores.
The company has completely fulfilled its export obligations as on the Balance Sheet date and is confident of fulfilling its
export obligations in future. It may be noted that in the above statement, the export obligation on the import of capital
goods, were considered in the year of purchase as against a period of four years allowed under the scheme.

Taxation
The economic reforms program of the Government of India has enhanced the velocity of business for companies in
India. Being one of the signatories to the World Trade Organization, India is committed to reducing the import tariff
levels, thereby exposing the Indian entrepreneurs to global competition.
At present, the export profits are deductible from income subject to tax in India. The government may reduce or
eliminate the tax exemptions provided to Indian exporters in the near future. This may result in the export profits of
the company being fully taxed, and may adversely affect the post-tax profits of the company in the future. This is
expected to be tackled by increasing the per-capita revenue productivity and moving up the value chain. This is
possible by increasing the contribution to revenue from products and productized services.
On a full-tax-paid basis, without any duty concessions on import of hardware and software for its operations, the
company's post-tax profits for the relevant years would be,
inRs.
1997 1996 1995
Profit before tax (excluding extraordinary items) 38,93,03,219 25,31,94,517 15,26,44.266
Less - Duty waiver on software purchases 11,19,799 18,51,521 87,57.071
- Additional depreciation to be provided on
duty waiver for computer systems 5,02,49,353 3,26,05,244 1,57,12.239
- Reduction in other income 2,22,26,527 2,10,56,536 84,63.986
Adjusted profit before tax 31,57.07,540 19,76,81,216 11,97,10.970
Less - Income tax on above on full tax basis 15,49,11,1 18 7,67,50,460 6,24,16.780
Adjusted profit after tax I b , 07.pt), 422 12,09,30,756 5,72,94.190
Adjusted Earnings Per Share 22.15 16.66 7.89

However, it may be noted that the above is an academic exercise only and the company has provided for income tax in I -] i o
full in the respective years and there is no carried forward liability on this account.
 Segment reporting
The geographical segment information given below is on the basis of markets and not on the source of revenue.
By geographical area ' R
1997 1996 1995
Revenues.
Americas 108,01.73 66,89.47 42.10.03
Europe 11,56.94 12,03.53 7,52.20
Rest of the world (ROW) 2,27.80 1,40.81 1,33.49
India 21,04.30 13,07.52 6,74.71
143,80.77 93,41.33 57,70.43

Profit before tax

Americas 29,82. 61
Europe 1,99.5)1
Rest of the world (ROW) 69.15
India 6,41.33
38,!)3.03
More than 76% of Infosys' revenue comes from the A.merican market and the balance predominantly from India and
Europe among other markets. The dependency on a single market for substantial part of the revenue is prone to risk.
Infosys has a corporate strategy of increasing its share of business from the European, Japanese and other markets,
thereby reducing its predominant dependency on the American market. The company's goal is to reduce the contribution
to the revenue from the Americas, to 60% (from the current 76%), by the year 2000.
By business segments fls. in lakhs
19<)7 1996 1995
Revenues
Software products and productized services 32,49.04 12,31.62 7,36.57
Software services 106,13.36 74,54.15 46,91.45
Software trading 59.54 1,69.55 1,13.93
Treasury 4,58.83 4,86.01 2,28.48
143,80.77 93,41.33 57,70.43
Profit before tax
Software products and productized services 9,58.12
Software services 26,01.81
Software trading 3.38
Treasury 3,29.72
38,93.03
Today, a substantial part of the company's revenue comes from software services. The company aims to move up the
value chain, by becoming a predominant player in the software product market. The vision of Infosys is to derive 40%
of its revenue from Products and Productizedseivices, 'by year 2000. The strategy is to use service-based skills and cash
accruals to build products to suit specific needs of various market segments.
The assets are not identifiable to particular segments and can be used interchangeably between segments. Hence, the
identifiable assets for each segment are not provided.

114
A historical perspective

fts. in lakhs except Per share data. Other information and ratios

Particulars 1981-82 1992-93 1993-94 1994-95 1995-96 1996-97

Revenue account
Revenue 11.63 14,33.46 30,08.47 57,70.43 93,41.34 143,8r.77
Operating profit (PBIDT) 4,30.12 9,70.71 19,85.97 33,95.36 50,05.78
Interest 9.78 4.64 - - 61 09
Depreciation 36.19 80.88 4,59.53 8,63.42 10,51.64
Provision for taxation 33.27 76.00 1,94.00 4,31.00 5,54.00
Profit after tax
from ordinary activities 3.78 3,50.88 8,09.19 13,32.44 21,00.95 33,39.02
Return on average net worth (%) 96.88 38.19 39.61 29.71 29.53 34.66
ROCE (PBIT/
average capital employed) (%) 96.88 39.61 43.14 31.79 33.12 4C.16

Capital account
Share capital 0.10 1,97.61 3,35.11 7,25.88 7,25.88 7,25.98
Reserves and surplus 3.78 6,74.47 25,35.00 55,19.92 72,57.94 105,57.63
Loan funds 39.92 - 6,33.91 4,26.06 -
Gross block 0.02 4,38.92 8,27.38 25,32.01 46,85.75 71,29.16
Capital investment 0.02 1,77.52 7,12.71 25,23.05 15.55.49 27,31.04
Net current assets 6.27 10,68.62 13,94.34 32,46.95 41,17.17 54,19.85
Debt - Equity ratio 0.05 -- 0.10 0.05 -
Market capitalization - 191,01.50 348,42.00 355,67.10 731,04.17

Per share data

Earnings (Rs.) 377.77 17.76 24.15 18.35* 28.94 46.00
Dividend (%) 30 35 45 50 55
Book value (Rs.) 383.10 44.08 81.26 86.04* 110.00 155.00

Other information
Number of shareholders 7 925 6,033 6,526 6,909 6,414

Credit ratings from CRISIL

Commercial paper program - - "P1+" "P1+" "PI -"
Non-convertible debenture issue - - "AA" "AA" "AA"

Note : Rs. One lakh equals One hundred thousand.

* After bonus issue of 1:1

115
 Infosys in the US Infosys in Europe Bhubaneshwar
Infosys Technologies Limited
US Headquarters Continental Europe Hot No. 1/70
Infosys Technologies Limited India Infosys Cuttack Madras Road, Nayapalli
42840 Chrisiy Sirooi Economic Struat 39 Uhuhnnoshwar, India.
Suite 10Z B433, KG Hoons brook Tel. : 91 674 48 3991
Fremont CA 94538, The Netherlands:. Fax : 91 674 48 3985
Tel. : (510)770-9393 Tel. : 31-45-523 7376
Fax : (510) 770-94G9 Fax : 31-45-521 8326 Chennai (Madras)
Infosys Technologies Limited
North-East US United Kingdom Alexander Square
Infosys Technologies Limited Infosys Technolcgies Limited 35, Sardar Patel Road, Guindy,
980 Washington Street Suite 429, Premier Suites Chennai 600 032, India.
Suite 217 Exchange House Tel. : 91 44 235 5036
Dedham MA 02026. 494 Midsummer Boulevard Fax : 91 44 235 5037
Tel. : (617)461-9083 Milton Keynes'MK9 2EA
Fax : (617)461-1517 United Kingdom Delhi
Tel. : 44 1 908 608 272 Infosys Technologies Limited
Western US Fnx : 44 1 908 008 279 K-30, Green Park Mflin
Infosys Technologies Limited Behind Green Park Market
4590 MacArthur New Delhi 110066, India.
Suite 500 Infosys in India Tel. : 91 11 685 3258
Newport Beach CA 92660. Fax : 91 11 688 3366
Tel. : (714)475-9295 Bangalore
Fax : (714)475-9293 Infosys Technologies Limited Mangalore
Electronics City, Hosur Road Infosys Technologies Limited
Mid-west US Bangalore 561 229, India. No. 16/403, Star of liombay Complex
Infosys Technologies Limited Tel. : 91 80852 0261 . 3rd Floor, Kankanady
One Tower Lane Fax : 91 80 852 0362 Mangalore 575 002, India.
Suite 1 700 Tel. : 91 824 43 9401
Infosys Technologies Limited
Oakbrook Terrace IL 60181. Fax : 91 824 43 7970
Pavithra Complex
Tel. : (630) 573-6050 No. 1, 27th Main,, 2nd Cross
Fax : (630) 573-6051 1st Stage, BTM Layout Mumbai (Bombay)
Bangalore 560 OSS, India. Infosys Technologies Limited
Eastern US Tel. : 91 80668 1755/0182 85, 'C, Mittal Towers, 8th Floor
Infosys Technologies Limited Fax : 91 80 668 0181 Nariman Point
991 US Hwy 22 Bombay 400 021, India.
Suite 200 Infosys Technologies Limited
K-310, 1st Main, 5th Block Tel. : 91 22 288 2911/2914, 284 6490
Bridgewater NJ 08807. Fax : 91 22 284 6489
Koramangala
Tel. : (908) 704-9819 Bangalore 560 035, India.
Fax : (908) 704-9820 Pune
Tel. : 91 80 553 0392/ 2591/ 2592
Infosys Technologies Limited
South-Central US Fax : 91 80) 5!i3 0391
321/A/3 Shankar Sheth Road
Infosys Technologies Limited N-403, Manipal Center Oswal Bandhu Samaj Building, 3rd Floor
14275 Midway Road Dickenson Road Mahatma Phule Peth
Suite 220 Bangalore - 560 042. Pune 411 042, India.
Dallas TX 75244. Tel. : 91 80 558 7024 / 558 9896-7 Tel. : 91 212 64 7420/21
Tel : (972)687-9119 Fax : 91 80 5588065 Fax : 91 212 64 8226
Fax : (972)687-9116

Visit Infosys on the Worldwide Web at http://www.inf.cOni

Send your e-mail to infosys@inf.com
Gallusat1-800-ITLlNFO

Bankers Company Secretary Auditor

State Bank of Mysore V. Viswanathan A. M. Bhatkal
HongKong Bank Chartered Accountant
Bank of Boston

-L -L D Creative concept and design: The Communication Design Group, Infosys

Printed at Pragati Art Primers, Hyderabad.
© 1997 Infosys Technologies Limited, Bangalore. India. Infosys believes the information in this publication is accurate as of its publication date; such infoimation is subject to change without
notice. Infosys acknowledges the proprietary rights in Ihe trademarks and product names of other companies mentioned in this document.