Annual Report - Infosys Technologies - 2010-2011

INFOSYS TECHNOLOGIES LIMITED

ANNUAL REPORT 2010-2011

DIRECTOR'S REPORT

To
The members,
INFOSYS TECHNOLOGIES LIMITED.

We are delighted to present the Report on our business and operations for
the year ended March 31, 2011.

1. Results of operations:
in Rs. crore,
except per share data
2011 2010

Income from software services and products 25,385 21,140

Software development expenses 14,267 11,559

Gross profit 11,118 9,581

Selling and marketing expenses 1,219 974

General and administration expenses 1,485 1,247

Operating profit before interest and
depreciation (PBIDTA) 8,414 7,360

Interest - -

Depreciation 740 807

Operating profit before tax 7,674 6,553

Other income, net 1,147 919

Net profit before tax and exceptional item 8,821 7,472

Provision for taxation 2,378 1,717

Net profit after tax and before
exceptional item 6,443 5,755

Income on sale of investments, net of taxes(1) - 48

Net profit after tax and after exceptional item 6,443 5,803

Profit and Loss account balance brought
forward 13,806 10,305

Amount available for appropriation 20,249 16,108
Dividend

Interim 574 573

30th year special dividend-interim 1,722 -

Final 1,149 861

Total dividend 3,445 1,434

Dividend tax 568 240

Amount transferred to general Reserve 645 580

Amount transferred to capital Reserve - 48

Balance in Profit and Loss account 15,591 13,806

EPS before exceptional item (2)

Basic 112.26 100.37

Diluted 112.22 100.26

EPS after exceptional item (2)

Basic 112.26 101.22

Diluted 112.22 101.10



Notes: Rs. 1 crore equals Rs. 10 million.

(1) Income from sale of investments in OnMobile Systems Inc., U.S., net of
taxes and transaction costs.

(2) Equity shares are at par value of Rs. 5/- each.

2. Building Tomorrow's Enterprise:

During the year, we formally launched our new corporate strategy, Building
Tomorrow's Enterprise to showcase our plan for leading the services
industry into the new era as the next generation global consulting and
services company. In our journey to increase our client Relevance and
sustain industry leadership, we have made organizational changes towards
creating Infosys 3.0 - a truly global enterprise partner for our clients to
drive their transformational, operational and innovation priorities and
helping them build their enterprise of the future.

To further our transition towards business-led consulting combined with
innovative products and solutions, we have Regrouped our existing industry
units globally into the following groups:

- Financial Services and Insurance

- Manufacturing

- Energy, Utilities, Communications and Services

- Retail, Consumer Packaged Goods, Logistics and Life Sciences

This transition will enable us to increase our client Relevance, strengthen
our strategic partnerships with our clients and evolve our business model.

It will help us to sharpen our industry vertical focus, allow us to invest
in capabilities to deliver higher business value and align our innovation
agenda with that of our clients. The new structure will also significantly
expand our global market and provide opportunities for the next generation
of leaders.

3. Business:

Our total income increased to Rs. 25,385 crore from Rs. 21,140 crore in the
previous year, at a growth Rate of 20.1%. Our software export Revenues
aggregated to Rs. 24,791 crore, up by 18.8% from Rs. 20,871 crore in the
previous year. Out of the total Revenue 66.2% came from North America,
20.7% from Europe and 10.7% from the Rest of the World.

Our Revenues from India have increased from Rs. 269 crore to Rs. 594 crore,
with a growth Rate of 120.8% which is higher than that of the other
Regions. The share of the fixed-price component of the business was 42.1%,
compared to 40.8% during the previous year.

Our gross profit amounted to Rs. 11,118 crore (43.8% of Revenue) as against
Rs.9,581 crore (45.3% of Revenue) in the previous year. The
onsite Revenues increased from 48.7% in the previous year to 50.2% in the
current year. The onsite person-months comprised 26.5% of the total billed
efforts, compared to 26.1% during the previous year. The Profit Before
Interest, Depreciation, Taxes and Amortization (PBIDTA) amounted to
Rs.8,414 crore (33.1% of Revenue) as against Rs. 7,360 crore (34.8%
of Revenue) in the previous year. Sales and marketing costs were 4.8% and
4.6% of our Revenue for the years ended March 31, 2011 and March 31, 2010
Respectively. General and administration expenses were 5.8% and 5.9% of our
Revenues during the current year and previous year Respectively. The net
profit after tax was Rs.6,443 crore (25.4% of Revenue) as against Rs. 5,803
crore (27.5% of Revenue) in the previous year. The net profit for the
previous year includes income from sale of investments in OnMobile Systems
Inc., U.S., of Rs. 48 crore, net of taxes and transaction costs.

We seek long-term partnerships with our clients that enhance their value
while addressing their IT Requirements. Our customercentric approach has
Resulted in high levels of client satisfaction.

We derived 98% of our Revenues from Repeat business. We, along with our
subsidiaries, added 139 new clients, including a substantial number of
large global corporations. The total client base at the end of the year
stood at 620. Further, we have 366 million-dollar clients (338 in the
previous year), 187 five-million-dollar clients (159 in the previous year),
126 ten-million-dollar clients (97 in the previous year), 28 fifty-million-
dollar clients (26 in the previous year), and 11 hundred-million-dollar
clients (6 in the previous year).

During the year, we added 19.86 lakh sq.ft. of physical infrastructure
space. The total available space now stands at 276.63 lakh sq.ft. The
number of marketing offices as at March 31, 2011 was 64 as compared to 65
in the previous year.

4. Subsidiaries:

We have nine subsidiaries: Infosys BPO Limited, Infosys Technologies
(Australia) Pty. Limited, Infosys Technologies (China) Company Limited,
Infosys Consulting, Inc., Infosys Technologies S.der. L.de C.V., Infosys
Technologies (Sweden) AB, Infosys Tecnologia do Brasil Ltda, Infosys Public
Services Inc., U.S., and Infosys Technologies (Shanghai) Company Limited.
We have four step-down subsidiaries : Infosys BPO s.r.o., Infosys BPO
(Poland) Sp.Z.o.o, McCamish Systems LLC, and Infosys Consulting India

Limited.

As per Section 212 of the Companies Act, 1956, we are Required to attach
the Directors' Report, Balance Sheet, and Profit and Loss account of our
subsidiaries. The Ministry of Corporate Affairs, Government of India vide
its circular no. 2/2011 dated February 8, 2011 has provided an exemption to
companies from complying with Section 212, provided such companies publish
the audited consolidated financial statements in the Annual Report.
Accordingly, the Annual Report 2010-11 does not contain the financial
statements of our subsidiaries. The audited annual accounts and Related
information of our subsidiaries, where applicable, will be made available
upon request. These documents will also be available for inspection during
business hours at our Registered office in Bangalore, India. The same will
also be published on our website, www.infosys.com

5. Finacle (TM):

Finacle (TM) our universal banking solution, partners with banks across the
globe to power their innovation agenda enabling them to differentiate their
products and services thereby enhancing customer experience and achieving
greater operational efficiency.

Finacle(TM) 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(TM) universal
banking solution include the Finacle(TM) Core Banking solution for regional
Rural banks; the Finacle(TM) Alerts Solution, which enables banks to alert
end-users on events Recorded by diverse business systems; Finacle(TM)
Advizor, which combines the convenience of human intervention with banking
self-service channels through the interplay of video, audio and data
communication; and Finacle(TM) Watch Wiz, a comprehensive new-generation
monitoring solution that allows banks to monitor, diagnose and Resolve
issues. 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(TM) a strong innovation facilitator, enabling banks to accelerate
growth, while maximizing value from their large-scale business
transformation.

Finacle(TM) is chosen by 140 banks across 73 countries to power operations
across 47,000 branches. Today, Finacle(TM) enables its customer banks to
serve 390 million accounts and 289 million consumers worldwide. Finacle(TM)
is also leading the financial inclusion agenda in India. Of the 82 Regional
Rural banks in the country, 45 have opted to leverage Finacle(TM) across
9,900 branches. Independent Reports by Renowned Research firms have
positioned Finacle(TM) among the leaders in the global evaluation
of Retail core banking solution vendors.

Finacle(TM) is one of the most scalable core banking solutions in the world
with an unparalleled performance benchmark of 104 million effective
transactions per hour for channel (non-branch) transactions and 41 million
effective transactions per hour for branch transactions.

6. Quality:

We continue our journey of delivering value to our clients through
significant investments in quality programs. In September 2010, an
enterprise-wide CMMi assessment was conducted by an SEI-certified high-
maturity appraiser, and we were assessed at CMMi Level 5. This is the
highest level of the CMMi assessment. SEI-CMMi is the Carnegie Mellon
Software Engineering Institute's Capability Maturity Model, which assesses
the quality of an organizations' processes and methodologies.

Our Quality department handles large change-management initiatives to drive
quality and productivity improvements across the organization and is
managed through the Balanced Scorecard and Infosys Scaling Outstanding
Performance (iSOP) program.

During the year, the Quality department, in collaboration with multiple
stakeholders across the organization, had developed a framework called
Business Value Articulation' which ensures alignment of our approaches to
deliver value to our customers. Some of our key initiatives are:

ENCORE: An initiative to promote Reuse and Reduce cycle time by creating
and deploying Reusable technical and business components.

i-Trim : A framework based on lean practices, focusing on eliminating non-
compete activities to optimize process performance, addressing business and
operational challenges in service delivery.

BrITe: Our customer centric, systematic, data driven methodology to create
an impact on the business Results and assist in maximizing profits.

Proso++: An empirical model based on the best practices and execution
experience of the delivery teams at Infosys.

We continue to focus on institutionalizing large initiatives. Some of our
achievements in the area are listed below:

Infy Swift: Our differentiated methodology for the Global Delivery Model
(GDM) to achieve faster time to market.

ESTEEM: This is our Centre of Excellence to enhance estimation maturity for
improved predictability and de-risking of our client delivery.

TRANSCEED: Our initiative to enhance program management capabilities,
including development of integrated systems and tools, relevant enabling/
certification and ecosystem for collaboration/knowledge exchange.

ASCENT: A framework to provide a Robust and integrated platform for account
management that further facilitates account planning, monitoring and
Reviews.

PROSPER : A differentiated methodology for driving excellence in production
support services.

TIDE : A solution that brings together tools, systems and processes across
lifecycle stages and enhances data integrity by capturing accurate data.

We are certified under various standards to meet our client demands and
improve value delivery. These certifications 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 CarnegieMellon University's Information Technology
Services Qualification Center. Our Australia and Shanghai centers have been
assessed at SEI-CMMi Level 5 and ISO 27001.

7. Infosys Labs:

Infosys Labs, launched as part of our strategic direction Building
Tomorrow's Enterprise', is Responsible for driving innovation across the
mega trends identified by us that will transform the businesses of our
clients. Building on the successes of the award winning SETLabs, Infosys
Labs will focus on the Company's vision and enable customer co-creation,
while continuing its focus on service differentiation and developing
client-focused business solutions.

Organized as a global network of Research labs and innovation hubs, Infosys
Labs will:

- Undertake Research to define the ideas behind Building Tomorrow's
Enterprise.

- Identify large, multidisciplinary problem spaces that embody the
challenges facing our clients and create technological solutions to solve
them.

- Create client-specific innovation agenda through co-creation and ensure
business value Realization.

- Collaborate with universities and external Research labs worldwide.

- Leverage global talent.

During the year, more than 96 articles were published by Infosys
Labs' Researchers in leading journals, magazines and conference
proceedings. SETLabs Briefings, our highly Respected peer-reviewed journal,
published multiple issues this fiscal year, in areas such as e-Governance,
Green IT, Business Platforms for Next-Gen Enterprise Packages, Leveraging
IT for Better Performance, Service Oriented Performance, Digital
Convergence and Perspectives on Software Engineering. Infosys Labs
collaborated with leading national and international universities such as
the University of Southern California, Indian Institute of Technology,
Bombay-Monash Research Academy, Purdue University, IIIT, Hyderabad and
IIIT, Bangalore.

During the year, Infosys Labs' IP Cell filed 91 patent applications in the
United States Patent and Trademark Office (USPTO) and the Indian Patent
Office. We now have an aggregate of 357 patent applications pending in
India and the U.S. The USPTO has granted us 22 patents.

8. Branding:

The Infosys brand is one of the most important intangible assets that we
own. As part of the journey towards building a globally Respected brand, we
Recently unveiled our new corporate strategy of Building Tomorrow's
Enterprise', to position Infosys as a next generation global consulting and
IT services company.

During the fiscal year, our brand has been Recognized by leading
publications and independent industry bodies. We were:

- Ranked as India's Most Admired Company according to the Wall Street

Journal survey.

- Voted the Most Admired Indian Company by peers in the Businessworld Most
Respected Companies 2011 survey.

- Acknowledged by the Harvard Business Review for our best practice in The
CEO's Role in Business Model Reinvention'.

- Awarded the NASSCOM Diversity Award for Innovative Programs.

- Awarded the Sustainability Leadership award by India Carbon Outlook

- Awarded the CII National Award for Excellence in Energy Management 2010

Industry analysts Rated us as a leader in Reports across our key services
and markets. The offerings for which we were Rated highly include
application outsourcing, infrastructure management, Oracle and SAP service
providers, comprehensive finance and accounting, business process
outsourcing, and for the Finacle(TM) core banking solution.

We saw a substantial increase in the number of visitors to our website and
continued to add to the million-plus visitors to our blogs on business and
technology-related topics during the year. Our employees contributed and
published several thought leadership articles across various industry
forums and publications. We leveraged social media platforms and engaged
with our stakeholders and investors on YouTube, SlideShare, Twitter and
Facebook.

Leading global publications commended us on our leadership, talent and
performance. We continued to have a leadership presence at premier industry
events like Oracler Open World and Sapphire. Our annual client event,
Confluence, in the U.S. and Europe were well attended, and highly
appreciated. At the World Economic Forum in Davos, Switzerland, our lunch
panel discussion witnessed a full audience and the evening get-together
hosted by us was attended by some of the most influential and powerful
global business leaders.

9. Awards and Recognition:

In 2010, as in previous years, awards and Recognition marked our
accomplishments in various fields. We were:

* The winners of the RMMY Best in Show award for the third year in a Row

- Among the top 20 global companies to win the Most Admired Knowledge
Enterprises (MAKE) Award 2010

- Named the best company for corporate governance in the Asiamoney poll

- Ranked among the top 10 value-creating technology and telecommunications
companies by the Boston Consulting Group

- The winners (along with Telstra) of the Best ITSM (IT Service Management)
Project of the Year, the top industry award given by it SMF Australia.

- Voted the best company in management, corporate governance, investor
Relations, and corporate social Responsibility (India) in a survey by
Finance Asia.

10. Capital expenditure:

During the year, we capitalized Rs.1,017 crore excluding Rs.3 crore, which
was due to the movement in land from leasehold to freehold to our gross
block. This comprises of Rs.251 crore for investment in computer equipment.
The balance of Rs.764 crore was due to infrastructure investment along with
Rs.2 crore on vehicles.

We invested Rs.225 crore to acquire 267 acres of land in Bangalore, Delhi
and Mangalore.

During the previous year, we capitalized Rs.787 crore to our gross block.
This comprised of Rs.140 crore for investment in computer equipment. The
balance of Rs.646 crore was due to infrastructure investment along with
Rs.1 crore on vehicles. We invested Rs. 43 crore to acquire 161 acres of
land in Hyderabad, Mysore and Mangalore.

11. Liquidity:

We continue to be debt-free, and maintain sufficient cash to meet our
strategic objectives. We clearly understand that the liquidity in the
Balance Sheet has to balance between earning adequate Returns and the need
to cover financial and business Risks. Liquidity also enables us to make a
Rapid shift in direction, should the market so demand. During fiscal 2011,
internal cash flows have more than adequately covered working
capital Requirements, capital expenditure, investment in subsidiaries and
dividend payments. As at March 31, 2011, we had liquid assets of Rs. 15,284
crore as against Rs. 14,794 crore at the previous year-end.

These funds have been invested in deposits with banks, highly Rated
financial institutions, certificates of deposits and liquid mutual funds.

12. Increase in share capital:

During the year, we issued 3,26,367 shares on the exercise of stock options
under the 1998 and 1999 Employee Stock Option Plans. As a Result of this,
the outstanding issued, subscribed and paid-up equity shares increased from
57,38,25,192 to 57,41,51,559 shares as at March 31, 2011.

13. Appropriations:

Dividend:

Our policy is to pay dividend of up to 30% of the consolidated net profit
after tax of the group.

In October 2010, we paid an interim dividend of Rs. 10/- per share and a
30th year special dividend of Rs. 30/- per share. We Recommended a final

dividend of Rs. 20/- per share (par value of Rs. 5/- each), making in all
Rs. 60/- per share as dividend for the year.

The total dividend amount paid out is Rs.3,445 crore, as against Rs. 1,434
crore in the previous year. Dividend (including dividend tax) excluding
30th year special dividend as a percentage of consolidated profit after tax
is 29.3% as compared to 26.9% in the previous year.

The Register of members and share transfer books will Remain closed from
May 28, 2011 to June 11, 2011 (both days inclusive). Our Annual General
Meeting has been scheduled to be held on June 11, 2011.

Transfer to Reserves:

We propose to transfer Rs. 645 crore (10% of the net profit for the year)
to the general Reserve. An amount of Rs.15,591 crore is proposed to be
retained in the Profit and Loss account.

14. Corporate governance:

We continue to be a pioneer in benchmarking our corporate governance
policies with the best in the world. Our efforts are widely recognized by
investors in India and overseas. We have undergone the corporate governance
audit by ICRA and Credit Rating Information Services of India Limited
(CRISIL). ICRA has Rated our corporate governance practices at CGR 1.
CRISIL has assigned CRISIL GVC Level 1 Rating to us.

We have complied with the Recommendations of the Narayana Murthy Committee
on Corporate Governance constituted by the Securities and Exchange Board of
India (SEBI). For fiscal year 2011, the compliance report is provided in
the Corporate governance section of the Annual Report. The auditors'
certificate on compliance with the mandatory recommendations of the
committee is provided in the Annexure to the directors' Report section.

We have documented our internal policies on corporate governance. In line
with the committee's Recommendations, the Management's Discussion and
Analysis of the financial position of the Company is provided in this
Annual Report.

During the year, we continued to fully comply with the U.S. Sarbanes- Oxley
Act of 2002. Several aspects of the Act, such as the Whistleblower Policy
and Code of Conduct, have been incorporated in our Company policy. Our Code
of Conduct was updated to make it Relevant and responsive to the changing
needs of our business.

15. Conservation of energy, Research and development, technology
absorption, foreign exchange earnings and outgo:

The particulars as prescribed under Sub-section (1)(e) of Section 217 of
the Companies Act, 1956, Read with the Companies (Disclosure of particulars
in the Report of the Board of Directors) Rules, 1988, are provided in the
Annexure to the directors' Report section.

16. Particulars of employees:

In terms of the provisions of Section 217(2A) of the Companies Act, 1956,
Read with the Companies (Particulars of Employees) Rules, 1975, the names
and other particulars of employees are set out in the Annexure to the
directors' Report. However, having Regard to the provisions of Section
219(1)(b)(iv) of the Companies Act, 1956, the Annual Report excluding the
aforesaid information is being sent to all the members of the Company and
others entitled thereto. Any member interested in obtaining such
particulars may write to the Company Secretary at the Registered office of
the Company. The same will also be published on our website www.infosys.com

17. Directors' Responsibility statement as Required under Section 217 (2AA)
of the Companies Act, 1956:

The financial statements are prepared in accordance with the accounting
standards issued by the Institute of Chartered Accountants of India and
the Requirements of the Companies Act, 1956, to the extent applicable to
us; and guidelines issued by SEBI on the historical cost convention; as a
going concern and on the accrual basis. There are no material departures
from prescribed accounting standards in the adoption of the accounting
standards.

The Board of Directors accepts Responsibility for the integrity and
objectivity of these financial statements. The accounting policies used in
the preparation of the financial statements have been consistently applied
except as otherwise stated in the notes accompanying the respective tables.
The estimates and judgments Related to the financial statements have been
made on a prudent and Reasonable basis, in order that the financial
statements Reflect in a true and fair manner the form and substance of
transactions, and Reasonably present our state of affairs and profits for
the year.

We have taken proper and sufficient care for the maintenance of adequate
accounting Records in accordance with the provisions of the Companies Act,
1956, to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities; and

18. Directors:

The Board inducted R. Seshasayee and Ravi Venkatesan to the Board. We seek
your support in confirming their appointment as directors liable to Retire
by Rotation.

In accordance with the retirement policy for the Company's Board of
Directors (the Board'), Claude Smadja, Independent Director, Retired from
the Board effective August 30, 2010. We place on Record our deep sense of
appreciation for the services Rendered by Claude Smadja during his tenure
as a Board member.

As per Article 122 of the Articles of Association, K. Dinesh, Srinath
Batni, Sridar A. Iyengar, Deepak M. Satwalekar and Dr. Omkar
Goswami Retire by Rotation in the forthcoming Annual General Meeting. All
of them, being eligible, seek Re-appointment, except K. Dinesh.

K. Dinesh has expressed his intention not to seekre-appointment. The
Members of the Board place on Record their deep sense of appreciation for
the services Rendered by K. Dinesh during his tenure as Member of the Board
and Head of Quality, Information Systems and the Communication Design
Group.

T.V. Mohandas Pai has Resigned as Member of the Board and has requested the
Board to Relieve him of the Responsibilities post the Company's Annual
General Meeting on June 11, 2011.

The Board of Directors considered and accepted the Resignation of T.V.
Mohandas Pai. The Resignation is effective June 11, 2011, post the
Company's Annual General Meeting. The Members of the Board have placed on
Record their deep sense of appreciation for the services Rendered by T.V.
Mohandas Pai during his tenure as Member of the Board, and Director and
Head-Administration, Education & Research, Finacle, Human Resources
Development, and Infosys Leadership Institute.

19. Auditors:

The auditors, BSRs. & Co., Chartered Accountants, Retire at the ensuing
Annual General Meeting and have confirmed their eligibility and willingness
to accept office, if Re-appointed.

20. Fixed deposits:

We have not accepted any fixed deposits and, as such, no amount of
principal or interest was outstanding as of the Balance Sheet date.

21. Human Resources management:

Employees are our vital and most valuable assets. We have created a
favorable work environment that encourages innovation and meritocracy. We
have also set up a scalable Recruitment and human resources management
process, which enables us to attract and Retain high-caliber employees. We
added 15,321 (net) and 32,247 (gross) employees this year, taking our total
strength to 1,08,009 from 92,688 at the end of the previous year. We added
17,024 (net) and 43,120 (gross) employees this year, taking the total
strength of the Infosys group to 1,30,820 from 1,13,796 at the end of the
previous year. Our attrition Rate stands at 17.0% compared to 13.4% for
the previous year. Over the last year, we Received 8,29,800 applications
from prospective employees and we continue to Remain an employer of choice
in the industry.

22. Education & Research:

Continuous education of our employees is of prime significance for us. We
believe that this is necessary not only for our own sustainability and
growth as an organization but also for enabling the professional
development of our employees. In addition to the six month Residential
foundation program that we conduct for every fresh engineer who joins us,
we also lay significant emphasis on the continuous education of our
employees. The foundation program is designed to aid students in
effectively transitioning from the academic world to the corporate world as
qualified professionals.

During the financial year, the total training provided for Infoscions was
over 1.5 million person days. During the year, we launched several novel
programs to help enhance the business competency of our employees, in
addition to introducing new programs aligned to evolving business needs.

We have made significant progress with the Campus Connect program aimed at
building a Robust industry-academia partnership. We deepened our
Relationship with several engineering institutions across India through the
co-creation of several new electives introduced into their curricula.
During the financial year, we engaged with 1,040 faculty members who in
turn trained 33,000 students. With this the total number of faculty covered
under the program is 5,600 and the number of students trained is 1,20,000
from 530 engineering institutions. The program has Received international
accolades such as the Corporate University Xchange Award for Excellence and
Innovation for the year 2011. As part of SPARK, an Infosys program to
expose students from high schools and universities to the world of IT
and Raise their aspirations, we engaged with over 1,75,000 students during
the financial year. From its launch a little over two years ago, the
program has Reached out to over 2,80,000 students.

Our internationally acclaimed Knowledge Management program won the Global
MAKE (Most Admired Knowledge Enterprise) award for the seventh time, the
Asian MAKE award for the eighth time, and the India MAKE award for the
sixth time during the financial year.

Our Researchers published their articles and white papers in prestigious
journals and conferences as well as in books and invited chapters in
reputed publications.

23. Infosys Leadership Institute:

The Infosys Leadership Institute (ILI) was established with the aim of
developing world-class corporate leaders. The institute helps to identify
potential candidates and earmarks them for the training Required to take on
key leadership positions within the Company. The ILI's Tier Leadership
development hopes to produce and mould business leaders of tomorrow. The
institute aims to be a globally Recognized institution with a focus on
training leaders capable of tackling current and future business
challenges. The work done by the ILI helps not only in the identification
of leaders but also in the nurturing of a leadership mindset and culture
across the organization.

Over the last year, ILI has engaged in several activities to support and
grow our group of high potential tier leaders' as well as advance the
field of leadership development. The institute Rolled out the Leadership
Journey Series Assessment and conducted assessment feedback sessions as
well as helped leaders plan and execute their personal development plans.
It also developed structured Roadmaps guiding development around the seven
key Infosys leadership dimensions, as well as key initiatives such as
Creating Client Value.

In 2010-11, ILI showcased thought leadership through collaborations with
leading Researchers from India and abroad, 12 conference presentations, one
peer-reviewed journal article, several keynote presentations and most
importantly, the Release of the book, Leadership @Infosys, which combines
Research and practice perspectives to capture the essence of what it means
to excel as a leader at Infosys.

24. Sustainability initiatives:

Sustainability is a commitment for us to align our strategy in all aspects
of our business with our stakeholders in various dimensions such as
economic, social and environment. Our focus areas are embodied in the
following themes-social contract, Resource intensity and green innovation -
and are articulated in our Sustainability Policy. Social contracts are our
implicit Responsibility to the larger society, to factor in social and
environmental aspects as important dimensions of our business. Resource
intensity is about doing more with less Resources-energy, water or
material. Green innovation is about leveraging the opportunity for business
leadership through sustainability.

The Infosys Sustainability Executive Council (ISEC) oversees the planning
and progress of all our sustainability initiatives.

As part of our sustainability journey, many of our business units are
pursuing innovation in green technologies and many of these have been
implemented as solutions for our clients. Some of them are:

- iSustain : An enterprise carbon energy and Resource management tool with
sustainability Reporting and performance management capabilities.

- InGreen Energy Management : Enables enterprises to Reduce energy usage
through automated tracking and identification of consumption patterns;
opportunities for changes and Reduction, reporting and analysis. It has
helped us save energy usage and costs to the tune of 20%.

- InGreen Personal Carbon Calculator : Helps organizations create awareness
among employees and measure their daily carbon footprint.

- iSmart : An intelligent power strip that can not only supply power from
an electrical source to devices connected to it in enterprise environments,
but also monitor their energy consumption level on a continuous basis.

- Integrated Real time Campus Management System (iRCMS): An enterprise
monitoring system that tracks and allows efficient energy management and
prolong the life of energy equipment through surveillance. iRCMS helps
enterprises with their manpower savings by allowing the facilities and
business managers to take informed decisions based on consumption and
demand Relatedparameters of energy thereby helping buildings and Real
estates go green and sustainable.

This fiscal year, our Green Initiatives and the Voice of Youth teams
successfully implemented several campaigns and initiatives for creating
awareness and influencing our employees and stakeholders in Reducing their
carbon footprint. Some of the key employee-driven activities have been:

- Earth Hour : The global drive of WWF which led to 3,136 units (over 3.1
MWh) of electrical equipment load turned off during one hour across nine
DC-locations in India.

- Infosys Megawatt Challenge: The Infosys Megawatt Challenge was launched
at our U.S. offices to Reward employees who brought about a Reduction in
their energy consumption over a period of six months and a positive
outreach at their local communities.

- COP16 : Representation at the United Nations Climate Change Conference
(COP16) held at Cancun as a member on the delegation from World Business
Council for Sustainable Development.

As part of our commitment to social contracts, several of our
employeedriven clubs and groups are actively involved in building an
equitable society. Some of the significant programs this fiscal year have
been:

- Notebook Drive: This initiative targets students of government schools
who are not in a position to afford notebooks and stationery to pursue
their academics. The NBD provides them stationery typically Required by the
beneficiaries for one academic year. We now Reach out to 45,000 children in
400 schools and distribute more than 1,72,000 notebooks. More than 4,000
Infoscions worldwide are actively involved in organizing donation
campaigns, purchasing notebooks, managing the logistics, and overseeing the
distribution of school kits.

-SPARK: This program offers a learning environment that helps students
Realize their potential and assess their industry preparedness. The program
partners with academic institutions to enhance talent pool as well as meet
the demands of the IT industry. Launched in August 2008, SPARK is managed
by 2,400 Infosys volunteers across development centers. This year it has
benefitted more than 1,75,000 students, 1,450 institutions and 6,200
faculty members.

- Karnataka flood Relief: Infosys always Responds to a humanitarian crisis
by volunteering and pledging support. In October 2009, the northern
districts of Karnataka were severely affected by floods after torrential
Rainfall. It claimed hundreds of lives and Rendered millions of villagers
homeless. Our employees joined hands to Rebuild villages and undertake a
mass housing project. Infoscions, together with the Board of Directors and
the Infosys Foundation, contributed Rs.30 crore towards Relief,
Rehabilitation and Reconstruction.

Under the auspices of the state government's Aasare' scheme, we partnered
with local NGOs to construct homes across 18 villages. The ongoing housing
project serves as a model for sustainable development.

For more details on our sustainability initiatives, visit www.infosys.com

25. Employee Stock Option Plan (ESOP):

We had introduced various stock option plans for our employees. The details
of options granted under the 1998 Stock Option Plan (the 1998 Plan) and the
1999 Stock Option Plan (the 1999 Plan) are as follows:

1998 Plan 1999 Plan
Total grants authorized
by the plan (no.) 1,17,60,000 ADS 5,28,00,000 shares

Pricing formula on date of grant Not less than 90% of fair market value
Fair market value

Variation in terms NA NA

Ratio of ADS to equity shares 1 ADS=1 equity share NA

Options granted during
the year (no.) - -

Weighted average price per
option granted (R) NA NA

Options vested as
at March 31, 2011 (no.) 50,070 40,232

Options exercised during
the year (no.) 1,88,675 1,37,692

Total number of shares 1,88,675 1,37,692
arising as a Result of
exercise of options

Money Raised on exercise of
options (Rs. crore) 13 11

Options forfeited and lapsed
during the year (no.) 3,519 18,052

Total number of options in force at
the end of the year (no.) 50,070 48,720

Grant to senior management - -

Employees Receiving 5% or more - -
of the total number of options
granted during the year

Employees granted options - -
equal to or exceeding 1% of
the issued capital

Diluted EPS on issue of shares 112.22 112.22
on exercise calculated in
accordance with AS 20

SEBI has issued the Employee Stock Option Scheme and Employee Stock
Purchase Scheme Guidelines, 1999. This is effective for all stock option
schemes established after June 19, 1999. In accordance with these
guidelines, the excess of the market price of the underlying equity shares
as of the date of the grant over the exercise price of the option,
including up-front payments, if any, is to be Recognized and amortized on a
straight line basis over the vesting period.

We have the 1998 Stock Option Plan and 1999 Stock Option Plan, where the
options are issued to the employees at an exercise price not less than the
fair market value.

If the compensation cost on account of stock options granted after June 30,
2003 (as Required by the amendment effective June 30, 2003) under 1998 and
1999 Plans was computed using the fair value method, our compensation cost
would have been higher by Rs. 1 crore. Our profit would hence be less by
Rs. 1 crore for fiscal 2010. The impact on EPS for fiscal 2010 would be
Rs.0.01. For fiscal 2011 there was no stock compensation cost. During
fiscal 2011 and 2010, stock options under the 1998 Plan and 1999 Plan have
not been granted. Hence, the weighted average fair values of grant during
these years are nil.

All stock options under the 1998 and 1999 Employees Stock Option Plans were
granted at the prevalent market price on the date of grant. Accordingly, we
have calculated the compensation cost arising on account of stock options
granted using the intrinsic value method. Hence, the disclosure in terms of
Clause 12.1 (n) of SEBI (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999, is not applicable.

A B C D
1998 Plan

Outstanding at the beginning of the year 2,42,264 613 9,16,759 904
Forfeited (3,519) 722 (60,424) 1,550
Exercised (1,88,675) 600 (614071) 854
Outstanding at the end of the year 50,070 683 2,42,264 613
Vested at the end of the year 50,070 683 2,42,264 613
1999 Plan
Outstanding at the beginning of the year 2,04,464 869 9,25,806 1,248
Forfeited (18,052) 964 (3,40,264) 1,968
Exercised (1,37,692) 823 (3,81,078) 821
Outstanding at the end of the year 48,720 962 2,04,464 869
Vested at the end of the year 40,232 717 1,84,759 735

A = 2011 No. of options
B = 2011 Weighted average exercise price (Rs.)
C = 2010 No. of options
D = 2010 Weighted average exercise price (Rs.)

26. Infosys Science Foundation:

The Infosys Science Foundation, a not-for-profit trust set up to promote
research in pure and applied sciences, presented the Infosys Prize to
scientists and Researchers in the five categories of Research listed below:

- Physical Sciences-Physics, Chemistry and Earth Sciences

- Mathematical Sciences-Mathematics and Statistics

- Engineering and Computer Science - All branches of Engineering

- Life Sciences-Biology, Medicine and Plant Science

- Social Sciences and Economics-History, Sociology, Anthropology, Political
Science, Economics and International Relations

Nominations were evaluated by an eminent jury in each area, comprising
outstanding international personalities selected by the trustees of the
Foundation.

The Infosys Prize 2010 presentation was held in Mumbai on January 6, 2011.
Laureates were felicitated by the Prime Minister of India, Dr. Manmohan
Singh. The prize in each category comprised a 24 karat gold medallion, a
citation and a cash grant of Rs. 50 lakh.

For more details on the Infosys Science Foundation, refer to the website
www.infosys-science-foundation.com

27. Infosys Foundation:

We are committed to contributing to the society and established Infosys
Foundation in 1996 as a not-for-profit trust to support our social
initiatives. The Foundation supports programs and organizations devoted to
the cause of the destitute, the Rural poor, the mentally challenged, and
the economically disadvantaged sections of the society. The Foundation also
helps preserve certain cultural forms and dying arts of India.

A summary of the work done by the Foundation is provided in the Additional
Information Report published on our website www.infosys.com. On your
behalf, we express our gratitude to the honorary trustees of the Foundation
for sparing their valuable time and energy for its activities.

28. Green initiative:

During the previous fiscal, we started a sustainability initiative with the
aim of being green and minimizing our impact on the environment. Like last
year, this year too we are publishing only the statutory disclosures in the
print version of the Annual Report along with the Abridged standalone
financial statements prepared in compliance with the Section 219 of the
Companies Act, 1956. Additional details are available on our website,
www.infosys.com.

Acknowledgments:

We thank our customers, vendors, investors and bankers for their continued
support during the year. We place on Record our appreciation of the
contribution made by our employees at all levels. Our consistent growth was
made possible by their hard work, solidarity, cooperation and support.

We thank the governments of various countries where we have our operations.
We also thank the Government of India, particularly the Ministry of
Communication and Information Technology, the Ministry of Commerce, the
Ministry of Finance, the Customs and Excise Departments, the Income Tax
Department, the Reserve Bank of India, the state governments, the Software
Technology Parks (STPs)-Bangalore, Bhubaneswar, Chandigarh, Chennai,
Gurgaon, Hyderabad, Jaipur, Mangalore, Mysore, Pune, and Thiruvananthapuram
and other government agencies for their support, and look forward to their
continued support in the future.

For and on behalf of the Board of Directors
S. Gopalakrishnan
Chief Executive Officer and S.D. Shibulal
Managing Director Chief Operating Officer and Director

Place: Bangalore
Date : April 15, 2011.

ANNEXURE TO THE DIRECTORS' REPORT:

a) Particulars pursuant to Companies:

(Disclosure of particulars in the Report of the Board of Directors) Rules,
1988:

Conservation of energy:

Building infrastructure:

During the year, two of our buildings, one in Jaipur and the other in
Thiruvananthapuram, were awarded the prestigious LEED Platinum rating-the
highest Rating for Green Buildings, by the Indian Green Building Council
(IGBC). All new buildings that were completed in the previous year have
been Registered for LEED Rating from IGBC and we hope to achieve a Platinum
Rating in all cases. The energy performance of all the buildings designed
in the previous year has been found to be more efficient than the globally
accepted ASHRAE efficiency standards for buildings.

On new technologies, one building in our Hyderabad campus has been
commissioned with Radiant cooling, a method of cooling used for the first
time in a commercial building in India. A chilled water storage tank of 300
KL capacity has been built at our Mangalore campus to increase the
efficiency of the air conditioning system. This system is under testing and
is expected to Reduce peak load as well as energy consumption. Initial
Results of this system have been very encouraging. Chilled beam systems,
which are expected to be more efficient than the conventional air
conditioning systems, are being implemented in three new buildings in our
Pune campus. High-efficiency chillers that consume considerably lesser
power have been selected for all new upcoming projects, thusRs.educing peak
demand as well as energy consumption.

During the year, we worked with electricity and power Regulators in
Karnataka and with the government of India for making green power cheaper,
an achievement that is significant not only for us but would also benefit
the community at large. A similar initiative is being taken up in other
parts of the country. We purchased about 8.53 million units of green power
during the year and this figure is expected to increase substantially in
the coming years. OnRs.enewable energy, two solar photovoltaic systems of
about 200 KW and 125 KW are being installed in our Jaipur and
Thiruvananthapuram campuses Respectively. Together, these are expected to
generate about 4,50,000 units of electricity annually, thus Reducing the
burden on the grid.

A considerable amount of time and effort was earmarked for conserving power
across all our development centers in India. Some of the measures taken
include:

* Installation of wind turbines at our campuses in Pune, Bangalore and
Mangalore

* Installation of occupancy sensors in conference Rooms and restrooms

* Introduction of LED lamps in lieu of fluorescent tubes

* Variable Frequency Drives (VFD) installed in condenser pumps on chillers

* Approval to Replace old and inefficient utilities such as DG sets, pumps
and motors

* Strong monitoring of the Environmental Management System as per ISO 14001
guidelines

These measures have Resulted in Reducing the per capita power consumption
by over 3% during the year.

IT infrastructure:

During the year, optimized desktop power management configuration has been
extended to around 80,000 desktops. Our in-house application, Terminator',
designed to force-schedule the shutdown of desktops, is being enhanced to
achieve further Reduction in power demand by desktops. In addition to this,
around 10,000 older desktops have been Replaced this year with newer power-
efficient models. We have continued our efforts towards Restructuring the
existing data centers and server Rooms. Around twelve server Rooms have
been revamped this year and about 4,400 sq. ft. of server Room/lab space
has been Released. Further, our projects have been swift to adopt the
internal enterprise cloud, a shared, secure and virtualized computing
environment with an easy-to-use Self-Service' portal. On an average, 90%
of the virtual instances are in use at any given time and we are planning
to further augment the capacity.

Video Conferencing (VC) usage has increased steadily this year and
currently, on an average, around 2,500 VC calls are happening per month.
Further, we have introduced Telepresence, an Ultra High Definition (1080p)
VC facility in three locations. Telepresence Relays true life-size images
and employs spatial audio to provide an immersive experience to the
participants. Usage of this facility would help us connect with customers
at CXO levels across the world and Reduce our travel Requirements.

Research and Development (R & D):

Our new strategic direction Building Tomorrow's Enterprise' identifies
trends that are driving and transforming the businesses of our clients
globally. These include digital consumers, emerging economies, healthcare
economy, sustainable tomorrow, new commerce, smarter organizations and
pervasive computing. These themes are now being used to define the Research
and innovation agenda of the Company.

Infosys Labs:

Infosys Labs, a dedicatedRs.esearch and innovation group comprising
technology and domain-focused members has been established. It builds on
the successes of the award winning 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 & Privacy, Distributed Computing and Innovation. We also
have dedicated Centers of Excellence on Maintenance & 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 &
sensor networks, scalable computing including GPGPU, multi-core and cloud
computing, data privacy and user authentication, preventive software
maintenance and software engineering.

Learn more about Infosys Labs and its focus areas at
http://www.infosys.com/infosys-labs/

Finacle:

The Finacle R & D unit at Infosys is engaged in the Research of developing
new technologies in the banking domain. Finacle R & D solutions address the
areas of core banking, wealth management, CRM, Islamic banking and treasury
Requirements of Retail, corporate and universal banks worldwide. Finacle
solutions also empower banks with multiple sales, service and marketing
channels including e-banking and mobile banking.

Education & Research:

The E-Com Research lab of the E&R unit focuses its Research in the areas of
game theory applications to IT services, distributed computing,
optimization theory applications to IT services, pattern Recognition
systems, face Recognition algorithms, large data management and education
technology.

Collaborations with academia and industry:

We co-create with clients, technology partners, universities and the larger
innovation ecosystem by setting up joint innovation centers and developing
solutions for complex business problems.

We are associated with various universities globally including, Purdue
University, Indian Institute of Science, Bangalore, IIIT, Hyderabad, IIIT,
Bangalore, IIT, Bombay-Monash Research Academy, University of Southern
California, University of Cambridge and the University of Illinois at
Urbana-Champaign. We also associate with several industry consortia
including the IU-ATC in the United Kingdom (U.K.) and the Smart Services
CRC in Australia.

With a definitive aim to enlarge the innovation ecosystem to include start-
ups, entrepreneurs, incubation cells and other innovation players in the
industry, Infosys Labs organized an Innovation Camp' in Bangalore in March
2011. This is part of our larger program planned across the globe.

R & D highlights:

Our efforts in R & D have helped us offer new services to clients in the
areas of Software Engineering, Convergence, Knowledge-driven Information
Systems, Security & Privacy and Distributed Computing. We are developing
client-focused business solutions based on the intellectual property
developed by multiple Research groups.

Our R & D efforts have helped us win large deals across industry verticals.

From a banking industry perspective, the Finacle R & D unit has launched
innovative offerings such as FinacleTM Advisor, FinacleTM Mobile Banking
2.0, FinacleTM Treasury-in-a-box, FinacleTM Core Banking for Regional Rural
banks and FinacleTM financial inclusion solutions. Our Research has also
helped develop key Finacle solutions like Core Banking, CRM, Consumer e-
banking, Wealth Management and others.

Our R & D efforts have also helped differentiate our solutions and win
awards. An illustrative list is provided here:

* FinacleTM was adjudged a Winner' in the 5th Annual Leaders in
Innovation Awards' by Financial-i, a leading U.K. based financial
publication for the Best Core Banking Software'.

* Our Research on mobility and our innovation accelerator Infosys mConnect,
has powered award winning Infosys solutions such as FlyppTM -Recognized for
its innovative approach to technology and business in telecom' at the
Aegis Graham Bell Awards 2010 and Infy-on-the-Go-Recognized at the
Information Week innovation award 2010.

* Infosys iSmart, a sensor-based energy management solution developed by
Infosys Labs, was selected as an innovative solution in the Grand
Challenges for Technologists (2010) held by Technology Review (India), the
magazine of the Massachusetts.

Institute of Technology:

During the year, the Research groups also published two books, Raising
Enterprise Applications-A Software Engineering Perspective and
Processcentric Architecture for Software Systems, and over 125 papers in
leading publications and journals.

Future plan of action:

We are now using the Building Tomorrow's Enterprise' theme to focus on our
technology Research and to identify large, multidisciplinary problem areas
that embody the challenges facing our clients. We will continue to focus on
and collaborate with leading national and international universities,
product vendors and technology start-up companies. We are creating an
ecosystem to co-create business solutions on client-specific business
themes.

Expenditure on R & D:
in Rs. crore
2011 2010

Revenue expenditure 521 437
Capital expenditure 6 3
Total 527 440
R & D expenditure/total Revenue 2.1% 2.1%

Foreign exchange earnings and outgo:

Activities Relating to exports, initiatives taken to increase exports,
development of new export markets for products and services, and export
plans

During the year, 97.7% of our Revenues were derived from exports. We have
established a substantial direct marketing network around the world,
including North America, Europe and Asia Pacific.

These offices are staffed with sales and marketing specialists who sell our
services to large international clients.

Foreign exchange earned and used:

in Rs. crore
2011 2010

Earnings 23,960 21,075
Outflow (including capital imports) 10,765 8,490
Net foreign exchange earnings (NFE) 13,195 12,585
NFE/Earnings 55.1% 59.7%

For and on behalf of the Board of Directors
S. Gopalakrishnan
Chief Executive Officer and S.D. Shibulal
Managing Director Chief Operating Officer and Director

Place: Bangalore
Date : April 15, 2011.

MANAGEMENT DISCUSSION AND ANALYSIS

Overview:

The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, guidelines issued by the
Securities and Exchange Board of India (SEBI) and the Generally Accepted
Accounting Principles (GAAP) in India. Our Management accepts
responsibility for the integrity and objectivity of these financial
statements, as well as for the various estimates and judgments used
therein. The estimates and judgments relating to the financial statements
have been made on a prudent and reasonable basis, so that the financial
statements reflect in a true and fair manner the form and substance of
transactions, and reasonably present our state of affairs, profits and cash
flows for the year.

A. Industry structure and developments:

Changing economic and business conditions and rapid technological
innovation are creating an increasingly competitive market environment that
is driving corporations to transform their operations. Consumers of
products and services are increasingly demanding accelerated delivery times
and lower prices. Companies are focusing on their core competencies and
using outsourced technology service providers to adequately address these
needs. The role of technology has evolved from supporting corporations to
transforming their business. There is an increasing need for highly skilled
technology professionals in the markets in which we operate. At the same
time, corporations are reluctant to expand their internal IT departments
and increase costs. These factors have increased the reliance of
corporations on their outsourced technology service providers and are
expected to continue to drive future growth for outsourced technology
services.

1. Increasing trend toward offshore technology services:

Outsourcing the development, management and ongoing maintenance of
technology platforms and solutions has become increasingly important to
companies. The effective use of offshore technology services offers a
variety of benefits to them, including lower cost of ownership of IT
infrastructure, lower labor costs, improved quality and innovation, faster
delivery of solutions and more flexibility in scheduling. In addition,
technology companies are also recognizing the benefits of offshore service
providers in software research and development and related support
functions, and are outsourcing a greater portion of these activities. This
has also resulted in more and more diversification in the range of services
delivered offshore.

2. 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% in fiscal 2011, to record
revenues of US$ 33.5 billion. The same review also forecasts that BPO
exports from India are estimated to grow by 14% in fiscal 2011 to record
revenues of US$ 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. Some of these factors are high-quality delivery, significant
cost benefits and abundant skilled resources.

3. Evolution of technology outsourcing:

The realm of technology outsourcing is changing. In an environment of rapid
technological advancement, globalization and regulatory changes, 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.

4. Global Delivery Model (GDM):

Our GDM allows us to execute services where it is most cost effective and
sell services where it is most profitable. The GDM makes the best use of
our large pool of highly skilled technology professionals and our 24-hour
execution capabilities across multiple time zones. Other factors that make
it one of the best delivery models in the world are its ability to
accelerate delivery times of large projects by simultaneously processing
project components; cost competitiveness across geographic regions; built-
in redundancy to ensure uninterrupted services; and a knowledge management
system that enables us to re-use solutions where appropriate.

Our GDM mitigates risks associated with providing offshore technology
services to our clients. Speedy and effective communication being the key,
we use multiple service providers and a mix of terrestrial and optical
fiber links with alternate routing. In India, we rely on two
telecommunication carriers to provide high-speed links interconnecting our
global development centers. We rely on multiple links on submarine cable
paths to interconnect our 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.

5. Our end-to-end solutions:

We complement our industry expertise with specialized support for our
clients. We also leverage the expertise of our various Centers of
Excellence and our software engineering group and technology lab to create
customized solutions for our clients. In addition, we continually evaluate
and train our professionals in new technologies and methodologies. 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 a robust knowledge management system that enables us to
leverage existing solutions across our Company. We use in-house tools for
project management and software lifecycle support. We believe that our
processes, methodologies, knowledge management systems and tools reduce the
overall cost to the client, mitigate risks, enhance the quality of our
offerings and allow clients to improve time-to-market for their solutions.
The revenues attributed to the custom application development, maintenance
and production support, product engineering, package-enabled consulting and
implementation and business transformation consulting services represented
a majority of our total revenues in fiscal 2011.

B. Financial condition Sources of funds:

1. Share capital:

At present, we have only one class of shares-equity shares of par value
Rs.5/- each. Our authorized share capital is Rs. 300 crore, divided into 60
crore equity shares of Rs/- each. The issued, subscribed and paid up
capital stood at Rs. 287 crore as at March 31, 2011 (same as the previous
year).

During the year, employees exercised 1,88,675 equity shares issued under
the 1998 Stock Option Plan and 1,37,692 equity shares issued under the 1999
Stock Option Plan. Consequently, the issued, subscribed and outstanding
shares increased by 3,26,367. The details of options granted, outstanding
and vested as at March 31, 2011, are provided in the Notes to the
consolidated financial statements section in the Annual Report.

2. Reserves and Surplus:

2. a Capital reserve:

The balance as at March 31, 2011 amounted to Rs.54 crore. During the
previous year, the addition to the capital reserve account of Rs.48 crore
is on account of transfer of profit on sale of investments in OnMobile
Systems Inc., U.S. of Rs. 48 crore, which was included in the net profit.

2. b Share premium:

The addition to the share premium account of Rs.35 crore during the year is
primarily on account of premium received on issue of 3,26,367 equity
shares, on exercise of options under the 1998 and 1999 Stock Option Plans
of Rs.24 crore.

An amount of Rs.11 crore (Rs.10 crore in the previous year) was credited to
the share premium account arising due to tax benefits in overseas
jurisdiction of deductions earned on exercise of employees' stock options,
in excess of compensation charged to the Profit and Loss account.

2. c General reserves:

An amount of Rs.645 crore representing 10% of the profits for the year
ended March 31, 2011 (previous year Rs. 580 crore) was transferred to the
general reserves account from the Profit and Loss account.

2.d Profit and Loss account:

The balance retained in the Profit and Loss account as at March 31, 2011 is
Rs.15,591 crore, after providing the interim, 30th year special and final
dividend for the year of Rs.574 crore, Rs.1,722 crore and Rs.1,149 crore
respectively and dividend tax of Rs.568 crore thereon. The total amount of
profits appropriated to dividend including dividend tax was Rs.4,013 crore,
as compared to Rs.1,674 crore in the previous year.

2. e. Shareholder funds:

The total shareholder funds increased to Rs.24,501 crore as at March 31,
2011 from Rs.22,036 crore as of the previous year end. The book value per
share increased to Rs.426.73 as at March 31, 2011, compared to Rs.384.01 as
of the previous year-end.

Application of funds:

3. Fixed assets:

3. a Capital expenditure:

We incurred a capital expenditure of Rs.1,152 crore (Rs.565 crore in the
previous year) comprising additions to gross block of Rs.1,017 crore, net
of Rs.3 crore movement in land from leasehold to freehold for the year
ended March 31, 2011. An increase of Rs.90 crore on account of increase in
capital work-in-progress and Rs.45 crore on account of decrease in
retention monies. The entire capital expenditure was funded out of internal
accruals.

3. b Additions to gross block:

During the year, we capitalized Rs.1,017 crore to our gross block
comprising Rs.251 crore for investment in computer equipment and the
balance of Rs.764 crore on infrastructure investment and Rs.2 crore on
vehicles. We invested Rs.225 crore to acquire 267 acres of land in
Bangalore, Delhi and Mangalore. The expenditure on buildings, computer
equipment, plant and machinery and furniture and fixtures, increased by
Rs.323 crore, Rs.251 crore, Rs. 147 crore and Rs.69 crore respectively.

During the previous year, we capitalized Rs.787 crore to our gross block,
including investment in computer equipment of Rs.140 crore, Rs.646 crore on
infrastructure investment and Rs.1 crore on vehicles. We invested Rs.43
crore to acquire 161 acres of land in Hyderabad, Jaipur, Mysore and
Mangalore.

3. c Deductions to gross block:

During the year, we deducted Rs.440 crore (net book value of Rs. nil) from
the gross block on retirement of assets. During the previous year, we
retired/transferred various assets with a gross block of Rs.387 crore (net
book value of Rs. nil) Rs.8 crore on donation of computer systems and Rs.21
crore on disposal of various assets.

3. d Capital expenditure commitments:

We have a capital expenditure commitment of Rs.742 crore, as at March 31,
2011 as compared to Rs.267 crore as at March 31, 2010.

4. Investments:

We made several strategic investments aimed at procuring business benefits
and operational efficiency for us. During the previous year, the Company
sold 32,31,151 shares of OnMobile Systems Inc., U.S., for a total
consideration of Rs.53 crore, net of taxes and transaction cost.

4. a Majority-owned subsidiary:

Infosys BPO Limited:

We established Infosys BPO Limited as a majority-owned and controlled
subsidiary on April 3, 2002, to provide business process management
services. Infosys BPO seeks to leverage the benefits of service delivery
globalization, process redesign and technology to drive efficiency and cost
effectiveness in customer business processes.

On December Rs. 4, 2009, Infosys BPO acquired 100% of voting interest in
McCamish Systems LLC, a business process solutions provider based at
Atlanta, U.S., for a cash consideration of Rs.173 crore and a contingent
consideration of Rs.67 crore.

4. b Wholly-owned subsidiaries:

During the year, the investments in our subsidiaries were as follows:

Subsidiary In foreign Rs. crore
currency
Infosys Technologies (China)
Company Limited US$ 9 million 42

Infosys Tecnologia do Brasil
Ltda BRL 3.8 million 10

Infosys Technologies S.de R.L.
de C.V, Mexico MXN 40 million 14

Infosys Technologies (Shanghai)
Company Limited (1) US$ 2.5 million 11

(1) During the year, Injosys Technologies Limited incorporated a wholly-
owned subsidiary Infosys Technologies (Shanghai) Company Limited.

5. Deferred tax assets/liabilities:

We recorded deferred tax assets of Rs.406 crore as at March 31, 2011
(Rs.313 crore as at March 31, 2010) and deferred tax liability of Rs.176
crore as at March 31, 2011 (Rs.232 crore as at March 31, 2010).

We assess the likelihood that our deferred tax assets will be recovered
from future taxable income. We believe it is more likely than not that we
will realize the benefits of these deductible differences.

6. Sundry debtors:

Sundry debtors amounted to Rs.4,212 crore (net of provision for doubtful
debts amounting to Rs.83 crore) as at March 31, 2011, compared to Rs. 3,244
crore (net of provision for doubtful debts amounting to Rs.100 crore) as at
March 31, 2010. These debts are considered good and realizable. Debtors are
at 16.6% of revenues for the year ended March 31, 2011, compared to 15.3%
for the previous year, representing a Days Sales Outstanding (DSO) of 61
days and 56 days foRs.the respective years.

Our largest client constituted 2.7% of sundry debtors as at March 31, 2011.
The age profile of debtors is as follows:

in %
Days 2011 2010

0-30 58.3 60.7
31-60 33.0 31.9
61-90 4.3 3.8
Above 91 4.4 3.6

100.0 100.0

Provisions are generally made for all debtors' outstanding for more than
180 days as also for others, depending on the Management's perception of
the risk. The need for provisions is assessed based on various factors,
including collectability of specific dues, risk perceptions of the industry
in which the customer operates and general economic factors that could
affect the customer's ability to settle.

The movement in provisions for doubtful debts during the year is as
follows:
in Rs. crore
2011 2010

Opening balance 100 105
Add : Amount provided 3 (1)
Less: Amount written-off 20 4
Closing balance 83 100

Provision for bad and doubtful debts as a percentage of revenue is 0.01%
for the year ended March 31, 2011, as against nil for the year ended March
31, 2010.

The unbilled revenues as at March 31, 2011 and March 31, 2010, amounted to
Rs.1,158 crore and Rs.789 crore respectively.

7. Cash and cash equivalents:

The bank balances in India include both rupee accounts and foreign currency
accounts. The bank balances in overseas current accounts are maintained to
meet the expenditure of the overseas branches and project-related
expenditure overseas. The deposit account represents deposits of maturity
up to 365 days.

Our treasury policy calls for investing surpluses with highly-rated
companies, banks and financial institutions for maturities up to 365 days,
as also with liquid mutual funds with a limit on investments in individual
entities.

8. Loans and advances:
in Rs. crore
2011 2010

Unsecured, considered good
Loans to subsidiary 32 46
Advances
Pre-paid expenses 52 25
Interest accrued but not due 14 14
Advance to Gratuity Fund Trust - 2
For supply of goods and services 50 5
Withholding and other taxes receivable 516 321
Others 10 13
Sub-total 674 426
Unbilled revenues 1,158 789
Advance income tax 924 641
Loans and advances to employees 126 100
Electricity and other deposits 60 60
Rental deposits 18 13
Deposits with financial institutions and
body corporate (1) 1,844 1,781
Mark-to-market gain on forward and
options contracts 63 88
Total 4,867 3,898

(1) An amount of Rs. 344 crore (Rs. 281 crore as at March 31, 2010)
deposited with the Life Insurance Corporation of India to settle leave
obligations as and when they arise during the normal course of business.
This amount is considered as restricted cash and hence not considered as
'cash and cash equivalents'.

As at March 31, 2011, the outstanding loan to Infosys Technologies (China)
Company Limited was Rs.23 crore (US$ 5 million), the outstanding loan as at
March 31, 2010 was Rs.46 crore (US$ 10 million). During the year, the
Company has given a loan of Rs.9 crore (US$ 2 million) to Infosys
Tecnologia do Brasil Ltda, which is outstanding as of March 31, 2011. The
loan is repayable within five years and six months at the discretion of the
subsidiary, for the China and Brazil subsidiaries respectively.

The withholding and other taxes receivable represents transaction taxes
paid in various domestic and overseas jurisdictions which are recoverable.

Unbilled revenues consist primarily of costs and earnings in excess of
billings to the client on fixed-price, and fixed-time frame contracts.

The details of advance income taxes are as follows:
in Rs. crore
2011 2010

Domestic tax 897 635
Overseas tax 27 6

Total 924 641

Our loan schemes provide for personal loans and salary advances that are
provided primarily to employees in India who are not executive officers or
directors. The loans and advances are recoverable within 24 months.

Electricity and other deposits represent electricity deposits, telephone
deposits, insurance deposits and advances of a similar nature. The rent
deposits are for buildings taken on lease by us for our software
development centers and marketing offices in locations across the world.

Deposits with financial institutions and corporate bodies represent surplus
money deployed in the form of short-term deposits.

9. Current liabilities:
in Rs. crore
2011 2010

Sundry creditors
For goods and services 85 96
For accrued salaries and benefits 405 446
For other liabilities
Provision for expenses 537 375
Retention monies 21 66
Withholding and other taxes 292 235
Gratuity obligations - unamortized
amount 22 26
Others 8 8
Sub-total 1,370 1,252
Advances received from clients 19 7
Unearned revenue 488 502
Unclaimed dividend 3 2

Total 1,880 1,763

Sundry creditors for accrued salaries and benefits include the provision
for bonus and incentive payable to the staff. Sundry creditors for other
liabilities represent amounts accrued for other operational expenses.
Retention monies represent monies withheld on contractor payments pending
final acceptance of their work. Withholding and other taxes payable
represent local taxes payable in various countries in which we operate and
the same will be paid in due course.

Effective July 1, 2007, we revised the employee death benefits provided
under the gratuity plan, and included all eligible employees under a
consolidated term insurance cover. Accordingly, the obligations under the
gratuity plan reduced by Rs.37 crore, which is being amortized on a
straight line basis to the Profit and Loss account over ten years,
representing the average future service period of employees. An amount of
Rs.4 crore was amortized during the year. The unamortized balance as at
March 31, 2011 was Rs.22 crore.

Advances received from clients represent monies received for the delivery
of future services. Unearned revenue consists primarily of advance client
billing on fixed-price, and fixed-timeframe contracts for which related
costs were not yet incurred. Unclaimed dividends represent dividends paid,
but not encashed by shareholders, and are represented by a bank balance of
the equivalent amount.

10. Provisions:
in Rs. crore
2011 2010

Proposed dividend 1,149 861
Tax on dividend 187 143
Income taxes 756 719
Unavailed leave 303 239
Post-sales client support and warranties 78 73
Total 2,473 2,035

Proposed dividend represents the final dividend we recommended to our
shareholders. Upon approval by our shareholders, this will be paid after
the Annual General Meeting. Provision for tax on dividend denotes taxes
payable on final dividend declared for the year.

Provisions for taxation represent estimated income tax liabilities, both in
India and overseas. The details are as follows:

in Rs. crore
2011 2010

Domestic tax 37 37
Overseas tax 719 682
Total 756 719

Provisions for unavailed leave is toward our liability for leave encashment
valued on an actuarial basis. The provision for post-sales client support
and warranties is towards likely expenses for providing post-sales client
support on fixed-price contracts.

C. Results of operations:

1. Income

Of the total revenues for the years ended March 31, 2011 and March 31,
2010, approximately 97.7% were derived from our overseas operations where
as 2.3% were derived from domestic operations.

Our revenues are generated primarily on fixed-timeframe or time-and-
material basis. Revenues from software services on fixed-price and fixed-
timeframe contracts are recognized as per the proportionate-completion
method. On time-and-material contracts, revenue is recognized as the
related services rendered. Revenue from the sale of user licenses for
software applications is recognized on transfer of the title in the user
license, except in multiple arrangement contracts, where revenue is
recognized as per the proportionate-completion method.

The segmentation of software services by project type is as follows:

in Rs. crore
2011 2010

Fixed-price 42.1 40.8
Time-and-material 57.9 59.2
Total 100.0 100.0

Our revenues are also segmented into onsite and offshore revenues. Onsite
revenues are for those services which are performed at our client locations
or at our close development centers, as part of software projects, while
offshore revenues are for services which are performed at our software
development centers located in India.

The segmentation of revenues by location (including product revenue) is as
follows:
in %
2011 2010

Onsite 50.2 48.7
Offshore 49.8 51.3
Total 100.0 100.0

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. Therefore, any increase in the
onsite effort impacts our margins.

The details of effort mix for software services and products in person-
months are as follows:

in %
2011 2010

Onsite 26.5 26.1
Offshore 73.5 73.9
Total 100.0 100.0

The growth in software services and product revenues is due to an all-round
growth in various segments of the business mix and is mainly due to growth
in business volumes.

The details of the same are as follows:

2011 2010
Income (in Rs.crore)

Software services 24,100 20,215
Software products 1,285 925
Total 25,385 21,140
Person-months Software services
Onsite 2,24,378 1,75,581
Offshore 5,50,555 4,42,336
Billed-total 7,74,933 6,17,917
Software products 71,020 54,772
Non-billable 2,04,435 2,31,186
Training 1,10,288 92,081
Sub-total 11,60,676 9,95,956
Support 62,345 54,032
Total 12,23,021 10,49,988
Increase/(Decrease) in billed person months
Onsite 48,797 (3,748)
% change 27.8 (2.1)
Offshore 1,08,219 34,359
% change 24.5 8.4
Total 1,57,016 30,611
% change 25.4 5.2
Support/total (%) 51 51

1. a Software services:

During the year, the volume of software services grew by 25.4% compared to
5.2% in the previous year. The onsite and offshore volume growth were 27.8%
and 24.5% respectively during the year, compared to (2.1)% and 8.4% in the
previous year. In U.S. dollar terms, onsite per capita revenues increased
by 0.7% during the year, offshore per capita revenues decreased by 4.2% and
blended per capita revenues decreased by 1.1%. During the previous year,
onsite per capita revenues increased by 3.4% offshore per capita revenues
decreased by 4.7% and blended per capita revenues decreased by 2.8% in U.S.
dollar terms.

1. b. Software products:

The revenues from software products grew 38.9% compared to 9.1% in the
previous year. Of the software products revenue, 82.1% came from exports
(same as previous year).

2. Expenditure:

2.a Software development expenses:
in Rs. crore
2011 % 2010 % Growth %

Revenues 25,385 100.0 21,140 100.0 20.1

Software
development
expenses:

Salaries and bonus 11,013 43.4 9,216 43.6 19.5

Technical
sub-contractors 2,044 8.0 1,479 7.0 38.2

Overseas travel
expenses 573 2.3 401 1.9 42.9

Cost of software
packages 320 1.3 309 1.4 3.6

Third party items
bought for service
delivery to clients 139 0.5 17 0.1 717.6

Communication
expenses 39 0.2 45 0.2 (13.3)

Post-sales
customer support
and warranties 5 - (2) - 350.0

Other expenses 134 0.5 94 0.5 42.6

Total 14,267 56.2 11,559 54.7 23.4

We incurred software development expenses at 56.2% of revenues, compared to
54.7% during the previous year. Employee costs relate to salaries paid to
employees in India and include overseas staff expenses. The total software
professionals person-months increased to 11,60,676 for the year ended March
31, 2011, from 9,95,956 person-months during the previous year, an increase
of 16.5%. Of this, the onsite and offshore billed person-months (including
software products) are 2,24,378 and 6,21,575 for the year ended March 31,
2011, as compared to 1,75,581 and 4,97,108 for the previous year. The non-
billable and trainees person-months were 3,14,723 and 3,23,267 during the
current and previous year respectively. The non-billable and trainees
person-months were 27.1% and 32.5% of the total software professional
person-months for the current and previous year respectively. We added
32,247 employees (gross) and 15,321 employees (net) during the year as
compared to 18,905 employees (gross) and 6,837 employees (net) during the
previous year.

The utilization rates of billable employees for the years ended March 31,
2011 and March 31, 2010 are as follows:

in %
2011 2010

Including trainees 72.9 67.5
Excluding trainees 80.5 74.4

The cost of technical sub-contractors includes Rs.1,568 crore toward
purchase of services from subsidiaries for the year ended March 31, 2011,
as against Rs.1,210 crore in the previous year. The details of such related
party transactions are available in the Notes to Accounts. The balance
amount was utilized toward availing the services of external consultants to
augment skill sets that were required in various projects. We continue to
engage the services of these consultants on a need basis.

The overseas travel expenses representing cost of travel overseas for
software development constituted approximately 2.3% and 1.9% respectively
of total revenue for the years ended March 31, 2011 and March 31, 2010.
Overseas travel expenses include visa charges of Rs. 184 crore (0.7% of
revenues) for the year, compared to Rs.92 crore (0.4% of revenues) in the
previous year.

Cost of software packages primarily represents the cost of software
packages and tools procured for our internal use. These packages and tools
enhance the quality of our services and also meet the needs of software
development. The cost of software packages was 1.3% and 1.4% respectively
of the revenues for the years ending March 31, 2011 and March 31, 2010. Our
accounting policy is to charge such purchases to the Profit and Loss
accounts in the year of purchase. Third party items bought for service
delivery to clients include software and hardware procured from third
parties for resale to clients primarily in India. 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.

A major part of our revenues is generated from offshore software
development. We use high-end communication tools in order to establish
real-time connections with our clients. The communication expenses
represent approximately 0.2% of revenues for the years ending March 31,
2011 and March 31, 2010 respectively.

The provision for post-sale customer support and warranties saw a charge of
Rs.5 crore against the reversal of Rs.2 crore for the years ended March 31,
2011 and March 31, 2010 respectively.

Other expenses representing staff welfare, computer maintenance,
consumables and rent approximate to 0.5% of revenues during the year (same
as the previous year).

2.b Gross profit:

The gross profit during the year was Rs.11,118 crore representing 43.8% of
revenues compared to Rs.9,581 crore representing 45.3% of revenues in the
previous year.

2.c Selling and marketing expenses:

We incurred selling and marketing expenses at 4.8% of our total revenues,
compared to 4.6% in the previous year. Selling and marketing expenses
primarily consist of employee costs which include bonus payment. All other
expenses excluding the employee cost were 1.0% of revenues during the year
(same as previous year). The number of sales and marketing personnel
increased from 800 as at March 31, 2010 to 902 as at March 31, 2011.

We and our subsidiaries added 139 new customers as compared to 141 during
the previous year.

2. d General and administration expenses:

We incurred general and administration expenses amounting to 5.8% and 5.9%
of our total revenues, during the current year and previous year
respectively. All other expenses excluding the employee cost were 4.2% of
revenues during the year as compared to 4.3% in the previous year.

Employee costs increased as the number of administration personnel
increased from 3,922 as at March 31, 2010 to 4,487 as at March 31, 2011.

3. Operating profits:

We earned an operating profit (PBIDTA) of Rs.8,414 crore, representing
33.2% of total revenues compared to Rs.7,360 crore, representing 34.8% of
total revenues, during the previous year.

4. Depreciation:

We provided Rs.740 crore and Rs.807 crore toward depreciation for the years
ended March 31, 2011 and March 31, 2010 representing 2.9% and 3.8% of total
revenues. The depreciation for the years ended March 31, 2011 and March 31,
2010 includes an amount of Rs.33 crore and Rs.86 crore, toward 100%
depreciation on assets costing less than Rs.5,000 each. The depreciation as
a percentage of average gross block (excluding land) is 11.9% and 13.7% for
the years ending March 31, 2011 and 2010 respectively.

5. Other income, net:

Our treasury policy allows us to invest in short-term instruments with a
maturity of up to 365 days, with a limit on individual fund / bank. The
increase in interest income during the year was on account of higher cash
generation in the business and increase in the average yield during the
year.

We use foreign exchange forward contracts and options to hedge our exposure
to movements in foreign exchange rates. The use of these foreign exchange
forward contracts and options reduces our risks / costs. We do not use
foreign exchange forward contracts or options for trading or speculation
purposes.

Foreign exchange gains/(losses) include transaction and translation losses
of Rs.13 crore and a loss of Rs.237 crore for the years ended March 31,
2011 and March 31, 2010 respectively and option/forward contracts-gain of
Rs.52 crore and a gain of Rs.276 crore for the years ended March 31, 2011
and March 31, 2010 respectively.

The composition of currency-wise revenues for the years ended March 31,
2011 and March 31, 2010 is as follows:

in %
Currency 2011 2010

US Dollar (US$) 73.7 74.4
UK Pound (GBP) 6.5 8.5
Euro (EUR) 6.8 6.7
Australian Dollar (AUD) 6.6 5.8
Others 6.4 4.6
Total 100.0 100.0

6. Sensitivity to rupee movement:

Every 1% movement in the Indian rupee against the US dollar has an impact
of approximately 50 basis points on operating margin.

7. Provision for tax:

We have provided for our tax liability both in India and overseas. The
Indian corporate tax rate for the year ended March 31, 2011 is 33.22%.
Export profits for the year were entitled to tax benefits under two schemes
of the Government of India viz., the STPI and SEZ scheme.

7. a Software Technology Parks (STPs):

The profits attributable to operations under the STP scheme were exempted
from income tax for a consecutive period of ten years from the financial
year in which the unit started producing computer software, or March 31,
2011, whichever was earlier.

The details regarding the commencement of operations at our STP locations
and the year upto which the deduction under the STP scheme was availed are
as follows:

Software Technology Year of Tax exemption
Park Commenc- Claimed Available
ement (1) from (1) upto (1)

Electronics City, Bangalore 1995 1997 2004
Mangalore 1996 1999 2005
Pune 1997 1999 2006
Bhubaneswar 1997 1999 2006
Chennai 1997 1999 2006
Phase I, Electronics City,
Bangalore 1999 1999 2008
Phase II, Electronics City,
Bangalore 2000 2000 2009
Hinjawadi, Pune 2000 2000 2009
Mysore 2000 2000 2009
Hyderabad 2000 2000 2009
Chandigarh 2000 2000 2009
Sholinganallur, Chennai 2001 2001 2010
Konark, Bhubaneswar 2001 2001 2010
Mangala, Mangalore 2001 2001 2010
Thiruvananthapuram 2004 2004 2011

(1) Financial year.

7. b Special Economic Zones (SEZs):

During the financial year three more SEZ units at Mysore, Hyderabad and
Mahindra City, Chennai commenced production.

As per the SEZ Act, the units will be eligible for a deduction of 100% of
profits or gains derived from the export of services for the first five
years from commencement of provision of services and 50% of such profits or
gains for the next five years. Certain tax benefits are also available
for a further five years subject to the units meeting defined conditions.

The details regarding the commencement of operations at our SEZ locations
and the year upto which the deduction under the SEZ scheme is available are
as follows:

Special Economic Zone Year of Tax exemption
Commenc- Claimed Available
ement (1) from (1) upto (1)

Mahindra City-unit 1,
Chennai 2006 2006 2020
Chandigarh 2007 2007 2021
Mangalore 2008 2008 2022
Pune 2008 2008 2022
Thiruvananthapuram 2010 2010 2024
Mysore 2011 2011 2025
Hyderabad 2011 2011 2025
Mahindra City-unit 2,
Chennai 2011 2011 2025

(1) Financial year.

Other fiscal benefits, including indirect tax waivers, are being extended
for setting up, operating and maintaining the unit.

For the current year, approximately 1.61% of our revenues came from the STP
unit at Thiruvananthapuram, which was under tax holiday, 9.60% of revenues
came from the SEZ at Mahindra City-unit 1, Chennai, which was eligible for
deduction based on 50% of the profits of the unit and 13.34% of revenues
came from other SEZ units, which were eligible for deduction based on
entire profits of these units. The balance 75.45% of revenues came from
other STP units, which were subject to full tax in India. We pay taxes in
various countries in which we operate, on the income that is sourced to
those countries. The details of provision for taxes are as follows:

in Rs. crore
2011 2010

Overseas tax 502 433
Domestic tax 2,019 1,551
2,521 1,984
MAT credit - (288)
Deferred taxes (143) 21
2,378 1,717

The effective tax rate increased to 26.96% in fiscal 2011 as compared to
23.0% in fiscal 2010.

8. Net profit after tax:

Our net profit increased by 12% to Rs.6,443 crore for the year ended March
31, 2011 from Rs.5,755 crore in the previous year, excluding exceptional
item. This represents 25.4% and 27.2% of total revenue for the year ended
March 31, 2011 and March 31, 2010 respectively.

9. Earnings Per Share (EPS):

Our basic EPS increased by 11.8% during the year to Rs.112.26 per share
from Rs.100.37 per share in the previous year. The outstanding shares used
in computing basic EPS increased from 57,33,09,523 for the year ended March
31, 2010 to 57,40,13,650 for the year ended March 31, 2011, an increase of
0.1%.

10. Segmental profitability:

Our operations predominantly relate to providing end-to-end business
solutions that leverage technology, thereby enabling clients to enhance
business performance, delivered to customers globally operating in various
industry segments. Accordingly, revenues represented along industry classes
comprise the primary basis of segmental information set out in these
financial statements. Secondary segmental reporting is performed on the
basis of the geographical location of customers.

The income and operating income by industry and geographical segments are
provided in this section.

10. a Industry segments:
in Rs. crore
Finan- Manu- Telecom Retail Others Total
cial factur-
services ing
Segmental
revenues:

2011 9,293 4,686 3,134 3,757 4,515 25,385
2010 7,354 3,988 3,234 2,989 3,575 21,140
Growth % 26.4 17.5 (3.1) 25.7 26.3 20.1

Segmental
operating
income:

2011 3,113 1,572 990 1,307 1,432 8,414
2010 2,644 1,258 1,167 1,065 1,226 7,360
Growth % 17.7 25.0 (15.2) 22.7 16.8 14.3

Segmental
operating
profit (%)

2011 33.5 33.5 31.6 34.8 31.7 33.1
2010 35.9 31.5 36.1 35.6 34.3 34.8

10. b Geographical segments:

in Rs. crore
North Europe India Rest of the Total
America World
Segmental revenues

2011 16,815 5,252 594 2,724 25,385
2010 14,170 4,633 269 2,068 21,140
Growth % 18.7 13.4 39.8 31.7 14.3

Segmental
operating income

2011 5,684 1,821 186 723 8,414
2010 5,028 1,650 133 549 7,360
Growth % 13.0 10.4 39.8 31.7 14.3

Segmental
operating
profit (%)

2011 33.8 34.7 31.3 26.5 33.1
2010 35.5 35.6 49.4 26.5 34.8

11. Liquidity:

Our growth has been financed largely through cash generated from
operations.

Net cash generated from operations was Rs.4,270 crore and Rs.5,855 crore
for the years ended March 31, 2011 and March 31, 2010 respectively. Net
cash provided by/(used in) investing activities was Rs.3,235 crore and
(Rs.3,298) crore for the years ended March 31, 2011 and March 31, 2010
respectively. Net cash used in financing activities was Rs.3,642 crore and
Rs.1,481 crore for the years ended March 31, 2011 and March 31, 2010,
respectively.

12. Related party transactions:

These have been discussed in detail in the Notes to the Abridged financial
statements section of this report.

13. Events occurring after the Balance Sheet date:

There were no significant events occurring after the Balance Sheet date.

D. Opportunities and threats

We believe our competitive strengths include:

* Leadership in sophisticated solutions that enable our clients to optimize
the efficiency of their business

* Proven GDM

* Commitment to superior quality and process execution

* Strong brand and long-standing client relationships

* Status as an employer of choice

* Ability to scale Innovation and leadership.

1. Our strategy:

We seek to further strengthen our position as a leading global technology
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

* Expand geographically

* Continue to invest in infrastructure and employees

* Continue to enhance our engagement models and offerings

* Continue to develop deep industry knowledge

* Enhance brand visibility

* Pursue alliances and strategic acquisitions

2. Competition:

We operate in a highly competitive and rapidly changing market and compete
with consulting firms such as Accenture Limited, Atos Origin S.A., Cap
Gemini S.A., and Deloitte Consulting LLP; divisions of large multinational
technology firms such as Hewlett-Packard Company and International Business
Machines Corporation; IT outsourcing firms such as Computer Sciences
Corporation, Keane Inc., Logica Plc and Dell Perot Systems; offshore
technology services firms such as Cognizant Technology Solutions
Corporation, Tata Consultancy Services Limited and Wipro Technologies
Limited; software firms such as Oracle Corporation and SAP A.G.; business
process outsourcing firms such as Genpact Limited and WNS Global Services
and in-house IT departments of large corporations.

In the future, we expect competition from firms establishing and building
their offshore presence and firms in countries with lower personnel costs
than those prevailing in India. However, we recognize that price alone
cannot constitute a sustainable competitive advantage. We believe that the
principal competitive factors in our business include the ability to
effectively integrate onsite and offshore execution capabilities to deliver
seamless, scalable, cost-effective services; increase scale and breadth of
service offerings to provide one-stop solutions; provide industry expertise
to clients' business solutions; attract and retain high-quality technology
professionals and maintain financial strength to make strategic investments
in human resources and physical infrastructure through business cycles.

We believe we compete favorably with respect to these factors.

E. Outlook, risks and concerns:

This section contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these statements as a result of certain factors.

The following lists our outlook, risks and concerns:

* Our revenues and expenses are difficult to predict and can vary
significantly from period to period, which could cause our share price to
decline. We may not be able to sustain our previous profit margins or
levels of profitability.

* Our revenues are highly dependent on clients primarily located in the
U.S. and Europe, as well as in certain industries, and an economic slowdown
or other factors that affect the economic health of the U.S., Europe or
these industries may affect our business.

* Currency fluctuations may affect the results of our operations.

* Our success depends largely upon our highly skilled technology
professionals and our ability to hire, attract, motivate, retain and train
our personnel.

* We may face difficulties in providing end-to-end business solutions for
our clients, which could lead to clients discontinuing their work with us.
This in turn could harm our business.

* Intense competition in the market for technology services could affect
our cost advantages, which could reduce our share of business from clients
and may decrease our revenues.

* 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.

* 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.

* Compliance with new and changing corporate governance and public
disclosure requirements adds uncertainty to our compliance policies and
increases our costs of compliance.

* Our failure to complete fixed-price, fixed-timeframe contracts or
transaction-based pricing contracts within the budget and on time, may
negatively affect our profitability.

* Our client contracts can be terminated without cause and with little or
no notice or penalty. This could negatively impact our revenues and
profitability.

* Our engagements with customers are singular in nature and do not
necessarily provide for subsequent engagements.

* Our client contracts are often conditioned upon our performance, which,
if unsatisfactory, may result in less revenue than previously anticipated.

* Some of our long-term client contracts contain benchmarking provisions
which, if triggered, could result in lower future revenues and
profitability under the contract.

* 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.

* Disruptions in telecommunications, system failures or virus attacks could
harm our ability to execute our GDM, which could result in client
dissatisfaction and a reduction of our revenues.

* We may be liable to our clients for damages caused by disclosure of
confidential information, system failures, errors or unsatisfactory
performance of services.

* Our increasing work with governmental agencies may expose us to
additional risks.

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.

We may be unable to recoup our investment costs to develop our software
products.

* Our insiders who are significant shareholders may control the election of
our Board and may have interests that conflict with those of our other
shareholders or holders of our ADSs.

* We may engage in acquisitions, strategic investments, strategic
partnerships or alliances or other ventures that may or may not be
successful.

* 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.

* 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

* 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

* 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.

* Terrorist attacks or a war could adversely affect our business, results
of operations and financial condition.

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

* Changes in immigration laws may affect our ability to compete and provide
services to our clients in various countries. This could hamper our growth
and may have an impact on our revenues.

* 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.

For more details on risk factors, refer to our quarterly and annual filings
with the Securities and Exchange Commission (SEC), USA, available on our
website www.infosys.com

F. Internal control systems and their adequacy

The CEO and CFO certification provided in the CEO and CFO Certification
section of the Annual Report discusses the adequacy of our internal control
systems and procedures.

G. Material developments in human resources/industrial relations, including
number of people employed:

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.

1. Human capital:

Our employees are our most important and valuable assets. During fiscal
2011, we received around 8,29,800 employment applications, approximately
1,36,200 were interviewed and 67,400 job offers were made. As of March 31,
2011, Infosys and its subsidiaries had employed 1,30,820 employees, of
which 1,23,811 are technology professionals, including trainees.

The key elements that define our human capital development include:

1. a Recruitment:

We have built our global talent pool by recruiting students from premier
universities, colleges and institutes in India and through need-based
hiring of project leaders and middle managers. We recruit students in India
who have consistently shown high levels of achievement. We have also begun
selective recruitment at campuses in the U.S., the U.K., 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.

1.b Training and development:

With a total built-up area of 1.44 million sq. ft., the Infosys Global
Education Center in Mysore, can train approximately 14,000 employees at a
time.

As of March 31, 2011, we employed 698 full-time employees as faculty,
including 255 with doctorates or masters degrees. Our faculty conducts
integrated training for our new employees. Our employees undergo
certification programs each year to develop/upgrade the skills relevant for
their roles.

Leadership development is a core part of our training program. We
established the Infosys Leadership Institute at our Mysore campus to
enhance the leadership skills required to manage the complexities of the
rapidly changing marketplace.

We have also been working with several colleges across India through our
Campus Connect program, enabling their faculty to provide industry related
training to students.

1. c Compensation:

Our technology professionals receive competitive salaries and benefits. We
have also adopted a performance-linked compensation program that links
compensation to individual performance, as well as the Company's
performance.

Risk management report:

The risk management report discusses the various dimensions of our
enterprise risk management practices. Readers are cautioned that the risk
related information outlined here is not exhaustive and is for information
purposes only. The discussion may contain statements, which may be forward-
looking in nature. Our business model is subject to uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Readers are advised to exercise their own
judgment in assessing risks associated with the Company and refer to
discussions of risks in the Company's previous annual reports and the
filings with the Securities and Exchange Commission, USA.

A. Overview:

Enterprise Risk Management (ERM) at Infosys encompasses practices relating
to identification, assessment, monitoring and mitigation of various risks
to our business objectives. ERM at Infosys seeks to minimize adverse impact
of risks on our business objectives and enable the Company to leverage
market opportunities effectively. Further, our risk management practices
seek to sustain and enhance the long-term competitive advantage of the
Company. Risk management is integral to our business model, described as
'Predictable, Sustainable, Profitable and De-risked' (PSPD). Our core
values and ethics provide the platform for our risk management practices.

B. Infosys risk management framework:

Our risk management framework comprises of the following key components.

1. Risk management structure:

The risk management structure at Infosys spans across the enterprise at all
levels. These levels also form the various lines of defense in our risk
management.

The key roles and responsibilities regarding risk management in the Company
are summarized below:

Level Key roles and responsibilities

Board of Directors * Corporate governance oversight of risk
(Board) management performed by the Executive Management

* Review the performance of the Risk Management
Risk Management
Committee (RMC) * Comprises four independent directors Committee
* David L. Boyles, Chairperson
* Sridar A. Iyengar
* Dr. Omkar Goswami
* Prof. Jeffrey S. Lehman

* Assisting the Board in fulfilling its corporate
governance oversight responsibilities with regard
to identification, evaluation and mitigation of
operational, strategic and external environment
risks

* Monitoring and reviewing risk management
practices of the Company

* Reviewing and approving risk-related disclosures

Risk Council (RC) * Comprises the Chief Executive Officer (CEO), the
Chief Operating Officer (COO) and the Chief
Financial Officer (CFO)

* Reviewing enterprise risks from time to time,
initiating mitigation actions, identifying the
owners and reviewing the progress and
effectiveness of mitigation actions

* Formulation and deployment of risk management
policies

* Deploying practices for the identification,
assessment, monitoring, mitigation and reporting
of risks

Risk Council (RC) * Providing updates to RMC and the Board from time
to time on the enterprise risks and actions taken
Office of Risk
Management (ORM) * Comprises the network of risk managers from
units and our group companies and is led by the
Chief Risk Officer (CRO)

* Facilitating the execution of risk management
practices in the enterprise as mandated, in the
areas of risk identification, assessment,
monitoring, mitigation and reporting

* Providing periodic updates to the RC and
quarterly updates to the RMC on top risks and
their mitigation

* Working closely with owners of risk in
deploying mitigation measures and monitoring
their effectiveness.

Unit Heads * Responsible for managing their functions as per
the Company risk management philosophy

* Responsible for managing risks concomitant to
the business decisions relating to their unit,
span of control or area of operations

* Manage risks at the unit level that may arise
from time to time, in consultation with the
Risk Council

The Infoscion * Adhering to risk management policies and
procedures

* Implementation of prescribed risk mitigation
actions

* Reporting risk events and incidents in a
timely manner

2. Risk categories:

The following broad categories of risks have been considered in our risk
management framework:

* Strategy: Risks emanating out of the choices we make on markets,
resources and delivery model which can potentially impact our long-term
competitive advantage

* Industry: Risks relating to inherent characteristics of our industry
including, competitive structure, technological landscape, extent of
linkage to economic environment and regulatory structure

* Counterparty: Risks arising from our association with entities for
conducting business. These include clients, vendors, alliance partners and
their respective industries

* Resources: Risks arising from inappropriate sourcing or sub-optimal
utilization of key organizational resources such as talent, capital and
infrastructure

* Operations: Risks inherent to business operations including those
relating to client acquisition, service delivery to clients, business
support activities, information security, intellectual property, physical
security and business activity disruptions.

* Regulations and compliance: Risks due to inadequate compliance to
regulations, contractual obligations and intellectual property violations
leading to litigation and loss of reputation.

3. Key risk management practices:

The key risk management practices include those relating to risk
assessment, measurement, monitoring, reporting, mitigation actions and
integration with strategy and business planning.

* Risk identification and assessment: Periodic assessment of business risk
environment to identify significant risks for the Company and prioritizing
the risks for action. Mechanisms for identification and prioritization of
risks include risk survey, business risk environment scanning and focused
discussions in the RC and the RMC. A risk survey of executives across
units, functions and subsidiaries is conducted before the annual strategy
exercise. The risk register and internal audit findings also provide
pointers for risk identification.

* Risk measurement, mitigation and monitoring: For top risks, dashboards
are created that track external and internal indicators relevant for risks,
so as to indicate the risk level. The trend line assessment of top risks,
analysis of exposure and potential impact are carried out. Mitigation plans
are finalized, owners are identified and the progress of mitigation actions
are monitored and reviewed.

* Risk Reporting: The top risks report outlining the risk level, trend
line, exposure, potential impact and status of mitigation actions is
discussed in the RC and the RMC on a periodic basis. In addition, risk
update is provided to the Board. Entity level risks such as project and
account level risks are reported to and discussed at the appropriate levels
within the organization.

* Integration with strategy and business planning : Identified risks are
used as one of the key inputs for the development of strategy and annual
business plan.

C. Overview of risk environment and key risk management activities of the
year:

While the business risk environment gradually improved during the year,
several macro economic and regulatory developments required our close
monitoring and interventions. In our key markets, business outlook
indicators improved and the financial position of several key clients
stabilized during the year. While unemployment rates in key markets
moderated, they continued to be high prompting several government policy
interventions. There were regulatory changes and proposals relating to visa
policies in key markets. Macroeconomic developments in the Eurozone led to
high volatility in currencies from which we derive our revenues. Keeping in
view the business risk environment, we closely monitored our competitive
position and deployed interventions.

Our risk management approach and practices continued to focus on minimizing
the adverse impact of risks on our business objectives and to enable the
Company to leverage market opportunities based on risk-return parity. Our
active management of currency risks minimized the impact in a volatile
currency market. Our continued emphasis on credit risk management through
periodic credit quality assessments and focused collection mechanisms
resulted in the improvement of credit quality indicators. We continued our
emphasis on talent management relating to attraction, retention, engagement
and competency development. We further strengthened operational risk
mitigation mechanisms in areas including information security, data
protection, physical security, project service delivery and contracts
management. Our periodic assessment and monitoring of business risk and
regulatory environment resulted in timely deployment of appropriate
mitigation measures.

The following risk management activities were conducted:

1. Top risk identification, tracking and review

* Annual risk survey across functions and subsidiaries to get inputs on key
risks and prioritization. Subsequent discussions in the RC and the RMC
for finalization of top risks

* Review of top risks in the RC and the RMC covering risk level, trend
line, exposure, potential impact and progress of key mitigation actions

* Review discussions on key items from risk register by the RC and the RMC

2. Risk assessments and review:

* Periodic assessment of business risk environment including analysis of
top clients, counterparty exposures, competitive positioning and sovereign
risk

* Risk assessment of regulatory environment, especially those relating to
visa and taxation

* Assessment and review of financial risks such as currency risk, credit
risk and liquidity

* Risk assessments in multiple areas including talent management,
competitive positioning, service delivery, information security,
intellectual property, physical security and business continuity

* Review of contractual compliance monitoring systems and account risk
management systems in business units.

* Evaluation of the company's ERM program with global best practices.