form20f.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
 
 
(Mark One)
 
o Registration statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
 
OR
 
x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 For the fiscal year ended March 31, 2011
 
OR
 
o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from __________ to __________
 
OR
 
o Shell Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of event requiring this shell company report________
 
 
Commission File Number 000-25383
 
 
INFOSYS TECHNOLOGIES LIMITED
(Exact name of Registrant as specified in its charter)
 
Not Applicable
(Translation of Registrant's name into English)
 
Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)
 
Electronics City, Hosur Road, Bangalore, Karnataka, India 560 100. +91-80-2852-0261
(Address of principal executive offices)
 
 
V. Balakrishnan, Chief Financial Officer, +91-80-2852-0261, balakv@infosys.com
Electronics City, Hosur Road, Bangalore, Karnataka, India 560 100.
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
 
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
 
Title of Each Class
Name of Each Exchange on Which Registered
 
 
American Depositary Shares each represented by one Equity Share, par value rupee symbol 5 per share
NASDAQ Global Select Market
 
 
 
Securities registered or to be registered pursuant to Section 12(g) of the Act:
 
None.
(Title of class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 
Not Applicable
(Title of class)
 
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual Report: 574,151,559 Equity Shares
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes x No o
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes o No x
 
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.
 
Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such filed).
 
Yes o No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
Accelerated filer o
Non- accelerated filer o
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP o International Financial Reporting Standards as issued by the International Account Standards Board x Other o
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes o No x
 
Currency of presentation and certain defined terms
 
In this Annual Report on Form 20-F, references to "U.S." or "United States" are to the United States of America, its territories and its possessions. References to "India" are to the Republic of India. References to "$" or "dollars" or "U.S. dollars" are to the legal currency of the United States and references to "Rupee symbol" or "Rupees" or "Indian rupees" are to the legal currency of India. Our financial statements are presented in U.S. dollars and are prepared in accordance with the International Financial Reporting Standards as issued by the International Account Standards Board, or IFRS. References to "Indian GAAP" are to Indian Generally Accepted Accounting Principles. References to a particular "fiscal" year are to our fiscal year ended March 31 of such year.
 
All references to "we," "us," "our," "Infosys" or the "Company" shall mean Infosys Technologies Limited, and, unless specifically indicated otherwise or the context indicates otherwise, our consolidated subsidiaries. "Infosys" is a registered trademark of Infosys Technologies Limited in the United States and India. All other trademarks or tradenames used in this Annual Report on Form 20-F are the property of their respective owners.
 
Except as otherwise stated in this Annual Report on Form 20-F, all translations from Indian rupees to U.S. dollars effected on or after April 1, 2009 are based on the fixing rate in the City of Mumbai on March 31, 2011 for cable transfers in Indian rupees as published by the Foreign Exchange Dealers' Association of India, or FEDAI, which was Rupee symbol 44.60 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.
 
Special Note Regarding Forward Looking Statements
 
This Annual Report on Form 20-F contains 'forward-looking statements', as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our current expectations, assumptions, estimates and projections about our Company, our industry, economic conditions in the markets in which we operate, and certain other matters. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'will', 'project', 'seek', 'should' and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results or outcomes to differ materially from those implied by the forward-looking statements. Important factors that may cause actual results or outcomes to differ from those implied by the forward-looking statements include, but are not limited to, those discussed in the “Risk Factors” section in this Annual Report on Form 20-F. In light of these and other uncertainties, you should not conclude that the results or outcomes referred to in any of the forward-looking statements will be achieved. All forward-looking statements included in this Annual Report on Form 20-F are based on information available to us on the date hereof, and we do not undertake to update these forward-looking statements to reflect future events or circumstances.
 
This Annual Report on Form 20-F includes statistical data about the IT industry that comes from information published by sources including Forrester Research, Inc., providers of market information and strategic information for the IT industry and the National Association of Software and Service Companies, or NASSCOM, an industry trade group. This type of data represents only the estimates of Forrester, NASSCOM, and other sources of industry data. In addition, although we believe that data from these companies is generally reliable, this type of data is inherently imprecise. We caution you not to place undue reliance on this data.
 
 
Table of Contents
 
 
Part I
 
Item 1. Identity of Directors, Senior Management and Advisers
 
Not applicable.
 
Item 2. Offer Statistics and Expected Timetable
 
Not applicable.
 
Item 3. Key Information
 
SELECTED FINANCIAL DATA
 
Summary of Consolidated Financial Data
 
You should read the summary consolidated financial data below in conjunction with the Company's consolidated financial statements and the related notes, as well as the section entitled “Operating and Financial Review and Prospects,” all of which are included elsewhere in this Annual Report on Form 20-F. The summary consolidated statements of comprehensive income for the four years ended March 31, 2011 and the summary consolidated balance sheet data as of March 31, 2011, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements and related notes which were prepared and presented in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board (IFRS). Historical results are not necessarily indicative of future results.
 
 (Dollars in millions, except share data)
Comprehensive Income Data
Fiscal Year ended March 31,
 
2011
2010
2009
2008
Revenues
$6,041
$4,804
$4,663
$4,176
Cost of sales
3,497
2,749
2,699
2,453
Gross profit
2,544
2,055
1,964
1,723
Operating expenses:
       
Selling and marketing expenses
332
251
239
230
Administrative expenses
433
344
351
334
Total operating expenses
765
595
590
564
Operating profit
1,779
1,460
1,374
1,159
Other income, net
267
209
101
175
Profit before income taxes
2,046
1,669
1,475
1,334
Income tax expense
547
356
194
171
Net profit
$1,499
$1,313
$1,281
$1,163
Earnings per equity share:
       
Basic ($)
2.62
2.30
2.25
2.04
Diluted ($)
2.62
2.30
2.25
2.04
Weighted average equity shares used in computing earnings per equity share:
       
Basic
571,180,050
570,475,923
569,656,611
568,564,740
Diluted
571,368,358
571,116,031
570,629,581
570,473,287
Cash dividend per Equity Share ($)*
1.22
0.48
0.89
0.31
Cash dividend per Equity Share (rupee symbol)*
55.00
23.50
37.25
12.50
* Excludes corporate dividend tax and converted at the monthly exchange rate in the month of declaration of dividend.
 
 (Dollars in millions, except share data)
Balance Sheet Data   As of March 31,
 
2011
2010
2009
2008
Cash and cash equivalents
$3,737
$2,698
$2,167
$2,058
Available-for-sale financial assets, current
5
561
18
Investments in certificates of deposit
27
265
Net current assets
4,496
3,943
2,583
2,578
Non-current assets
1,698
1,495
1,249
1,381
Total assets
7,010
6,148
4,369
4,508
Non-current liabilities
72
77
48
43
Total equity
$6,122
$5,361
$3,784
$3,916
 
Exchange rates
 
Our functional currency is the Indian rupee. We generate a major portion of our revenues in foreign currencies, particularly the U.S. dollar, the United Kingdom Pound Sterling, Euro and the Australian dollar, whereas we incur a majority of our expenses in Indian rupees. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are adversely affected as the rupee appreciates against the U.S. dollar. For fiscal 2011, 2010, 2009 and 2008, U.S. dollar denominated revenues represented 72.8%, 73.3%, 71.1% and 69.5% of total revenues. For the same periods, revenues denominated in United Kingdom Pound Sterling represented 7.2%, 9.2%, 12.7% and 14.9% of total revenues, revenues denominated in the Euro represented 6.9%, 6.9%, 7.1% and 5.7% of total revenues while revenues denominated in the Australian dollar represented 6.5%, 5.8%, 4.6% and 4.8% of total revenues. As such, our exchange rate risk primarily arises from our foreign currency revenues, receivables and payables.
 
Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will also affect the U.S. dollar equivalent of the Indian rupee price of our equity shares on the Indian stock exchanges and, as a result, will likely affect the market price of our ADSs, and vice versa. Such fluctuations also impact the U.S. dollar conversion by the Depositary of any cash dividends paid in Indian rupees on our equity shares represented by the ADSs.
 
The following table sets forth, for the fiscal years indicated, information concerning the number of Indian rupees for which one U.S. dollar could be exchanged based on the fixing rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by the Foreign Exchange Dealers' Association of India, or FEDAI. The column titled “Average” in the table below is the average of the last business day of each month during the year.
         
Fiscal
Period End
Average
High
Low
 
rupee symbol
rupee symbol
rupee symbol
rupee symbol
2011
44.60
45.54
47.36
44.07
2010
44.90
47.43
50.57
44.87
2009
50.72
46.54
52.00
39.88
2008
40.02
40.00
43.05
38.48
 
The following table sets forth the high and low exchange rates for the previous six months and is based on the fixing rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by the FEDAI.
     
 Month
High
Low
 
rupee symbol
rupee symbol
April 2011 44.63 44.00
March 2011
45.29
44.62
February 2011
45.82
45.11
January 2011
45.95
44.71
December 2010
45.65
44.79
November 2010
46.01
44.24
 
On May 6, 2011, the fixing rate in the City of Mumbai for cash transfers in Indian rupees as published by FEDAI was Rupee symbol44.79.
 
The exchange rates for month-end and period-end reporting purposes have been based on the FEDAI rates. We believe that exchange rates published by FEDAI are more representative of market exchange rates than exchange rates published by individual banks. However, FEDAI does not publish exchange rates on a daily basis, and in the absence of availability of daily exchange rates from FEDAI, we utilize exchange rates from Deutsche Bank, Mumbai, for daily transactions in the ordinary course of business.
 
Risk Factors
 
This Annual Report on Form 20-F contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the following risk factors and elsewhere in this Annual Report on Form 20-F.
 
Risks Related to Our Company and Our Industry
 
Our revenues and expenses are difficult to predict and can vary significantly from period to period, which could cause our share price to decline.
 
Our revenues and profitability have grown rapidly in recent years until the onset of the global economic slowdown in 2008, and are likely to vary significantly in the future from period to period. Therefore, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of our future performance. It is possible that in the future our results of operations may be below the expectations of market analysts and our investors, which could cause the share price of our equity shares and our ADSs to decline significantly.
 
Factors which affect the fluctuation of our operating results include:
A significant part of our total operating expenses, particularly expenses related to personnel and facilities, are fixed in advance of any particular period. As a result, unanticipated variations in the number and timing of our projects or employee utilization rates, or the accuracy of our estimates of the resources required to complete ongoing projects, may cause significant variations in our operating results in any particular period.
 
There are also a number of factors, other than our performance, that are not within our control that could cause fluctuations in our operating results from period to period. These include:
In addition, the availability of visas for working in the United States may vary substantially from quarter to quarter. Visas for working in the United States may be available during one quarter, but not another, or there may be differences in the number of visas available from one quarter to another. As such, the variable availability of visas may require us to incur significantly higher visa-related expenses in certain quarters when compared to others. For example, we incurred $13.3 million in costs for visas in the three months ended September 30, 2010, compared to $7.7 million in costs for visas in the three months ended March 31, 2011.
 
Such fluctuations may affect our operating margins and profitability in certain quarters during a fiscal year.
 
We may not be able to sustain our previous profit margins or levels of profitability.
 
Our profitability could be affected by pricing pressures on our services, volatility of the exchange rates between the Indian rupee, the U.S. dollar and other currencies in which we generate revenues or incur expenses, increased wage pressures in India and at other locations where we maintain operations, and increases in taxes or the expiration of tax benefits.
 
Since fiscal 2003, we have incurred substantially higher selling and marketing expenses as we have invested to increase brand awareness among target clients and promote client loyalty and repeat business among existing clients. We may incur increased selling and marketing expenses in the future, which could result in declining profitability. In addition, while our Global Delivery Model allows us to manage costs efficiently, if the proportion of our services delivered at client sites increases we may not be able to keep our operating costs as low in the future, which would also have an adverse impact on our profit margins. Further, in recent years, our profit margin has been adversely impacted by the expiration of certain tax holidays and benefits in India, and we expect that our profit margin may be further adversely affected as additional tax holidays and benefits expire in the future.
 
During fiscal 2011 and 2010, there was volatility in the exchange rate of the Indian rupee against the U.S. dollar. The exchange rate for one dollar as published by FEDAI was Rupee symbol44.60 as of March 31, 2011 as against Rupee symbol44.90 as of March 31, 2010 and Rupee symbol50.72 as of March 31, 2009. Exchange rate fluctuations and our hedging activities have in the past adversely impacted, and may in the future adversely impact, our operating results.
 
Increased selling and marketing expenses, and other operating expenses in the future, as well as fluctuations in foreign currency exchange rates including, in particular, the appreciation of the rupee against foreign currencies or the appreciation of the U.S. dollar against other foreign currencies, could materially and adversely affect our profit margins and results of operations in future periods.
 
The economic environment, pricing pressure and employee utilization rates could negatively impact our revenues and operating results.
 
Spending on technology products and services is subject to fluctuations depending on many factors, including the economic environment in the markets in which our clients operate. For example, there was a decline in the growth rate of global IT purchases in the latter half of 2008 due to the global economic slowdown. This downward trend continued into 2009, with global IT purchases declining due to the challenging global economic environment. We believe that the economic environment in the markets in which many of our clients operate is slowly recovering, but the economic conditions in many countries remain challenging and may continue to be challenging in the near future. For instance, in many European countries, large government deficits together with a downgrading of government debt and credit ratings, have escalated concerns about continuing weakness in the economies of such countries.
 
Reduced IT spending in response to the challenging economic environment has also led to increased pricing pressure from our clients, which has adversely impacted our revenue productivity, which we define as our revenue divided by billed person months. For instance, during the year ended March 31, 2011, our offshore revenue productivity, other than for business process management, decreased by 3.1% when compared to the three months ended March 31, 2010.
 
Further, many of our clients have also been seeking extensions in credit terms from the standard terms that we provide, including pursuing credit from us for periods of up to 60 days or more. Such extended credit terms may reduce our revenues, or result in the delay of the realization of revenues, and may adversely affect our cash flows. Additionally, extended credit terms also increase our exposure to customer-specific credit risks. Reductions in IT spending, reductions in revenue productivity, increased credit risk and extended credit terms arising from or related to the global economic slowdown have in the past adversely impacted, and may in the future adversely impact, our revenues, gross profits, operating margins and results of operations.
 
Moreover, in the past, reduced or delayed IT spending has also adversely impacted our utilization rates for technology professionals. For instance, for fiscal 2010, our utilization rate for technology professionals, including trainees, was approximately 67.5%, as compared to 68.9% during fiscal 2009. This decrease in employee utilization rates adversely affected our profitability for fiscal 2010, and any decrease in employee utilization rates in the future, whether on account of reduced or delayed IT spending, particularly if accompanied by pricing pressure, may adversely impact our results of operations.
 
In addition to the business challenges and margin pressure resulting from the global economic slowdown and the response of our clients to such slowdown, there is also a growing trend among consumers of IT services towards consolidation of technology service providers in order to improve efficiency and reduce costs. Our success in the competitive bidding process for new consolidation projects or in retaining existing projects is dependent on our ability to fulfill client expectations relating to staffing, efficient offshoring of services, absorption of transition costs, deferment of billing and more stringent service levels. If we fail to meet a client's expectations in such consolidation projects, this would likely adversely impact our business, revenues and operating margins. In addition, even if we are successful in winning the mandates for such consolidation projects, we may experience significant pressure on our operating margins as a result of the competitive bidding process.
 
Moreover, our ability to maintain or increase pricing is restricted as clients often expect that as we do more business with them, they will receive volume discounts or special pricing incentives. In addition, existing and new customers are also increasingly using third-party consultants with broad market knowledge to assist them in negotiating contractual terms. Any inability to maintain or increase pricing on this account may also adversely impact our revenues, gross profits, operating margins and results of operations.
 
Our revenues are highly dependent on clients primarily located in the United States and Europe, as well as on clients concentrated in certain industries, and an economic slowdown or other factors that affect the economic health of the United States, Europe or those industries or otherwise impact the growth of such industries may affect our business.
 
In fiscal 2011, fiscal 2010 and fiscal 2009, approximately 65.3%, 65.8% and 63.2% of our revenues were derived from projects in North America. In the same periods, approximately 21.5%, 23.0% and 26.4% of our revenues were derived from projects in Europe. The recent crisis in the financial and credit markets in the United States, Europe and Asia led to a global economic slowdown, with the economies of the United States and Europe showing significant signs of weakness. If the United States or European economy remains weak or weakens further, our clients may reduce or postpone their technology spending significantly, which may in turn lower the demand for our services and negatively affect our revenues and profitability.
 
In fiscal 2011, fiscal 2010 and fiscal 2009, we derived approximately 35.8%, 34.0% and 33.9% of our revenues from the financial services industry. The crisis in the financial and credit markets in the United States has led to a significant change in the financial services industry in the United States, with the United States federal government being forced to take over or provide financial support to many leading financial institutions and with some leading investment banks going bankrupt or being forced to sell themselves in distressed circumstances. The subprime mortgage crisis and the resultant turbulence in the financial services sector may result in the reduction, postponement or consolidation of IT spending by our clients, contract terminations, deferrals of projects or delays in purchases, especially in the financial services sector. Any reduction, postponement or consolidation in IT spending may lower the demand for our services or impact the prices that we can obtain for our services and consequently, adversely affect our revenues and profitability.
 
Further, if the economy of the United States does not recover as rapidly as expected or at all, any lingering weakness in the United States economy could have a material adverse impact on our revenues, particularly from businesses in the financial services industry and other industries that are particularly vulnerable to a slowdown in consumer spending. In fiscal 2011, fiscal 2010 and fiscal 2009, we derived approximately 35.8%, 34.0% and 33.9% of our revenues from clients in the financial services industry, 12.9%, 16.1% and 18.1% of our revenues from clients in the telecommunications industry and about 14.2%, 13.3% and 12.5% of our revenues from clients in the retail industry, which industries are especially vulnerable to a slowdown in the U.S. economy. Any weakness in the U.S. economy or in the industry segments from which we generate revenues could have a negative effect on our business and results of operations.
 
Some of the industries in which our clients are concentrated, such as the financial services industry or the energy and utilities industry, are, or may be, increasingly subject to governmental regulation and intervention. For instance, clients in the financial services sector are likely to be subject to increased regulation following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States. Increased regulation, changes in existing regulation or increased governmental intervention in the industries in which our clients operate may adversely affect the growth of their respective businesses and therefore negatively impact our revenues. 
 
Currency fluctuations may affect the results or our operations or the value of our ADSs.
 
Our functional currency is the Indian rupee although we transact a major portion of our business in several currencies and accordingly face foreign currency exposure through our sales in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies. Generally, we generate the majority of our revenues in foreign currencies, such as the U.S. dollar or the United Kingdom Pound Sterling, and incur the majority of our expenses in Indian rupees. Recently, as a result of the increased volatility in foreign exchange currency markets, there has been increased demand from our clients that all risks associated with foreign exchange fluctuations be borne by us. Also, historically, we have held a substantial majority of our cash funds in Indian rupees. Accordingly, changes in exchange rates may have a material adverse effect on our revenues, other income, cost of services sold, gross margin and net income, and may have a negative impact on our business, operating results and financial condition. The exchange rate between the Indian rupee and foreign currencies, including the U.S. dollar, the United Kingdom Pound Sterling, the Euro and the Australian dollar, has changed substantially in recent years and may fluctuate substantially in the future, and this fluctuation in currencies had a material and adverse effect on our operating results in fiscal 2011, fiscal 2010 and fiscal 2009. We expect that a majority of our revenues will continue to be generated in foreign currencies, including the U.S. dollar, the United Kingdom Pound Sterling, the Euro and the Australian dollar, for the foreseeable future and that a significant portion of our expenses, including personnel costs, as well as capital and operating expenditures, will continue to be denominated in Indian rupees. Consequently, the results of our operations are adversely affected as the Indian rupee appreciates against the U.S. dollar and other foreign currencies.
 
We use derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecast cash flows denominated in certain foreign currencies. As of March 31, 2011, we had outstanding forward contracts of U.S. $546 million, Euro 28 million, United Kingdom Pound Sterling 15 million and Australian dollar 10 million. Although we believe that these financial instruments constitute hedges from an economic perspective, they do not qualify for hedge accounting under IAS 39, Financial Instruments: Recognition and Measurement. We may not purchase derivative instruments adequate to insulate ourselves from foreign currency exchange risks. For instance, during fiscal 2009, we incurred significant losses as a result of exchange rate fluctuations that were not offset in full by our hedging strategy.
 
Additionally, our hedging activities have also contributed to increased losses in recent periods due to volatility in foreign currency markets. For example, in fiscal 2009, we incurred losses of $165 million in our forward and option contracts. These losses, partially offset by gains of $71 million as a result of foreign exchange translations during the same period, resulted in a total loss of $94 million related to foreign currency transactions, which had a significant and adverse effect on our profit margin and results of operations. If foreign currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely affect our profit margins and results of operations in future periods. Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively.
 
Further, the policies of the Reserve Bank of India may change from time to time which may limit our ability to hedge our foreign currency exposures adequately. In addition, a high-level committee appointed by the Reserve Bank of India recommended that India move to increased capital account convertibility over the next few years and proposed a framework for such increased convertibility. Full or increased capital account convertibility, if introduced, could result in increased volatility in the fluctuations of exchange rates between the rupee and foreign currencies.
 
During fiscal 2011, we derived 27.2% of our revenues in currencies other than the U.S. dollar including 7.2%, 6.9% and 6.5% of our revenues in United Kingdom Pound Sterling, Euro and Australian dollars, respectively. For the year ended March 31, 2011, the U.S. dollar depreciated against a majority of the currencies in which we transact business, with the U.S. dollar depreciating by 3.1% and 6.4% against the United Kingdom Pound Sterling and Euro, respectively. These cross currency fluctuations adversely impacted our reported revenues for fiscal 2011 and may adversely impact our reported revenues in future periods.
 
Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar will also affect the dollar conversion by Deutsche Bank Trust Company Americas, the Depositary with respect to our ADSs, of any cash dividends paid in Indian rupees on the equity shares represented by the ADSs. In addition, these fluctuations will affect the U.S. dollar equivalent of the Indian rupee price of equity shares on the Indian stock exchanges and, as a result, the prices of our ADSs in the United States, as well as the U.S. dollar value of the proceeds a holder would receive upon the sale in India of any equity shares withdrawn from the Depositary under the Depositary Agreement. Holders may not be able to convert Indian rupee proceeds into U.S. dollars or any other currency, and there is no guarantee of the rate at which any such conversion will occur, if at all.
 
Our success depends largely upon our highly skilled technology professionals and our ability to hire, attract, motivate, retain and train these personnel.
 
Our ability to execute projects, maintain our client relationships and obtain new clients depends largely on our ability to attract, train, motivate and retain highly skilled technology professionals, particularly project managers and other mid-level professionals. If we cannot hire, motivate and retain personnel, our ability to bid for projects, obtain new projects and expand our business will be impaired and our revenues could decline.
 
We believe that there is significant worldwide competition for skilled technology professionals. Additionally, technology companies, particularly in India, have recently increased their hiring efforts. Increasing worldwide competition for skilled technology professionals and increased hiring by technology companies may affect our ability to hire an adequate number of skilled and experienced technology professionals and may have an adverse effect on our business, results of operations and financial condition.
 
Increasing competition for technology professionals in India may also impact our ability to retain personnel. For example, our attrition rate for the twelve months ended March 31, 2011 was 17.0%, compared to our attrition rate for the twelve months ended March 31, 2010, which was 13.4%, without accounting for attrition in Infosys BPO or our other subsidiaries. We may not be able to hire enough skilled and experienced technology professionals to replace employees who we are not able to retain. If we are unable to motivate and retain technology professionals, this could have an adverse effect on our business, results of operations and financial condition.
 
Changes in policies or laws may also affect the ability of technology companies to attract and retain personnel. For instance, the central government or state governments in India may introduce legislation requiring employers to give preferential hiring treatment to underrepresented groups. The quality of our work force is critical to our business. If any such central government or state government legislation becomes effective, our ability to hire the most highly qualified technology professionals may be hindered.
 
In addition, the demands of changes in technology, evolving standards and changing client preferences may require us to redeploy and retrain our technology professionals. If we are unable to redeploy and retrain our technology professionals to keep pace with continuing changes in technology, evolving standards and changing client preferences, this may adversely affect our ability to bid for and obtain new projects and may have a material adverse effect on our business, results of operations and financial condition.
 
Any inability to manage our growth could disrupt our business and reduce our profitability.
 
We have grown significantly in recent periods. Between March 31, 2007 and March 31, 2011 our total employees grew from approximately 72,200 to approximately 130,800. We added approximately 17,000, 8,900 and 13,600 new employees, net of attrition, in fiscal 2011, fiscal 2010 and fiscal 2009, respectively. As of March 31, 2011, we had approximately 130,800 employees. In addition, in the last five years we have undertaken and continue to undertake major expansions of our existing facilities, as well as the construction of new facilities. We expect our growth to place significant demands on our management team and other resources. Our growth will require us to continuously develop and improve our operational, financial and other internal controls, both in India and elsewhere. In addition, continued growth increases the challenges involved in:
Our growth strategy also relies on the expansion of our operations to other parts of the world, including Europe, Australia, Latin America and other parts of Asia. During fiscal 2004, we established Infosys China and also acquired Infosys Australia to expand our operations in those countries. In fiscal 2005, we formed Infosys Consulting to focus on consulting services in the United States. In addition, we have embarked on an expansion of our business in China, and have expended significant resources in this expansion. During fiscal 2008, we established a wholly owned subsidiary and opened a development center in Mexico. Also, during fiscal 2008, as part of an outsourcing agreement with a client, Philips Electronics Nederland B.V. (“Philips”), our majority owned subsidiary, Infosys BPO, acquired from Koninklijke Philips Electronics N.V. certain shared services centers in India, Poland and Thailand that were engaged in the provision of finance, accounting and procurement support services to Philips' operations worldwide. In fiscal 2010, we established a wholly-owned subsidiary, Infosys Tecnologia do Brasil Ltda, in Brazil to provide information technology services in Latin America. Further, during fiscal 2010, we formed Infosys Public Services, Inc. to focus on governmental outsourcing and consulting in the United States. The costs involved in entering and establishing ourselves in new markets, and expanding such operations, may be higher than expected and we may face significant competition in these regions. Our inability to manage our expansion and related growth in these markets or regions may have an adverse effect on our business, results of operations and financial condition.
 
We may face difficulties in providing end-to-end business solutions for our clients, which could lead to clients discontinuing their work with us, which in turn could harm our business.
 
Over the past several years, we have been expanding the nature and scope of our engagements by extending the breadth of services that we offer. The success of some of our newer service offerings, such as operations and business process consulting, IT consulting, business process management, systems integration and infrastructure management, depends, in part, upon continued demand for such services by our existing and new clients and our ability to meet this demand in a cost-competitive and effective manner. In addition, our ability to effectively offer a wider breadth of end-to-end business solutions depends on our ability to attract existing or new clients to these service offerings. To obtain engagements for our end-to-end solutions, we are competing with large, well-established international consulting firms as well as other India-based technology services companies, resulting in increased competition and marketing costs. Accordingly, our new service offerings may not effectively meet client needs and we may be unable to attract existing and new clients to these service offerings.
 
The increased breadth of our service offerings may result in larger and more complex client projects. This will require us to establish closer relationships with our clients and potentially with other technology service providers and vendors, and require a more thorough understanding of our clients' operations. Our ability to establish these relationships will depend on a number of factors including the proficiency of our technology professionals and our management personnel.
 
Larger projects often involve multiple components, engagements or stages, and a client may choose not to retain us for additional stages or may cancel or delay additional planned engagements. These terminations, cancellations or delays may result from the business or financial condition of our clients or the economy generally, as opposed to factors related to the quality of our services. Cancellations or delays make it difficult to plan for project resource requirements, and resource planning inaccuracies may have a negative impact on our profitability.
 
Intense competition in the market for technology services could affect our cost advantages, which could reduce our share of business from clients and decrease our revenues.
 
The technology services market is highly competitive. Our competitors include large consulting firms, captive divisions of large multinational technology firms, infrastructure management services firms, Indian technology services firms, software companies and in-house IT departments of large corporations.
 
The technology services industry is experiencing rapid changes that are affecting the competitive landscape, including recent divestitures and acquisitions that have resulted in consolidation within the industry. These changes may result in larger competitors with significant resources. In addition, some of our competitors have added or announced plans to add cost-competitive offshore capabilities to their service offerings. These competitors may be able to offer their services using the offshore and onsite model more efficiently than we can. Many of these competitors are also substantially larger than us and have significant experience with international operations. We may face competition in countries where we currently operate, as well as in countries in which we expect to expand our operations. We also expect additional competition from technology services firms with current operations in other countries, such as China and the Philippines. Many of our competitors have significantly greater financial, technical and marketing resources, generate greater revenues, have more extensive existing client relationships and technology partners and have greater brand recognition than we do. We may be unable to compete successfully against these competitors, or may lose clients to these competitors. Additionally, we believe that our ability to compete also depends in part on factors outside our control, such as the price at which our competitors offer comparable services, and the extent of our competitors' responsiveness to their clients' needs.
 
Our revenues are highly dependent upon a small number of clients, and the loss of any one of our major clients could significantly impact our business.
 
We have historically earned, and believe that in the future we will continue to earn, a significant portion of our revenues from a limited number of clients. In fiscal 2011, fiscal 2010 and fiscal 2009, our largest client accounted for 4.7%, 4.6% and 6.9% of our total revenues, respectively, and our five largest clients together accounted for 15.4%, 16.4% and 18.0% of our total revenues, respectively. The volume of work we perform for specific clients is likely to vary from year to year, particularly since we historically have not been the exclusive external technology services provider for our clients. Thus, a major client in one year may not provide the same level of revenues in a subsequent year. However, in any given year, a limited number of clients tend to contribute a significant portion of our revenues. There are a number of factors, other than our performance, that could cause the loss of a client and that may not be predictable. In certain cases, we have significantly reduced the services provided to a client when the client either changed its outsourcing strategy by moving more work in-house or replaced its existing software with packaged software supported by the licensor. Reduced technology spending in response to a challenging economic or competitive environment may also result in our loss of a client. If we lose one of our major clients or one of our major clients significantly reduces its volume of business with us or there is an increase in the accounts receivables from any of our major clients, our revenues and profitability could be reduced.
 
Legislation in certain countries in which we operate, including the United States and the United Kingdom, may restrict companies in those countries from outsourcing work to us, or may limit our ability to send our employees to our client sites.
 
Recently, some countries and organizations have expressed concerns about a perceived association between offshore outsourcing and the loss of jobs. With the growth of offshore outsourcing receiving increasing political and media attention, especially in the United States, which is our largest market, and particularly given the prevailing economic environment, it is possible that there could be a change in the existing laws or the enactment of new legislation restricting offshore outsourcing or imposing restrictions on the deployment of, and regulating the wages of, work visa holders at client locations, which may adversely impact our ability to do business in the jurisdictions in which we operate, especially with governmental entities. For instance, the Governor of the State of Ohio recently issued an executive order that prohibits governmental entities of the State of Ohio from expending public funds for services that are provided offshore. It is also possible that private sector companies working with these governmental entities may be restricted from outsourcing projects related to government contracts or may face disincentives if they outsource certain operations.
 
The recent credit crisis in the United States and elsewhere has also resulted in the United States federal government and governments in Europe acquiring or proposing to acquire equity positions in leading financial institutions and banks. If either the United States federal government or another governmental entity acquires an equity position in any of our clients, any resulting changes in management or reorganizations may result in deferrals or cancellations of projects or delays in purchase decisions, which may have a material adverse effect on our business, results of operations or financial condition. Moreover, equity investments by governmental entities in, or governmental financial aid to, our clients may involve restrictions on the ability of such clients to outsource offshore or otherwise restrict offshore IT vendors from utilizing the services of work visa holders at client locations. Any restriction on our ability to deploy our trained offshore resources at client locations may in turn require us to replace our existing offshore resources with local resources, or hire additional local resources, which local resources may only be available at higher wages. Any resulting increase in our compensation, hiring and training expenses could adversely impact our revenues and operating profitability.
 
In addition, the European Union (EU) member states have adopted the Acquired Rights Directive, while some European countries outside of the EU have enacted similar legislation. The Acquired Rights Directive and certain local laws in European countries that implement the Acquired Rights Directive, such as the Transfer of Undertakings (Protection of Employees) Regulations, or TUPE, in the United Kingdom, allow employees who are dismissed as a result of "service provision changes", which may include outsourcing to non-EU companies, to seek compensation either from the company from which they were dismissed or from the company to which the work was transferred. This could deter EU companies from outsourcing work to us and could also result in our being held liable for redundancy payments to such workers. Any such event could adversely affect our revenues and operating profitability.
 
Restrictions on immigration may affect our ability to compete for and provide services to clients in the United States, which could hamper our growth and cause our revenues to decline.

The vast majority of our employees are Indian nationals. Most of our projects require a portion of the work to be completed at the client's location. The ability of our technology professionals to work in the United States, Europe and in other countries depends on the ability to obtain the necessary visas and work permits.

As of March 31, 2011, the majority of our technology professionals in the United States held either H-1B visas (approximately 10,100 persons, not including Infosys BPO employees or employees of our wholly owned subsidiaries), which allow the employee to remain in the United States for up to six years during the term of the work permit and work as long as he or she remains an employee of the sponsoring firm, or L-1 visas (approximately 2,200 persons, not including Infosys BPO employees or employees of our wholly owned subsidiaries), which allow the employee to stay in the United States only temporarily. Although there is no limit to new L-1 visas, there is a limit to the aggregate number of new H-1B visas that the U.S. Citizenship and Immigration Services, or CIS, may approve in any government fiscal year which is 85,000 annually. 20,000 of these visas are only available to skilled workers who possess a Master's or higher degree from institutions of higher education in the United States. Further, in response to the terrorist attacks in the United States, the CIS has increased its level of scrutiny in granting new visas. This may, in the future, also lead to limits on the number of L-1 visas granted. In addition, the granting of L-1 visas precludes companies from obtaining such visas for employees with specialized knowledge: (1) if such employees will be stationed primarily at the worksite of another company in the U.S. and the employee will not be controlled and supervised by his or her employer, or (2) if such offsite placement is essentially an arrangement to provide labor for hire rather than in connection with the employee's specialized knowledge. Immigration laws in the United States may also require us to meet certain levels of compensation, and to comply with other legal requirements, including labor certifications, as a condition to obtaining or maintaining work visas for our technology professionals working in the United States.

Immigration laws in the United States and in other countries are subject to legislative change, as well as to variations in standards of application and enforcement due to political forces and economic conditions. For instance, the U.S. government is considering the enactment of an Immigration Reform Bill, and the United Kingdom government has recently introduced an interim limit on the number of visas that may be granted. Further, effective August 14, 2010, the CIS has announced a fee increase of $2,000 for certain H-1B visa petitions and $2,250 for certain L-1 visa petitions. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or monitoring work visas for our technology professionals. Our reliance on work visas for a significant number of technology professionals makes us particularly vulnerable to such changes and variations as it affects our ability to staff projects with technology professionals who are not citizens of the country where the work is to be performed. As a result, we may not be able to obtain a sufficient number of visas for our technology professionals or may encounter delays or additional costs in obtaining or maintaining the conditions of such visas. Additionally, we may have to apply in advance for visas and this could result in additional expenses during certain quarters of the fiscal year.

Recently, one of our employees filed a lawsuit against us which alleged, among other things, that we were improperly utilizing the U.S. B-1 business visitor visa program. Following the filing of such lawsuit, a United States senator submitted a letter to U.S. Secretary of State and Secretary of Homeland Security, requesting that their respective departments review the B-1 business visa program and investigate the manner in which it is being utilized by companies, including Infosys. In the event that the U.S. government undertakes any actions which limit the B-1 business visa program or other visa program that we utilize, this could materially and adversely affect our business and results of operations.
 
Our success depends in large part upon our management team and key personnel and our ability to attract and retain them.
 
We are highly dependent on the senior members of our Board and the management team, including the continued efforts of our Chairman, our Chief Executive Officer, our Chief Operating Officer, our Chief Financial Officer, other executive members of the Board and members of our executive council which consists of certain executive and other officers. Our future performance will be affected by any disruptions in the continued service of our directors, executives and other officers. For instance, in April 2011 we announced significant changes to our board of directors and senior management. We cannot assure you that the departure of directors and the transition of management personnel will not cause disruption to our operations or customer relationships, or materially impact our results of operations.
 
Competition for senior management in our industry is intense, and we may not be able to retain senior management personnel or attract and retain new senior management personnel in the future. Furthermore, we do not maintain key man life insurance for any of the senior members of our management team or other key personnel. The loss of any member of our senior management or other key personnel may have a material adverse effect on our business, results of operations and financial condition.
 
Our failure to complete fixed-price, fixed-timeframe contracts or transaction-based pricing contracts within budget and on time may negatively affect our profitability.
 
As an element of our business strategy, in response to client requirements and pressures on IT budgets, we are offering an increasing portion of our services on a fixed-price, fixed-timeframe basis, rather than on a time-and-materials basis. In fiscal 2011, fiscal 2010 and fiscal 2009, revenues from fixed-price, fixed-timeframe projects accounted for 40.3%, 38.5% and 35.4% of our total services revenues, respectively, including revenues from our business process management services. In addition, pressure on the IT budgets of our clients has led us to deviate from our standard pricing policies and to offer varied pricing models to our clients in certain situations in order to remain competitive. For example, we have recently begun entering into transaction-based pricing contracts with certain clients in order to give our clients the flexibility to pay as they use our services.
 
The risk of entering into fixed-price, fixed-timeframe arrangements and transaction-based pricing arrangements is that if we fail to properly estimate the appropriate pricing for a project, we may incur lower profits or losses as a result of being unable to execute projects on the timeframe and with the amount of labor we expected. Although we use our software engineering methodologies and processes and past project experience to reduce the risks associated with estimating, planning and performing fixed-price, fixed-timeframe projects and transaction-based pricing projects, we bear the risk of cost overruns, completion delays and wage inflation in connection with these projects. If we fail to estimate accurately the resources and time required for a project, future wage inflation rates, or currency exchange rates, or if we fail to complete our contractual obligations within the contracted timeframe, our profitability may suffer. We expect that we will continue to enter into fixed-price, fixed-timeframe and transaction-based pricing engagements in the future, and such engagements may increase in relation to the revenues generated from engagements on a time-and-materials basis, which would increase the risks to our business.
 
Our client contracts can typically be terminated without cause and with little or no notice or penalty, which could negatively impact our revenues and profitability.
 
Our clients typically retain us on a non-exclusive, project-by-project basis. Most of our client contracts, including those that are on a fixed-price, fixed-timeframe basis, can be terminated with or without cause, with between zero and 90 days notice and without any termination-related penalties. Our business is dependent on the decisions and actions of our clients, and there are a number of factors relating to our clients that are outside of our control which might lead to termination of a project or the loss of a client, including:
Our inability to control the termination of client contracts could have a negative impact on our financial condition and results of operations.
 
Our engagements with customers are singular in nature and do not necessarily provide for subsequent engagements.
 
Our clients generally retain us on a short-term, engagement-by-engagement basis in connection with specific projects, rather than on a recurring basis under long-term contracts. Although a substantial majority of our revenues are generated from repeat business, which we define as revenue from a client who also contributed to our revenue during the prior fiscal year, our engagements with our clients are typically for projects that are singular in nature. Therefore, we must seek out new engagements when our current engagements are successfully completed or are terminated, and we are constantly seeking to expand our business with existing clients and secure new clients for our services. In addition, in order to continue expanding our business, we may need to significantly expand our sales and marketing group, which would increase our expenses and may not necessarily result in a substantial increase in business. If we are unable to generate a substantial number of new engagements for projects on a continual basis, our business and results of operations would likely be adversely affected.
 
Our client contracts are often conditioned upon our performance, which, if unsatisfactory, could result in less revenue than previously anticipated.
 
A number of our contracts have incentive-based or other pricing terms that condition some or all of our fees on our ability to meet defined performance goals or service levels. Our failure to meet these goals or a client's expectations in such performance-based contracts may result in a less profitable or an unprofitable engagement.
 
Some of our long-term client contracts contain benchmarking provisions which, if triggered, could result in lower future revenues and profitability under the contract.
 
As the size and duration of our client engagements increase, clients may increasingly require benchmarking provisions. Benchmarking provisions allow a customer in certain circumstances to request a benchmark study prepared by an agreed upon third-party comparing our pricing, performance and efficiency gains for delivered contract services to that of an agreed upon list of other service providers for comparable services. Based on the results of the benchmark study and depending on the reasons for any unfavorable variance, we may be required to reduce the pricing for future services performed under the balance of the contract, which could have an adverse impact on our revenues and profitability. Benchmarking provisions in our client engagements may have a greater impact on our results of operations during an economic slowdown, because pricing pressure and the resulting decline in rates may lead to a reduction in fees that we charge to clients that have benchmarking provisions in their engagements with us.
 
Our increasing work with governmental agencies may expose us to additional risks.
 
Currently, the vast majority of our clients are privately or publicly owned. However, we are increasingly bidding for work with governments and governmental agencies, both within and outside the United States. Projects involving governments or governmental agencies carry various risks inherent in the government contracting process, including the following:
In addition, we operate in jurisdictions in which local business practices may be inconsistent with international regulatory requirements, including anti-corruption and anti-bribery regulations prescribed under the U.S. Foreign Corrupt Practices Act (“FCPA”), and the Bribery Act 2010 (U.K.), which, among other things, prohibits giving or offering to give anything of value with the intent to influence the awarding of government contracts. Although we believe that we have adequate policies and enforcement mechanisms to ensure legal and regulatory compliance with the FCPA, the Bribery Act 2010 and other similar regulations, it is possible that some of our employees, subcontractors, agents or partners may violate any such legal and regulatory requirements, which may expose us to criminal or civil enforcement actions, including penalties and suspension or disqualification from U.S. federal procurement contracting. If we fail to comply with legal and regulatory requirements, our business and reputation may be harmed.
 
Any of the above factors could have a material and adverse effect on our business or our results of operations.
 
Our business will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and in the industries on which we focus.
 
The technology services market is characterized by rapid technological change, evolving industry standards, changing client preferences and new product and service introductions. Our future success will depend on our ability to anticipate these advances and develop new product and service offerings to meet client needs. We may fail to anticipate or respond to these advances in a timely basis, or, if we do respond, the services or technologies that we develop may not be successful in the marketplace. The development of some of the services and technologies may involve significant upfront investments and the failure of these services and technologies may result in our being unable to recover these investments, in part or in full. Further, products, services or technologies that are developed by our competitors may render our services non-competitive or obsolete.
 
We have recently introduced, and propose to introduce, several new solutions involving complex delivery models combined with innovative, and often transaction based, pricing models. Some of our solutions, including the Software as a Service, or SaaS, solution, are often based on a transaction-based pricing model even though these solutions require us to incur significant upfront costs. The complexity of these solutions, our inexperience in developing or implementing them and significant competition in the markets for these solutions may affect our ability to market these solutions successfully. Further, customers may not adopt these solutions widely and we may be unable to recover any investments made in these solutions. Even if these solutions are successful in the market, the dependence of these solutions on third party hardware and software and on our ability to meet stringent service levels in providing maintenance or support services may result in our being unable to deploy these solutions successfully or profitably. Further, where we offer a transaction-based pricing model in connection with an engagement, we may also be unable to recover any upfront costs incurred in solutions deployed by us in full.
 
Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.
 
Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations, NASDAQ Global Select Market rules, Securities and Exchange Board of India or SEBI rules and Indian stock market listing regulations are creating uncertainty for companies like ours. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.
 
In particular, continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting requires the commitment of significant financial and managerial resources and external auditor's independent assessment of the internal control over financial reporting.
 
In connection with our Annual Report on Form 20-F for fiscal 2011, our management assessed our internal controls over financial reporting, and determined that our internal controls were effective as of March 31, 2011, and our independent auditors have expressed an unqualified opinion over the effectiveness of our internal control over financial reporting as of the end of such period. However, we will undertake management assessments of our internal control over financial reporting in connection with each annual report, and any deficiencies uncovered by these assessments or any inability of our auditors to issue an unqualified opinion could harm our reputation and the price of our equity shares and ADSs.
 
Further, during 2009 and continuing into 2011, there has been an increased focus on corporate governance by the U.S. Congress and by the SEC in response to the recent credit and financial crisis in the United States. As a result of this increased focus, additional corporate governance standards have been promulgated with respect to companies whose securities are listed in the United States, including by way of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and more governance standards are expected to be imposed on companies whose securities are listed in the United States in the near future.
 
It is also possible that laws in India may be made more stringent with respect to standards of accounting, auditing, public disclosure and corporate governance. We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
 
In addition, it may become more expensive or more difficult for us to obtain director and officer liability insurance. Further, our Board members, Chief Executive Officer, and Chief Financial Officer could face an increased risk of personal liability in connection with their performance of duties and our SEC reporting obligations. As a result, we may face difficulties attracting and retaining qualified Board members and executive officers, which could harm our business. If we fail to comply with new or changed laws or regulations, our business and reputation may be harmed.
 
Disruptions in telecommunications, system failures, or virus attacks could harm our ability to execute our Global Delivery Model, which could result in client dissatisfaction and a reduction of our revenues.
 
A significant element of our distributed project management methodology, which we refer to as our Global Delivery Model, is to continue to leverage and expand our global development centers. We currently have 63 global development centers located in various countries around the world. Our global development centers are linked with a telecommunications network architecture that uses multiple service providers and various satellite and optical links with alternate routing. We may not be able to maintain active voice and data communications between our various global development centers and our clients' sites at all times due to disruptions in these networks, system failures or virus attacks. Any significant failure in our ability to communicate could result in a disruption in business, which could hinder our performance or our ability to complete client projects on time. This, in turn, could lead to client dissatisfaction and a material adverse effect on our business, results of operations and financial condition.
 
We may be liable to our clients for damages caused by disclosure of confidential information, system failures, errors or unsatisfactory performance of services.
 
We are often required to collect and store sensitive or confidential client and customer data. Many of our client agreements do not limit our potential liability for breaches of confidentiality. If any person, including any of our employees, penetrates our network security or misappropriates sensitive data, we could be subject to significant liability from our clients or from our clients' customers for breaching contractual confidentiality provisions or privacy laws. Unauthorized disclosure of sensitive or confidential client and customer data, whether through breach of our computer systems, systems failure or otherwise, could damage our reputation and cause us to lose clients.
 
Many of our contracts involve projects that are critical to the operations of our clients' businesses, and provide benefits which may be difficult to quantify. Any failure in a client's system or breaches of security could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Furthermore, any errors by our employees in the performance of services for a client, or poor execution of such services, could result in a client terminating our engagement and seeking damages from us.
 
Although we generally attempt to limit our contractual liability for consequential damages in rendering our services, these limitations on liability may be unenforceable in some cases, or may be insufficient to protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors or omissions, however, this coverage may not continue to be available on reasonable terms and may be unavailable in sufficient amounts to cover one or more large claims. Also an insurer might disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirement, could adversely affect our operating results.
 
Recently, many of our clients have been seeking more favorable terms from us in our contracts, particularly in connection with clauses related to the limitation of our liability for damages resulting from unsatisfactory performance of services. The inclusion of such terms in our client contracts, particularly where they relate to our attempt to limit our contractual liability for damages, may increase our exposure to liability in the case of our failure to perform services in a manner required under the relevant contracts. Further, any damages resulting from such failure, particularly where we are unable to recover such damages in full from our insurers, may adversely impact our business, revenues and operating margins. 
 
We are investing substantial cash assets in new facilities and physical infrastructure, and our profitability could be reduced if our business does not grow proportionately.
 
As of March 31, 2011, we had contractual commitments of approximately $183 million for capital expenditures, particularly related to the expansion or construction of facilities. We may encounter cost overruns or project delays in connection with new facilities. These expansions will increase our fixed costs. If we are unable to grow our business and revenues proportionately, our profitability will be reduced.
 
We may be unable to recoup our investment costs to develop our software products.
 
In fiscal 2011, fiscal 2010 and fiscal 2009, we earned 4.9%, 4.2% and 3.9% of our total revenue from the licensing of software products, respectively. The development of our software products requires significant investments. The markets for our primary suite of software products which we call FinacleTM are competitive. Our current software products or any new software products that we develop may not be commercially successful and the costs of developing such new software products may not be recouped. Since software product revenues typically occur in periods subsequent to the periods in which the costs are incurred for the development of such software products, delayed revenues may cause periodic fluctuations in our operating results.
 
Our insiders who are significant shareholders may control the election of our Board and may have interests which conflict with those of our other shareholders or holders of our ADSs.
 
Our executive officers and directors, together with members of their immediate families, beneficially owned, in the aggregate, 12.97% of our issued equity shares as of May 5, 2011. As a result, acting together, this group has the ability to exercise significant control over most matters requiring our shareholders' approval, including the election and removal of directors and significant corporate transactions.
 
We may engage in acquisitions, strategic investments, strategic partnerships or alliances or other ventures that may or may not be successful.
 
We may acquire or make strategic investments in complementary businesses, technologies, services or products, or enter into strategic partnerships or alliances with third parties in order to enhance our business. For example, during fiscal 2008, as part of an outsourcing agreement with Philips, our majority-owned subsidiary, Infosys BPO, acquired from Koninklijke Philips Electronics N.V. certain shared services centers in India, Poland and Thailand that were engaged in the provision of finance, accounting and procurement support services to Philips' operations worldwide. Further, during fiscal 2010, Infosys BPO completed the acquisition of McCamish Systems LLC. 
 
It is possible that we may not identify suitable acquisitions, candidates for strategic investment or strategic partnerships, or if we do identify suitable targets, we may not complete those transactions on terms commercially acceptable to us, or at all. Our inability to identify suitable acquisition targets or investments or our inability to complete such transactions may affect our competitiveness and growth prospects.
 
Even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or because the target is acquired by another company. Furthermore, in the event that we are able to identify and consummate any future acquisitions, we could:
These financing activities or expenditures could harm our business, operating results and financial condition or the price of our common stock. Alternatively, due to difficulties in the capital and credit markets, we may be unable to secure capital on acceptable terms, if at all, to complete acquisitions.
 
Moreover, even if we do obtain benefits from acquisitions in the form of increased sales and earnings, there may be a delay between the time when the expenses associated with an acquisition are incurred and the time when we recognize such benefits.
 
Further, if we acquire a company, we could have difficulty in assimilating that company's personnel, operations, technology and software. In addition, the key personnel of the acquired company may decide not to work for us. These difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses.
 
We have made and may in the future make strategic investments in early-stage technology start-up companies in order to gain experience in or exploit niche technologies. However, our investments may not be successful. The lack of profitability of any of our investments could have a material adverse effect on our operating results.
 
We may be the subject of litigation which, if adversely determined, could harm our business and operating results.

We are, and may in the future be, subject to claims arising in the normal course of business. An unfavorable outcome on any litigation matter could require that we pay substantial damages, or, in connection with any intellectual property infringement claims, could require that we pay ongoing royalty payments or could prevent us from selling certain of our products. In addition, we may decide to settle any litigation, which could cause us to incur significant costs. A settlement or an unfavorable outcome on any litigation matter could have a material adverse effect on our business, operating results, financial position or cash flows.

The markets in which we operate are subject to the risk of earthquakes, floods, tsunamis and other natural and manmade disasters.

Some of the regions that we operate in are prone to earthquakes, floods, tsunamis and other natural and manmade disasters. In the event that any of our business centers are affected by any such disasters, we may sustain damage to our operations and properties, suffer significant financial losses and be unable to complete our client engagements in a timely manner, if at all. Further, in the event of a natural disaster, we may also incur costs in redeploying personnel and property. For instance, on account of the natural calamities in Japan in March 2011, and the resulting fallout of nuclear radiation from damaged nuclear power plants, we were required to temporarily relocate some of the employees from our offices in Japan to India. In addition if there is a major earthquake, flood or other natural disaster in any of the locations in which our significant customers are located, we face the risk that our customers may incur losses, or sustained business interruption, which may materially impair their ability to continue their purchase of products or services from us. A major earthquake, flood or other natural disaster in the markets in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Risks Related to Investments in Indian Companies and International Operations Generally
 
Our net income would decrease if the Government of India reduces or withdraws tax benefits and other incentives it provides to us or when our tax holidays expire or terminate.
 
We benefit from the tax incentives the Government of India provides to the export of software from specially designated software technology parks, or STPs, in India and for facilities set up under the Special Economic Zones Act, 2005.
 
As per the original provisions of the Indian Income Tax Act, the STP tax holiday was available for ten consecutive years beginning from the financial year when the unit started producing computer software or April 1, 1999, whichever is earlier. The Indian Government, through the Finance Act, 2009, had extended the tax holiday for STP units until March 31, 2011. During the fiscal 2011, one of our STP units was under tax holiday. Since the Finance Act, 2011 has not extended the tax holiday for STP units beyond March 31, 2011, the tax benefits for the unit have expired. As at March 31, 2011, all of our STP units have already completed the tax holiday period.
 
In the Finance Act, 2005, the Government of India introduced a separate tax holiday scheme for units set up under designated special economic zones, or SEZs, engaged in manufacture of articles or in provision of services. Under this scheme, units in designated SEZs which begin providing services on or after April 1, 2005, will be eligible for a deduction of 100 percent of profits or gains derived from the export of software or services for the first five years from commencement of provision of software or services and 50 percent of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions.
 
As a result of these tax incentives, a portion of our pre-tax income has not been subject to significant tax in recent years. These tax incentives, excluding the effect of overseas taxes, resulted in a decrease of $173 million and $223 million in our income tax expense for fiscal 2011 and fiscal 2010 respectively, compared to the effective tax amounts that we estimate we would have been required to pay if these incentives had not been available.
 
In August 2010, the Direct Taxes Code Bill, 2010 was introduced in the Indian Parliament. The Direct Taxes Code Bill, if enacted, is intended to replace the Indian Income Tax Act beginning on April 1, 2012. The Direct Taxes Code Bill proposes that while profit-linked tax benefits for existing units in SEZs will continue for the unexpired portions of the applicable tax holiday period, such tax benefits will not be available to new units in SEZs that become operational after March 31, 2014.
 
Further, the Finance Act, 2007, had included income eligible for deductions under Section 10A of the Indian Income Tax Act in the computation of book profits for the levy of a Minimum Alternative Tax, or MAT. Effective April 1, 2011, the Finance Act, 2011 has extended MAT to SEZ operating as also SEZ developer units. Income in respect of which a deduction may be claimed under section 10AA or section 80IAB of the Indian Income Tax Act has therefore to be included in book profits for computing MAT liability. The Finance Act, 2011 has increased the effective rate of MAT for domestic companies from 19.93% to 20.01% (inclusive of a surcharge and education cess) of book profits. With growth of business in SEZ units, we may have to compute our tax liability under MAT in future years.

The Income Tax Act provides that the MAT paid by us can be adjusted against our regular tax liability over the next ten years. Although MAT paid by us can be set off against our future tax liability, due to the introduction of MAT, our net income and cash flows for intervening periods could be adversely affected.
 
The Direct Taxes Code Bill also proposes the rate of MAT to be 20% (including surcharges) on the book profits of domestic companies, and the amounts paid towards MAT are expected to be adjusted against regular tax liability over a fifteen year period.
 
The expiration, modification or termination of any of our tax benefits or holidays, including on account of non-availability of the SEZ tax holiday scheme pursuant to the enactment of the Direct Taxes Code Bill, would likely increase our effective tax rates significantly. Any increase in our effective tax liability in India could have a material and adverse effect on our net income.
 
In the event that the Government of India or the government of another country changes its tax policies in a manner that is adverse to us, our tax expense may materially increase, reducing our profitability.
 
In the recent years, the Government of India has introduced a tax on various services provided within India including on the maintenance and repair of software. The Government of India has in the Finance Act, 2008, included services provided in relation to information technology software under the ambit of service tax, if it is in the course or furtherance of the business. Under this tax, service providers are required to pay a tax of 10% (excluding applicable education cess) on the value of services provided to customers. The Government of India may expand the services covered under the ambit of this tax to include various services provided by us. This tax, if expanded, could increase our expenses, and could adversely affect our operating margins and revenues. Although currently there are no material pending or threatened claims against us for service taxes, such claims may be asserted against us in the future. Defending these claims would be expensive, time consuming and may divert our management's attention and resources from operating our company.
 
We operate in jurisdictions that impose transfer pricing and other tax-related regulations on us, and any failure to comply could materially and adversely affect our profitability.
 
We are required to comply with various transfer pricing regulations in India and other countries. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins. Additionally, we operate in several countries and our failure to comply with the local and municipal tax regime may result in additional taxes, penalties and enforcement actions from such authorities. In the event that we do not properly comply with transfer pricing and tax-related regulations, our profitability may be adversely affected.
 
Wage pressures in India and the hiring of employees outside India may prevent us from sustaining our competitive advantage and may reduce our profit margins.
 
Wage costs in India have historically been significantly lower than wage costs in the United States and Europe for comparably skilled professionals, which has been one of our competitive strengths. Although, currently, a vast majority of our workforce consists of Indian nationals, we expect to increase hiring in other jurisdictions, including the United States and Europe. Any such recruitment of foreign nationals is likely to be at wages higher than those prevailing in India and may increase our operating costs and adversely impact our profitability.
 
Further, in certain jurisdictions in which we operate, legislation has been adopted that requires our non-resident alien employees working in such jurisdictions to earn the same wages as similarly situated residents or citizens of such jurisdiction. In jurisdictions where this is required, the compensation expenses for our non-resident alien employees would adversely impact our results of operations. For example, recently, the minimum wages for certain work permit holders in the United Kingdom have been revised upwards, thereby increasing the cost of conducting business in that jurisdiction.
 
Additionally, wage increases in India may prevent us from sustaining this competitive advantage and may negatively affect our profit margins. We have historically experienced significant competition for employees from large multinational companies that have established and continue to establish offshore operations in India, as well as from companies within India. This competition has led to wage pressures in attracting and retaining employees, and these wage pressures have led to a situation where wages in India are increasing at a faster rate than in the United States, which could result in increased costs for companies seeking to employ technology professionals in India, particularly project managers and other mid-level professionals. We may need to increase our employee compensation more rapidly than in the past to remain competitive with other employers, or seek to recruit in other low labor cost jurisdictions to keep our wage costs low. For example, we established a long term retention bonus policy for our senior executives and employees. Under this policy, certain senior executives and employees will be entitled to a yearly cash bonus upon their continued employment with us based upon seniority, their role in the company and their performance. Typically, we undertake an annual compensation review, and, pursuant to such review, the average salaries of our employees have increased significantly. Any compensation increases in the future may result in a material adverse effect on our business, results of operations and financial condition.
 
Terrorist attacks or a war could adversely affect our business, results of operations and financial condition.
 
Terrorist attacks, such as the attacks of September 11, 2001 in the United States, the attacks of July 25, 2008 in Bangalore, the attacks of November 26 to 29, 2008 in Mumbai and other acts of violence or war, such as the continuing conflicts in Iraq and Afghanistan, have the potential to have a direct impact on our clients or on us. To the extent that such attacks affect or involve the United States or Europe, our business may be significantly impacted, as the majority of our revenues are derived from clients located in the United States and Europe. In addition, such attacks may destabilize the economic and political situation in India, may make travel more difficult, may make it more difficult to obtain work visas for many of our technology professionals who are required to work in the United States or Europe, and may effectively reduce our ability to deliver our services to our clients. Such obstacles to business may increase our expenses and negatively affect the results of our operations. Furthermore, any attacks in India could cause a disruption in the delivery of our services to our clients, and could have a negative impact on our business, personnel, assets and results of operations, and could cause our clients or potential clients to choose other vendors for the services we provide. Terrorist threats, attacks or war could make travel more difficult, may disrupt our ability to provide services to our clients and could delay, postpone or cancel our clients' decisions to use our services.
 
Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our operations and cause our business to suffer.
 
South Asia has, from time to time, experienced instances of civil unrest and hostilities among neighboring countries, including between India and Pakistan. In recent years there have been military confrontations between India and Pakistan that have occurred in the region of Kashmir and along the India-Pakistan border. Further, in recent months, Pakistan has been experiencing significant instability and this has heightened the risks of conflict in South Asia. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult and such political tensions could create a greater perception that investments in Indian companies involve higher degrees of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including our equity shares and our ADSs, and on the market for our services.
 
Changes in the policies of the Government of India or political instability could delay the further liberalization of the Indian economy and adversely affect economic conditions in India generally, which could impact our business and prospects.
 
Since 1991, successive Indian governments have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Nevertheless, the role of the Central and State governments in the Indian economy as producers, consumers and regulators has remained significant. The current Government of India, formed in May 2009, has announced policies and taken initiatives that support the continued economic liberalization policies pursued by previous governments. However, these liberalization policies may not continue in the future. The rate of economic liberalization could change, and specific laws and policies affecting technology companies, foreign investment, currency exchange and other matters affecting investment in our securities could change as well. A significant change in India's economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally, and our business in particular.
 
The Indian Government has also announced its intent to make further changes in the policies applicable to Special Economic Zones, or SEZs. Some of our software development centers located at Chandigarh, Chennai, Hyderabad, Mangalore, Mysore, Pune and Trivandrum currently operate in SEZs and many of our proposed development centers are likely to operate in SEZs. If the Government of India changes its policies affecting SEZs in a manner that adversely impact the incentives for establishing and operating facilities in SEZs, our business, results of operations and financial condition may be adversely affected.
 
Political instability could also delay the reform of the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including our equity shares and our ADSs, and on the market for our services.
 
Our international expansion plans subject us to risks inherent in doing business internationally.
 
Currently, we have global development centers in 15 countries around the world, with our largest development centers located in India. We have recently established or intend to establish new development facilities. During fiscal 2004, we established Infosys China and also acquired Infosys Australia to expand our operations in those countries. In fiscal 2005, we formed Infosys Consulting to focus on consulting services in the United States. In fiscal 2008, we established a wholly-owned subsidiary, Infosys Technologies S. De RL De CV ("Infosys Mexico"), in Monterrey, Mexico, to provide business consulting and information technology services for clients in North America, Latin America and Europe. Also, during fiscal 2008, as part of an outsourcing agreement with Philips, our majority-owned subsidiary, Infosys BPO, acquired from Koninklijke Philips Electronics N.V. certain shared services centers in India, Poland and Thailand that are engaged in the provision of finance, accounting and procurement support services to Philips' operations worldwide. In fiscal 2010, we established a wholly-owned subsidiary, Infosys Tecnologia do Brasil Ltda in Brazil to provide information technology services in Latin America. Further, during fiscal 2010, we formed Infosys Public Services, Inc. to focus on governmental outsourcing and consulting in the United States.
 
We also have a very large workforce spread across our various offices worldwide. As of March 31, 2011, we employed approximately 130,800 employees worldwide, and approximately 27,600 of those employees were located outside of India. Because of our global presence, we are subject to additional risks related to our international expansion strategy, including risks related to compliance with a wide variety of treaties, national and local laws, including multiple and possibly overlapping tax regimes, privacy laws and laws dealing with data protection, export control laws, restrictions on the import and export of certain technologies and national and local labor laws dealing with immigration, employee health and safety, and wages and benefits, applicable to our employees located in our various international offices and facilities. We may from time to time be subject to litigation or administrative actions resulting from claims against us by current or former employees, individually or as part of a class action, including for claims of wrongful termination, discrimination (including on grounds of nationality, ethnicity, race, faith, gender, marital status, age or disability), misclassification, payment of redundancy payments under TUPE-type legislation, or other violations of labor laws, or other alleged conduct. Our being held liable for unpaid compensation, redundancy payments, statutory penalties, and other damages arising out of such actions and litigations could adversely affect our revenues and operating profitability. For example, in December 2007, we entered into a voluntary settlement with the California Division of Labor Standards Enforcement regarding the potential misclassification of certain of our current and former employees, whereby we agreed to pay overtime wages that may have been owed to such employees. The total settlement amount was approximately $26 million, including penalties and taxes.
 
In addition, we may face competition in other countries from companies that may have more experience with operations in such countries or with international operations generally. We may also face difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture. As an international company, our offshore and onsite operations may also be impacted by disease, epidemics and local political instability. For instance, some of the regions in which we operate, including North Africa, have experienced political instability in recent times, due to which we were required to temporarily redeploy some of our personnel and property from those regions. Political instability in the regions in which we operate could have a material adverse effect on revenues and profitability.
 
Our international expansion plans may not be successful and we may not be able to compete effectively in other countries. Any of these events could adversely affect our revenues and operating profitability.
 
It may be difficult for holders of our ADSs to enforce any judgment obtained in the United States against us or our affiliates.
 
We are incorporated under the laws of India and many of our directors and executive officers reside outside the United States. Virtually all of our assets are located outside the United States. As a result, holders of our ADSs may be unable to effect service of process upon us outside the United States. In addition, holders of our ADSs may be unable to enforce judgments against us if such judgments are obtained in courts of the United States, including judgments predicated solely upon the federal securities laws of the United States.
 
The United States and India do not currently have a treaty providing for reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States on the basis of civil liability, whether or not predicated solely upon the federal securities laws of the United States, would not be enforceable in India. However, the party in whose favor such final judgment is rendered may bring a new suit in a competent court in India based on a final judgment that has been obtained in the United States. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a foreign judgment in India is required to obtain approval from the Reserve Bank of India under the Foreign Exchange Management Act, 1999, to repatriate any amount recovered pursuant to the execution of such a judgment.
 
Holders of ADSs are subject to the Securities and Exchange Board of India’s Takeover Code with respect to their acquisitions of ADSs or the underlying equity shares, and this may impose requirements on such holders with respect to disclosure and offers to purchase additional ADSs or equity shares.
 
Under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, or the Takeover Code, upon the acquisition of 5%, 10%, 14%, 54% or 74% (or more, in each case) of the outstanding shares or voting rights of a publicly-listed Indian company, the acquirer (meaning a person who directly or indirectly, acquires or agrees to acquire shares or voting rights in a target company, or acquires or agrees to acquire control over the target company, either by himself or together with any person acting in concert) is required to disclose the aggregate of his or her shareholding or voting rights in that target company to the company. The target company and the said acquirer are required to notify all the stock exchanges on which the shares of such company are listed. Further, the Takeover Code requires any person holding more than 15% and less than 55% of the shares or voting rights in a publicly-listed Indian company to disclose to the company and to the stock exchanges on which the equity shares of the company are listed, the sale or acquisition of 2% or more of the shares or voting rights of the company and his or her revised shareholding to the company within two days of such acquisition or sale or receipt of intimation of allotment of such shares. A person who holds more than 15% of the shares or voting rights in any publicly-listed Indian company is required to make an annual disclosure of his or her holdings to that company (which in turn is required to disclose the same and to each of the stock exchanges on which the company's shares are listed).
 
Within four days of the acquisition of or entering into an agreement (whether written or otherwise) to acquire 15% or more of such shares or voting rights, or a change in control of a publicly-listed Indian company by an acquirer along with persons acting in concert, the acquirer is required to make a public announcement to the other shareholders offering to purchase from the other shareholders at least a further 20% of all the outstanding shares of the company at a minimum offer price determined pursuant to the Takeover Code. If an acquirer holding more than 15% but less than 55% of shares acquires or agrees to acquire more than 5% shares during a fiscal year, the acquirer is required to make a public announcement offering to purchase from the other shareholders at least 20% of all the outstanding shares of the company at a minimum offer price determined pursuant to the Takeover Code. Any further acquisition of or agreement to acquire (other than the acquisition of up to 5% of the shares or voting rights of the company on the stock market subject to the post-acquisition holding being less than 75% of the shares or voting rights of the company) outstanding shares or voting rights of a publicly listed company by an acquirer who holds more than 55% but less than 75% of shares or voting rights also requires the making of an open offer to acquire such number of shares as would not result in the public shareholding being reduced to below the minimum specified in the listing agreement. Since we are a publicly-listed company in India, the provisions of the Takeover Code apply to us and to any person acquiring our equity shares or voting rights in our company.
 
Previously, the Takeover Code contained a specific exemption from the above requirements in relation to instruments (such as ADSs) which were convertible into equity shares of a company. However, on November 6, 2009, SEBI amended the Takeover Code. Pursuant to this amendment, instruments such as ADSs are treated in the same manner as shares in respect of the requirement to make an open offer of at least 20% of the shares of a company to the existing shareholders of the company (a) if the holders of such convertible instruments are entitled to exercise voting rights in respect of the shares underlying the instruments, or (b) if the holders of such convertible instruments are not entitled to exercise voting rights in respect of the underlying shares, upon their conversion with the underlying shares carrying voting rights. Under the terms of our Depositary Agreement, holders of our ADSs are entitled to voting rights. These provisions could therefore materially and adversely impact our ADS holders.
 
The laws of India do not protect intellectual property rights to the same extent as those of the United States, and we may be unsuccessful in protecting our intellectual property rights. We may also be subject to third party claims of intellectual property infringement.
 
We rely on a combination of patent, copyright, trademark and design laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property. However, the laws of India do not protect proprietary rights to the same extent as laws in the United States. Therefore, our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information.
 
The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. We may need to litigate to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time consuming and costly. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights increase, we believe that companies in our industry will face more frequent infringement claims. Defense against these claims, even if such claims are not meritorious, could be expensive, time consuming and may divert our management's attention and resources from operating our company. From time to time, third parties have asserted, and may in the future assert, patent, copyright, trademark and other intellectual property rights against us or our customers. Our business partners may have similar claims asserted against them. A number of third parties, including companies with greater resources than Infosys, have asserted patent rights to technologies that we utilize in our business. If we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantial damage award and be forced to develop non-infringing technology, obtain a license or cease selling the applications or products that contain the infringing technology. We may be unable to develop non-infringing technology or to obtain a license on commercially reasonable terms, or at all. An unfavorable outcome in connection with any infringement claim against us as a result of litigation, other proceeding or settlement, could have a material and adverse impact on our business, results of operations and financial position.
 
Our ability to acquire companies organized outside India depends on the approval of the Government of India and/or the Reserve Bank of India, and failure to obtain this approval could negatively impact our business.
 
Generally, the Reserve Bank of India must approve any acquisition by us of any company organized outside of India. The Reserve Bank of India permits acquisitions of companies organized outside of India by an Indian party without approval if the transaction consideration is paid in cash, the transaction value does not exceed 400% of the net worth of the acquiring company as on the date of the latest audited balance sheet, or unless the acquisition is funded with cash from the acquiring company's existing foreign currency accounts or with cash proceeds from the issue of ADRs/GDRs.
 
It is possible that any required approval from the Reserve Bank of India or any other government agency may not be obtained. Our failure to obtain approvals for acquisitions of companies organized outside India may restrict our international growth, which could negatively affect our business and prospects.
 
Indian laws limit our ability to raise capital outside India and may limit the ability of others to acquire us, which could prevent us from operating our business or entering into a transaction that is in the best interests of our shareholders.
 
Indian law relating to foreign exchange management constrains our ability to raise capital outside India through the issuance of equity or convertible debt securities. Generally, any foreign investment in, or acquisition of an Indian company does not require the approval from relevant government authorities in India, including the Reserve Bank of India. However, in a number of industrial sectors, there are restrictions on foreign investment in an Indian Company. Changes to the policies may create restrictions on our capital raising abilities. For example, a limit on the foreign equity ownership of Indian technology companies or pricing restrictions on the issue of ADRs/GDRs may constrain our ability to seek and obtain additional equity investment by foreign investors. In addition, these restrictions, if applied to us, may prevent us from entering into certain transactions, such as an acquisition by a non-Indian company, which might otherwise be beneficial for us and the holders of our equity shares and ADSs.
 
Additionally, under current Indian law, the sale of a technology services company can result in the loss of the tax benefits for specially designed software technology parks in India. The potential loss of this tax benefit may discourage others from acquiring us or entering into a transaction with us that is in the best interest of our shareholders.
 
Risks Related to the ADSs
 
Historically, our ADSs have traded at a significant premium to the trading prices of our underlying equity shares, and may not continue to do so in the future.
 
Historically, our ADSs have traded on NASDAQ at a premium to the trading prices of our underlying equity shares on the Indian stock exchanges. We believe that this price premium has resulted from the relatively small portion of our market capitalization previously represented by ADSs, restrictions imposed by Indian law on the conversion of equity shares into ADSs, and an apparent preference of some investors to trade dollar-denominated securities. We have already completed three secondary ADS offerings and the completion of any additional secondary ADS offering will significantly increase the number of our outstanding ADSs. Also, over time, some of the restrictions on the issuance of ADSs imposed by Indian law have been relaxed and we expect that other restrictions may be relaxed in the future. As a result, the historical premium enjoyed by ADSs as compared to equity shares may be reduced or eliminated upon the completion of any additional secondary offering of our ADSs or similar transactions in the future, a change in Indian law permitting further conversion of equity shares into ADSs or changes in investor preferences.
 
Recently, we have seen the conversion of our ADSs into equity shares in India as the premium on ADSs compared to equity shares has significantly narrowed. If a substantial quantum of our ADSs are converted into underlying equity shares in India, it could affect the liquidity of such ADSs on the NASDAQ market and could impact the price of our ADSs.
  
Sales of our equity shares may adversely affect the prices of our equity shares and ADSs.
 
Sales of substantial amounts of our equity shares, including sales by our insiders in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our equity shares or the ADSs or our ability to raise capital through an offering of our securities. In the future, we may also sponsor the sale of shares currently held by some of our shareholders as we have done in the past, or issue new shares. We can make no prediction as to the timing of any such sales or the effect, if any, that future sales of our equity shares, or the availability of our equity shares for future sale, will have on the market price of our equity shares or ADSs prevailing from time to time.
 
Negative media coverage and public scrutiny may adversely affect the prices of our equity shares and ADSs.
 
Media coverage and public scrutiny of our business practices, policies and actions has increased dramatically over the past several years, particularly through the use of Internet forums and blogs. Any negative media coverage in relation to our business, regardless of the factual basis for the assertions being made, may adversely impact our reputation. Responding to allegations made in the media may be time consuming and could divert the time and attention of our senior management from our business. Any unfavorable publicity may also adversely impact investor confidence and result in sales of our equity shares and ADSs, which may lead to a decline in the share price of our equity shares and our ADSs.
 
Indian law imposes certain restrictions that limit a holder's ability to transfer the equity shares obtained upon conversion of ADSs and repatriate the proceeds of such transfer which may cause our ADSs to trade at a premium or discount to the market price of our equity shares.
 
Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has given general permission to effect sales of existing shares or convertible debentures of an Indian company by a resident to a non-resident, subject to certain conditions, including the price at which the shares may be sold. Additionally, except under certain limited circumstances, if an investor seeks to convert the rupee proceeds from a sale of equity shares in India into foreign currency and then repatriate that foreign currency from India, he or she will have to obtain Reserve Bank of India approval for each such transaction. Required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all.
 
An investor in our ADSs may not be able to exercise preemptive rights for additional shares and may thereby suffer dilution of such investor's equity interest in us.
 
Under the Companies Act, 1956, or the Indian Companies Act, a company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless such preemptive rights have been waived by three-fourths of the shareholders voting on the resolution to waive such rights. Holders of ADSs may be unable to exercise preemptive rights for equity shares underlying ADSs unless a registration statement under the Securities Act of 1933 as amended, or the Securities Act, is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to prepare and file such a registration statement and our decision to do so will depend on the costs and potential liabilities associated with any such registration statement, as well as the perceived benefits of enabling the holders of ADSs to exercise their preemptive rights, and any other factors we consider appropriate at the time. No assurance can be given that we would file a registration statement under these circumstances. If we issue any such securities in the future, such securities may be issued to the Depositary, which may sell such securities for the benefit of the holders of the ADSs. There can be no assurance as to the value, if any, the Depositary would receive upon the sale of such securities. To the extent that holders of ADSs are unable to exercise preemptive rights granted in respect of the equity shares represented by their ADSs, their proportional interests in us would be reduced.
 
ADS holders may be restricted in their ability to exercise voting rights.
 
At our request, the Depositary will electronically mail to holders of our ADSs any notice of shareholders' meeting received from us together with information explaining how to instruct the Depositary to exercise the voting rights of the securities represented by ADSs. If the Depositary receives voting instructions from a holder of our ADSs in time, relating to matters that have been forwarded to such holder, it will endeavor to vote the securities represented by such holder's ADSs in accordance with such voting instructions. However, the ability of the Depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that holders of our ADSs will receive voting materials in time to enable such holders to return voting instructions to the Depositary in a timely manner. Securities for which no voting instructions have been received will not be voted. There may be other communications, notices or offerings that we only make to holders of our equity shares, which will not be forwarded to holders of ADSs. Accordingly, holders of our ADSs may not be able to participate in all offerings, transactions or votes that are made available to holders of our equity shares.
 
Item 4. Information on the Company
 
COMPANY OVERVIEW
 
Infosys provides business consulting, technology, engineering and outsourcing services to help clients in over 30 countries build tomorrow’s enterprise.
 
Our comprehensive end-to-end business solutions leverage technology for our clients. Our suite of business solutions includes business and technology consulting, custom application development, infrastructure management services, maintenance and production support, package enabled consulting and implementation including enterprise solutions, product engineering and lifecycle solutions, systems integration, validation solutions and cloud-based solutions and services. We also provide software products to the banking industry. Through Infosys BPO, we provide business process management services such as offsite customer relationship management, finance and accounting, and administration and sales order processing.
 
Our professionals deliver high quality solutions through our Global Delivery Model. Using our Global Delivery Model, we divide projects into components that we execute simultaneously at client sites and at our development centers in India and around the world. We optimize our cost structure by maintaining the flexibility to execute project components where it is most cost effective. Our Global Delivery Model, with its easily scalable infrastructure and ability to execute project components around the clock and across time zones, enables us to reduce project delivery times.
 
We have organized our sales, marketing and business development teams to focus on specific geographies and industries, thus enabling us to customize our service offerings to our clients' needs. Our primary geographic markets are North America, Europe, and the Asia-Pacific region. We serve clients in financial services and insurance, manufacturing; energy, utilities, communications and services, retail, consumer packaged goods, logistics and life sciences, healthcare and public services.
 
Our revenues grew from $4,176 million in fiscal 2008 to $6,041 million in fiscal 2011, representing an annualized growth of 13.1%. Our net income grew from $1,163 million to $1,499 million during the same period, representing an annualized growth of 8.8%. Between March 31, 2008 and March 31, 2011, our total employees grew from approximately 91,200 to approximately 130,800, representing a compound annualized growth rate of approximately 12.8%.
 
We believe we have among the best talent in the Indian technology services industry, and we are committed to remaining among the industry's leading employers.
 
We were incorporated on July 2, 1981 in Maharashtra, India, as Infosys Consultants Private Limited, a private limited company under the Indian Companies Act, 1956. We changed our name to Infosys Technologies Private Limited in April 1992 and to Infosys Technologies Limited in June 1992, when we became a public limited company. We completed our initial public offering of equity shares in India in 1993 and our initial public offering of ADSs in the United States in 1999. In August 2003, June 2005 and November 2006, we completed sponsored secondary offerings of ADSs in the United States on behalf of our shareholders. Our 2005 and 2006 offerings also each included a public offering without listing in Japan, or POWL. In December 2006, we became the first Indian company to be added to the NASDAQ - 100 index. In 2008, we were selected as an original component member of 'The Global Dow', a world-wide stock index made up of 150 leading blue-chip stocks.
 
Infosys BPO is our majority-owned and controlled subsidiary. Infosys Australia, Infosys Brazil, Infosys China, Infosys Consulting, Infosys Mexico, Infosys Sweden, Infosys Public Services and Infosys Shanghai, are our wholly-owned and controlled subsidiaries.
 
The address of our registered office is Electronics City, Hosur Road, Bangalore-560 100, Karnataka, India. The telephone number of our registered office is +91-80-2852-0261. Our agent for service of process in the United States is CT Corporation System, 1350 Treat Boulevard, Suite 100, Walnut Creek, CA 94597-2152. Our website address is www.infosys.com and the information contained in our website does not constitute a part of this Annual Report.
 
Principal Capital Expenditures and Divestitures
 
In fiscal 2011, 2010 and 2009, we spent $285 million, $138 million and $287 million, respectively, on capital expenditure. As of March 31, 2011, we had contractual commitments of approximately $183 million for capital expenditure. These commitments included approximately $177 million in domestic purchases and $6 million in imports and overseas commitments for hardware, supplies and services. All our capital expenditures were financed out of cash generated from operations.
 
On October 1, 2007, Infosys BPO acquired 100% of the equity shares of P-Financial Services Holding B.V. This business acquisition was conducted by entering into a Sale and Purchase Agreement with Koninklijke Philips Electronics N.V. (Philips), a company incorporated under the laws of the Netherlands, for acquiring the shared service centers of Philips for finance, accounting and procurement business in Poland, Thailand and India for a cash consideration of $27 million, of which $1 million was paid during the year ended March 31, 2009. During the year ended March 31, 2009, the investments held by P-Financial Services Holding B.V. in its wholly owned subsidiaries Pan-Financial Shared Services India Private Limited, Infosys BPO (Poland) Sp. Z.o.o., and Infosys BPO (Thailand) Limited were transferred to Infosys BPO, after which P-Financial Services Holding B.V. was liquidated. Further, during the year ended March 31, 2009, Infosys BPO merged its wholly owned subsidiary, Pan-Financial Shared Services India Private Limited, retrospectively with effect from April 1, 2008, via a scheme of amalgamation sanctioned by the High Courts of Karnataka and Tamil Nadu. During the year ended March 31, 2011 Infosys BPO (Thailand) Limited was liquidated.
 
On December 4, 2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta, Georgia, in the United States. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of $37 million and a contingent consideration of up to $20 million. The fair value of the contingent consideration on the date of acquisition was $9 million.
 
During the year ended March 31, 2009, the Company incorporated a wholly owned subsidiary, Infosys Technologies (Sweden) AB.
 
On August 7, 2009, the Company incorporated a wholly-owned subsidiary, Infosys Tecnologia do Brasil Ltda. On August 19, 2009, Infosys Consulting incorporated a wholly-owned subsidiary, Infosys Consulting India Limited. Additionally, on October 9, 2009, the Company incorporated a wholly-owned subsidiary, Infosys Public Services, Inc.

On February 21, 2011, Infosys incorporated a wholly owned subsidiary Infosys Technologies (Shanghai) Company Limited.
 
INDUSTRY OVERVIEW
 
Changing economic and business conditions, rapid technological innovation, proliferation of the internet and globalization are creating an increasingly competitive market environment that is driving corporations to transform the manner in which they operate.
 
Consumers of products and services are increasingly demanding accelerated delivery times and lower prices. To adequately address these needs, companies are focusing on their core competencies and are using outsourced technology services providers to help improve productivity, develop new products, conduct research and development activities, reduce business risk, and manage operations more effectively.
 
The role of technology has evolved from supporting corporations to transforming them. The ability to design, develop, implement, and maintain advanced technology platforms and solutions to address business and client needs has become a competitive advantage and a priority for corporations worldwide. Concurrently, the prevalence of multiple technology platforms and a greater emphasis on network security and redundancy have increased the complexity and cost of IT systems, and have resulted in greater technology-related risks. The need for more dynamic technology solutions and the increased complexity, cost and risk associated with these technology platforms has created a growing need for specialists with experience in leveraging technology to help improve efficiency and security.
 
There is an increasing need for highly skilled technology professionals in the markets in which we operate. At the same time, enterprises are reluctant to expand their internal IT departments and increase costs. These factors have increased the reliance of enterprises on their outsourced technology service providers and are expected to continue to drive future growth for outsourced technology services. According to the 2010 To 2012 Global Tech Industry Outlook, an independent report published by Forrester Research, Inc. in January 2011, purchases of IT consulting, systems integration services and IT outsourcing by global businesses and governments are estimated to grow by 7.2% in calendar year 2011, when calculated in U.S. dollars.
 
Increasing trend towards Offshore Technology Services
 
Outsourcing the development, management and ongoing maintenance of technology platforms and solutions has become an important component of the business model of many enterprises worldwide. Companies are increasingly turning to offshore technology service providers to meet their need for high quality, cost competitive technology solutions. As a result, offshore technology service providers have become critical to the operations of many enterprises, and continue to grow in recognition and sophistication. The effective use of offshore technology services offers a variety of benefits, including lower cost of ownership of IT infrastructure, lower labor costs, improved quality and innovation, faster delivery of technology solutions and more flexibility in scheduling. In addition, technology companies are also recognizing the benefits of offshore technology service providers in software research and development, and related support functions and are outsourcing a greater portion of these activities. We believe the range of services delivered offshore is also increasing.
 
The India Advantage
 
India is widely recognized as the premier destination for offshore technology services.
 
According to the NASSCOM Strategic Review 2011, IT services exports (excluding exports relating to business process outsourcing (BPO), hardware, engineering design and product development) from India are estimated to grow by 22.7 percent in fiscal 2011, to record revenues of $33.5 billion. According to the NASSCOM Strategic Review 2011, BPO exports from India are estimated to grow by 14 percent in fiscal 2011 to record revenues of $14.1 billion. There are several key factors contributing to the growth of IT and IT-enabled services (ITES) in India and by Indian companies.
 
High Quality Delivery. According to the Process Maturity Profile published by the Carnegie Mellon Software Engineering Institute in September 2010, of the 576 appraisals conducted in India, approximately 197 companies were appraised at SEI-CMMi Level 5, higher than any other country in the world. SEI-CMMi is the Carnegie Mellon Software Engineering Institute's Capability Maturity Model, which assesses the quality of organizations' management system processes and methodologies. Level 5 is the highest level of the CMMi assessment.
 
Significant Cost Benefits. The NASSCOM Strategic Review 2011 indicates that India offers the lowest cost of delivery as compared to other offshore locations, with certain cities in India offering savings of approximately 60 to 70 percent over source locations.
 
Abundant Skilled Resources. India has a large and highly skilled English-speaking labor pool. According to the NASSCOM Strategic Review 2011, the total number of university graduates in India has more than doubled in the last decade, with an additional 4 million students expected to graduate from Indian universities in fiscal 2011, including approximately 709,000 graduates that are receiving technical degrees.
 
The factors described above also make India the premier destination for other services such as IT-enabled services, which we refer to as business process management.
 
While these advantages apply to many companies with offshore capabilities in India, we believe that there are additional factors critical to a successful, sustainable and scalable technology services business. These factors include the ability to:
Evolution of Technology Outsourcing
 
The nature of technology outsourcing is changing. Historically, enterprises either outsourced their technology requirements entirely or on a standalone project-by-project basis. In an environment of rapid technological change, globalization and regulatory changes, the complete outsourcing model is often perceived to limit a company's operational flexibility and not fully deliver potential cost savings and efficiency benefits. Similarly, project-by-project outsourcing is also perceived to result in increased operational risk and coordination costs, and as failing to fully leverage technology service providers' full ranges of capabilities. To address these issues, companies are looking at outsourcing approaches that require their technology service providers to develop specialized systems, processes and solutions along with cost-effective delivery capabilities.
 
OUR COMPETITIVE STRENGTHS
 
We believe our competitive strengths include:
 
Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business. We bring together our expertise in consulting, IT services and business process outsourcing to create solutions that allow our clients to improve their operating efficiency, increase their customer loyalty through faster innovation and delivery, to restructure their cost base, and help them achieve greater success through shifting business cycles. Our expertise helps our clients improve their own efficiencies, create better value for their end customers and to become more competitive. Our suite of comprehensive, end-to-end business solutions leveraging technology enables us to offer services through our broad network of relationships, increase our dialogue with key decision makers within each client, and increase the points of sale for new clients. As a result, we believe we are able to capture a greater share of our clients' technology budgets. Our suite of business solutions includes business and technology consulting, custom application development, infrastructure management services, maintenance and production support, package enabled consulting and implementation including enterprise solutions, product engineering and lifecycle solutions, systems integration, validation solutions and cloud-based solutions and services. Through Infosys BPO, we provide business process management services. Through our consulting group and software engineering and technology lab, we research, develop and engineer new solutions tailored for our clients and their respective industries. Through Infosys Consulting, we provide strategic and competitive analysis and complex operational consulting services. We have a well-defined methodology to update and extend our service offerings to meet the evolving needs of the global marketplace.
 
Proven Global Delivery Model. We have a highly evolved Global Delivery Model which enables us to execute services where it is most cost effective and sell services where it is most profitable. Over the past decade, we have developed our onsite and offshore execution capabilities to deliver high quality and scalable services. In doing so, we have made substantial investments in our processes, infrastructure and systems, and have refined our Global Delivery Model to effectively integrate onsite and offshore technology services. Our Global Delivery Model provides clients with seamless, high quality solutions in reduced timeframes enabling our clients to achieve operating efficiencies. To address changing industry dynamics, we are continuously refining our Global Delivery Model. Through our Modular Global Sourcing framework, we assist clients in segmenting their internal business processes and applications, including IT processes, and outsourcing these segments selectively on a modular basis to reduce risk and cost and increase operational flexibility. We believe that this approach and other ongoing refinements to our Global Delivery Model help us retain our leadership position in the industry.
 
Commitment to Superior Quality and Process Execution. We have developed a sophisticated project and program management methodology to ensure timely, consistent and accurate delivery of superior quality solutions to maintain a high level of client satisfaction. We benchmark our services and processes against globally recognized quality standards. Our Australia, Bangalore and Shanghai centers have been assessed at SEI-CMMi Level 5. Certifications we have received include TL 9000-SV, ISO 9001:2008, AS EN 9100, ISO 20000, BS25999, OHSAS 18001, ISO 14001, ISO 23026, ISO 27001 and ISO 13485. Infosys BPO has been certified for eSCM – SP v. 2.0 Level 5, the eSourcing Capability Model for Service Providers developed by a consortium led by Carnegie Mellon University's Information Technology Services Qualification Center.
 
Strong Brand and Long-Standing Client Relationships. We have long-standing relationships with large multinational companies built on successful prior engagements with them. Our track record of delivering high quality solutions across the entire software life cycle and our strong domain expertise helps us to solidify these relationships and gain increased business from our existing clients. As a result, we have a history of client retention and derive a significant proportion of revenues from repeat clients.
 
Status as an Employer of Choice. We believe we have among the best talent in the Indian technology services industry and we are committed to remaining among the industry's leading employers. We have a presence in 13 cities in India, allowing us to recruit technology professionals with specific geographic preferences. Our diverse workforce includes employees of 88 nationalities. Our training programs ensure that new hires enhance their skills in alignment with our requirements and are readily deployable upon completion of their training programs. Our lean organizational structure and strong unifying culture facilitate the sharing of knowledge and best practices among our employees.
 
Ability to Scale. We have successfully managed our growth by investing in infrastructure and by rapidly recruiting, training and deploying new professionals. We currently have 63 global development centers, the majority of which are located in India. We also have development centers in various countries including Australia, Brazil, Canada, China, Japan, Mauritius, Mexico, Poland, Philippines and at multiple locations in the United States and Europe. Our financial position allows us to make the investments in infrastructure and personnel required to continue growing our business. We can rapidly deploy resources and execute new projects through the scalable network of our global delivery centers. Between March 31, 2008 and March 31, 2011, our total employees grew from approximately 91,200 to approximately 130,800.
 
Innovation and Leadership. We are a pioneer in the technology services industry. We were one of the first Indian companies to achieve a number of significant milestones, which has enhanced our reputation in the marketplace. For example, we were one of the first companies to develop and deploy a global delivery model and attain SEI-CMMI Level 5 certification for both our offshore and onsite operations. We have also established a business consulting practice in the United States which leverages our Global Delivery Model. In addition, we were the first Indian company to list on a U.S. stock exchange, and were also the first Indian company to complete a POWL in Japan. In December 2006, we became the first Indian company to be added to the NASDAQ - 100 index. In 2008, we were selected as an original component member of 'The Global Dow', a world-wide stock index made up of 150 leading blue-chip stocks.
 
OUR STRATEGY
 
We seek to further strengthen our position as a leading global consulting and IT services company by successfully differentiating our service offerings and increasing the scale of our operations. To achieve these goals, we seek to:
 
Increase Business from Existing and New Clients. Our goal is to build enduring relationships with both existing and new clients. With existing clients, we aim to expand the nature and scope of our engagements by increasing the size and number of projects and extending the breadth of our service offerings. For new clients, we seek to provide value-added solutions by leveraging our in-depth industry expertise and expanding the breadth of services offered to them beyond those in the initial engagement. We manage first-time engagements by educating clients about our Global Delivery Model, taking on smaller projects to minimize client risk and demonstrating our execution capabilities. We also seek to increase our recurring business with existing clients by providing product engineering, maintenance, infrastructure management and business process management services which are long-term in nature and require frequent client contact. In order to further improve our business generation capabilities, we have established a Strategic Global Sourcing Group, which is comprised of senior professionals, and seeks to identify, secure and manage new, large, and long-term client engagements.
 
Expand Geographically. We seek to selectively expand our global presence to enhance our ability to service clients. We plan to accomplish this by establishing new sales and marketing offices, representative offices and global development centers to expand our geographical reach. We intend to further increase our presence in China through Infosys China and Infosys Shanghai, in the Czech Republic and Eastern Europe directly and through Infosys BPO, in Australia through Infosys Australia and in Latin America, through Infosys Brazil and Infosys Mexico. We intend to use our operations in these regions to eventually support clients in the local market as well as our global clients.
 
Continue to Invest in Infrastructure and Employees. We intend to continue to invest in physical and technological infrastructure to support our growing worldwide development and sales operations and to increase our productivity. To enhance our ability to hire and successfully deploy increasingly greater numbers of technology professionals, we intend to continue investing in recruiting, training and maintaining a challenging and rewarding work environment. During fiscal 2011, we received approximately 829,800 employment applications, interviewed approximately 136,200 applicants and extended offers of employment to approximately 67,400 applicants. These statistics do not include Infosys BPO or our other subsidiaries. We have also completed the construction of an employee training facility, the Infosys Global Education Center, in our campus in Mysore, India to further enhance our employee training capabilities. The Infosys Global Education Center can train approximately 14,000 employees at a time.
 
Continue to Enhance our Engagement Models and Offerings. We seek to continually enhance our portfolio of solutions as a means of developing and growing our business. To differentiate our services, we focus on emerging trends, new technologies, specific industries and pervasive business issues that confront our clients. In the changing world of today, many opportunities are closely linked with advances in IT. In our endeavor to assist our clients in taking advantage of business and technological change, we have identified seven key drivers digital consumers, emerging economies, sustainable tomorrow, smarter organizations, new commerce, pervasive computing and healthcare economy. We believe that realizing the full potential of these drivers is important for tomorrow's enterprise to forge ahead of its competition. We seek to align our offerings to enable our clients to take advantage of these trends. In recent years, we have also added new services offerings to our portfolio and have extended our capability to areas such as cloud-based solutions and services.
 
Continue to Develop Deep Industry Knowledge. We continue to build specialized industry expertise in the financial services and insurance, manufacturing, energy, utilities, communications and services, retail, consumer packaged goods, logistics, life sciences and healthcare industries. We combine deep industry knowledge with an understanding of our clients' needs and technologies to provide high value, quality services. Our industry expertise can be leveraged to assist clients throughout an industry, thereby improving quality and reducing the cost of services to our clients. We will continue to build on our extensive industry expertise and we plan to provide our services to new industries in the future.
 
Enhance Brand Visibility. We continue to invest in the development of our premium brand identity in the marketplace. Our branding efforts include participating in media and industry analyst events, sponsorship of, and participation in, targeted industry conferences, trade shows, recruiting efforts, community outreach programs and investor relations. We have instituted the ACM-Infosys Foundation Award jointly with the Association of Computing Machinery, or ACM, for the recognition of young scientists and system developers whose innovations have an impact on the computing field. Additionally, in February 2009, the Infosys Science Foundation had instituted an annual award of Rupee symbol5 million each in five categories to honor outstanding contributions and achievements by Indians across various sciences. We believe that a strong and recognizable Infosys brand will continue to facilitate the new-business lead generation process and enhance our ability to attract talented personnel globally.
 
Pursue Alliances and Strategic Acquisitions. We intend to continue to develop alliances that complement our core competencies. Our alliance strategy is targeted at partnering with leading technology providers, which allows us to take advantage of emerging technologies in a mutually beneficial and cost-competitive manner. We also intend to selectively pursue acquisitions that augment our existing expertise, client base or geographical presence. For example, in December 2009, through Infosys BPO, we acquired US-based business process solutions provider McCamish Systems LLC, to enhance our capability to deliver end-to-end business solutions for the insurance and financial services industries.
 
OUR GLOBAL DELIVERY MODEL
 
Our Global Delivery Model allows us to execute services where it is most cost effective and sell services where it is most profitable. The Global Delivery Model enables us to derive maximum benefit from:
In a typical offshore development project, we assign a team of technology professionals to visit a client's site to determine the scope and requirements of the project. Once the initial specifications of the project have been established, our project managers return to the relevant global development center to supervise a larger team of technology professionals dedicated to the development or implementation of the solution. Typically, a small team remains at the client's site to manage project coordination and address changes in requirements as the project progresses. Teams return to the client's site when necessary to ensure seamless integration. To the extent required, a dedicated team provides ongoing maintenance from our global development centers. The client's systems are linked to our facilities enabling simultaneous processing in our global development centers. Our model ensures that project managers remain in control of execution throughout the life of the project regardless of their geographical location.
 
We have successfully executed projects at our global development centers. We have 63 global development centers, of which 30 are located in India, 15 are in North and South America, 13 are in the Asia-Pacific region and 5 are in Europe. Our largest development centers are located in India. Approximately 74.0% of the total billed person-months for our services rendered during fiscal 2011 originated from our global development centers in India, with the balance efforts being rendered at client sites and our global development centers located outside India.
 
Our quality control processes and programs are designed to minimize defects and ensure adherence to pre-determined project parameters. Additionally, software quality advisors help individual teams establish appropriate processes for projects and adhere to multi-level testing plans. The project manager is responsible for tracking metrics, including actual effort spent versus initial estimates, project budgeting and estimating the remainder of efforts required on a project.
 
Our Global Delivery Model mitigates risks associated with providing offshore technology services to our clients. For our communications needs, we use multiple service providers and a mix of terrestrial and optical fiber links with alternate routing. In India, we rely on two telecommunications carriers to provide high-speed links inter-connecting our global development centers. Internationally, we rely on multiple links on submarine cable paths provided by various service providers to connect our Indian global development centers with network hubs in other parts of the world. Our significant investment in redundant infrastructure enables us to provide uninterrupted service to our clients.
 
MODULAR GLOBAL SOURCING
 
The nature of technology outsourcing is changing. Historically, enterprises either outsourced their technology requirements entirely or on a standalone project-by-project basis. The complete outsourcing model is perceived to be deficient as a result of:
Similarly, project-by-project outsourcing is also perceived to have its deficiencies, resulting in increased operational risk and coordination costs, as well as the failure to fully leverage service providers' complete range of capabilities.
 
We have developed our Modular Global Sourcing framework to address these issues and assist clients in evaluating and defining, on both a modular and an enterprise-wide basis, the client's business processes and applications that can be outsourced, and the capabilities required to effectively deliver those processes and applications to the organization. We then assist the client in assessing whether a particular process, application or infrastructure is best retained within the organization or is suitable for outsourcing based on various factors including third-party capabilities, potential cost savings, risks to the organization and importance of the function. Thereafter, we assist in sourcing decisions, the related risk assessments, transitioning, and program management and execution.
 
Our systematic approach to evaluating an enterprise's IT systems and business processes under the Modular Global Sourcing framework allows us to better align our solutions to our clients' business, operations and IT platforms. As a result, our clients are able to benefit from our Global Delivery Model and potentially realize cost savings, enhanced efficiencies and competitive advantages, while retaining control and flexibility. Modular Global Sourcing also positions us to offer the broadest range of services to the greatest number of clients and to capture a greater share of our clients' technology budgets.

OUR END-TO-END SOLUTIONS

We provide comprehensive business solutions that leverage technology and our domain expertise to help our clients gain market differentiation and competitive advantage. Our approach to the development of solutions is to work collaboratively with our clients to ensure that we are meeting their current needs and anticipating the evolving demands of their businesses. Our comprehensive offerings include business and technology consulting, custom application development, maintenance and production support, infrastructure management, package enabled consulting and implementation, product engineering solutions and product lifecycle management, systems integration, re-engineering, independent validation, and business process management, as well as newer solutions such as cloud strategy and adoption, and SaaS. We also offer a core banking software solution, FinacleTM, along with required customization and implementation services.
 
These offerings are provided to clients across geographies and industry verticals including banking and capital markets, insurance, technology, communications, media, entertainment, energy, utilities, manufacturing, aerospace and defense, pharmaceuticals, healthcare, and retail. We complement our industry expertise with specialized support for our clients. We also leverage the expertise of our various Centers of Excellence and Infosys labs, our research arm, to create customized solutions for our clients. Finally, we ensure the integrity of our service delivery by utilizing a scalable and secure infrastructure. 

We generally assume full project management responsibility in each of our solution offerings. We strictly adhere to our SEI-CMMI Level 5 internal quality and project management processes. Our project delivery focus is supplemented by our knowledge management system that enables us to leverage existing solutions across our company, where appropriate, and develop in-house tools for project management and software life-cycle support. We believe that these processes, methodologies, knowledge management systems and tools help deliver cost-effective solutions to clients, mitigate project-related risks, enhance the quality of our offerings and allow our clients to improve the time-to-market for their solutions.
 
Custom Application Development
 
We develop customized software solutions for our clients. We aim to provide high-quality solutions that are secure, easy-to-deploy and modular so as to facilitate enhancements and extensions. Our proprietary methodologies also allow our software applications to integrate stringent security measures throughout the software development lifecycle.

We create new applications or enhance the functionalities of our clients' existing software applications. Our projects vary in size and duration. Each project typically involves all aspects of the software development process including defining requirements, designing, prototyping, programming and module integration, user acceptance testing, user training, installation and maintenance and support of these systems.
 
We perform system design and software coding and run pilots primarily at our global development centers, while activities relating to the defining of requirements, transition planning, user training, user acceptance testing and deployment are performed at the client's site. Our application development services span the entire range of mainframe, client server, Internet and mobile technologies. An increasing proportion of our application development engagements are related to platforms such as Microsoft's .Net or open platforms such as J2EETM and Linux®.

As an example, we were recently engaged by a mobile application and software solutions provider to integrate its award-winning service to a cloud-based platform, which resulted in significant performance improvement, scalability and cost savings. The client’s service allows small businesses and consumers to quickly create personalized mobile Internet sites, without code-creation. Infosys developed a usage-based platform for the client that provided a set of developer services for creating a range of flexible, cost-effective solutions via the cloud.

In another instance, we developed a services oriented architecture based order management system for a large global automotive company that operated in multiple countries. The application we developed enables the client to rationalize its order management systems by converging applications across geographies and order management business models. Our development of this application resulted in a significant reduction in the duplication of technology platforms and related services across our client’s organization, and a reduction in the cost and time required for the development of new functionality enhancements. In addition, the costs of maintaining the application were significantly reduced compared to the client’s legacy systems.

Maintenance and Production Support
 
Our maintenance and production support services help clients improve the availability of their applications portfolio and reduce cost of maintenance. These services also provide clients with insights into their application portfolio and help them optimize the value of that portfolio and manage the risks associated with it. We take a proactive approach to software maintenance and production support, by focusing on long-term functionality, stability and preventive maintenance to avoid problems that typically arise from incomplete or short-term solutions. The Maintenance Center of Excellence (CoE) at Infosys works constantly to pioneer next generation, enhanced maintenance services that enable our clients to reduce lights-on operational spends and focus on strategic transformation. This approach is coupled with stringent quality control processes and global shared services centers. We have also invested in knowledge management and internal development of software processes and tools to increase automation of our delivery systems and thereby enhance productivity.

Our Intelligent Production Support Platform (IPSP) provides a set of applications to aid in the acquisition, collating and use of organizational knowledge and incident diagnosis in production support. IPSP is a knowledge-management platform that addresses multiple issues that commonly arise in the maintenance and support of software, and enables our clients to get the benefit of reduced IT support cost, higher-quality first level problem resolution and operational efficiency.

As an example, we have strengthened our relationship with an agribusiness company for a range of IT applications catering to various business functions, including manufacturing, supply chain management, marketing, finance and other enabling functions. Our team of approximately 400 professionals is working with the client's IT and business teams from multiple locations in Europe, the United States and India to maintain these applications based on specified service levels. These service levels are monitored regularly for service penalties applicable across the portfolio and tracked consistently with the client.

In another instance, we are working with a leading financial services company that needs to operate continuously in different time zones and maintain high levels of data security and operational reliability. The client partnered with us for 24x7 production support, including beeper support, life cycle support for bug fixes and enhancements, and support for analysis requests for one of the critical applications at the company. Using the IPSP, we significantly reduced the time taken to transition production support activities from the client, thereby freeing the company’s resources to focus on other business critical tasks. IPSP enabled the project team to reduce the training period and the number of incidents and increase annual productivity.

Package-Enabled Consulting and Implementation
 
Enterprises use commercially available software packages to deliver their goods and services and manage their businesses. We provide solutions to help our clients implement and utilize software packages developed by third party vendors. Our solutions largely relate to product suites from SAP and Oracle and also extend to certain product suites from IBM, Microsoft, Pegasystems, SalesForce, Software AG and TIBCO. Our portfolio of services includes consulting, supporting the evaluation of these packages, implementation and global rollouts of packages, providing training and supporting their upgrades and maintenance on an ongoing basis. Our service offerings also enable business transformation by leveraging packaged software through consulting activities relating to process re-engineering, re-designing of application architecture and organization change management. We provide services to clients in areas such as customer relationship management, supply chain management, human capital management, corporate performance management and business analytics and enterprise application integration. We also provide architecture consulting and implementation services for package-based cloud offerings, mobility solutions and advanced analytics.

As an example, a global power leader had embarked on strategic transformation by implementing a single global solution and technology platform to support its rapidly growing business, enable global expansion, and reduce operational and maintenance costs of its IT applications and infrastructure. We provided program management, consulting and technology services for implementing an Oracle Solution for the company’s manufacturing plants, sales offices, warehouses and aftermarket services in US, Europe, Mexico, China and India. Deployment of this solution has resulted in better customer satisfaction, process standardization, global supply chain visibility and higher operational efficiency.

Business Transformation Consulting
 
We offer consulting and business transformation services from strategy through implementation. Our professionals, many of whom have significant functional and industry expertise, utilize our Value Realization Method and our Global Delivery Model in offering these programs. Our business transformation consulting services are organized around four major domains:
Our offerings are anchored by our Value Realization Method (VRM) for measuring business value created during a business transformation program. Through VRM, we assist our clients in quantifying the expected value (using free cash flow) derived by measuring key processes and help guide design decisions that ultimately measure the long-term success of a business transformation program. In addition our proprietary IMPACTTM framework helps us organize our work to minimize delivery risk in large scale business transformation programs and allows our consultants to collaborate in a seamless and integrated manner globally.
 
For example, we were recently selected as a business transformation partner by a leading global consumer packaged goods company. The engagement is intended to transform the client’s core order-to cash-processes into an integrated global capability, underpinned by a flexible ‘enterprise’ business processes and system platform that would be capable of effectively supporting the new business model. As part of the initial phase of this engagement, Infosys Consulting utilized its IMPACTTM framework to map out the transformation approach, its VRM to focus the process redefinition and system configuration efforts on the critical elements and the Value Diagram and Decision Framework within its VRM to prioritize the decisions that needed to be made and bring a value-focused discipline to that decision-making. Using this approach, we have identified key operational levers whose value for the program is estimated to result in significant benefits. The new business model and associated business platform are operational in key regions with the remaining global implementations underway.

OTHER SOLUTIONS

Independent Validation Solutions

We offer end-to-end validation solutions, including test consulting, test organization transformation, testing for large business transformation and testing for package implementations, upgrades and rollouts. These solutions are provided to clients across various industry verticals in relation to custom application engagements, software products and packaged software. Our quality assurance solutions are aimed at building high reliability and predictability in our client technology systems within a fixed time and at minimal cost.

We have invested in internally developing testing solutions comprising of technology based solutions for test life cycle automation and non-functional testing and vertical specific solutions. We have also built alliances with leading test tool vendors such as HP, IBM, Microsoft, iTKO Lisa and are involved in building joint solutions with these alliance partners. These testing solutions facilitate high-reliability in our client applications and products while ensuring that they are delivered cost-effectively and with reduced time-to-market. Our dedicated testing professionals are trained at an in-house testing academy along various dimensions including industry domains, technology, quality processes, testing methodologies and project management.

As an example, we are a major quality assurance partner for a leading global financial services firm. Our engagement spans across multiple geographies and business lines of the client, and we provide a broad range of services, including CRM package implementation testing, test environment management, data warehouse testing, capacity assessment and performance monitoring of systems and user acceptance testing for risk management applications. We provide these offerings through a “Managed Testing Services” model with centers of specialization for test automation, performance testing, data warehouse testing and user acceptance testing. With our managed testing services model and our test consulting services, we have played a key role in transforming the client’s testing organization leading to continuous improvement in quality at reduced costs.

Engineering Services

We provide engineering solutions across the lifecycle of our clients’ offerings, ranging from product ideation to realization and sustenance. Our solution offerings include product and software development where we operate development teams as businesses (research and development services, design and development of mechanical, electronic and embedded systems, product globalization, testing and validation), product and commodity management where we combine our engineering, supply chain and business process outsourcing capabilities (benchmarking, value analysis/engineering, prototyping and sourcing, commodity management, digital manufacturing and automation, manufacturing support, professional services), product co-innovation where we work with our clients to take their offerings to market (with our solution offerings relating to engineering consulting and mobility), business platforms where we design, implement and maintain engineering systems to support our clients’ business processes (product lifecycle management, manufacturing execution, knowledge-based engineering, innovation and collaboration, telecom network operations and contact centers) and cross-industry services where we provide specialized engineering capabilities as shared services to our clients. Our solution offerings cater to a cross-section of industries including aerospace, automotive, banking and financial services, business services, chemicals, consumer products, energy, high technology, industrial products and equipment, media and entertainment, medical devices, metals and mining, pharmaceuticals, retail, telecommunications and utilities.

As an example, a large aerospace supplier partnered with us for design, development and manufacturing support for multiple global aircraft programs, leveraging our global engineering model. We set up a virtual engineering center at our facilities in India, with the relationship expanding from 15 Infosys engineers on a single project to a team of 220 engineers, working on multiple programs. Our team currently supports structural design and analysis (mechanical, electrical, software), design for manufacture, knowledge-based engineering, manufacturing engineering (digital manufacturing, tool design, test fixtures), sourcing, supplier and manufacturing process, and quality control. The client has gained scale and flexible engineering capacity, reduced product cycle time and cost through increased productivity from knowledge-based engineering systems and engineers deployed across multiple programs, and views the virtual engineering center as an extension of their in-house engineering team operating in a collaborative model.

In another example, a large networking solutions provider engaged us to expand their research and development organization, processes and systems to support significant growth in their business, improve customer experience, and maintain leadership in high-end networking devices. Our engineering consultants worked with the client to identify engineering process and architecture bottlenecks and limitations, optimize the client’s research and development activity, establish a target R&D process roadmap and process benchmarks and best practices, and define success metrics to measure value realization from these programs. The client has identified significant cost savings through improved process effectiveness and efficiencies with our assistance and now has a scalable R&D model.

Business Process Management
 
We offer business process management services through Infosys BPO. Infosys BPO enables clients to outsource several process-intensive operations that relate to specific industry vertical processes and functional horizontal processes. Infosys BPO's industry-specific service offerings include the following:
The function-specific service offerings of Infosys BPO include the following:
As an example, we manage the end-to-end sales and fulfillment processes, including sales operations, fulfillment operations and revenue operations, for a leading network equipment manufacturer with operations in over 60 countries. By leveraging our domain expertise, operational excellence and technology-focused approach, our customer service representatives provide processing and management support for the consolidation and integration of the client's sales and fulfillment processes. Infosys BPO handles service requests received from partners, resellers and end customers of the client through voice and data support and has, among other things, enabled a reduction in response and resolution time from 56 hours to about 38 hours, leading to increased working capital efficiency.
 
As another example, we manage the securities processing services across the middle office and back office functions for a global investment bank. We are responsible for the timely clearing of transactions and manage the clearing process for the client’s exchange-traded derivatives business globally across 56 exchanges. We perform a number of key functions for this client, including transaction clearing, confirmations, deliveries and reconciliations. We have also partnered with this client to create a shared-services reconciliation utility, which provides end-to-end reconciliation services across product classes such as derivatives, fixed income securities and equity securities within the investment banking operations and aids in the management of operational risk. Our client has experienced significant efficiency improvements and operational benefits as a result of our partnership.

Systems Integration

Our systems integration services practice drives technology-enabled business transformation programs for our global clientele and also undertakes delivery of large and complex programs. We leverage existing and emerging technologies to provide end-to-end business and systems integration in a cost-effective and efficient manner. Typically, our engagements begin with the definition of a technology roadmap to fit the client’s business strategy and end with the implementation of the solution using our mature execution capabilities.
 
Our systems integration services are delivered through the following practices:
As an example, we partnered with the Indian Income Tax Department to build and operate the Centralized Processing Centre for India. We re-engineered and automated the receipt, scanning and digitization of paper tax returns and electronic returns, tax payment accounting and reconciliation, the reviewing of tax returns for internal inconsistencies and verification of tax payment claims, demand notices and refunds, and handling of requests for rectification. In addition, we assisted our client in establishing and operating a call center for queries, requests and grievances from taxpayers. The Centralized Processing Center enables the efficient and accurate processing of returns and enables taxpayers to get closure on their tax filings and refunds expeditiously. The Centralized Processing Center has won the National E-Governance Gold Award for Excellence in Government Process Re-Engineering.

Infrastructure Management Services

Through our infrastructure management services offering, we assist with the transformation of our clients' IT infrastructure. Our service offerings include IT infrastructure transformation consulting, data center management, technical support services, application management services, ITIL® process implementation/enhancement services and IT infrastructure consulting. Our end-to-end solutions leverage our technical expertise and benchmarked operational processes to help our clients achieve technology-led business transformation, and to manage the costs and complexity of their ever-changing IT infrastructure. We assist our clients with new IT operations’ process paradigms, such as virtualization, cloud computing, grid computing, infrastructure-as-utility, “green” IT and ITIL® V3, and help transform our clients’ IT environments to leverage these next generation technologies across their data centers, networks, production and end-user computing environments.
 
For example, we manage the internal IT services for applications, devices, and databases for a large technology company in 450 locations across 104 countries. We have established a dedicated Service Excellence Office to help the client implement ISO 20000 and ITSM processes. As part of this managed services engagement, we have streamlined implementation processes, simplified support and service, while lowering enterprise costs through the use of solutions, such as Microsoft Windows 7. Infosys has provided end-to-end infrastructure services including multi-language service desks integrated with desk side support that have helped enhance end-user productivity. We are delivering this engagement in an outcome-based pricing model, enabling the client to manage IT costs based on business variables and demand.
 
Cloud+Services (including Business Platforms)
 
Infosys’ vision is to deliver a trusted cloud ecosystem for our clients. Our proposition is to be a cloud ecosystem integrator, whereby we deliver to our clients the following:
Banking Software Products
 
Our Finacle™ product is utilized by banks across the globe to enable them to differentiate their products and services, enhance customer experience and achieve greater operational efficiency.
 
Finacle™, our universal banking solution, is a comprehensive, flexible and fully web-enabled solution that addresses the core banking, treasury, wealth management, Islamic banking, consumer and corporate e-banking, direct banking, financial inclusion and mobile banking requirements of universal, retail and corporate banks worldwide. Other offerings in the Finacle™ universal banking solution include the Finacle™ core banking solution for regional rural banks, the Finacle™ alerts solution which enables banks to alert end users on events recorded by diverse business systems, the Finacle™ Advizor, which combines the convenience of human intervention with banking self-service channels through the interplay of video, audio and data communication and the Finacle™ WatchWiz, a comprehensive new generation monitoring solution. Our professional services complement the solutions portfolio and include consulting, package implementation, independent validation, migration, application development and maintenance, system integration, software performance engineering and support. These offerings make Finacle™ a strong innovation-facilitator enabling banks to accelerate growth, while maximizing value from their large-scale business transformation.

OUR CLIENTS
 
We market our services to large enterprises in North America, Europe and the Asia Pacific region. We have a strong market presence in North America and are working towards expanding our presence in Europe.
 
Our revenues for the last three fiscal years by geographic area are as follows:
     
 
 
Fiscal
 
2011
2010
2009
North America
65.3%
65.8%
63.2%
Europe
21.5%
23.0%
26.4%
India
2.2%
1.2%
1.3%
Rest of the World
11.0%
10.0%
9.1%
Total
100.0%
100.0%
100.0%
 
We have in-depth expertise in the financial services, manufacturing, telecommunications and retail industries, as well as, to a lesser extent, the utilities and logistics industries. Our revenues for the last three fiscal years by market segment are as follows:
     
 
 
Fiscal
 
2011
2010
2009
Financial Services
35.8%
34.0%
33.9%
Manufacturing
19.6%
19.8%
19.7%
Telecommunications
12.9%
16.1%
18.1%
Retail
14.2%
13.3%
12.5%
Others (primarily utilities, logistics and services)
17.5%
16.8%
15.8%
Total
100.0%
100.0%
100.0%
 
For fiscal 2011, 2010 and 2009 our largest client contributed 4.7%, 4.6% and 6.9%, respectively, of our total revenues.
 
The volume of work we perform for specific clients is likely to vary from year to year, particularly since we are not the exclusive external IT services provider for our clients. Thus, a major client in one year may not provide the same level of revenues in a subsequent year. However, in any given year, a limited number of clients tend to contribute a significant portion of our revenues.
 
SALES AND MARKETING
 
Our sales and marketing strategies are distinct and complementary.
 
Sales Strategy: Our sales strategy focuses on the following:
Marketing Strategy: Our marketing strategy complements our sales strategy by:
Sales Execution Strategy: Our sales teams are trained to promote and sell our solutions by articulating the business value that we are able to deliver to our prospects and clients. To do so, we use a cross-functional, integrated sales approach in which our account managers, sales personnel, project managers and business consultants analyze potential projects and collaboratively develop strategies to sell our solutions to potential clients.
 
Also, all significant sales efforts have an executive-level sponsor to provide requisite oversight and institutionalize the relationship with the prospect or client organization.
 
This integrated sales approach allows for a smooth transition to execution once the sale is completed, and the institutionalized connection between the organizations strengthens the relationship and helps to address client concerns and changes in project requirements rapidly and effectively.
 
With existing clients, we constantly seek to expand the nature and scope of our engagements by extending the breadth and volume of services offered, with a focus on increasing our clients' competitiveness through our proven and reliable Global Delivery Model. During fiscal 2011, 2010 and 2009, 98.0%, 97.3% and 97.6% of our revenue came as repeat business from existing clients, respectively. Our onsite project and account managers proactively identify client needs and work with our sales team to structure solutions to address those needs.
 
Further, client visits offshore also serve as an important mechanism to strengthen client loyalty and trust. Clients interact with their respective Infosys teams, share their own experiences and expectations with us, and in turn get a much better perspective about our strengths and capabilities.
 
Besides these one-on-one contacts between our clients and Infosys, we also promote client loyalty through a sales, marketing and alliances program that includes media and industry analyst events, sponsorship of, and participation in, targeted industry conferences, trade shows, recruiting efforts, community outreach and investor relations.
 
As a result of our growing worldwide brand and presence, prospective clients proactively reach out to us in many cases.
 
Sales and Marketing Organization. We sell and market our services from 64 sales and marketing offices located in 29 countries. With our global sales operations spread across different parts of the world, we target our efforts towards the world's largest companies. Our sales efforts are complemented by our marketing team, which assists in brand building and other corporate and field-level marketing efforts. As of March 31, 2011, we had 1,001 sales and marketing employees.
 
COMPETITION
 
We operate in a highly competitive and rapidly changing market and compete with:
For larger projects, we typically bid against other technology services providers in response to requests for proposals. Clients often cite our Global Delivery Model, comprehensive end-to-end solutions, ability to scale, superior quality and process execution, industry expertise, experienced management team, talented professionals, track record and competitive pricing as reasons for awarding us contracts.
 
In the future we expect intensified competition from some of the firms above, and may also experience competition from new competitors. In particular, we expect increased competition from firms that strengthen their offshore presence in India or other low-cost locations and from firms in market segments that we have recently entered.
 
We understand that price alone cannot constitute a sustainable competitive advantage. We believe that the principal competitive factors in our business are:
 We believe we compete favorably with respect to these factors.
 
HUMAN CAPITAL
 
Our professionals are our most important assets. We believe that the quality and level of service that our professionals deliver are among the highest in the global technology services industry. We are committed to remaining among the industry's leading employers.
 
As of March 31, 2011, we employed approximately 130,800 employees, of which approximately 123,800 are technology professionals, including trainees. During fiscal 2011, we recorded approximately 17,000 new hires, net of attrition. Our culture and reputation as a leader in the technology services industry enables us to recruit and retain some of the best available talent in India. The key elements that define our culture include:
 
Recruitment
 
We have built our global talent pool by recruiting new students from premier universities, colleges and institutes in India and through need-based hiring of project leaders and middle managers. We typically recruit only students in India who have consistently shown high levels of achievement. We also selectively recruit students from campuses in the United States, the United Kingdom, Australia and China. We rely on a rigorous selection process involving a series of aptitude tests and interviews to identify the best applicants. This selection process is continually assessed and refined based on the performance tracking of past recruits.
 
Our reputation as a premier employer enables us to select from a large pool of qualified applicants. For example, during fiscal 2011, we received approximately 829,800 employment applications, interviewed approximately 136,200 applicants and extended offers of employment to approximately 67,400 applicants. In fiscal 2011, we added approximately 15,300 new employees, net of attrition. These statistics do not include Infosys BPO and our wholly-owned subsidiaries, which together, recruited approximately 1,700 new hires, net of attrition, during fiscal 2011.
 
Training and Development
 
We have established a world-class training facility, the Infosys Global Education Center, in our campus in Mysore, India, with a view to consolidate learning activities across the Company. With a total built-up area of 1.44 million square feet, the Infosys Global Education Center can train approximately 14,000 employees at a time.

Our training, continuing education and career development programs are designed to ensure our technology professionals enhance their skill-sets in alignment with their respective roles. Fresh engineering graduate hires complete approximately 20 to 23 weeks of integrated training prior to being assigned to a business unit.

As of March 31, 2011, we employed 698 full-time employees as educators, including 255 with doctorate or masters degrees. Our educators conduct training program for our new and experienced employees. We also have our experienced employees undergo certification programs to develop their skills relevant for their roles. Our researchers published extensively during the financial year with articles, white papers in prestigious journals and conferences as well as books and invited chapters in reputed publications.

In addition, we also have been working with several colleges across India through our Campus Connect program, enabling their faculty to develop industry related training to students at the colleges.

We provide a challenging, entrepreneurial and empowering work environment that rewards dedication and a strong work ethic. We continually build the competence of our professionals with training and exposure to new skills, technologies and global opportunities.

Leadership development is a core part of our training programs. We established the Infosys Leadership Institute in our 337-acre campus in Mysore, India, to enhance leadership skills that are required to manage the complexities of the rapidly changing marketplace and to further instill our culture through leadership training.
  
Compensation
 
Our technology professionals receive competitive salaries and benefits. We have a performance-linked compensation program that links compensation to individual performance, as well as our company performance.
 
INTELLECTUAL PROPERTY
 
Our intellectual property rights are critical to our business. We rely on a combination of patent, copyright, trademark and design laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property. We currently have 22 issued patents granted by the United States Patent and Trademark Office. An aggregate of 357 patent applications are pending in the U.S. Patent and Trademark Office and the Indian Patent Office. We have 11 trademarks registered across classes identified for various goods and services in India and in other countries. We require employees, independent contractors and, whenever possible, vendors to enter into confidentiality agreements upon the commencement of their relationships with us. These agreements generally provide that any confidential or proprietary information developed by us or on our behalf be kept confidential. These agreements also provide that any confidential or proprietary information disclosed to third parties in the course of our business be kept confidential by such third parties. However, our clients usually own the intellectual property in the software we develop for them.
 
Our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products and/or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information. In addition, the laws of India do not protect intellectual property rights to the same extent as laws in the United States. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and expensive.
 
We could be subject to intellectual property infringement claims as the number of our competitors grows and our product or service offerings overlap with competitive offerings. In addition, we may become subject to such claims since we may not always be able to verify the intellectual property rights of third parties from whom we license a variety of technologies. Defending against these claims, even if they are not meritorious, could be expensive and divert our attention from operating our company. If we become liable to third parties for infringing upon their intellectual property rights, we could be required to pay substantial damage awards and be forced to develop non-infringing technology, obtain licenses or cease selling the applications that contain the infringing technology. The loss of some of our existing licenses could delay the introduction of software enhancements, interactive tools and other new products and services until equivalent technology could be licensed or developed. We may be unable to develop non-infringing technology or obtain licenses on commercially reasonable terms, if at all.
 
We regard our trade name, trademarks, service marks and domain names as important to our success. We rely on the law to protect our proprietary rights to them, and we have taken steps to enhance our rights by filing trademark applications where appropriate. We have obtained registration of our key brand 'INFOSYS' as a trademark in both India and in the United States. We also aggressively protect these names and marks from infringement by others.
 
RESEARCH AND DEVELOPMENT
 
Our research and development efforts focus on developing and refining our methodologies, tools and techniques, improving estimation processes and adopting new technologies. We have several groups engaged in our research and development activities. These groups are listed below.
 
Education and Research Group. This group is the home to all of our educators engaged in designing, developing and conducting our competency development programs. The group partners with world class academic institutions to conduct joint research in areas that are relevant to our business.
 
Infosys Labs. Infosys Labs is our dedicated research and innovation group, comprising technology and domain-focused members. It builds on the successes of the Software Engineering and Technology Labs (SETLabs) and envisages a broader mandate.

The primary research focus areas include software engineering, convergence, knowledge-driven information systems, security and privacy, distributed computing and innovation. We also have dedicated Centers of Excellence on maintenance and service differentiation, Microsoft technology and cloud computing.

Some of the specific areas of research include semantic and language technologies for information extraction from social media and for customer engagement, context aware systems, pervasive computing including mobility and sensor networks, scalable computing, multi-core and cloud computing, data privacy and user authentication, preventive software maintenance and software engineering.

Our research and development expenses for fiscal 2011, 2010 and 2009 were $116 million, $92 million and $51 million, respectively.
 
EFFECT OF GOVERNMENT REGULATION ON OUR BUSINESS
 
Regulation of our business by the Indian government affects our business in several ways. We benefit from certain tax incentives promulgated by the Government of India, including a ten-year tax holiday from Indian corporate income taxes for the operation of our Indian facilities located in STPs and tax holidays for operation of our Indian facilities located in SEZs. As a result of these incentives, our operations have been subject to relatively insignificant Indian tax liabilities. The tax holiday for all of our STP units expired as of March 31, 2011. We have also benefited from the liberalization and deregulation of the Indian economy by the successive Indian governments since 1991, including the current Indian government. Further, there are restrictive Indian laws and regulations that affect our business, including regulations that require us to obtain approval from the Reserve Bank of India and/or the Ministry of Finance of the Government of India to acquire companies organized outside India, and regulations that require us, subject to some exceptions, to obtain approval from relevant government authorities in India in order to raise capital outside India. The conversion of our equity shares into ADSs is governed by guidelines issued by the Reserve Bank of India.
 
In addition, the ability of our technology professionals to work in the United States, Europe and in other countries depends on the ability to obtain the necessary visas and work permits.

As of March 31, 2011, the majority of our technology professionals in the United States held either H-1B visas (approximately 10,100 persons, not including Infosys BPO employees or employees of our wholly owned subsidiaries), which allow the employee to remain in the United States for up to six years during the term of the work permit and work as long as he or she remains an employee of the sponsoring firm, or L-1 visas (approximately 2,200 persons, not including Infosys BPO employees or employees of our wholly owned subsidiaries), which allow the employee to stay in the United States only temporarily. Although there is no limit to new L-1 visas, there is a limit to the aggregate number of new H-1B visas that the U.S. Citizenship and Immigration Services, or CIS, may approve in any government fiscal year which is 85,000 annually. 20,000 of these visas are only available to skilled workers who possess a Master's or higher degree from institutions of higher education in the United States. Further, in response to the terrorist attacks in the United States, the CIS has increased its level of scrutiny in granting new visas. This may, in the future, also lead to limits on the number of L-1 visas granted. In addition, the granting of L-1 visas precludes companies from obtaining such visas for employees with specialized knowledge: (1) if such employees will be stationed primarily at the worksite of another company in the U.S. and the employee will not be controlled and supervised by his or her employer, or (2) if such offsite placement is essentially an arrangement to provide labor for hire rather than in connection with the employee's specialized knowledge. Immigration laws in the United States may also require us to meet certain levels of compensation, and to comply with other legal requirements, including labor certifications, as a condition to obtaining or maintaining work visas for our technology professionals working in the United States.

Immigration laws in the United States and in other countries are subject to legislative change, as well as to variations in standards of application and enforcement due to political forces and economic conditions. For instance, the U.S. government is considering the enactment of an Immigration Reform Bill, and the United Kingdom government has recently introduced an interim limit on the number of visas that may be granted. Further, effective August 14, 2010, the CIS has announced a fee increase of $2,000 for certain H-1B visa petitions and $2,250 for certain L-1 visa petitions. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or monitoring work visas for our technology professionals. Our reliance on work visas for a significant number of technology professionals makes us particularly vulnerable to such changes and variations as it affects our ability to staff projects with technology professionals who are not citizens of the country where the work is to be performed. As a result, we may not be able to obtain a sufficient number of visas for our technology professionals or may encounter delays or additional costs in obtaining or maintaining the conditions of such visas. Additionally, we may have to apply in advance for visas and this could result in additional expenses during certain quarters of the fiscal year.

Recently, one of our employees filed a lawsuit against us which alleged, among other things, that we were improperly utilizing the U.S. B-1 business visitor visa program. Following the filing of such lawsuit, a United States senator submitted a letter to U.S. Secretary of State and Secretary of Homeland Security, requesting that their respective departments review the B-1 business visa program and investigate the manner in which it is being utilized by companies, including Infosys. In the event that the U.S. government undertakes any actions which limit the B-1 business visa program or other visa program that we utilize, this could materially and adversely affect our business and results of operations.
 
LEGAL PROCEEDINGS
 
We are subject to legal proceedings and claims, which have arisen in the ordinary course of our business. Our management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on our results of operations or financial condition.
 
ORGANIZATIONAL STRUCTURE

We hold a majority interest in the following company:

Infosys BPO. Infosys established Infosys BPO in April 2002, under the laws of India. As of March 31, 2011, Infosys holds 99.98% of the outstanding equity shares of Infosys BPO.

Infosys is the sole shareholder of the following companies:

Infosys Australia. In January 2004, we acquired, for cash, 100% of the equity in Expert Information Services Pty. Limited, Australia for $14 million. The acquired company was renamed as 'Infosys Technologies (Australia) Pty. Limited'.

Infosys China. In October 2003, we established a wholly-owned subsidiary, Infosys China in Shanghai, China, to expand our business operations in China. During fiscal 2009, we disbursed $2 million as loans to Infosys China, at an interest rate of 6.0% per annum. The loans are repayable within five years from the date of disbursement at the discretion of the subsidiary. Further, during fiscal 2009, we made an additional investment of $4 million in Infosys China. During fiscal 2011, Infosys China repaid the loan to the extent of $5 million. Also during fiscal 2011, we made an additional investment of $9 million in the subsidiary. As of March 31, 2011, we have invested $23 million as equity capital and $5 million as loans in the subsidiary.

Infosys Consulting. In April 2004, we incorporated a wholly-owned subsidiary, Infosys Consulting, in the State of Texas to add high-end consulting capabilities to our Global Delivery Model. During fiscal 2010 and 2009, we made an additional investment of $10 million and $5 million, respectively, in Infosys Consulting. As of March 31, 2011, we have invested an aggregate of $55 million in the subsidiary. There is a further earnout payable to the eligible employees and directors of Infosys Consulting subject to their continued employment.
 
Infosys Mexico. In June 2007, we established a wholly-owned subsidiary, Infosys Mexico to expand our business operations in Latin America. During fiscal 2011 and 2010, we made additional investments of $3 million and $4 million, respectively, in Infosys Mexico. As of March 31, 2011, we have invested an aggregate of $12 million in the subsidiary.

Infosys Sweden. In March 2009, we incorporated a wholly owned subsidiary, Infosys Technologies (Sweden) AB to expand our operations in Europe.

Infosys Brasil. On August 7, 2009, we incorporated a wholly owned subsidiary, Infosys Tecnologia do Brasil Ltda to expand our operations in South America and invested an aggregate of $6 million in the subsidiary. During fiscal 2011, we made an additional investment of $2 million in Infosys Brasil. Further, during fiscal 2011 we disbursed $2 million as loan to Infosys Brazil at an interest rate of 6.0% per annum. The loan is repayable within six months at the discretion of the subsidiary. As of March 31, 2011 we have invested an aggregate of $8 million as equity capital and $2 million as loans in the subsidiary.

Infosys Public Services. On October 9, 2009 we incorporated a wholly-owned subsidiary, Infosys Public Services, to focus and expand our operations in the U.S public services market. We have invested an aggregate of $5 million in Infosys Public Services as of March 31, 2011.

Infosys Shanghai. On February 21, 2011 we incorporated a wholly-owned subsidiary, Infosys Technologies (Shanghai) Company Limited and invested $3 million in the subsidiary. Further, in April 2011 we have made an additional investment of $13 million in Infosys Shanghai.  As of April 2011, we have invested an aggregate of $16 million in the subsidiary.
 
PROPERTY, PLANTS AND EQUIPMENT
 
Our principal campus, "Infosys City" is located at Electronics City, Bangalore, India. Infosys City consists of approximately 3.55 million square feet of land and 4 million square feet of operational facilities. The campus features:
Additionally, we have leased independent facilities measuring approximately 373,500 square feet in Electronics City which accommodates approximately 4,100 employees.
 
Our capital expenditure on property, plant and equipment for fiscal 2011, 2010 and 2009 was $285 million, $138 million and $287 million, respectively. As of March 31, 2011 we had contractual commitments for capital expenditure of $183 million. All our capital expenditures are financed out of cash generated from operations. We will construct, expand and improve our facilities through the course of fiscal 2012.
 
Our software development facilities are equipped with a world-class technology infrastructure that includes networked workstations, servers, data communication links and video-conferencing.
 
We have 19 sales and marketing offices in the United States, 4 each in Australia, India and Germany, 3 each in Switzerland, UAE and UK, 2 each in Canada, the Czech Republic and France  and one each in Belgium, Brazil, Denmark, Finland, Greece, Hong Kong, Ireland, Japan, Malaysia, Mauritius, Mexico, the Netherlands, New Zealand, Norway, Russia, Singapore, Spain and Sweden. We believe our facilities are adequately utilized. Appropriate expansion plans are being undertaken to meet our expected future growth.
 
Our most significant leased and owned properties are listed in the table below. We have only listed our leased and owned properties that are in excess of 100,000 square feet, and each such facility is located in India. 
       
Location
Building
Land
 
 
Approx. Sq. ft.
Approx Sq. ft.
Ownership
Software Development Facilities
 
 
 
Bangalore (Infosys City), Karnataka
23,958
Leased
Bangalore (Infosys City), Karnataka
3,772,114
3,540,365
Owned
Bangalore (Center Point, Electronics City), Karnataka
148,300
Leased
Bangalore Sarjapur & Billapur, Karnataka
  –
11,263,353
Owned
Bangalore (Devanahalli), Karnataka
 418,178
 Owned
Bangalore (Salarpuria Building, Electronics City) Karnataka
225,245
Leased
Bangalore (Tower Office, Banerghatta Road), Karnataka
120,906
Leased
Bhubaneswar (Chandaka Industrial Park), Orissa
879,721
1,999,455
Leased
Chandigarh (SEZ Campus)
1,135,580
1,316,388
Leased
Chennai (Sholinganallur), Tamil Nadu
508,300
578,043
Leased
Chennai (Maraimalai Nagar), Tamil Nadu
2,522,532
5,617,084
Leased
Hyderabad (Manikonda Village), Andhra Pradesh
1,873,209
2,194,997
Owned
Hyderabad (Pocharam Village), Andhra Pradesh
3,89,485
19,615,145
Owned
Mangalore (Kottara), Karnataka
204,000
119,790
Owned
Mangalore (Pajeeru and Kairangala Village), Karnataka
627,192
14,079,954
Leased
Mysore (Hebbal Electronic City), Karnataka
8,928,195
12,652,487
Owned
Mysore (Hebbal Electronic City), Karnataka
  –
2,062,157
Leased
Pune (Hinjewadi), Maharashtra
589,647
1,089,004
Leased
Pune (Hinjewadi Phase II), Maharashtra
4,034,523
4,965,005
Leased
Thiruvananthapuram (SEZ campus), Kerala
291,049
2,178,009
Leased
Thiruvananthapuram (Technopark), Kerala
124,576
Leased
Jaipur (BPO – SEZ Campus, M-City), Rajasthan
374,139
Leased
Jaipur (Mahindra World City), Rajasthan
 –
 6,452,568
 Leased
New Delhi-Vasanth Vihar
  –
9,360
Owned
Proposed Software Development Facilities
 
 
 
Chennai (Maraimalai Nagar), Tamil Nadu
1,248,190
Leased
Hyderabad (Pocharam Village), Andhra Pradesh
1,791,284
Owned
Mangalore, Karnataka
6,13,702
Leased
Mysore (Hebbal Electronic City), Karnataka
1,732,534
Leased
Pune (Hinjewadi Phase II), Maharashtra
          1,270,101
Leased
Thiruvananthapuram (Technopark), Kerala
1,552,767
Leased
 
Item 4 A. Unresolved Staff Comments
 
None
 
Item 5. Operating and Financial Review and Prospects
 
The financial statements of the Company included in this Annual Report on Form 20-F have been prepared in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board. The discussion, analysis and information presented in this section should be read in conjunction with our financial statements included herein and the notes thereto.
 
OPERATING RESULTS
 
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below and is incorporated herein by reference.
 
LIQUIDITY AND CAPITAL RESOURCES
 
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below and is incorporated herein by reference.
 
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
 
We have committed and expect to continue to commit in the future, a material portion of our resources to research and development. Efforts towards research and development are focused on refinement of methodologies, tools and techniques, implementation of metrics, improvement in estimation process and the adoption of new technologies.
 
Our research and development expenses for the fiscal year ended March 31, 2011, 2010 and 2009 were $116 million, $92 million and $51 million, respectively.
 
TREND INFORMATION
 
This information is set forth under the caption entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations” below and is incorporated herein by reference.
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Overview
 
We are a leading global technology services company that provides comprehensive end-to-end business solutions that leverage technology for our clients, including technical consulting, design, development, product engineering, maintenance, systems integration, package evaluation and implementation, validation and infrastructure management services. We also provide software products to the banking industry. Through Infosys BPO, we provide business process management services such as offsite customer relationship management, finance and accounting, and administration and sales order processing. Our clients rely on our solutions to enhance their business performance.
 
Our professionals deliver high quality solutions by leveraging our Global Delivery Model through which we divide projects into components that we execute simultaneously at client sites and at our development centers in India and around the world. We seek to optimize our cost structure by maintaining the flexibility to execute project components where it is most cost effective. Our Global Delivery Model also allows us to provide clients with high quality solutions in reduced time-frames enabling them to achieve operational efficiencies. Our sales, marketing and business development teams are organized to focus on specific geographies and industries and this helps us to customize our service offerings to our client's needs. Our primary geographic markets are North America, Europe and the Asia Pacific region. We serve clients in financial services, manufacturing, telecommunications, retail, utilities, logistics and other industries.
 
There is an increasing need for highly skilled technology professionals in the markets in which we operate and in the industries to which we provide services. At the same time, companies are reluctant to expand their internal IT departments and increase costs. These factors have increased the reliance of companies on their outsourced technology service providers and are expected to continue to drive future growth for outsourced technology services. We believe that because the effective use of offshore technology services may offer lower total costs of ownership of IT infrastructure, lower labor costs, improved quality and innovation, faster delivery of technology solutions and more flexibility in scheduling, companies are increasingly turning to offshore technology service providers. India, in particular, has become a premier destination for offshore technology services. The key factors contributing to the growth of IT and IT enabled services in India include high quality delivery, significant cost benefits and the availability of skilled IT professionals. Our proven Global Delivery Model, our comprehensive end to end solutions, our commitment to superior quality and process execution, our long standing client relationships and our ability to scale make us one of the leading offshore technology service providers in India.
 
There are numerous risks and challenges affecting the business. These risks and challenges are discussed in detail in the section entitled 'Risk Factors' and elsewhere in this Annual Report on Form 20-F.
 
We were founded in 1981 and are headquartered in Bangalore, India. We completed our initial public offering of equity shares in India in 1993 and our initial public offering of ADSs in the United States in 1999. We completed three sponsored secondary ADS offerings in the United States in August 2003, June 2005 and November 2006. We did not receive any of the proceeds from any of our sponsored secondary offerings.
 
During fiscal 2009, Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty Limited (MSPL) for a cash consideration of $3 million.
 
During fiscal 2008, Infosys BPO acquired 100% of the equity shares of P-Financial Services Holding B.V. This business acquisition was conducted by entering into a Sale and Purchase Agreement with Koninklijke Philips Electronics N.V. (Philips), a company incorporated under the laws of the Netherlands, for acquiring the shared service centers of Philips for finance, accounting and procurement business in Poland, Thailand and India for a cash consideration of $27 million. During fiscal 2009, the investments held by P-Financial Services Holding B.V. in its wholly owned subsidiaries Pan-Financial Shared Services India Private Limited, Infosys BPO (Poland) Sp. Z.o.o., and Infosys BPO (Thailand) Limited were transferred to Infosys BPO, consequent to which P-Financial Services Holding B.V. was liquidated. Further, Infosys BPO merged its wholly owned subsidiary Pan-Financial Shared Services India Private Limited, retrospectively with effect from April 1, 2008, through a scheme of amalgamation sanctioned by the Karnataka and Tamil Nadu High courts. During the year ended March 31, 2011 Infosys BPO (Thailand) Limited was liquidated.
 
During fiscal 2009, we incorporated a wholly owned subsidiary, Infosys Technologies (Sweden) AB.
 
During fiscal 2010, we incorporated two wholly-owned subsidiaries, Infosys Tecnologia do Brasil Ltda and Infosys Public Services, Inc., and, Infosys Consulting incorporated a wholly-owned subsidiary, Infosys Consulting India Limited.
 
During fiscal 2010, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta, Georgia, in the United States. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of $37 million and a contingent consideration of up to $20 million. The fair value of the contingent consideration on the date of acquisition was $9 million.
 
On February 21, 2011 we incorporated a wholly owned subsidiary, Infosys Technologies (Shanghai) Company Limited.
 
At our Annual General Meeting held on June 12, 2010, our shareholders approved a final dividend of $0.33 per equity share, which in the aggregate resulted in a cash outflow of $215 million, inclusive of corporate dividend tax of $31 million. Our Board of Directors, during its meeting held on October 15, 2010 approved payment of an interim dividend of approximately $0.22 per equity share and a 30th year special dividend of approximately $0.67 per equity share. The dividend payment resulted in a cash outflow of approximately $601 million, including corporate dividend tax of $86 million, and was paid to holders of our equity shares and ADSs in October 2010.
 
Further, our Board of Directors, in its meeting on April 15, 2011, proposed a final dividend of approximately $0.45 per equity share (Rupee symbol20 per equity share). The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 11, 2011, and if approved, would result in a cash outflow of approximately $300 million, inclusive of corporate dividend tax of $42 million.
 
The following table illustrates our growth in revenues, net profit, earnings per equity share and number of employees from fiscal 2008 to fiscal 2011:
   (Dollars in millions except share data)
 
2011
2008
Compound annual
growth rate
Revenues
                   $6,041
$4,176
13.1%
Net profit
 $1,499
$1,163
8.8%
Earnings per equity share (Basic)
$2.62
$2.04
8.7%
Earnings per equity share (Diluted)
$2.62
$2.04
8.7%
Approximate number of employees at the end of the fiscal year
130,800
91,200
12.8%
 
Our revenue growth was attributable to a number of factors, including an increase in the size and number of projects executed for clients, as well as an expansion in the solutions that we provide to our clients. We added 139 new customers during fiscal 2011 as compared to 141 new customers during fiscal 2010 and 156 new customers during fiscal 2009. For fiscal 2011, 2010 and 2009, 98.0%, 97.3% and 97.6%, respectively, of our revenues came from repeat business, which we define as revenue from a client who also contributed to our revenue during the prior fiscal year.
 
Our business is designed to enable us to seamlessly deliver our onsite and offshore capabilities using a distributed project management methodology, which we refer to as our Global Delivery Model. We divide projects into components that we execute simultaneously at client sites and at our geographically dispersed development centers in India and around the world. Our Global Delivery Model allows us to provide clients with high quality solutions in reduced time-frames enabling them to achieve operational efficiencies.
 
Revenues
 
Our revenues are generated principally from technology services provided on either a time-and-materials or a fixed-price, fixed-timeframe basis. Revenues from services provided on a time-and-materials basis are recognized as the related services are performed. Revenues from services provided on a fixed-price, fixed-timeframe basis are recognized pursuant to the percentage-of-completion method. Most of our client contracts, including those that are on a fixed-price, fixed-timeframe basis can be terminated by clients with or without cause, without penalties and with short notice periods of between 0 and 90 days. Since we collect revenues on contracts as portions of the contracts are completed, terminated contracts are only subject to collection for portions of the contract completed through the time of termination. Most of our contracts do not contain specific termination-related penalty provisions. In order to manage and anticipate the risk of early or abrupt contract terminations, we monitor the progress on all contracts and change orders according to their characteristics and the circumstances in which they occur. This includes a focused review of our ability and our client's ability to perform on the contract, a review of extraordinary conditions that may lead to a contract termination, as well as historical client performance considerations. Since we also bear the risk of cost overruns and inflation with respect to fixed-price, fixed-timeframe projects, our operating results could be adversely affected by inaccurate estimates of contract completion costs and dates, including wage inflation rates and currency exchange rates that may affect cost projections. Losses on contracts, if any, are provided for in full in the period when determined. Although we revise our project completion estimates from time to time, such revisions have not, to date, had a material adverse effect on our operating results or financial condition. We also generate revenue from software application products, including banking software. Such software products represented 4.9%, 4.2% and 3.9% of our total revenues for fiscal 2011, 2010 and 2009, respectively.
 
We experience from time to time, pricing pressure from our clients. For example, clients often expect that as we do more business with them, they will receive volume discounts. Additionally, clients may ask for fixed-price, fixed-time frame arrangements or reduced rates. We attempt to use fixed-price arrangements for engagements where the specifications are complete, so individual rates are not negotiated.
 
Cost of Sales
 
Cost of sales represented 57.9%, 57.2% and 57.9% of total revenues for fiscal 2011, 2010 and 2009, respectively. Our cost of sales primarily consists of salary and other compensation expenses, depreciation, amortization of intangible assets, overseas travel expenses, cost of software purchased for internal use, cost of technical subcontractors, rent and data communication expenses. We depreciate our personal computers, mainframe computers and servers over two to five years and amortize intangible assets over their estimated useful life. Third party items bought for service delivery to clients are expensed on acceptance of delivery by the client. We recorded share-based compensation expense of less than $1 million and $1 million, under cost of sales during fiscal 2010 and fiscal 2009, respectively, using the fair value recognition provisions contained in IFRS 2, Share-based Payment. For fiscal 2011, the share-based compensation expense was nil. Amortization expense for fiscal 2011, fiscal 2010 and fiscal 2009 included under cost of sales was $2 million, $8 million and $4 million, respectively.
 
We typically assume full project management responsibility for each project that we undertake. Approximately 74.0%, 75.8% and 74.9% of the total billed person-months for our services during fiscal 2011, 2010 and 2009, respectively, were performed at our global development centers in India, and the balance of the work was performed at client sites and global development centers located outside India. The proportion of work performed at our facilities and at client sites varies from quarter to quarter. We charge higher rates and incur higher compensation and other expenses for work performed at client sites and global development centers located outside India. Services performed at a client site or at a global development center located outside India typically generate higher revenues per-capita at a lower gross margin than the same services performed at our facilities in India. As a result, our total revenues, cost of sales and gross profit in absolute terms and as a percentage of revenues fluctuate from quarter- to- quarter based in part on the proportion of work performed outside India. We intend to hire more local employees in many of the overseas markets in which we operate, which could decrease our gross profits due to increased wage and hiring costs. Additionally, any increase in work performed at client sites or global development centers located outside India may decrease our gross profits. We hire subcontractors on a limited basis from time to time for our own technology development needs, and we generally do not perform subcontracted work for other technology service providers. For fiscal 2011, 2010 and 2009, approximately 3.8%, 2.9% and 3.1%, respectively, of our cost of sales was attributable to cost of technical subcontractors. We do not anticipate that our subcontracting needs will increase significantly as we expand our business.
 
Revenues and gross profits are also affected by employee utilization rates. We define employee utilization as the proportion of total billed person months to total available person months, excluding administrative and support personnel. We manage utilization by monitoring project requirements and timetables. The number of software professionals that we assign to a project will vary according to the size, complexity, duration, and demands of the project. An unanticipated termination of a significant project could also cause us to experience lower utilization of technology professionals, resulting in a higher than expected number of unassigned technology professionals. In addition, we do not utilize our technology professionals when they are enrolled in training programs, particularly during our 20-29 week training course for new employees.
 
Selling and Marketing Expenses
 
Selling and marketing expenses represented 5.5%, 5.2% and 5.1% of total revenues for fiscal 2011, 2010 and 2009, respectively. Our selling and marketing expenses primarily consist of expenses relating to salaries and other compensation expenses of sales and marketing personnel, travel expenses, brand building, commission charges, rental for sales and marketing offices and telecommunications. We recorded share-based compensation expense of less than $1 million in selling and marketing expenses during each of fiscal 2010 and fiscal 2009, using the fair value recognition provisions contained in IFRS 2. For fiscal 2011, the share-based compensation expense was nil. We may increase our selling and marketing expenses as we seek to increase brand awareness among target clients and promote client loyalty and repeat business among existing clients.
 
Administrative Expenses
 
Administrative expenses represented 7.2%, 7.2% and 7.5% of total revenues for fiscal 2011, 2010 and 2009, respectively. Our administrative expenses primarily consist of expenses relating to salaries and other compensation expenses of senior management and other support personnel, travel expenses, legal and other professional fees, telecommunications, office maintenance, power and fuel charges, insurance, other miscellaneous administrative costs and provisions for doubtful accounts receivable. The factors which affect the fluctuations in our provisions for bad debts and write offs of uncollectible accounts include the financial health of our clients and of the economic environment in which they operate. We recorded share-based compensation expense of less than $1 million in administrative expenses during each of fiscal 2010 and fiscal 2009 using the fair value recognition provisions contained in IFRS 2. For fiscal 2011, the share-based compensation expense was nil.
 
Other Income
 
Other income includes interest income, income from certificates of deposit, income from available-for-sale financial assets, marked to market gains / (losses) on foreign exchange forward and option contracts and foreign currency exchange gains / (losses) on translation of other assets and liabilities. For fiscal 2011, the interest income on deposits and certificates of deposit was $250 million and income from available-for-sale financial assets / investments was $5 million. In fiscal 2011, we also recorded a foreign exchange gain of $13 million on forward and options contracts, partially offset by a foreign exchange loss of $4 million on translation of other assets and liabilities. For fiscal 2010, the interest income on deposits and certificates of deposit was $164 million and income from available-for-sale financial assets / investments was $34 million. In fiscal 2010, we also recorded a foreign exchange gain of $63 million on forward and options contracts, partially offset by a foreign exchange loss of $57 million on translation of other assets and liabilities. Income from available-for-sale financials assets/investments includes $11 million of income from sale of an unlisted equity securities. For fiscal 2009, the interest income on deposits and certificates of deposit was $186 million and income from available-for-sale financial assets/ investments was $1 million. In fiscal 2009, we incurred a foreign exchange loss of $165 million on forward and options contracts, partially offset by a foreign exchange gain of $71 million on translation of other assets and liabilities.
 
Functional Currency and Foreign Exchange
 
The functional currency of Infosys and Infosys BPO is the Indian rupee. The functional currencies for Infosys Australia, Infosys China, Infosys Consulting, Infosys Mexico, Infosys Sweden, Infosys Brasil, Infosys Public Services and Infosys Shanghai are the respective local currencies. The consolidated financial statements included in this Annual Report on Form 20-F are presented in U.S. dollars (rounded off to the nearest million) to facilitate global comparability. The translation of functional currencies of foreign operations to U.S. dollars is performed for assets and liabilities using the exchange rate in effect at the balance sheet date, and for revenue, expenses and cash flow items using a monthly average exchange rate for the respective periods. The gains or losses resulting from such translation are included in other comprehensive income and presented as currency translation reserves under other components of equity.
 
Generally, Indian law requires residents of India to repatriate any foreign currency earnings to India to control the exchange of foreign currency. More specifically, Section 8 of the Foreign Exchange Management Act, or FEMA, requires an Indian company to take all reasonable steps to realize and repatriate into India all foreign currency earned by the company outside India, within such time periods and in the manner specified by the Reserve Bank of India, or RBI. The RBI has promulgated guidelines that require the company to repatriate any realized foreign currency back to India, and either:
We typically collect our earnings and pay expenses denominated in foreign currencies using a dedicated foreign currency account located in the local country of operation. In order to do this, we are required to, and have obtained, special approval from the RBI to maintain a foreign currency account in overseas countries like the United States. However, the RBI approval is subject to limitations, including a requirement that we repatriate all foreign currency in the account back to India within a reasonable time, except an amount equal to our local monthly operating cost for our overseas branch. We currently pay such expenses and repatriate the remainder of the foreign currency to India on a regular basis. We have the option to retain those in an EEFC account (foreign currency denominated) or an Indian-rupee-denominated account. We convert substantially all of our foreign currency to Indian rupees to fund operations and expansion activities in India.
 
Our failure to comply with these regulations could result in RBI enforcement actions against us.
 
Income Taxes
 
Our net profit earned from providing software development and other services outside India is subject to tax in the country where we perform the work. Most of our taxes paid in countries other than India can be applied as a credit against our Indian tax liability to the extent that the same income is subject to tax in India.
 
We benefit from the tax incentives the Government of India gives to the export of software from specially designated software technology parks, or STPs, in India and for facilities set up under the Special Economic Zones Act, 2005. The STP Tax Holiday was available for ten consecutive years beginning from the financial year when the unit started producing computer software or April 1, 1999, whichever was earlier. The Indian Government through the Finance Act, 2009 had extended the tax holiday for the STP units until March 31, 2011. The tax holidays for all of our STP units expired by the end of fiscal 2011. Under the Special Economic Zones Act, 2005 scheme, units in designated special economic zones which begin providing services on or after April 1, 2005 are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50 percent of such profits or gains for the next five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. When our tax holidays expire or terminate, our tax expense will materially increase, reducing our profitability.
 
As a result of these tax incentives, a substantial portion of our pre-tax income has not been subject to significant tax in recent years. These tax incentives resulted in a decrease in our income tax expense of $173 million, $223 million and $418 million for fiscal 2011, 2010 and 2009, respectively, compared to the effective tax amounts that we estimate we would have been required to pay if these incentives had not been available.
 
Further, as a result of such tax incentives our effective tax rate for fiscal 2011, 2010 and 2009 was 26.7%, 21.3% and 13.2%, respectively. The increase in the effective tax rate to 26.7% for fiscal 2011 is mainly due to the expiration of the tax holiday period for our STP units. Our Indian statutory tax rate for the same period was 33.22%.
 
Pursuant to the enacted changes in the Indian Income Tax Laws effective April 1, 2007, a Minimum Alternate Tax (MAT) has been extended to income in respect of which a deduction may be claimed under section 10A of the Income Tax Act; consequently, Infosys BPO has calculated its tax liability for current domestic taxes after considering MAT. The excess tax paid under MAT provisions being over and above regular tax liability can be carried forward and set off against future tax liabilities computed under regular tax provisions. Infosys BPO was required to pay MAT, and, accordingly, a deferred tax asset of $14 million has been recognized on the balance sheet as of March 31, 2011, which can be carried forward for a period of ten years from the year of recognition.
 
In addition, the Finance Act, 2011, which became effective April 1, 2011, has extended MAT to SEZ operating and SEZ developer units also, which means that income in respect of which a deduction may be claimed under section 10AA or 80IAB of the Income Tax Act has to be included in book profits for computing MAT liability. With the growth of our business in SEZ units, we may be required to compute our tax liability under MAT in future years.
  
Results of Operations
 
The following table sets forth certain financial information as a percentage of revenues:
 
     Fiscal
 
2011
2010
2009
Revenues
100.0%
100.0%
100.0%
Cost of sales
57.9%
57.2%
57.9%
Gross profit
42.1%
42.8%
42.1%
Operating expenses:
     
Selling and marketing expenses
5.5%
5.2%
5.1%
Administrative expenses
7.2%
7.2%
7.5%
Total operating expenses
12.7%
12.4%
12.6%
Operating profit
29.4%
30.4%
29.5%
Other income, net
4.4%
4.3%
2.2%
Profit before income taxes
33.8%
34.7%
31.7%
Income tax expense
9.0%
7.4%
4.2%
Net profit
24.8%
27.3%
27.5%
 
Results for Fiscal 2011 compared to Fiscal 2010
 
Revenues
 
The following table sets forth the growth in our revenues in fiscal 2011 from fiscal 2010:
    (Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Revenues
$6,041
$4,804
$1,237
25.7%
 
Revenues increased in almost all segments of our business. The increase in revenues was attributable primarily to an increase in business from existing clients, particularly in industries such as financial services, manufacturing and retail.
 
The following table sets forth our revenues by industry segments for fiscal 2011 and fiscal 2010:
   
Industry Segments
Percentage of Revenues
 
Fiscal 2011
Fiscal 2010
Financial services
35.8%
34.0%
Manufacturing
19.6%
19.8%
Telecommunication
12.9%
16.1%
Retail
14.2%
13.3%
Others including utilities, logistics and services
17.5%
16.8%
 
The increase in the percentage of revenues from the financial services segment during fiscal 2011 as compared to fiscal 2010 was due to an increase in business from existing clients and the addition of new clients. The decline in the percentage of revenues from the telecommunication segment during fiscal 2011 as compared to fiscal 2010 was due to a decrease in business from existing clients.
 
During fiscal 2011, the U.S. dollar appreciated against a majority of the currencies in which we transact business. The U.S. dollar appreciated by 3.1% and 6.4% against the United Kingdom Pound Sterling and Euro respectively and depreciated by 10.6% against the Australian dollar.
 
There were significant currency movements during fiscal 2011. Had the average exchange rate between each of these currencies and the U.S. dollar remained constant, during fiscal 2011 in comparison to fiscal 2010, our revenues in constant currency terms for fiscal 2011 would have been lower by $13 million at $6,028 million as against our reported revenues of $6,041 million, resulting in a growth of 25.5% as against a reported growth of 25.7%. The following table sets forth our revenues by industry segments for fiscal 2011, had the average exchange rate between each of the currencies namely, the United Kingdom Pound Sterling, Euro and Australian dollar, and the U.S. dollar remained constant, during fiscal 2011 in comparison to fiscal 2010, in constant currency terms:
  
Industry Segments
Fiscal 2011
Financial services
35.8%
Manufacturing
19.7%
Telecommunication
12.7%
Retail
14.3%
Others including utilities, logistics and services
17.5%
 
The following table sets forth our industry segment profit (revenues less identifiable operating expenses and allocated expenses) as a percentage of industry segment revenue for fiscal 2011 and fiscal 2010 (refer note 2.20.1 under Item 18 of this Annual Report):
     
Industry Segments
Fiscal 2011
Fiscal 2010
Financial services
33.3%
35.1%
Manufacturing
31.6%
30.5%
Telecommunication
34.7%
39.6%
Retail
32.2%
33.8%
Others including utilities, logistics and services
31.0%
34.1%
 
Our revenues are also segmented into onsite and offshore revenues. Onsite revenues are for those services which are performed at client sites or at our global development centres outside India, as part of software projects, while offshore revenues are for services which are performed at our software development centers located in India. The table below sets forth the percentage of our revenues by location for fiscal 2011 and fiscal 2010:
 
 
Percentage of revenues
 
Fiscal 2011
Fiscal 2010
Onsite
49.2%
46.1%
Offshore
50.8%
53.9%
 
The services performed onsite typically generate higher revenues per-capita, but at lower gross margins in percentage as compared to the services performed at our own facilities. The table below sets forth details of billable hours expended as a percentage of revenue for onsite and offshore for fiscal 2011 and fiscal 2010:
 
 
Fiscal 2011
Fiscal 2010
Onsite
           24.2%
22.6%
Offshore
           75.8%
77.4%
 
Revenues from services represented 95.1% of total revenues for fiscal 2011 as compared to 95.8% for fiscal 2010. Sales of our software products represented 4.9% of our total revenues for fiscal 2011 as compared to 4.2% for fiscal 2010.
 
The following table sets forth the revenues from fixed-price, fixed-timeframe contracts and time-and-materials contracts as a percentage of total services revenues for fiscal 2011 and fiscal 2010:
 
 
Percentage of total services revenues
 
Fiscal 2011
Fiscal 2010
Fixed-price, fixed-time frame contracts
40.3%
38.5%
Time-and-materials contracts
59.7%
61.5%
 
The following table sets forth our revenues by geographic segments for fiscal 2011 and fiscal 2010:
 
 
Percentage of revenues
Geographic Segments
Fiscal 2011
Fiscal 2010
North America
65.3%
65.8%
Europe
21.5%
23.0%
India
2.2%
1.2%
Rest of the World
11.0%
10.0%
 
A focus of our growth strategy is to expand our business to parts of the world outside North America, including Europe, Australia and other parts of Asia, as we expect that increases in the proportion of revenues generated from customers outside of North America would reduce our dependence upon our sales to North America and the impact on us of economic downturns in that region.
 
There were significant currency movements during fiscal 2011. The following table sets forth our revenues by geographic segments for fiscal 2011, had the average exchange rate between each of the currencies namely, the United Kingdom Pound Sterling, Euro and Australian dollar, and the U.S. dollar remained constant, during fiscal 2011 in comparison to fiscal 2010, in constant currency terms:
 
Geographic Segments
Fiscal 2011
North America
65.3%
Europe
22.2%
India
2.2%
Rest of the World
10.3%
 
The following table sets forth our geographic segment profit (revenues less identifiable operating expenses and allocated expenses) as a percentage of geographic segment revenue for fiscal 2011 and fiscal 2010 (refer note 2.20.2 under Item 18 of this Annual Report):
 
Geographic Segments
Fiscal 2011
Fiscal 2010
North America
31.9%
34.2%
Europe
33.4%
34.8%
India
29.5%
44.8%
Rest of the World
35.5%
35.1%
 
The decline in geographic segment profit as a percentage of geographic segment revenue in the Indian geographic segment during fiscal 2011 as compared to fiscal 2010 was primarily due to the initial operational costs incurred in connection with certain projects.
 
During fiscal 2011 the total billed person-months for our services other than business process management grew by 23.4% compared to fiscal 2010. The onsite and offshore billed person-months growth for our services other than business process management were 25.3% and 22.6% during fiscal 2011 compared to fiscal 2010. During fiscal 2011 there was a 3.1% decrease in offshore revenue productivity compared to fiscal 2010 for our services other than business process management. There was a 5.4% increase in the onsite revenue productivity of fiscal 2011 when compared to fiscal 2010. On a blended basis, the revenue productivity increased by 1.8% in fiscal 2011 when compared to fiscal 2010.
 
Cost of sales
 
The following table sets forth our cost of sales for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Cost of sales
$3,497
$2,749
$748
27.2%
As a percentage of revenues
57.9%
57.2%
   

(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Employee benefit costs
           $2,850
$2,241
           $609
Depreciation and amortization
                189
199
               (10)
Travelling costs
                152
103
                  49
Cost of technical sub-contractors
                132
79
                 53
Software packages for own use
                  77
71
                    6
Third party items bought for service delivery to clients
                  30
3
                  27
Operating lease payments
                  20
15
                    5
Communication costs
                  18
18
                    –
Repairs and maintenance
                 12
6
                    6
Provision for post-sales client support
                    1
                    1
Other expenses
16
14
2
Total
$3,497
$2,749
$748
 
The increase in cost of sales as a percentage of revenues during fiscal 2011 from fiscal 2010 was attributable primarily to an increase in our employee benefit costs, travelling costs and cost of technical sub-contractors. The increase in employee benefit costs during fiscal 2011 from fiscal 2010 was due to an increase in employees, excluding sales and support personnel, from 106,900 as of fiscal 2010 to 123,800 as of fiscal 2011. Further, the offshore and onsite wages of our employees increased on an average by 15.5% and 2.0% to 3.0%, respectively, with effect from April 2010. The increase in the cost of technical sub-contractors was due to increased engagements of technical sub-contractors to meet specific skill requirements in certain large projects. Travelling cost increased during fiscal 2011 from fiscal 2010 due to an overall increase in business and increased spending for visas which has increased from $21 million in fiscal 2010 to $42 million in fiscal 2011. The increase in third party items bought for service delivery to clients is due to an increase in volume of system integration projects executed in the Indian market.
 
Gross profit
 
The following table sets forth our gross profit for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Gross profit
$2,544
$2,055
489
23.8%
As a percentage of revenues
42.1%
42.8%
   
 
The increase in gross profit during fiscal 2011 from fiscal 2010 was attributable to a 25.7% increase in revenue, marginally offset by a 0.7% increase in cost of sales as a percentage of revenue.
 
Revenues and gross profits are also affected by employee utilization rates. The following table sets forth the utilization rates of billable employees for services and software application products, excluding business process outsourcing services:
 
 
Fiscal
 
2011
2010
Including trainees
72.1%
67.5%
Excluding trainees
79.6%
74.2%
 
Selling and marketing expenses
 
The following table sets forth our selling and marketing expenses for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Selling and marketing expenses
$332
$251
$81
32.3%
As a percentage of revenues
5.5%
5.2%
   

(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Employee benefit costs
              $268
$198
                $70
Travelling costs
                  28
23
                    5
Branding and marketing
                  21
16
                    5
Operating lease payments
                   4
3
                    1
Commission
                   3
3
                    –
Consultancy and professional charges
3
5
(2)
Other expenses
5
3
2
Total
$332
$251
$81
 
The number of our sales and marketing personnel increased to 1,001 as of March 31, 2011 from 896 as of March 31, 2010. The increase in selling and marketing expenses during fiscal 2011 from fiscal 2010 was primarily attributable to an increase in employee benefit costs as a result of increased head count and the result of the salary increase in April 2010.
 
Administrative expenses
 
The following table sets forth our administrative expenses for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Administrative expenses
$433
$344
$89
25.9%
As a percentage of revenues
7.2%
7.2%
   

(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Employee benefit costs
              $147
$114
                $33
Consultancy and professional charges
                  72
54
                  18
Repairs and maintenance
                  67
49
                  18
Power and fuel
                  37
30
                    7
Communication costs
                  30
27
                    3
Travelling costs
                  30
21
                    9
Rates and taxes
                12
7
                    5
Operating lease payments
                    9
8
                    1
Insurance charges
                   7
7
                    –
Postage and courier
                    3
2
                    1
Printing and stationery
                    3
2
                    1
Provisions for doubtful accounts receivable
                    –
                   –
Other expenses
                  16
23
                 (7)
Total
$433
$344
$89
 
The increase in administrative expenses for fiscal 2011 compared to fiscal 2010 was primarily due to an increase in employee benefit costs as a result of the salary increase in April 2010. The increase in consultancy and professional charges is primarily due to an increase in hiring charges of employees. The gross and net addition of employees was 27,600 and 8,900 in fiscal 2010 and 43,000 and 17,000 in fiscal 2011. The increase in repairs and maintenance is due to an overall increase in the size of our business in fiscal 2011.
  
Operating profit
 
The following table sets forth our operating profit for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Operating profit
$1,779
$1,460
$319
21.8%
As a percentage of revenues
29.4%
30.4%
   
 
The decrease in operating profit as a percentage of revenues for fiscal 2011 from fiscal 2010 was attributable to a 0.7% decrease in gross profit as a percentage of revenue and 0.3% increase in selling and marketing expenses as a percentage of revenue.
 
Other income
 
The following table sets forth our other income for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Other income, net
$267
$209
$58
27.8%
 
Other income for fiscal 2011 includes interest income on deposits and certificates of deposit of $250 million, income from available-for-sale financial assets/investments of $5 million and foreign exchange gain of $13 million on forward and options contracts, partially offset by a foreign exchange loss of $4 million on translation of other assets and liabilities. Other income for fiscal 2010 includes interest income on deposits and certificates of deposit of $164 million, income from available-for-sale financial assets/investments of $34 million and foreign exchange gain of $63 million on forward and options contracts, partially offset by a foreign exchange loss of $57 million on translation of other assets and liabilities. Income from available-for-sale financials assets/investments for fiscal 2010 includes $11 million of income from sale of an unlisted equity securities.
 
We generate substantially all of our revenues in foreign currencies, particularly the U.S. dollar, the United Kingdom Pound Sterling, Euro and the Australian dollar, whereas we incur a majority of our expenses in Indian rupees. The exchange rate between the Indian rupee and the U.S. dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are adversely affected as the Indian rupee appreciates against the U.S. dollar. Foreign exchange gains and losses arise from the appreciation and depreciation of the Indian rupee against other currencies in which we transact business and from foreign exchange forward and option contracts.
 
The following table sets forth the currency in which our revenues for fiscal 2011 and fiscal 2010 were denominated:
 
 Currency
Percentage of Revenues
 
Fiscal 2011
Fiscal 2010
U.S. dollar
72.8%
73.3%
United Kingdom Pound Sterling
7.2%
9.2%
Euro
6.9%
6.9%
Australian dollar
6.5%
5.8%
Others
6.6%
4.8%
 
The following table sets forth information on the foreign exchange rates in Rupees per U.S. dollar, United Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2011 and fiscal 2010:
 
 
Fiscal
Appreciation / (Depreciation)
in percentage
 
2011 (rupee symbol)
2010 (rupee symbol)
 
Average exchange rate during the period:
     
U.S. dollar
45.54
47.43
4.0%
United Kingdom Pound Sterling
70.77
75.74
6.6%
Euro
60.14
67.02
10.3%
Australian dollar
42.95
40.30
(6.6)%


 
Fiscal
 
2011 (rupee symbol)
2010 (rupee symbol)
Exchange rate at the beginning of the period:
   
U.S. dollar
44.90
50.72
United Kingdom Pound Sterling
67.96
72.49
Euro
60.45
67.44
Australian dollar
41.16
35.03
Exchange rate at the end of the period:
   
U.S. dollar
 44.60
44.90
United Kingdom Pound Sterling
 71.80
67.96
Euro
 63.38
60.45
Australian dollar
  46.11
41.16
Appreciation / (Depreciation) of the rupee against the relevant currency during the period (as a percentage):
   
U.S. dollar
0.7%
11.5%
United Kingdom Pound Sterling
(5.7)%
6.2%
Euro
(4.8)%
10.4%
Australian dollar
(12.0)%
(17.5)%
 
The following table sets forth information on the foreign exchange rates in U.S. dollar per United Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2011 and fiscal 2010:
 
 
Fiscal
Appreciation / (Depreciation)
in percentage
 
2011 ($)
2010 ($)
 
Average exchange rate during the period:
     
United Kingdom Pound Sterling
   1.55
1.60
3.1%
Euro
 1.32
1.41
6.4%
Australian dollar
 0.94
0.85
(10.6)%
 
 
 
Fiscal
 
2011 ($)
2010 ($)
Exchange rate at the beginning of the period:
   
United Kingdom Pound Sterling
1.51
1.43
Euro
1.35
1.33
Australian dollar
0.92
0.69
Exchange rate at the end of the period:
   
United Kingdom Pound Sterling
 1.61
1.51
Euro
 1.42
1.35
Australian dollar
 1.03
0.92
Appreciation / (Depreciation) of U.S. dollar against the relevant currency during the period:
   
United Kingdom Pound Sterling
(6.6)%
(5.6)%
Euro
(5.2)%
(1.5)%
Australian dollar
(12.0)%
(33.3)%
 
For fiscal 2011, every percentage point depreciation/appreciation in the exchange rate between the Indian rupee and the U.S. dollar has affected our operating margins by approximately 0.5%. The exchange rate between the rupee and U.S. dollar has fluctuated substantially in recent years and may continue to do so in the future. We are unable to predict the impact that future fluctuations may have on our operating margins.
 
Income tax expense
 
The following table sets forth our income tax expense and effective tax rate for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal
Change
Percentage Change
 
2011
2010
   
Income tax expense
$547
$356
$191
53.7%
Effective tax rate
26.7%
21.3%
   
 
The increase in the effective tax rate is primarily due to the expiration of the tax holiday period for approximately 15.4% of our revenues from STP and SEZ units that were benefiting from a tax holiday in fiscal 2010.
 
Net profit
 
The following table sets forth our net profit for fiscal 2011 and fiscal 2010:
(Dollars in millions)
 
Fiscal 2011
Fiscal 2010
Change
Percentage Change
Net profit
$1,499
$1,313
$186
14.2%
As a percentage of revenues
24.8%
27.3%
   
 
The decrease in net profit as a percentage of revenues for fiscal 2011 from fiscal 2010 was attributable to a 1.0% decrease in operating profit as a percentage of revenue and an increase of 5.4% in our effective tax rate.
 
Results for Fiscal 2010 compared to Fiscal 2009
 
Revenues
 
The following table sets forth the growth in our revenues from fiscal 2009 to fiscal 2010:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Revenues
$4,804
$4,663
$141
3.0%
 
Revenues increased in almost all segments of our business. The increase in revenues was attributable primarily to an increase in business from existing clients, particularly in industries such as financial services, manufacturing and retail.
 
During fiscal 2010, the U.S. dollar depreciated against a majority of the currencies in which we transact business. The U.S. dollar depreciated by 5.6%, 1.5% and 33.3% against the United Kingdom Pound Sterling, Euro and Australian dollar, respectively.
 
There were significant currency movements during fiscal 2010. Had the average exchange rate between each of these currencies and the U.S. dollar remained constant, during fiscal 2010 in comparison to fiscal 2009, our revenues in constant currency terms for fiscal 2010 would have been lower by $5 million at $4,799 million as against our reported revenues of $4,804 million, resulting in a growth of 2.9% as against a reported growth of 3.0%.
 
The following table sets forth our revenues by industry segments for fiscal 2010 and fiscal 2009:
 
Industry Segments
Percentage of Revenues
 
Fiscal 2010
Fiscal 2009
Financial services
34.0%
33.9%
Manufacturing
19.8%
19.7%
Telecommunication
16.1%
18.1%
Retail
13.3%
12.5%
Others including utilities, logistics and services
16.8%
15.8%
 
The increase in the percentage of revenues from the retail segment during fiscal 2010 as compared to fiscal 2009 is due to addition of new clients and the decline in the percentage of revenues from the telecommunication segment during fiscal 2010 as compared to fiscal 2009 is due to decrease of business from European clients.
 
There were significant currency movements during fiscal 2010. The following table sets forth our revenues by industry segments for fiscal 2010, had the average exchange rate between each of the currencies namely, the United Kingdom Pound Sterling, Euro and Australian dollar, and the U.S. dollar remained constant, during fiscal 2010 in comparison to fiscal 2009, in constant currency terms:
 
Industry Segments
Fiscal 2010
Financial services
34.0%
Manufacturing
19.8%
Telecommunication
16.0%
Retail
13.4%
Others including utilities, logistics and services
16.8%
 
The following table sets forth our industry segment profit (revenues less identifiable operating expenses and allocated expenses) as a percentage of industry segment revenue for fiscal 2010 and fiscal 2009 (refer note 2.20.1 under Item 18):
 
Industry Segments
Fiscal 2010
Fiscal 2009
Financial services
35.1%
32.0%
Manufacturing
30.5%
30.9%
Telecommunication
39.6%
37.0%
Retail
33.8%
32.5%
Others including utilities, logistics and services
34.1%
33.6%
 
Our revenues are also segmented into onsite and offshore revenues. Onsite revenues are for those services which are performed at client sites or at our global development centres outside India, as part of software projects, while offshore revenues are for services which are performed at our software development centers located in India. The table below sets forth the percentage of our revenues by location for fiscal 2010 and fiscal 2009:
 
 
Percentage of revenues
 
Fiscal 2010
Fiscal 2009
Onsite
46.1%
46.7%
Offshore
53.9%
53.3%
 
The services performed onsite typically generate higher revenues per-capita, but at lower gross margins in percentage as compared to the services performed at our own facilities. The table below sets forth details of billable hours expended as a percentage of revenue for onsite and offshore for fiscal 2010 and fiscal 2009:
 
 
Fiscal 2010
Fiscal 2009
Onsite
22.6%
23.6%
Offshore
77.4%
76.4%
 
Revenues from services represented 95.8% of total revenues for fiscal 2010 as compared to 96.1% for fiscal 2009. Sale of our software products represented 4.2% of our total revenues for fiscal 2010 as compared to 3.9% for fiscal 2009.
 
The following table sets forth the revenues from fixed-price, fixed-timeframe contracts and time-and-materials contracts as a percentage of total services revenues for fiscal 2010 and fiscal 2009:
 
 
Percentage of total services revenues
 
Fiscal 2010
Fiscal 2009
Fixed-price, fixed-time frame contracts
38.5%
35.4%
Time-and-materials contracts
61.5%
64.6%
 
The following table sets forth our revenues by geographic segments for fiscal 2010 and fiscal 2009:
 
Geographic Segments
Percentage of revenues
 
Fiscal 2010
Fiscal 2009
North America
65.8%
63.2%
Europe
23.0%
26.4%
India
1.2%
1.3%
Rest of the World
10.0%
9.1%
 
A focus of our growth strategy is to expand our business to parts of the world outside North America, including Europe, Australia and other parts of Asia, as we expect that increases in the proportion of revenues generated from customers outside of North America would reduce our dependence upon our sales to North America and the impact on us of economic downturns in that region.
 
There were significant currency movements during fiscal 2010. The following table sets forth our revenues by geographic segments for fiscal 2010, had the average exchange rate between each of the currencies namely, the United Kingdom Pound Sterling, Euro and Australian dollar, and the U.S. dollar remained constant, during fiscal 2010 in comparison to fiscal 2009, in constant currency terms:
 
Geographic Segments
Fiscal 2010
North America
65.9%
Europe
23.5%
India
1.2%
Rest of the World
9.4%
 
The following table sets forth our geographic segment profit (revenues less identifiable operating expenses and allocated expenses) as a percentage of geographic segment revenue for fiscal 2010 and fiscal 2009 (refer note 2.20.2 under Item 18):
 
Geographic Segments
Fiscal 2010
Fiscal 2009
North America
34.2%
31.8%
Europe
34.8%
33.6%
India
44.8%
51.7%
Rest of the World
35.1%
37.5%
 
The decline in geographic segment profit as a percentage of geographic segment revenue in the Indian segment in fiscal 2010 as compared to fiscal 2009 is due to the initial operational costs being incurred in connection with certain projects in this segment.
 
During fiscal 2010 the total billed person-months for our services other than business process management grew by 6.7% compared to fiscal 2009. The onsite and offshore billed person-months growth for our services other than business process management were 1.5% and 9.0% during fiscal 2010 compared to fiscal 2009. During fiscal 2010 there was 5.1% decrease in offshore rates compared to fiscal 2009 for our services other than business process management. There was no material change in the onsite rates of fiscal 2010 when compared to fiscal 2009. On a blended basis, the billing rates declined by 4.0% in fiscal 2010 when compared to fiscal 2009.
 
Cost of sales
 
The following table sets forth our cost of sales for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Cost of sales
$2,749
$2,699
$50
1.9%
As a percentage of revenues
57.2%
57.9%
   

(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Employee benefit costs
$2,241
$2,177
$64
Depreciation and amortization
199
165
34
Travelling costs
103
133
(30)
Software packages for own use
71
68
3
Third party items bought for service delivery to clients
3
9
(6)
Provision for post-sales client support
8
(8)
Operating lease payments
15
16
(1)
Communication costs
18
20
(2)
Cost of technical sub-contractors
79
85
(6)
Repairs and maintenance
6
5
1
Other expenses
14
13
1
Total
$2,749
$2,699
$50
 
The decrease in cost of sales as a percentage of revenues for fiscal 2010 from fiscal 2009 was attributable primarily to a decrease in our travelling costs and cost of technical sub-contractors. The increase in employee benefit costs commensurate with the increase in employee strength. Further, during fiscal 2010, the offshore and onsite wages of our employees increased on an average by 8% and 2%, respectively, with effect from October 2010, as against the average offshore and onsite wage increase of 11% to 13% and 4% to 5%, respectively, during fiscal 2009. The reduction in travelling costs is primarily due to reduction in non-billable travel costs. The reduction in the cost of technical sub-contractors is due to decreased engagements of technical sub-contractors.
 
Gross profit
 
The following table sets forth our gross profit for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Gross profit
$2,055
$1,964
$91
4.6%
As a percentage of revenues
42.8%
42.1%
   
 
The increase in gross profit for fiscal 2010 from fiscal 2009 was attributable to a 3.0% increase in revenue and a 0.7% decrease in cost of sales as a percentage of revenue in the same period as compared to fiscal 2009.
 
Revenues and gross profits are also affected by employee utilization rates. The following table sets forth the utilization rates of billable employees for services and software application products, excluding business process outsourcing services:
 
 
Fiscal
 
2010
2009
Including trainees
67.5%
68.9%
Excluding trainees
74.2%
73.9%
 
Selling and marketing expenses
 
The following table sets forth our selling and marketing expenses for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Selling and marketing expenses
$251
$239
$12
5.0%
As a percentage of revenues
5.2%
5.1%
   

(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Employee benefit costs
$198
$179
$19
Travelling costs
23
25
(2)
Branding and marketing
16
19
(3)
Commission
3
3
Operating lease payments
3
3
Consultancy and professional charges
5
5
Other expenses
3
5
(2)
Total
$251
$239
$12
 
The number of our sales and marketing personnel increased from 821 as of March 31, 2009 to 896 as of March 31, 2010. The increase in selling and marketing expenses during fiscal 2010 from fiscal 2009 was primarily attributable to an increase in employee benefit costs, which was partially offset by a decrease in our travelling costs and in our branding and marketing expenses.
 
Administrative expenses
 
The following table sets forth our administrative expenses for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Administrative expenses
$344
$351
$(7)
(2.0)%
As a percentage of revenues
7.2%
7.5%
   

(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Employee benefit costs
$114
$100
$14
Consultancy and professional charges
54
51
2
Repairs and maintenance
49
49
Power and fuel
30
32
(2)
Communication costs
27
34
(7)
Travelling costs
21
26
(5)
Provisions for doubtful accounts receivable
16
(16)
Rates and taxes
7
7
Insurance charges
7
6
1
Operating lease payments
8
6
2
Postage and courier
2
2
Printing and stationery
2
3
(1)
Other expenses
23
19
4
Total
$344
$351
$(7)
 
The decrease in administrative expenses and administrative expenses as a percentage of revenues for fiscal 2010 compared to fiscal 2009 was primarily due to a decrease in the provisions for doubtful accounts receivable, communication costs and travelling costs, partially offset by an increase in employee benefit costs.
 
The factors which affect the fluctuations in our provisions for doubtful accounts receivable include the financial health of our clients and the economic environment in which they operate. No one client has contributed significantly to a loss, and we have had no significant changes in our collection policies or payment terms. Provisions for doubtful accounts receivable as a percentage of revenue was zero and 0.34% in fiscal 2010 and fiscal 2009, respectively.
 
Operating profit
 
The following table sets forth our operating profit for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Operating profit
$1,460
$1,374
$86
6.3%
As a percentage of revenues
30.4%
29.5%
   
 
The increase in operating profit and operating profit as a percentage of revenues for fiscal 2010 from fiscal 2009 was attributable to a 4.6% increase in gross profit and a 2.0% decrease in administrative expenses for fiscal 2010, which was partially offset by a 5.0% increase in selling and marketing expenses, in fiscal 2010 compared to fiscal 2009.
 
Other income
 
The following table sets forth our other income for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Other income, net
$209
$101
$108
106.9%
 
Other income for fiscal 2010 includes interest income on deposits and certificates of deposit of $164 million, income from available-for-sale financial assets/investments of $34 million and foreign exchange gain of $63 million on forward and options contracts, partially offset by a foreign exchange loss of $57 million on translation of other assets and liabilities. Income from available-for-sale financials assets/investments includes $11 million of income from sale of an unlisted equity instrument. Other income for fiscal 2009 includes interest income on deposits and certificates of deposit of $186 million, income from available-for-sale financial assets/investments of $1 million and a foreign exchange gain of $71 million on translation of other assets and liabilities, partially offset by a foreign exchange loss of $165 million on forward and options contracts. Other income for fiscal 2009 includes a net amount of $4 million, consisting of $7 million received from Axon Group Plc as inducement fees offset by $3 million of expenses incurred towards the transaction.
 
We generate substantially all of our revenues in foreign currencies, particularly the U.S. dollar, the United Kingdom Pound Sterling, Euro and the Australian dollar, whereas we incur a majority of our expenses in Indian rupees. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are adversely affected as the rupee appreciates against the U.S. dollar. Foreign exchange gains and losses arise from the appreciation and depreciation of the rupee against other currencies in which we transact business and from foreign exchange forward and option contracts.
 
The following table sets forth the currency in which our revenues for fiscal 2010 and fiscal 2009 were denominated:
 
 Currency
Percentage of Revenues
 
Fiscal 2010
Fiscal 2009
U.S. dollar
73.3%
71.1%
United Kingdom Pound Sterling
9.2%
12.7%
Euro
6.9%
7.1%
Australian dollar
5.8%
4.6%
Others
4.8%
4.5%
 
The following table sets forth information on the foreign exchange rates in Rupees per U.S. dollar, United Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2010 and fiscal 2009:
 
 
Fiscal
Appreciation / (Depreciation)
in percentage
 
2010 (rupee symbol)
2009 (rupee symbol)
 
Average exchange rate during the period:
     
U.S. dollar
47.43
46.54
(1.9)%
United Kingdom Pound Sterling
75.74
78.43
3.4%
Euro
67.02
65.54
(2.3)%
Australian dollar
40.30
36.24
(11.2)%


 
Fiscal
 
2010 (rupee symbol)
2009 (rupee symbol)
Exchange rate at the beginning of the period:
   
U.S. dollar
50.72
40.02
United Kingdom Pound Sterling
72.49
79.46
Euro
67.44
63.25
Australian dollar
35.03
 36.55
Exchange rate at the end of the period:
   
U.S. dollar
44.90
50.72
United Kingdom Pound Sterling
67.96
72.49
Euro
60.45
67.44
Australian dollar
41.16
35.03
Appreciation / (Depreciation) of the rupee against the relevant currency during the period (as a percentage):
   
U.S. dollar
11.5%
(26.7)%
United Kingdom Pound Sterling
6.2%
8.8%
Euro
10.4%
(6.6)%
Australian dollar
(17.5)%
4.2%
 
The following table sets forth information on the foreign exchange rates in U.S. dollar per United Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2010 and fiscal 2009:
 
 
Fiscal
Appreciation / (Depreciation)
in percentage
 
2010 ($)
2009 ($)
 
Average exchange rate during the period:
     
United Kingdom Pound Sterling
1.60
1.69
5.2%
Euro
1.41
1.41
Australian dollar
0.85
0.78
(9.1)%
 
 
 
Fiscal
 
2010 ($)
2009 ($)
Exchange rate at the beginning of the period:
   
United Kingdom Pound Sterling
1.43
1.99
Euro
1.33
1.58
Australian dollar
0.69
0.91
Exchange rate at the end of the period:
   
United Kingdom Pound Sterling
1.51
1.43
Euro
1.35
1.33
Australian dollar
0.92
0.69
Appreciation / (Depreciation) of U.S. dollar against the relevant currency during the period:
   
United Kingdom Pound Sterling
(5.6)%
28.0%
Euro
(1.5)%
15.9%
Australian dollar
(33.3)%
24.4%
 
For fiscal 2010, every percentage point depreciation/appreciation in the exchange rate between the Indian rupee and the U.S. dollar has affected our operating margins by approximately 0.6%. The exchange rate between the rupee and U.S. dollar has fluctuated substantially in recent years and may continue to do so in the future. We are unable to predict the impact that future fluctuations may have on our operating margins.
 
Income tax expense
 
The following table sets forth our income tax expense and effective tax rate for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal
Change
Percentage Change
 
2010
2009
   
Income tax expense
$356
$194
$162
83.5%
Effective tax rate
21.3%
13.2%
   
 
The increase in the effective tax rate is primarily due to the expiration of the tax holiday period for approximately 64.8% of our revenues from STP units that were benefiting from a tax holiday in fiscal 2009. Further, we are subject to 15% Branch Profit Tax (BPT) in the U.S. to the extent our U.S. branch’s profits during the year is greater than the increase in the net assets of our U.S. branch, computed in accordance with the Internal Revenue Code. During the year ended March 31, 2010, we provided for deferred income tax liability of $44 million pertaining to branch profit tax, as we estimate that these branch profits are expected to be distributed in the foreseeable future.
 
Net profit
 
The following table sets forth our net profit for fiscal 2010 and fiscal 2009:
(Dollars in millions)
 
Fiscal 2010
Fiscal 2009
Change
Percentage Change
Net profit
$1,313
$1,281
$32
2.5%
As a percentage of revenues
27.3%
27.5%
   
 
The increase in net profit and net profit as a percentage of revenues for fiscal 2010 from fiscal 2009 was attributable to a 6.3% increase in operating profit and 106.9% increase in other income, which were partially offset by an 83.5% increase in income tax expense during the same period.
 
Liquidity and capital resources
 
Our growth has been financed largely by cash generated from operations and, to a lesser extent, from the proceeds from the issuance of equity. In 1993, we raised approximately $4.4 million in gross aggregate proceeds from our initial public offering of equity shares in India. In 1994, we raised an additional $7.7 million through private placements of our equity shares with foreign institutional investors, mutual funds, Indian domestic financial institutions and corporations. On March 11, 1999, we raised $70.4 million in gross aggregate proceeds from our initial public offering of ADSs in the United States.
 
As of March 31, 2011, 2010 and 2009, we had $4,496 million, $3,943 million and $2,583 million in working capital, respectively, including $3,737 million in cash and cash equivalents, $5 million in available-for-sale financial assets and $27 million in Investments in certificates of deposit as of March 31, 2011, including $2,698 million in cash and cash equivalents, $561 million in available-for-sale financial assets and $265 million in Investments in certificates of deposit as of March 31, 2010, $2,167 million in cash and cash equivalents as of March 31, 2009. We have no outstanding bank borrowings. We believe that our current working capital is sufficient to meet our requirements for the next 12 months. We believe that a sustained reduction in IT spending, a longer sales cycle, or a continued economic downturn in any of the various geographic locations or industry segments in which we operate, could result in a decline in our revenue and negatively impact our liquidity and cash resources.
 
Our principal sources of liquidity are our cash and cash equivalents and the cash flow that we generate from our operations. Our cash and cash equivalents comprise of cash and bank deposits and deposits with corporations which can be withdrawn at any point of time without prior notice or penalty. These cash and cash equivalents included a restricted cash balance of $24 million and $16 million as of March 31, 2011 and March 31, 2010, respectively. The restricted cash balance as of March 31, 2009 was less than $1 million. These restrictions are primarily on account of unclaimed dividends and cash balances held by irrevocable trusts controlled by us.
 
In summary, our cash flows were:
(Dollars in millions)
 
Fiscal
 
2011
2010
2009
Net cash provided by operating activities
$1,298
$1,452
$1,411
Net cash used in investing activities
$490
$(925)
$(292)
Net cash used in financing activities
$(811)
$(310)
$(545)
 
Net cash provided by operations consisted primarily of net profit adjusted for depreciation and amortization, deferred taxes and income taxes and changes in working capital.
 
Trade receivables increased by $254 million during fiscal 2011, compared to a decrease of $41 million and an increase of $81 million during fiscal 2010 and fiscal 2009, respectively. Trade receivables as a percentage of last 12 months revenues were 17.3%, 16.2% and 15.5% as of March 31, 2011, 2010 and 2009, respectively. Days sales outstanding on the basis of last 12 months revenues were 63 days, 59 days and 57 days as of March 31, 2011, 2010 and 2009, respectively. Prepayments and other assets increased by $52 million during fiscal 2011, compared to an increase of $49 million during fiscal 2010 and a decrease of $11 million during fiscal 2009. There was an increase in unbilled revenues of $88 million during fiscal 2011, of $19 million during fiscal 2010 and of $58 million during fiscal 2009. Unbilled revenues represent revenues that are recognized but not yet invoiced. The increase in unbilled revenues is primarily due to efforts spent in certain large transformational projects for which the billing milestones have not yet crystallized. Other liabilities and provisions increased by $98 million during fiscal 2011 as compared to a decrease of $23 million during fiscal 2010 and an increase of $91 million during fiscal 2009. Unearned revenues decreased by $3 million and increased by $42 million and $10 million during fiscal 2011, fiscal 2010 and fiscal 2009, respectively. Unearned revenue resulted primarily from advance client billings on fixed-price, fixed-timeframe contracts for which related efforts had not been expended. Revenues from fixed-price, fixed-timeframe contracts represented 40.3%, 38.5% and 35.4% of total services revenues for fiscal 2011, 2010 and 2009, respectively, whereas revenues from time-and-materials contracts represented 59.7%, 61.5% and 64.6% of total services revenues for fiscal 2011, 2010 and 2009, respectively.
 
Net cash used in investing activities, relating to our acquisition of additional property, plant and equipment for fiscal 2011, 2010 and 2009 was $285 million, $138 million and $287 million, respectively for our software development centers. During fiscal 2011, we invested $425 million in available-for-sale financial assets, $185 million in certificates of deposit, $22 million in non-current deposits with corporations and redeemed available-for-sale financial assets of $973 million and $436 million of certificates of deposit. During fiscal 2010 we invested $2,091 million in available-for-sale financial assets, $249 million in certificates of deposit, $6 million in non-current deposits with corporations and redeemed available-for-sale financial assets of $1,571 million. During fiscal 2009, we invested $186 million in available-for-sale financial assets, $41 million in certificates of deposit, and $20 million in non-current deposits with corporations, and redeemed available-for-sale financial assets of $202 million and certificates of deposit of $41 million. The proceeds realized from the redemption of available-for-sale financial assets were used in our day to day business activities.
 
During fiscal 2010, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta, Georgia, in the United States. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of $37 million. Of this contingent consideration, $10 million was outstanding as of March 31, 2011.
 
During fiscal 2009, Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty. Limited (MSPL) for a cash consideration of $3 million, of which $1 million was outstanding as of March 31, 2009 and has been subsequently paid.
 
Previously, we provided various loans to employees including car loans, home loans, personal computer loans, telephone loans, medical loans, marriage loans, personal loans, salary advances, education loans and loans for rental deposits. These loans were provided primarily to employees in India who were not executive officers or directors. Housing and car loans were available only to middle level managers, senior managers and n