Analysis of Infosys Annual Result for the year ended 31st March 2010.

Course Name:- Financial Accounting and Analysis

Report Submitted by:1) Anusha A 101

2) Gangadhar Biradar 108 3) Abhiram Reddy 4) Prerna Chopra 5) Dhiren Chaudhary 6) Mehul Jain 7) Pankhuri Bindal 111 115 112 124 107

Cash Flow from Investing Activities Fixed Assets - In comparison to the FY 2008-09, in 2009-10 there was a nearly 50% drop in the investment into acquiring fixed assets. It decreased from Rs. 1327 crore to Rs. 675 crore. Due to the negative economic environment, Infosys was much more wary and conservative on its future growth potential. So based on its predictions, there was a sharp fall in investments into fixed assets (computers and infrastructure) compared to the buoyant mid2000s. Acquisition of Business - Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based at Atlanta, U.S. The cash part of this deal was worth Rs. 173 crore. This accounts for the increase in excess of 1700%, in comparison to the previous financial year i.e. 2008-09. Investments in securities - In the FY 2008-09 there has been a net decrease in the marketable securities, whereas in the FY 2009-10 there is a huge investment into marketable securities. Infosys invests huge amounts in marketable securities such as certificates of deposit and liquid mutual fund units based on its philosophy of maintaining sufficient cash to meet its strategic objectives. For Liquid mutual fund units, the increase is over 10 times compared to the previous financial year and for Certificates of Deposit it is over 5 times. As at March 31, 2010, the liquid assets of Infosys stand at Rs. 14,804 crore. While it is necessary to maintain sufficient of amount liquidity to cover financial and business risks, such huge amounts are not desirable and they can be used for other purposes. Moreover since Infosys is debt-free, the risks involved are low. Cash Flow from Financing Activities (From Notes) The total dividend amount paid out is Rs. 1,434 crore, as against Rs. 1,345 crore in the previous year. Dividend (including dividend tax) as a percentage of profit after tax before exceptional items is 29.1% as compared to 27.0% in the previous year. Cash Flow from Operating Activities The Cash flow from Operating Activities is increasing, which is a good sign. Since it is in the services sector, the increase in cash flow from operating activities is a positive sign. But in the IT sector, the increase in cash from operating activities is usually in the range of 20 to 30%. But for the FY 2009-10 the increase is only about 16.5%. The reason for this relatively lesser growth is the slowing of economic activity around the globe. Effect of exchange differences on translation of foreign currency cash and cash equivalents In the financial year 2008-2009 the currency environment was highly volatile with exchange rates varying from Rs. 39.9/USD to Rs. 51.2/USD . In 2009-10 the currencies were much more stable and through better risk management, these cross-currency variations were dealt in a better manner. This accounts for the positive effect of exchange differences in the FY 2009-10.

R&D expenditure Being an IT company it is very important for Infosys to invest in R&D. Infosys spent 2.1% of total revenue on R&D as compared to 1.3% spent in 2009. This shows that they have invested more in R&D which is good for growth of the company. Sundry Debtors The cash recovered from Sundry Debtors is 194 crore as compared to net outflow of 375 crore in previous year. The largest client constituted 2.8% of sundry debtors indicating that the risk has been diversified by having more number of small debts. Also almost 92% of these loans have been given for a period of 0-60 days only. Provision for bad and doubtful debts as a percentage of revenue is nil for the year ended March 31, 2010, as against 0.37% for the year ended March 31, 2009, which is good for the company. Gross profit The gross profit during the year was Rs. 9,581 crore representing 45.3% of revenues compared to Rs. 9,119 crore representing 45.0% of revenues in the previous year. It indicates that Infosys has maintained the consistency in terms of Gross profit. Same is the case with ratio of operating profit with total revenues. Depreciation vs Capital Expenditure The depreciation is Rs. 905 crore where as capital expenditure is 581 crore indicating that there is no net investment in long term assets. The capital expenditure in this year has almost halved which shows that Infosys is being cautious and not expanding aggressively. The depreciation in the previous year was 761 crore. The difference in the depreciation for this year and previous year might be due to last years capital expenditures. That might be the reason they havent spent much amount on capital expenditure in this fiscal year. Liquidity Internal cash flows have more than adequately covered working capital requirements, capital expenditure, investment in subsidiaries and dividend payments, leaving a surplus of Rs. 4,515 crore. As at March 31, 2010, Infosys had liquid assets of Rs.14804 crore as against Rs. 10,289 crore at the previous year-end. Shareholder funds The total shareholder funds increased to Rs. 22036 crore as at March 31, 2010 from Rs. 17809 crore as of the previous year end. The book value per share increased to Rs. 384.01 as at March 31, 2010, compared to Rs. 310.90 as of the previous year-end.

Other Income The other income has almost doubled as compared to previous year. It is on account of two major things. 1) Dividend received on investment in liquid mutual funds has increased from 5 to 106 crore in comparison with previous year. 2) Last year there was net outflow of 439 crore on account of losses of foreign currency but this year there is net inflow of 30 crore.

Income Tax There has been tremendous increase in advance income tax paid. (Last year it was 56 crore this year 393 crore) this indicates that the company is expecting good profits in the coming year/quarter. Also For fiscal 2008 and 2009, the Company had calculated its tax liability under MAT. The MAT credit can be carried forward and set off against the future tax payable. In the current year, the Company has calculated its tax liability under normal provisions of the Income Tax Act and utilized the brought forward MAT Credit. The change in Current Liabilities and Provision The change in Current Liabilities and Provision has almost halved as compared to previous year. The major contributing factor to this is difference in the income tax paid in these two years. Last year income tax paid was 581 crore where as this year it is 724 crore.