annual general meeting infosys technologies limited 2002-2003 financial performance 2002 - 2003 v....

© Infosys Technologies Limited 2002-2003

AnnualGeneralMeeting

Financial Performance2002 - 2003

V. BalakrishnanCompany Secretary

and Vice President - Finance

June 14, 2003 © Infosys Technologies Limited 2002-2003


This presentation may contain certain forward looking statements. The company may not achieve results as expressed or implied by such forward looking statements. Actual results could differ materially from those expressed or implied in such forward looking statements due to a number of factors including those discussed under the head "Risk factors" in the company's filings with the United States Securities and Exchange Commission. Do not place undue reliance on these forward looking statements. This presentation contains references to findings of various reports available in the public domain. The company makes no representation as to their accuracy or that the company subscribes to those findings. They are provided only by way of information.



Highlights

» Achieved a revenue growth of 38% ( in $ terms ) as against our guidance of 18% in April 2002

» 92 clients added during the year

» Net addition of 4,618 employees during the year

» Progeon achieved break-even in Q4

» Dividend Payout at 20% ( Rs. 27 per share – 540% on par value of Rs. 5 ) as compared to 17% in the previous year



1,379

1,809

The year at a glance

2,604

3,623

Income (Rs.cr)

39%

2,552

3,544

Export Income(Rs.cr)

Gross Profit(Rs.cr)

39%

2002 2003 2002 2003 2002 2003

31%




1,038

1,272

Operating Profit(Rs.cr)

943

1,159

PBT(Rs.cr)

808

958

PAT(Rs.cr)

23%23%

19%

2002 2003 2002 2003 2002 2003




53%50%

Gross Profit (%)

Operating Profit(%)

PAT(%)

40%35%

31%26%

2002 2003 2002 2003 2002 2003



The most challenging year

Continued pricing pressureIn $ terms

FY99 FY00 FY01 FY02

FY03

Revenue growth (%) 77.0 68.2 103.4 31.737.6

of which Volume growth (%) 50.3 49.6 62.0 34.2

42.6Price growth (%) 26.7 18.6 41.4 (2.5)

(5.0)




Stronger rupee

FY 2002FY 2003

Re - USD rate as at 31st March 48.79

47.53




» SARS and Iraq war

» Weak US economic environment

» Increased competition from global players



We responded to the challenge…Strong volume growth and Increased utilization

FY 99 FY 00FY 01FY 02 FY 03

Increase in billed person monthsOnsite 2,4505,244 7,8424,748 12,596Offshore 5,7075,006 13,61816,796 17,893Total 8,15710,250 21,46021,544 30,489

Change in billed person months (%)Onsite 63.0 82.767.7 24.4 52.1Offshore 42.8 26.356.6 44.6 32.8Total 47.3 40.460.2 37.738.8

Utilization rates Including trainees (%) 78.4 72.967.4 70.177.6Excluding trainees (%) 88.2 79.478.3 72.982.2



We responded to the challenge…

Moved to a higher variable compensation structure

FY 2002 FY 2003

Growth %

Revenues ( Rs. crore ) 2,604 3,62339%

Total Employee Cost ( Rs. crore ) 1,118 1,677Total Man-months ( Nos. ) 1,24,352 1,54,304Average Per-Capita Cost ( Rs. ) 89,896 1,08,690

21%




Spent more on sales and marketing infrastructure

FY 2002 FY 2003

Marketing offices (Nos.) 2830Employees (Nos.) 143280Brand Building (Rs. cr) 1329Brand Building exp/Revenue (%) 0.5%0.8%Total Sales & Marketing cost 4.99% 7.37%

(as a % to revenue)




Tight control on General & Administration expenditure

FY 2002 FY 2003

Total General & Administration cost 8.12% 7.46%(as a % to revenue)

Total No. of Employees 10,738 15,356G&A Personnel 874 1,069% to Total Employees 8.13% 6.96%




Started actively hedging the net forex receivables($ mn)

FY 2002FY 2003

Forward foreign exchange contractsoutstanding as at March 31 2

88



...and delivered on our promise

As per US GAAP - 2002-03

0.32

0.38 - 0.39

(Guidance Vs Performance)

0.33 - 0.34

0.40 - 0.41



Strategic investments» Provided for Rs. 23.77 crore towards strategic investments during the year» The provision was based on the review of their financial condition as also the

business environment in which they operate

Rs. cr

Cumulative investments up to March 31, 2003 79.31

Cumulative billings up to March 31, 2003 208.23Less: Provisions / write-off of investments (46.11)Less: Accounts receivables provided for / written-off (10.64)Net benefit 151.48



AcquisitionsAcquired IPRs worth Rs. 42.12 crore during the year

Rs. cr

Banking Business UnitTreasury Management Product 16.97Signature Display Software 0.65Sub-Total 17.62

Engineering Service and Consulting PracticeAUTOLAY Product 24.50

Grand total 42.12



Revenue segmentation



Geographic segments

73.0%

2.1%7.2%

17.7%

71.2%

7.3%2.0%

19.5%

2001-2002 2002-2003



Business segments

29.0%

10.1%

32.0%

4.0%5.4%

2.6%

9.8%

4.2%

2.9%

32.1%

28.2%

11.0%

8.3%

4.6%

3.4%

4.3%

2.6%

5.5%

2001-2002 2002-2003



Vertical domains

16.4%

14.3%

23.3%

11.4%

6.8%

9.7%

2.9%

15.2%

17.1%

16.2%

20.4%

12.4%

2.7%

13.6%

2.0%

15.6%

2001-2002 2002-2003



Project segmentation

31.6%

68.4%

36.7%

63.3%

2001-2002 2002-2003



Onsite - offshore segmentation

50.8%

49.2%

54.7%

45.3%

2001-2002 2002-2003



De-risking



Client concentrationFY 2001 FY 2002FY 2003

Active clients 273 293 345Clients added 122116 92% of revenue from top client 7.3%6.1% 5.8%% of revenue from top 5 clients 26.0%24.1% 23.4%% of revenue from top 10 clients 39.2%39.4% 37.3%Clients accounting for >5% of revenue 32 2Million dollar clients 8083 1155-million dollar clients 1925 4110-million dollar clients 1116 1620-million dollar clients 36 9Million dollar clients / total clients 29.3%28.3% 33.3%Repeat Business (%) 87.0% 88.0% 92.0%



Cash management



We have a strong and liquid Balance Sheet(Rs. crore)

Mar 31, 2002 %Mar 31, 2003 %

SOURCES OF FUNDSShare capital 33.092 33.121Reserves and surplus 2,047.2298 2,827.53 99Total 2,080.31100 2,860.65 100

APPLICATION OF FUNDSFixed assets 718.2435 772.72 27Investments 44.442 33.201Deferred tax assets 24.221 36.811Sundry debtors 336.7316 512.14 18Cash and equivalents 1,026.9649 1,638.51 58Other current assets 389.1319 570.50 20Current liabilities & provisions (459.41)(22) (703.23) (25)Total 2,080.31100 2,860.65 100

Continued to be a zero-debt company



0.5%

30.0%

69.0%

0.5%1.3%

66.1%

28.7%

3.9%

Our receivables are under control

Days of sales receivable - 47 days Days of sales receivable - 52 days

Age profile of accounts receivable

2002-20032001-2002



Our cash flows are strongFY 2002

(Rs. Crore)FY 2003

(Rs. Crore)

Operating cash flows 820.96 915.96

Financing cash flows (104.77) (151.97)

Proceeds on exercise of stock options 4.60 13.52

Dividends paid (109.37) (165.49)

Investing cash flows (280.23) (153.41)

Purchases of fixed assets (322.74) (219.26)

Proceeds on sale of fixed assets 1.60 0.33

Long-term investments (10.32) (12.53)

Interest income 51.23 78.05

Effect of exchange differences 13.26 0.97

Net increase in cash and cash equivalents 449.22 611.55

Cash and cash equivalents, beginning of year 577.74 1,026.96

Cash and cash equivalents, end of year 1,026.96 1,638.51



Our cash management policies

» Financial policies» Maintain liquid assets at

» 25% of revenue and » 40% of total assets

» Earn» Return on capital – 2x cost of capital» Return on average invested capital – 3x cost of capital» Our current cost of capital is estimated to be 16.99%

» Maintain sufficient cash in the Balance Sheet » To fund ongoing capex requirements to meet growth objectives» To fund operational expenses and other strategic initiatives for the next

one year» To maintain business continuance in case of exigencies



Cash management – How we performed

Description Target FY 2001 FY 2002 FY 2003

ROCE (%) 62.6% 54.4% 46.9%

Times cost of Capital 2.0 2.9 3.2 2.8

ROIC (%) 105.4% 83.1% 79.9%

Times cost of Capital 3.0 5.0 4.8 4.7

Days sales outstanding 60 58 47 52

Cash & equivalents / total assets 40.0% 41.6% 49.4% 57.3%

Cash & equivalents / revenue 25.0% 30.4% 39.4% 45.2%



Other performance indicators




56.1%46.6%

38.8%

Return on Average Net Worth (RONW) (%)

62.6%54.4%

46.9%

Return on Capital Employed (ROCE) (%)

105.4%

83.1% 79.9%

Return on Invested Capital (ROIC) (%)

2002 20032001 2002 20032001 2002 20032001




EPS from Ordinary Activities(Rs.)

111.29

146.40

173.22

Cash EPS(Rs.)

Dividend Payout(%)

94.23

122.12

144.68

12.0% 17.0%19.9%

2002 20032001 2002 20032001 2002 20032001




210.05

314.31

431.84

Book Value (Rs.)

43.19 30.50 28.01

Price Earnings (Multiple)

68,54762,737

68,259

Market Price /Adjusted IPO Price (%)

2002 20032001 2002 20032001 2002 20032001



Strength of the invisibles

FY 2001 FY 2002FY 2003

Average age of employees (yrs) 25.6726.60 26.60Education index 28,72531,385 44,972Brand value (Rs.cr) 5,3767,257 7,488EVA (Rs.cr) 389510 538Value added (Rs.cr) 1,5632,239 3,043HR value (Rs.cr) 5,1239,539 10,417Revenue from image enhancing

clients (%) 52%56% 56%



Progeon



Performance highlights

» Started operations on April 03, 2002» Break-even in Q4» 539 employees» 5 customers» Revenues of Rs. 20.85 crore for the year» Projected revenue of Rs. 76 crore to Rs. 85 crore for next

fiscal



Financial Highlights– US GAAP



753.81

545.05

Revenues(US$ million)

252.02

336.45

178.55218.6

4

Gross Profit(US$ million)

Operating Income(US$ million)

2002 2003 2002 2003 2002 2003

38%

22%34%



183.55

223.44

Operating Income (excl. stock comp)

(US$ million)

164.47

194.87 169.4

7

199.67

Net Income(US$ million)

Net Income (excl. stock comp)

(US$ million)

2002 2003 2002 2003 2002 2003

22%18%

18%



Investor services

» Share transfers in physical form completed within 15 days » Investor grievances / correspondence attended to within a

period of 10 days (except in cases constrained by disputes or legal impediments)

» 99.18% of the company’s shares are now held in electronic form

» Pending share transfer related litigation -18 cases



Community services

» Grants Rs. 5.53 crore during the year to Infosys Foundation, a not-for-profit trust to support initiatives that benefit society at large.

» Continued to adhere to the principles of the UN Global Compact Programme.

» Infosys donated 1,490 computers to various institutions across India through its Computers @ Classrooms initiative launched since January 1999.



Awards won during the year

» Award for the best presented Annual Report for fiscal 2002 received from The Institute of Chartered Accountants of India. This award was received for the seventh consecutive year.

» Asiamoney award for best investor relations in India for 2002.

» Infosys was ranked number one in India in The Asset's survey on Best Corporate Governance.



Thank You

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