UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
20-F
    (Mark
One)
  oRegistration statement pursuant to
Section 12(b) or (g) of the Securities Exchange Act of 1934
  OR
  xAnnual Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
  For
the fiscal year ended March 31, 2010
  OR
  oTransition Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934
  For the transition period from
__________ to __________
  OR
  oShell Company Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 Date
of event requiring this shell company report________
   Commission File
Number 000-25383
   INFOSYS
TECHNOLOGIES LIMITED
 (Exact
name of Registrant as specified in its charter)
  Not
Applicable
 (Translation
of Registrant's name into English)
  Bangalore,
Karnataka, India
 (Jurisdiction
of incorporation or organization)
  Electronics City,
Hosur Road, Bangalore, Karnataka, India 560 100. +91-80-2852-0261
 (Address
of principal executive offices)
   V. Balakrishnan,
Chief Financial
Officer, +91-80-2852-0261, balakv@infosys.com
 Electronics City,
Hosur Road, Bangalore, Karnataka, India 560 100.
 (Name, telephone, e-mail and/or
facsimile number and address of company contact person)
   Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
  Title of Each
      Class
              Name of Each
      Exchange on Which RegisteredAmerican
      Depositary Shares each represented by one Equity Share, par value Rs. 5
      per share
              NASDAQ Global
      Select Market
   Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
  None.
 (Title
of class)
  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
  Not
Applicable
 (Title
of class)
  Indicate the number
of outstanding shares of each of the issuer's classes of capital or common stock
as of the close of the period covered by the Annual Report: 570,991,592 Equity
Shares
  Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
  Yes x No o
  If this report is
an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
  Yes o No x
  Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
  Yes x No o
  Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data file required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such filed).
  Yes o No o
  Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
  Large
      accelerated filer x
              Accelerated
      filer o
              Non-
      accelerated filer o
  Indicate by check
mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:
  U.S. GAAP o International Financial
Reporting Standards as issued by the International Account Standards Board x Other o
  If this is an
annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
  Yes o No x
  Currency
of presentation and certain defined terms
  In this Annual
Report on Form 20-F, references to "U.S." or "United States" are to the United
States of America, its territories and its possessions. References to "India"
are to the Republic of India. References to "$" or "dollars" or "U.S. dollars"
are to the legal currency of the United States and references to "Rs." or
"rupees" or "Indian rupees" are to the legal currency of India. Our financial
statements are presented in U.S. dollars and are prepared in accordance with the
International Financial Reporting Standards as issued by the International
Account Standards Board, or IFRS. References to "Indian GAAP" are to Indian
Generally Accepted Accounting Principles. References to a particular "fiscal"
year are to our fiscal year ended March 31 of such year.
  All references to
"we," "us," "our," "Infosys" or the "Company" shall mean Infosys Technologies
Limited, and, unless specifically indicated otherwise or the context indicates
otherwise, our consolidated subsidiaries. "Infosys" is a registered trademark of
Infosys Technologies Limited in the United States and India. All other
trademarks or tradenames used in this Annual Report on Form 20-F are the
property of their respective owners.
  Except as otherwise
stated in this Annual Report on Form 20-F, all translations from Indian rupees
to U.S. dollars effected on or after April 1, 2009 are based
on the fixing rate in the City of Mumbai on March 31, 2010 for cable
transfers in Indian rupees as published by the Foreign Exchange Dealers'
Association of India, or FEDAI, which was Rs. 44.90per $1.00. No
representation is made that the Indian rupee amounts have been, could have been
or could be converted into U.S. dollars at such a rate or any other rate. Any
discrepancies in any table between totals and sums of the amounts listed are due
to rounding.
  Special
Note Regarding Forward Looking Statements
  This Annual Report
on Form 20-F contains 'forward-looking statements', as defined in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that are based on our current expectations,
assumptions, estimates and projections about our Company, our industry, economic
conditions in the markets in which we operate, and certain other matters.
Generally, these forward-looking statements can be identified by the use of
forward-looking terminology such as 'anticipate', 'believe', 'estimate',
'expect', 'intend', 'will', 'project', 'seek', 'should' and similar expressions.
Those statements include, among other things, the discussions of our business
strategy and expectations concerning our market position, future operations,
margins, profitability, liquidity and capital resources. These statements are
subject to known and unknown risks, uncertainties and other factors, which may
cause actual results or outcomes to differ materially from those implied by the
forward-looking statements. Important factors that may cause actual results or
outcomes to differ from those implied by the forward-looking statements include,
but are not limited to, those discussed in the “Risk Factors” section in this
Annual Report on Form 20-F. In light of these and other uncertainties, you
should not conclude that the results or outcomes referred to in any of the
forward-looking statements will be achieved. All forward-looking statements
included in this Annual Report on Form 20-F are based on information available
to us on the date hereof, and we do not undertake to update these
forward-looking statements to reflect future events or
circumstances.
  This Annual Report
on Form 20-F includes statistical data about the IT industry that comes from
information published by sources including Forrester Research, Inc., providers
of market information and strategic information for the IT industry and the
National Association of Software and Service Companies, or NASSCOM, an industry
trade group. This type of data represents only the estimates of Forrester,
NASSCOM, and other sources of industry data. In addition, although we believe
that data from these companies is generally reliable, this type of data is
inherently imprecise. We caution you not to place undue reliance on this
data.
   Table
of Contents
  Part
      IItem 1.
              Identity of Directors, Senior
      Management and AdvisersItem 2.
              Offer Statistics and Expected
      TimetableItem 3.
              Key
      InformationItem 4.
              Information on the CompanyItem 4A.
              Unresolved Staff
      CommentsItem 5.
              Operating and Financial Review
      and ProspectsItem 6.
              Directors, Senior Management and
      EmployeesItem 7.
              Major Shareholders and Related
      Party TransactionsItem 8.
              Financial
      InformationItem 9.
              The Offer and
      ListingItem 10.
              Additional
      InformationItem 11.
              Quantitative and Qualitative
      Disclosures About Market RiskItem 12.
              Description of Securities Other
      than Equity SecuritiesPart
      IIItem 13.
              Defaults, Dividend Arrearages
      and DelinquenciesItem 14.
              Material Modifications to the
      Rights of Security Holders and Use of
  ProceedsItem 15.
              Controls and
      ProceduresItem 16A.
              Audit Committee Financial
      ExpertItem 16B.
              Code of
      EthicsItem 16C.
              Principal Accountant Fees and
      ServicesItem 16D.
              Exemptions from the Listing
      Standards for Audit CommitteesItem 16E.
              Purchases of Equity Securities
      by the Issuer and Affiliated PurchasersItem 16F.
              Change in Registrant’s Certifying
      AccountantItem 16G
              Corporate
      GovernancePart
      IIIItem 17.
              Financial
      StatementsItem 18.
              Financial
      StatementsItem 19.
              Exhibits
  Part
I
  Item 1. Identity of Directors, Senior
Management and Advisers
  Not
applicable.
  Item 2. Offer Statistics and Expected
Timetable
  Not
applicable.


Item 3. Key Information




SELECTED
FINANCIAL DATA




Summary
of Consolidated Financial Data




You should read the
summary consolidated financial data below in conjunction with the Company's
consolidated financial statements and the related notes, as well as the section
entitled “Operating and Financial Review and Prospects,” all of which are
included elsewhere in this Annual Report on Form 20-F. The summary consolidated
statements of comprehensive income for the three years ended March 31, 2010 and
the summary consolidated balance sheet data as of March 31, 2010, 2009 and 2008
have been prepared and presented in accordance with International Financial
Reporting Standards as issued by International Accounting Standards Board (IFRS)
and have been derived from our audited consolidated financial statements and
related notes. Historical results are not necessarily indicative of future
results.


(Dollars in millions, except
      share data)Comprehensive Income
      Data
            Fiscal
      Year ended March 31,2010
            2009
            2008Revenues
            $4,804
            $4,663
            $4,176Cost of
      sales
            2,749
            2,699
            2,453Gross
      profit
            2,055
            1,964
            1,723Operating
      expenses:Selling and
      marketing expenses
            251
            239
            230Administrative
      expenses
            344
            351
            334Total
      operating expenses
            595
            590
            564Operating
      profit
            1,460
            1,374
            1,159Other income,
      net
            209
            101
            175Profit
      before income taxes
            1,669
            1,475
            1,334Income tax
      expense
            356
            194
            171Net
      profit
            $1,313
            $1,281
            $1,163Earnings per
      equity share:Basic
      ($)
            2.30
            2.25
            2.04Diluted
      ($)
            2.30
            2.25
            2.04Weighted
      average equity shares used in computing earnings per equity
      share:Basic
            570,475,923
            569,656,611
            568,564,740Diluted
            571,116,031
            570,629,581
            570,473,287Cash dividend
      per Equity Share ($)*
            0.48
            0.89
            0.31Cash dividend
      per Equity Share (Rs.)*
            23.50
            37.25
            12.50


*
Excludes corporate dividend tax and converted at the monthly exchange rate in
the month of declaration of dividend.





(Dollars in millions, except
      share data)Balance Sheet
      Data
            As
      of March 31,2010
            2009
            2008Cash and cash
      equivalents
            $2,698
            $2,167
            $2,058Available-for-sale
      financial assets
            569
            –
            18Investments
      in certificates of deposit
            265
            –
            –Net current
      assets
            3,951
            2,583
            2,578Non-current
      assets
            1,487
            1,249
            1,381Total
      assets
            6,148
            4,369
            4,508Non- current
      liabilities
            77
            48
            43Total
      equity
            $5,361
            $3,784
            $3,916




Exchange rates




Our functional
currency is the Indian rupee. We generate a major portion of our revenues in
foreign currencies, particularly the U.S. dollar, the United Kingdom Pound
Sterling, Euro and the Australian dollar, whereas we incur a majority of our
expenses in Indian rupees. The exchange rate between the rupee and the U.S.
dollar has changed substantially in recent years and may fluctuate substantially
in the future. Consequently, the results of our operations are adversely
affected as the rupee appreciates against the U.S. dollar. For fiscal 2010, 2009
and 2008, U.S. dollar denominated revenues represented 73.3%, 71.1% and 69.5% of
total revenues. For the same periods, revenues denominated in United Kingdom
Pound Sterling represented 9.2%, 12.7% and 14.9% of total revenues, revenues
denominated in the Euro represented 6.9%, 7.1% and 5.7% of total revenues while
revenues denominated in the Australian dollar represented 5.8%, 4.6% and 4.8% of
total revenues. As such, our exchange rate risk primarily arises from our
foreign currency revenues, receivables and payables.




Fluctuations in the
exchange rate between the Indian rupee and the U.S. dollar will also affect the
U.S. dollar equivalent of the Indian rupee price of our equity shares on the
Indian stock exchanges and, as a result, will likely affect the market price of
our ADSs, and vice versa. Such fluctuations also impact the U.S. dollar
conversion by the Depositary of any cash dividends paid in Indian rupees on our
equity shares represented by the ADSs.




The following table
sets forth, for the fiscal years indicated, information concerning the number of
Indian rupees for which one U.S. dollar could be exchanged based on the fixing
rate in the City of Mumbai on business days during the period for cable
transfers in Indian rupees as published by the Foreign Exchange Dealers'
Association of India, or FEDAI. The column titled “Average” in the table below
is the average of the last business day of each month during the
year.


Fiscal
            Period
      End
            Average
            High
            LowRs.
            Rs.
            Rs.
            Rs.2010
            44.90
            47.26
            50.57
            44.872009
            50.72
            46.54
            52.00
            39.882008
            40.02
            40.00
            43.05
            38.48




The following table
sets forth the high and low exchange rates for the previous six months and is
based on the fixing rate in the City of Mumbai on business days during the
period for cable transfers in Indian rupees as published by the
FEDAI.


Month
            High
            LowRs.
            Rs.March
      2010
            46.02
            44.87February
      2010
            46.71
            45.97January
      2010
            46.49
            45.36December
      2009
            46.84
            46.15November
      2009
            47.17
            46.12October
      2009
            47.88
            45.79




On April 30, 2010,
the fixing rate in the City of Mumbai for cash transfers in Indian rupees as
published by FEDAI was Rs. 44.44.




The exchange rates
for month-end and period-end reporting purposes have been based on the FEDAI
rates. We believe that exchange rates published by FEDAI are more
representative of market exchange rates than exchange rates published by
individual banks. However, FEDAI does not publish exchange rates on a daily
basis, and in the absence of availability of daily exchange rates from
FEDAI, we utilize exchange rates from Deutsche Bank, Mumbai, for daily
transactions in the ordinary course of business.




Risk
Factors




This Annual Report
on Form 20-F contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth in the following risk factors and elsewhere in this Annual
Report on Form 20-F.
 
 Risks
Related to Our Company and Our Industry
 
 Our
revenues and expenses are difficult to predict and can vary significantly from
period to period, which could cause our share price to decline.
 
 Our revenues and
profitability have grown rapidly in recent years until the onset of the global
economic slowdown in 2008, and are likely to vary significantly in the future
from period to period. Therefore, we believe that period-to-period comparisons
of our results of operations are not necessarily meaningful and should not be
relied upon as an indication of our future performance. It is possible that in
the future our results of operations may be below the expectations of market
analysts and our investors, which could cause the share price of our equity
shares and our ADSs to decline significantly.
 
 Factors which
affect the fluctuation of our operating results include:
 the size, timing
  and profitability of significant projects, including large outsourcing
  deals;
        changes in our
  pricing policies or the pricing policies of our competitors;
        economic
  fluctuations that affect the strength of the economy of the United States,
  Europe or any of the other markets in which we operate;
        foreign currency
  fluctuations and our hedging activities that are intended to address such
  fluctuations;
        the effect of
  wage pressures, seasonal hiring patterns, attrition, and the time required to
  train and productively utilize new employees, particularly information
  technology, or IT professionals;
        the proportion of
  services that we perform at our development centers or at our client
  sites;
        utilization of
  billable employees;
        the size and
  timing of facilities expansion and resulting depreciation and amortization
  costs;
        varying
  expenditures and lead times in connection with responding to, and submission
  of proposals for large client engagements including on account of changing due
  diligence requirements;
        unanticipated
  cancellations, contract terminations, deferrals of projects or delays in
  purchases, including those resulting from our clients reorganizing their
  operations, mergers or acquisitions involving our clients and changes in
  management;
        the inability of
  our clients and potential clients to forecast their business and IT needs, and
  the resulting impact on our business;
        unanticipated
  cancellations, contract terminations, deferrals of projects or delays in
  purchases resulting from our clients' efforts to comply with regulatory
  requirements;
        the proportion of
  our customer contracts that are on a fixed-price, fixed-timeframe basis,
  compared with time and material contracts; and
        unanticipated
  variations in the duration, size and scope of our projects, as well as in the
  corporate decision-making process of our client base. A significant part
of our total operating expenses, particularly expenses related to personnel and
facilities, are fixed in advance of any particular period. As a result,
unanticipated variations in the number and timing of our projects or employee
utilization rates, or the accuracy of our estimates of the resources required to
complete ongoing projects, may cause significant variations in our operating
results in any particular period.
 
 There are also a
number of factors, other than our performance, that are not within our control
that could cause fluctuations in our operating results from period to period.
These include:
 the duration of
  tax holidays or tax exemptions and the availability of other incentives from
  the Government of India;
        changes in
  regulations and taxation in India or the other countries in which we conduct
  business;
        currency
  fluctuations, particularly when the rupee appreciates in value against the
  U.S. dollar, the United Kingdom Pound Sterling, the Euro or the
  Australian dollar, since the majority of our revenues are in these currencies
  and a significant part of our costs are in rupees; and
        other general
  economic and political factors, including the economic conditions in the
  United States, Europe or any other geographies in which we
  operate. In addition, the
availability of visas for working in the United States may vary substantially
from quarter to quarter. Visas for working in the United States may be available
during one quarter, but not another, or there may be differences in the number
of visas available from one quarter to another. As such, the variable
availability of visas may require us to incur significantly higher visa-related
expenses in certain quarters when compared to others. For example, we incurred
$9 million in costs for visas in the three months ended December 31, 2009,
compared to $3 million in the three months ended September 30,
2009.
 
 Such fluctuations
may affect our operating margins and profitability in certain quarters during a
fiscal year.
 
 We
may not be able to sustain our previous profit margins or levels of
profitability.
 
 Our profitability
could be affected by pricing pressures on our services, volatility of the
exchange rates between the rupee, the dollar and other currencies in which we
generate revenues or incur expenses, and increased wage pressures in India and
at other locations where we maintain operations.
 
 Since fiscal 2003,
we have incurred substantially higher selling and marketing expenses as we have
invested to increase brand awareness among target clients and promote client
loyalty and repeat business among existing clients. We may incur increased
selling and marketing expenses in the future, which could result in declining
profitability. In addition, while our Global Delivery Model allows us to manage
costs efficiently, if the proportion of our services delivered at client sites
increases we may not be able to keep our operating costs as low in the future,
which would also have an adverse impact on our profit margins.
 
 During fiscal 2010,
there was significant volatility in the exchange rate of the Indian rupee
against the U.S. dollar. The exchange rate for one dollar as published by FEDAI
was Rs. 44.90 as of March 31, 2010, as against Rs. 50.72 as of March 31, 2009.
Exchange rate fluctuations and our hedging activities have in the past adversely
impacted, and may in the future adversely impact, our operating
results.
 
 Increased selling
and marketing expenses, and other operating expenses in the future, as well as
fluctuations in foreign currency exchange rates including, in particular, the
appreciation of the rupee against foreign currencies or the appreciation of the
U.S. dollar against other foreign currencies, could materially and adversely
affect our profit margins and results of operations in future
periods.
 
 The
economic environment, pricing pressure and decreased employee utilization rates
could negatively impact our revenues and operating results.
 
 Spending on
technology products and services is subject to fluctuations depending on many
factors, including the economic environment in the markets in which our clients
operate. For example, there was a decline in the growth rate of global IT
purchases in the latter half of 2008 due to the global economic slowdown. This
downward trend continued into 2009, with global IT purchases declining due to
the challenging global economic environment. According to the
U.S. and Global I.T. Market
Outlook: Q1 2010, an independent report published by Forrester Research,
Inc. in April 2010, it is estimated that in 2009, purchases of IT goods and
services by global businesses and governments declined by 8.8% over the previous
year.
 Reduced IT spending
in response to the challenging economic environment has also led to increased
pricing pressure from our clients, which has adversely impacted our billing
rates. For instance, during the three months ended March 31, 2010, our onsite
and offshore billing rates, other than for business process
management, decreased by 0.6% and 2.6% when compared to the three months
ended December 31, 2009.
 
 In addition to
seeking reduced billing rates, many of our clients have also been seeking
extensions in credit terms from the standard terms that we provide, including
pursuing credit from us for periods of up to 60 days or more. Such extended
credit terms may reduce our revenues, or result in the delay of the realization
of revenues, and may adversely affect our cash flows. Additionally, extended
credit terms also increase our exposure to customer-specific credit risks.
Reductions in IT spending, reductions in billing rates, increased credit risk
and extended credit terms arising from or related to the global economic
slowdown have in the past adversely impacted, and may in the future may
adversely impact, our revenues, gross profits, operating margins and results of
operations.
 
 Further, reduced or
delayed IT spending has also adversely impacted our utilization rates for
technology professionals. For instance, for fiscal 2010, our utilization rate
for technology professionals, including trainees, was approximately 67.5%, as
compared to 68.9% during fiscal 2009. This decrease in employee utilization
rates has adversely affected our profitability for fiscal 2010, and any further
decrease in employee utilization rates in the future, whether on account of
reduced or delayed IT spending, particularly if accompanied by pricing pressure,
may adversely impact our results of operations.
 
 In addition to the
business challenges and margin pressure resulting from the global economic
slowdown and the response of our clients to such slowdown, there is also a
growing trend among consumers of IT services towards consolidation of technology
service providers in order to improve efficiency and reduce costs. Our success
in the competitive bidding process for new consolidation projects or in
retaining existing projects is dependent on our ability to fulfill client
expectations relating to staffing, efficient offshoring of services, absorption
of transition costs, deferment of billing and more stringent service levels. Our
failure to meet a client's expectations in such consolidation projects may
adversely impact our business, revenues and operating margins. In addition, even
if we are successful in winning the mandates for such consolidation projects, we
may experience significant pressure on our operating margins as a result of the
competitive bidding process.
 
 Moreover, our
ability to maintain or increase pricing is restricted as clients often expect
that as we do more business with them, they will receive volume discounts or
special pricing incentives. In addition, existing and new customers are also
increasingly using third-party consultants with broad market knowledge to assist
them in negotiating contractual terms. Any inability to maintain or increase
pricing on this account may also adversely impact our revenues, gross profits,
operating margins and results of operations.
 
 Our
revenues are highly dependent on clients primarily located in the United States
and Europe, as well as on clients concentrated in certain industries, and an
economic slowdown or other factors that affect the economic health of the United
States, Europe or these industries may affect our business.
 
 In fiscal 2010,
fiscal 2009 and fiscal 2008, approximately 65.8%, 63.2% and 62.0% of our
revenues were derived from projects in North America. In the same periods,
approximately 23.0%, 26.4% and 28.1% of our revenues were derived from projects
in Europe. The recent crisis in the financial and credit markets in the United
States, Europe and Asia led to a global economic slowdown, with the economies of
the United States and Europe showing significant signs of weakness. If the
United States and/or European economy remains weak or weakens further, our
clients may reduce or postpone their technology spending significantly, which
may in turn lower the demand for our services and negatively affect our revenues
and profitability.
 
 In fiscal 2010,
fiscal 2009 and fiscal 2008, we derived approximately 34.0%, 33.9% and 35.8% of
our revenues from the financial services industry. The crisis in the
financial and credit markets in the United States has led to a significant
change in the financial services industry in the United States, with the United
States federal government being forced to take over or provide financial support
to many leading financial institutions and with some leading investment banks
going bankrupt or being forced to sell themselves in distressed circumstances.
The subprime mortgage crisis and the resultant turbulence in the financial
services sector may result in the reduction, postponement or consolidation of IT
spending by our clients, contract terminations, deferrals of projects or delays
in purchases, especially in the financial services sector. Any reduction,
postponement or consolidation in IT spending may lower the demand for our
services or impact the prices that we can obtain for our services and
consequently, adversely affect our revenues and profitability.
 
 Further, if the
economy of the United States does not recover as rapidly as expected or at all,
any lingering weakness in the United States economy could have a material
adverse impact on our revenues, particularly from businesses in the financial
services industry and other industries that are particularly vulnerable to a
slowdown in consumer spending. In fiscal 2010, fiscal 2009 and fiscal 2008,
we derived approximately 34.0%, 33.9% and 35.8% of our revenues from clients in
the financial services industry, 16.1%, 18.1% and 21.6% of our revenues from
clients in the telecommunications industry and about 13.3%, 12.5% and 11.8% of
our revenues from clients in the retail industry, which industries are
especially vulnerable to a slowdown in the U.S. economy. Any weakness in the
U.S. economy or in the industry segments from which we generate revenues could
have a negative effect on our business and results of operations.
 
 Currency
fluctuations may affect the results or our operations or the value of our
ADSs.
 
 Our functional
currency is the Indian rupee although we transact a major portion of our
business in several currencies and accordingly face foreign currency exposure
through our sales in the United States and elsewhere, and purchases from
overseas suppliers in various foreign currencies. Generally, we generate the
majority of our revenues in foreign currencies, such as the U.S. dollar or the
United Kingdom Pound Sterling, and incur the majority of our expenses in Indian
rupees. Recently, as a result of the increased volatility in foreign exchange
currency markets, there has been increased demand from our clients that all
risks associated with foreign exchange fluctuations be borne by us. Also,
historically, we have held a substantial majority of our cash funds in rupees.
Accordingly, changes in exchange rates may have a material adverse effect on our
revenues, other income, cost of services sold, gross margin and net income, and
may have a negative impact on our business, operating results and financial
condition. The exchange rate between the Indian rupee and foreign currencies,
including the U.S. dollar, the United Kingdom Pound Sterling, the Euro and the
Australian dollar, has changed substantially in recent years and may fluctuate
substantially in the future, and this fluctuation in currencies had a material
and adverse effect on our operating results in fiscal 2010, fiscal 2009 and
fiscal 2008. We expect that a majority of our revenues will continue to be
generated in foreign currencies, including the U.S. dollar, the United Kingdom
Pound Sterling, the Euro and the Australian dollar, for the foreseeable future
and that a significant portion of our expenses, including personnel costs, as
well as capital and operating expenditures, will continue to be denominated in
Indian rupees. Consequently, the results of our operations are adversely
affected as the Indian rupee appreciates against the U.S. dollar and other
foreign currencies.
 
 We use derivative
financial instruments such as foreign exchange forward and option contracts to
mitigate the risk of changes in foreign exchange rates on accounts receivable
and forecast cash flows denominated in certain foreign currencies. As of March
31, 2010, we had outstanding forward contracts of $267 million, Euro 22 million,
United Kingdom Pound Sterling 11 million and Australian dollar $3 million and
option contracts of $200 million. We may not purchase derivative instruments
adequate to insulate ourselves from foreign currency exchange risks. For
instance, during fiscal 2009, we incurred significant losses as a result of
exchange rate fluctuations that were not offset in full by our hedging
strategy.
 
 Additionally, our
hedging activities have also contributed to increased losses in recent periods
due to volatility in foreign currency markets. For example, in fiscal 2009, we
incurred losses of $165 million in our forward and option contracts. These
losses, partially offset by gains of $71 million as a result of foreign exchange
translations during the same period, resulted in a total loss of $94 million
related to foreign currency transactions, which had a significant and adverse
effect on our profit margin and results of operations. If foreign currency
markets continue to be volatile, such fluctuations in foreign currency exchange
rates could materially and adversely affect our profit margins and results of
operations in future periods. Also, the volatility in the foreign currency
markets may make it difficult to hedge our foreign currency exposures
effectively.
 
 Further, the
policies of the Reserve Bank of India may change from time to time which may
limit our ability to hedge our foreign currency exposures adequately. In
addition, a high-level committee appointed by the Reserve Bank of India
recommended that India move to increased capital account convertibility over the
next few years and proposed a framework for such increased convertibility. Full
or increased capital account convertibility, if introduced, could result in
increased volatility in the fluctuations of exchange rates between the rupee and
foreign currencies.
 
 During fiscal 2010,
we derived 26.7% of our revenues in currencies other than the U.S. dollar
including 9.2%, 6.9% and 5.8% of our revenues in United Kingdom Pound Sterling,
Euro and Australian dollars, respectively. For the year ended March 31, 2010,
the U.S. dollar depreciated against a majority of the currencies in which we
transact business, with the U.S. dollar depreciating by 5.6%, 1.5% and 33.3%
against the United Kingdom Pound Sterling, Euro and Australian dollar,
respectively. These cross currency fluctuations adversely impacted our reported
revenues for fiscal 2010 and may adversely impact our reported revenues in
future periods.
 
 Fluctuations in the
exchange rate between the Indian rupee and the U.S. dollar will also affect the
dollar conversion by Deutsche Bank Trust Company Americas, the Depositary with
respect to our ADSs, of any cash dividends paid in Indian rupees on the equity
shares represented by the ADSs. In addition, these fluctuations will affect the
U.S. dollar equivalent of the Indian rupee price of equity shares on the Indian
stock exchanges and, as a result, the prices of our ADSs in the United States,
as well as the U.S. dollar value of the proceeds a holder would receive upon the
sale in India of any equity shares withdrawn from the Depositary under the
Depositary Agreement. Holders may not be able to convert Indian rupee proceeds
into U.S. dollars or any other currency, and there is no guarantee of the rate
at which any such conversion will occur, if at all.
 
 Our
success depends largely upon our highly skilled technology professionals and our
ability to hire, attract, motivate, retain and train these
personnel.
 
 Our ability to
execute projects, maintain our client relationships and obtain new clients
depends largely on our ability to attract, train, motivate and retain highly
skilled technology professionals, particularly project managers and other
mid-level professionals. If we cannot hire, motivate and retain personnel, our
ability to bid for, obtain new projects and expand our business will be impaired
and our revenues could decline.
 
 We believe that
there is significant worldwide competition for skilled technology professionals.
Additionally, technology companies, particularly in India, have recently
increased their hiring efforts. Increasing worldwide competition for skilled
technology professionals and increased hiring by technology companies may affect
our ability to hire an adequate number of skilled and experienced technology
professionals and may have an adverse effect on our business, results of
operations and financial condition.
 
 Increasing
competition for technology professionals in India may also impact our ability to
retain personnel. For instance, our attrition rate for fiscal 2010 was 13.4%
compared to our attrition rate for fiscal 2009, which was 11.1%, without
accounting for attrition in Infosys BPO or our other subsidiaries. We may not be
able to hire enough skilled and experienced technology professionals to replace
employees who we are not able to retain. Our inability to motivate and retain
technology professionals may have an adverse effect on our business, results of
operations and financial condition.
 
 Changes in policies
or laws may also affect the ability of technology companies to attract and
retain personnel. For instance, the central government or state governments in
India may introduce legislation requiring employers to give preferential hiring
treatment to underrepresented groups. The quality of our work force is critical
to our business. If any such central government or state government legislation
becomes effective, our ability to hire the most highly qualified technology
professionals may be hindered.
 
 We may not be able
to redeploy and retrain our technology professionals to keep pace with
continuing changes in technology, evolving standards and changing client
preferences. Our inability to redeploy and retrain our technology professionals
may adversely affect our ability to bid for and obtain new projects and may have
a material adverse effect on our business, results of operations and financial
condition.
 
 Any
inability to manage our growth could disrupt our business and reduce our
profitability.
 
 We have grown
significantly in recent periods. Between March 31, 2006 and March 31,
2010 our total employees grew from approximately 52,700 to approximately
113,800. In addition, in the last five years we have undertaken and continue to
undertake major expansions of our existing facilities, as well as the
construction of new facilities. We expect our growth to place significant
demands on our management and other resources. Our growth will require us to
continuously develop and improve our operational, financial and other internal
controls, both in India and elsewhere. In addition, continued growth increases
the challenges involved in:
 recruiting,
  training and retaining sufficient skilled technical, marketing and management
  personnel;
        adhering to and
  further improving our high quality and process execution
  standards;
        preserving our
  culture, values and entrepreneurial environment;
        successfully
  expanding the range of services offered to our clients;
        developing and
  improving our internal administrative infrastructure, particularly our
  financial, operational, communications and other internal
  systems; and
        maintaining high
  levels of client satisfaction. Our growth strategy
also relies on the expansion of our operations to other parts of the world,
including Europe, Australia, Latin America and other parts of
Asia. During fiscal 2004, we established Infosys China and also
acquired Infosys Australia to expand our operations in those countries. In
fiscal 2005, we formed Infosys Consulting to focus on consulting services in the
United States. In addition, we have embarked on an expansion of our business in
China, and have expended significant resources in this expansion. During fiscal
2008, we established a wholly owned subsidiary and opened a development
center in Mexico. Also, during fiscal 2008, as part of an outsourcing agreement
with a client, Philips Electronics Nederland B.V. (“Philips”), our majority
owned subsidiary, Infosys BPO, acquired from Koninklijke Philips Electronics
N.V., certain shared services centers in India, Poland and Thailand that were
engaged in the provision of finance, accounting and procurement support services
to Philips' operations worldwide. Further, during fiscal 2010, we formed Infosys
Public Services, Inc. to focus on governmental outsourcing and consulting in the
United States. The costs involved in entering and establishing ourselves in new
markets, and expanding such operations, may be higher than expected and we may
face significant competition in these regions. Our inability to manage our
expansion and related growth in these markets or regions may have an adverse
effect on our business, results of operations and financial
condition.
 
 We
may face difficulties in providing end-to-end business solutions for our
clients, which could lead to clients discontinuing their work with us, which in
turn could harm our business.
 
 Over the past
several years, we have been expanding the nature and scope of our engagements by
extending the breadth of services that we offer. The success of some of our
newer service offerings, such as operations and business process consulting, IT
consulting, business process management, systems integration and infrastructure
management, depends in part, upon continued demand for such services by our
existing and new clients and our ability to meet this demand in a
cost-competitive and effective manner. In addition, our ability to effectively
offer a wider breadth of end-to-end business solutions depends on our ability to
attract existing or new clients to these service offerings. To obtain
engagements for our end-to-end solutions, we are competing with large,
well-established international consulting firms as well as other India-based
technology services companies, resulting in increased competition and marketing
costs. Accordingly, our new service offerings may not effectively meet client
needs and we may be unable to attract existing and new clients to these service
offerings.
 
 The increased
breadth of our service offerings may result in larger and more complex client
projects. This will require us to establish closer relationships with our
clients and potentially with other technology service providers and vendors, and
require a more thorough understanding of our clients' operations. Our ability to
establish these relationships will depend on a number of factors including the
proficiency of our technology professionals and our management
personnel.
 
 Larger projects
often involve multiple components, engagements or stages, and a client may
choose not to retain us for additional stages or may cancel or delay additional
planned engagements. These terminations, cancellations or delays may result from
the business or financial condition of our clients or the economy generally, as
opposed to factors related to the quality of our services. Cancellations or
delays make it difficult to plan for project resource requirements, and resource
planning inaccuracies may have a negative impact on our
profitability.
 
 Intense
competition in the market for technology services could affect our cost
advantages, which could reduce our share of business from clients and decrease
our revenues.
 
 The technology
services market is highly competitive. Our competitors include large consulting
firms, captive divisions of large multinational technology firms, infrastructure
management services firms, Indian technology services firms, software companies
and in-house IT departments of large corporations.
 
 The technology
services industry is experiencing rapid changes that are affecting the
competitive landscape, including recent divestitures and acquisitions that have
resulted in consolidation within the industry. These changes may result in
larger competitors with significant resources. In addition, some of our
competitors have added or announced plans to add cost-competitive offshore
capabilities to their service offerings. These competitors may be able to offer
their services using the offshore and onsite model more efficiently than we can.
Many of these competitors are also substantially larger than us and have
significant experience with international operations. We may face competition in
countries where we currently operate, as well as in countries in which we expect
to expand our operations. We also expect additional competition from technology
services firms with current operations in other countries, such as China and the
Philippines. Many of our competitors have significantly greater financial,
technical and marketing resources, generate greater revenues, have more
extensive existing client relationships and technology partners and have greater
brand recognition than we do. We may be unable to compete successfully against
these competitors, or may lose clients to these competitors. Additionally, we
believe that our ability to compete also depends in part on factors outside our
control, such as the price at which our competitors offer comparable services,
and the extent of our competitors' responsiveness to their clients'
needs.
 
 Our
revenues are highly dependent upon a small number of clients, and the loss of
any one of our major clients could significantly impact our
business.
 
 We have
historically earned, and believe that in the future we will continue to earn, a
significant portion of our revenues from a limited number of corporate clients.
In fiscal 2010, fiscal 2009 and fiscal 2008, our largest client accounted for
4.6%, 6.9% and 9.1% of our total revenues, respectively, and our five largest
clients together accounted for 16.4%, 18.0% and 20.9% of our total revenues,
respectively. The volume of work we perform for specific clients is likely to
vary from year to year, particularly since we historically have not been the
exclusive external technology services provider for our clients. Thus, a major
client in one year may not provide the same level of revenues in a subsequent
year. However, in any given year, a limited number of clients tend to contribute
a significant portion of our revenues. There are a number of factors, other than
our performance, that could cause the loss of a client and that may not be
predictable. In certain cases, we have significantly reduced the services
provided to a client when the client either changed its outsourcing strategy by
moving more work in-house or replaced its existing software with packaged
software supported by the licensor. Reduced technology spending in response to a
challenging economic or competitive environment may also result in our loss of a
client. If we lose one of our major clients or one of our major clients
significantly reduces its volume of business with us or there is an increase in
the accounts receivables from any of our major clients, our revenues and
profitability could be reduced.
 
 Legislation
in certain countries in which we operate, including the United States and the
United Kingdom, may restrict companies in those countries from outsourcing
work to us.
 
 Recently, some
countries and organizations have expressed concerns about a perceived
association between offshore outsourcing and the loss of jobs. With the growth
of offshore outsourcing receiving increasing political and media attention,
especially in the United States, which is our largest market, and particularly
given the prevailing economic environment, it is possible that there could be a
change in the existing laws or the enactment of new legislation restricting
offshore outsourcing or imposing restrictions on the deployment of, and
regulating the wages of, work visa holders at client locations, which may
adversely impact our ability to do business in the jurisdictions in which we
operate, especially with governmental entities. It is also possible that private
sector companies working with these governmental entities may be restricted from
outsourcing projects related to government contracts or may face disincentives
if they outsource certain operations.
 
 The recent credit
crisis in the United States and elsewhere has also resulted in the United States
federal government and governments in Europe acquiring or proposing to acquire
equity positions in leading financial institutions and banks. If either the
United States federal government or another governmental entity acquires an
equity position in any of our clients, any resulting changes in management or
reorganizations may result in deferrals or cancellations of projects or delays
in purchase decisions, which may have a material adverse effect on our business,
results of operations or financial condition. Moreover, equity investments by
governmental entities in, or governmental financial aid to, our clients may
involve restrictions on the ability of such clients to outsource offshore or
otherwise restrict offshore IT vendors from utilizing the services of work visa
holders at client locations. Any restriction on our ability to deploy our
trained offshore resources at client locations may in turn require us to replace
our existing offshore resources with local resources, or hire additional local
resources, which local resources may only be available at higher wages. Any
resulting increase in our compensation, hiring and training expenses could
adversely impact our revenues and operating profitability.
 
 In addition, the
European Union (EU) member states have adopted the Acquired Rights Directive,
while some European countries outside of the EU have enacted similar
legislation. The Acquired Rights Directive, and certain local laws in European
countries that implement the Acquired Rights Directive, such as the Transfer of
Undertakings (Protection of Employees) Regulations, or TUPE, in the United
Kingdom, allow employees who are automatically and unfairly dismissed as a
result of "service provision changes", which may include outsourcing to non-EU
companies, to seek compensation either from the company from which they were
dismissed or from the company to which the work was transferred. This could
deter EU companies from outsourcing work to us and could also result in our
being held liable for redundancy payments to such workers. Any such event could
adversely affect our revenues and operating profitability.
 
 Our
success depends in large part upon our management team and key personnel and our
ability to attract and retain them.
 
 We are highly
dependent on the senior members of our Board and the management team, including
the continued efforts of our Chairman, our Chief Executive Officer, our Chief
Operating Officer, our Chief Financial Officer, other executive members of the
Board and members of our executive council which consists of certain executive
and other officers. Our future performance will be affected by any disruptions
in the continued service of our directors, executives and other officers. For
example, on July 9, 2009, Nandan M. Nilekani stepped down as the Co-Chairman of
the Company’s Board of Directors to undertake a role with the Government of
India. Competition for senior management in our industry is intense, and we may
not be able to retain such senior management personnel or attract and retain new
senior management personnel in the future. Furthermore, we do not maintain key
man life insurance for any of the senior members of our management team or other
key personnel. The loss of any member of our senior management or other key
personnel may have a material adverse effect on our business, results of
operations and financial condition.
 
 Our
failure to complete fixed-price, fixed-timeframe contracts or transaction-based
pricing contracts within budget and on time may negatively affect our
profitability.
 
 As an element of
our business strategy, in response to client requirements and pressures on IT
budgets, we are offering an increasing portion of our services on a fixed-price,
fixed-timeframe basis, rather than on a time-and-materials basis. In fiscal
2010, fiscal 2009 and fiscal 2008, revenues from fixed-price, fixed-timeframe
projects accounted for 38.5%, 35.4% and 31.0% of our total services revenues,
respectively, including revenues from our business process management services.
In addition, pressure on the IT budgets of our clients has led us to deviate
from our standard pricing policies and to offer varied pricing models to our
clients in certain situations in order to remain competitive. For example, we
have recently begun entering into transaction-based pricing contracts with
certain clients in order to give our clients the flexibility to pay as they use
our services.
 
 The risk of
entering into fixed-price, fixed-timeframe arrangements and transaction-based
pricing arrangements is that if we fail to properly estimate the appropriate
pricing for a project, we may incur lower profits or losses as a result of being
unable to execute projects on the timeframe and with the amount of labor we
expected. Although we use our software engineering methodologies and processes
and past project experience to reduce the risks associated with estimating,
planning and performing fixed-price, fixed-timeframe projects and
transaction-based pricing projects, we bear the risk of cost overruns,
completion delays and wage inflation in connection with these projects. If we
fail to estimate accurately the resources and time required for a project,
future wage inflation rates, or currency exchange rates, or if we fail to
complete our contractual obligations within the contracted timeframe, our
profitability may suffer. We expect that we will continue to enter into
fixed-price, fixed-timeframe and transaction-based pricing engagements in the
future, and such engagements may increase in relation to the revenues generated
from engagements on a time-and-materials basis, which would increase the risks
to our business.
 
 Our
client contracts can typically be terminated without cause and with little or no
notice or penalty, which could negatively impact our revenues and
profitability.
 
 Our clients
typically retain us on a non-exclusive, project-by-project basis. Most of our
client contracts, including those that are on a fixed-price, fixed-timeframe
basis, can be terminated with or without cause, with between zero and
90 days' notice and without any termination-related penalties.
Additionally, our contracts with clients are typically limited to discrete
projects without any commitment to a specific volume of business or future work.
Our business is dependent on the decisions and actions of our clients, and there
are a number of factors relating to our clients that are outside of our control
which might lead to termination of a project or the loss of a client,
including:
 financial
  difficulties for a client;
        a change in
  strategic priorities, resulting in a reduced level of technology
  spending;
        a demand for
  price reductions;
        a change in
  outsourcing strategy by moving more work to the client's in-house technology
  departments or to our competitors;
        the replacement
  by our clients of existing software with packaged software supported by
  licensors;
        mergers and
  acquisitions; and
        consolidation of
  technology spending by a client, whether arising out of mergers and
  acquisitions, or otherwise. Our inability to
control the termination of client contracts could have a negative impact on our
financial condition and results of operations.
 
 Our engagements with customers are
singular in nature and do not necessarily provide for subsequent
engagements.
 
 Our clients
generally retain us on a short-term, engagement-by-engagement basis in
connection with specific projects, rather than on a recurring basis under
long-term contracts. Although a substantial majority of our revenues are
generated from repeat business, which we define as revenue from a client who
also contributed to our revenue during the prior fiscal year, our engagements
with our clients are typically for projects that are singular in nature.
Therefore, we must seek out new engagements when our current engagements are
successfully completed or are terminated, and we are constantly seeking to
expand our business with existing clients and secure new clients for our
services. In addition, in order to continue expanding our business, we may need
to significantly expand our sales and marketing group, which would increase our
expenses and may not necessarily result in a substantial increase in business.
If we are unable to generate a substantial number of new engagements for
projects on a continual basis, our business and results of operations would
likely be adversely affected.
 
 Our
client contracts are often conditioned upon our performance, which, if
unsatisfactory, could result in less revenue than previously
anticipated.
 
 A number of our
contracts have incentive-based or other pricing terms that condition some or all
of our fees on our ability to meet defined performance goals or service levels.
Our failure to meet these goals or a client's expectations in such
performance-based contracts may result in a less profitable or an unprofitable
engagement.
 
 Some
of our long-term client contracts contain benchmarking provisions which, if
triggered, could result in lower future revenues and profitability under the
contract.
 
 As the size and
duration of our client engagements increase, clients may increasingly require
benchmarking provisions. Benchmarking provisions allow a customer in certain
circumstances to request a benchmark study prepared by an agreed upon
third-party comparing our pricing, performance and efficiency gains for
delivered contract services to that of an agreed upon list of other service
providers for comparable services. Based on the results of the benchmark study
and depending on the reasons for any unfavorable variance, we may be required to
reduce the pricing for future services to be performed under the balance of the
contract, which could have an adverse impact on our revenues and profitability.
Benchmarking provisions in our client engagements may have a greater impact on
our results of operations during an economic slowdown, because pricing pressure
and the resulting decline in rates may lead to a reduction in fees that we
charge to clients that have benchmarking provisions in their engagements with
us.
 
 Our
increasing work with governmental agencies may expose us to additional
risks.
 
 Currently, the vast
majority of our clients are privately or publicly owned. However, we are
increasingly bidding for work with governments and governmental agencies, both
within and outside the United States. Projects involving governments or
governmental agencies carry various risks inherent in the government contracting
process, including the following:
 Such projects may
  be subject to a higher risk of reduction in scope or termination than other
  contracts due to political and economic factors such as changes in government,
  pending elections or the reduction in, or absence of, adequate
  funding;
        Terms and
  conditions of government contracts tend to be more onerous than other
  contracts and may include, among other things, extensive rights of audit, more
  punitive service level penalties and other restrictive covenants. Also, the
  terms of such contracts are often subject to change due to political and
  economic factors;
        Government
  contracts are often subject to more extensive scrutiny and publicity than
  other contracts. Any negative publicity related to such contracts, regardless
  of the accuracy of such publicity, may adversely affect our business or
  reputation;
        Participation in
  government contracts could subject us to stricter regulatory requirements,
  which may increase our cost of compliance; and
        Such projects may
  involve multiple parties in the delivery of services and require greater
  project management efforts on our part. Any failure in this regard may
  adversely impact our performance. In addition, we
operate in jurisdictions in which local business practices may be inconsistent
with international regulatory requirements, including anti-corruption
regulations prescribed under the U.S. Foreign Corrupt Practices Act (“FCPA”),
which, among other things, prohibits giving or offering to give anything of
value with the intent to influence the awarding of government contracts.
Although we believe that we have adequate policies and enforcement mechanisms to
ensure legal and regulatory compliance with the FCPA and other similar
regulations, it is possible that some of our employees, subcontractors, agents
or partners may violate any such legal and regulatory requirements, which may
expose us to criminal or civil enforcement actions, including penalties and
suspension or disqualification from U.S. federal procurement contracting.
If we fail to comply with legal and regulatory requirements, our business and
reputation may be harmed.
 
 Any of the above
factors could have a material and adverse effect on our business or our results
of operations.
 
 Our
business will suffer if we fail to anticipate and develop new services and
enhance existing services in order to keep pace with rapid changes in technology
and in the industries on which we focus.
 
 The technology
services market is characterized by rapid technological change, evolving
industry standards, changing client preferences and new product and service
introductions. Our future success will depend on our ability to anticipate these
advances and develop new product and service offerings to meet client needs. We
may fail to anticipate or respond to these advances in a timely basis, or, if we
do respond, the services or technologies that we develop may not be successful
in the marketplace. The development of some of the services and technologies may
involve significant upfront investments and the failure of these services and
technologies may result in our being unable to recover these investments, in
part or in full. Further, products, services or technologies that are developed
by our competitors may render our services non-competitive or
obsolete.
 
 We have recently
introduced, and propose to introduce, several new solutions involving complex
delivery models combined with innovative, and often transaction based, pricing
models. For instance, we recently introduced an integrated service solution,
Software as a Service, or SaaS, that combines the supply of hardware, network
infrastructure, application software and associated professional services,
maintenance and support. Our new solutions, including the SaaS solution, are
often based on a transaction-based pricing model even though these solutions
require us to incur significant upfront costs. The complexity of these
solutions, our inexperience in developing or implementing them and significant
competition in the markets for these solutions may affect our ability to market
these solutions successfully. Further, customers may not adopt these solutions
widely and we may be unable to recover any investments made in these solutions.
Even if these solutions are successful in the market, the dependence of these
solutions on third party hardware and software and on our ability to meet
stringent service levels in providing maintenance or support services may result
in our being unable to deploy these solutions successfully or profitably.
Further, where we offer a transaction-based pricing model in connection with an
engagement, we may also be unable to recover any upfront costs incurred in
solutions deployed by us in full.
 
 Compliance
with new and changing corporate governance and public disclosure requirements
adds uncertainty to our compliance policies and increases our costs of
compliance.
 
 Changing laws,
regulations and standards relating to accounting, corporate governance and
public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC
regulations, NASDAQ Global Select Market rules, Securities and Exchange Board of
India or SEBI rules and Indian stock market listing regulations are creating
uncertainty for companies like ours. These new or changed laws, regulations and
standards may lack specificity and are subject to varying interpretations. Their
application in practice may evolve over time as new guidance is provided by
regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs of compliance as a result of
ongoing revisions to such governance standards.
 
 In particular,
continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002
and the related regulations regarding our required assessment of our internal
control over financial reporting requires the commitment of significant
financial and managerial resources and external auditor's independent assessment
of the internal control over financial reporting.
 
 In connection with
our Annual Report on Form 20-F for fiscal 2010, our management assessed our
internal controls over financial reporting, and determined that our internal
controls were effective as of March 31, 2010, and our independent auditors
have expressed an unqualified opinion over the effectiveness of our internal
control over financial reporting as of the end of such period. However, we
will undertake management assessments of our internal control over financial
reporting in connection with each annual report, and any deficiencies uncovered
by these assessments or any inability of our auditors to issue an unqualified
opinion could harm our reputation and the price of our equity shares and
ADSs.
 
 Further, during
2009 and continuing into 2010, there has been an increased focus on corporate
governance by the U.S. Congress and by the SEC in response to the recent credit
and financial crisis in the United States. As a result of this increased
focus, additional corporate governance standards have been promulgated with
respect to companies whose securities are listed in the United States, and more
governance standards are expected to be imposed on companies whose securities
are listed in the United States in the near future.
 
 It is also possible
that laws in India may be made more stringent with respect to standards of
accounting, auditing, public disclosure and corporate governance. We are
committed to maintaining high standards of corporate governance and public
disclosure, and our efforts to comply with evolving laws, regulations and
standards in this regard have resulted in, and are likely to continue to result
in, increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance
activities.
 
 In addition, it may
become more expensive or more difficult for us to obtain director and officer
liability insurance. Further, our Board members, Chief Executive Officer, and
Chief Financial Officer could face an increased risk of personal liability in
connection with their performance of duties and our SEC reporting obligations.
As a result, we may face difficulties attracting and retaining qualified Board
members and executive officers, which could harm our business. If we fail to
comply with new or changed laws or regulations, our business and reputation may
be harmed.
 
 Disruptions
in telecommunications, system failures, or virus attacks could harm our ability
to execute our Global Delivery Model, which could result in client
dissatisfaction and a reduction of our revenues.
 
 A significant
element of our distributed project management methodology, which we refer to as
our Global Delivery Model, is to continue to leverage and expand our global
development centers. We currently have 63 global development centers
located in various countries around the world. Our global development centers
are linked with a telecommunications network architecture that uses multiple
service providers and various satellite and optical links with alternate
routing. We may not be able to maintain active voice and data communications
between our various global development centers and our clients' sites at all
times due to disruptions in these networks, system failures or virus attacks.
Any significant failure in our ability to communicate could result in a
disruption in business, which could hinder our performance or our ability to
complete client projects on time. This, in turn, could lead to client
dissatisfaction and a material adverse effect on our business, results of
operations and financial condition.
 
 We
may be liable to our clients for damages caused by disclosure of confidential
information, system failures, errors or unsatisfactory performance of
services.
 
 We are often
required to collect and store sensitive or confidential client and customer
data. Many of our client agreements do not limit our potential liability for
breaches of confidentiality. If any person, including any of our employees,
penetrates our network security or misappropriates sensitive data, we could be
subject to significant liability from our clients or from our clients' customers
for breaching contractual confidentiality provisions or privacy laws.
Unauthorized disclosure of sensitive or confidential client and customer data,
whether through breach of our computer systems, systems failure or otherwise,
could damage our reputation and cause us to lose clients.
 
 Many of our
contracts involve projects that are critical to the operations of our clients'
businesses, and provide benefits which may be difficult to quantify. Any failure
in a client's system or breaches of security could result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. Furthermore, any errors by our employees in the performance of services
for a client, or poor execution of such services, could result in a client
terminating our engagement and seeking damages from us.
 
 Although we
generally attempt to limit our contractual liability for consequential damages
in rendering our services, these limitations on liability may be unenforceable
in some cases, or may be insufficient to protect us from liability for damages.
We maintain general liability insurance coverage, including coverage for errors
or omissions, however, this coverage may not continue to be available on
reasonable terms and may be unavailable in sufficient amounts to cover one or
more large claims. Also an insurer might disclaim coverage as to any future
claim. A successful assertion of one or more large claims against us that
exceeds our available insurance coverage or changes in our insurance policies,
including premium increases or the imposition of a large deductible or
co-insurance requirement, could adversely affect our operating
results.
 
 Recently, many of
our clients have been seeking more favorable terms from us in our contracts with
them, particularly in connection with clauses related to the
limitation of our liability for damages resulting from unsatisfactory
performance of services. The inclusion of such terms in our client contracts,
particularly where they relate to our attempt to limit our contractual liability
for damages, may increase our exposure to liability in case of our failure to
perform services in a manner required under the relevant contracts. 
Further, any damages resulting from such failure, particularly where we are
unable to recover such damages in full from our insurers, may adversely impact
our business, revenues and operating margins.
 
 We
are investing substantial cash assets in new facilities and physical
infrastructure, and our profitability could be reduced if our business does not
grow proportionately.
 
 As of March 31,
2010, we had contractual commitments of approximately $67 million for capital
expenditures, particularly related to the expansion or construction of
facilities. We may encounter cost overruns or project delays in connection with
new facilities. These expansions will increase our fixed costs. If we are unable
to grow our business and revenues proportionately, our profitability will be
reduced.
 
 We
may be unable to recoup our investment costs to develop our software
products.
 
 In fiscal 2010,
fiscal 2009 and fiscal 2008, we earned 4.2%, 3.9% and 3.6% of our total revenue
from the licensing of software products, respectively. The development of our
software products requires significant investments. The markets for our primary
suite of software products which we call FinacleTM are
competitive. Our current software products or any new software products that we
develop may not be commercially successful and the costs of developing such new
software products may not be recouped. Since software product revenues typically
occur in periods subsequent to the periods in which the costs are incurred for
the development of such software products, delayed revenues may cause periodic
fluctuations in our operating results.
 
 Our
insiders who are significant shareholders may control the election of our Board
and may have interests which conflict with those of our other shareholders or
holders of our ADSs.
 
 Our executive
officers and directors, together with members of their immediate families,
beneficially owned, in the aggregate, 13.0% of our issued equity shares as of
April 29, 2010. As a result, acting together, this group has the ability to
exercise significant control over most matters requiring our shareholders'
approval, including the election and removal of directors and significant
corporate transactions.
 
 We
may engage in acquisitions, strategic investments, strategic partnerships or
alliances or other ventures that may or may not be successful.
 
 We may acquire or
make strategic investments in complementary businesses, technologies, services
or products, or enter into strategic partnerships or alliances with third
parties in order to enhance our business. For example, during fiscal 2008, as
part of an outsourcing agreement with Philips, our majority-owned subsidiary,
Infosys BPO, acquired from Koninklijke Philips Electronics N.V. certain shared
services centers in India, Poland and Thailand that were engaged in the
provision of finance, accounting and procurement support services to Philips'
operations worldwide. Further, during fiscal 2010, Infosys BPO completed
the acquisition of McCamish Systems LLC. It is possible that we may not
identify suitable acquisitions, candidates for strategic investment or strategic
partnerships, or if we do identify suitable targets, we may not complete those
transactions on terms commercially acceptable to us, or at all. For instance, on
August 25, 2008, we announced a recommended cash offer of approximately £407.1
million for the issued and to be issued share capital of Axon Group plc, or
Axon, a company listed on the London Stock Exchange. On September 26, 2008, the
Axon Board informed us of a higher competing offer for Axon and subsequently,
announced the withdrawal of its recommendation of our offer and its intent to
unanimously recommend the higher competing offer. After careful consideration,
on October 10, 2008, we announced that we would not increase the price of our
original offer and, consequently, on October 20, 2008, Axon announced that it
would focus on implementing the competing offer. Our inability to identify
suitable acquisition targets or investments or our inability to complete such
transactions may affect our competitiveness and our growth
prospects.
 
 Even if we are able
to identify an acquisition that we would like to consummate, we may not be able
to complete the acquisition on commercially reasonable terms or because the
target is acquired by another company. Furthermore, in the event that we are
able to identify and consummate any future acquisitions, we could:
 issue equity
  securities which would dilute current shareholders' percentage
  ownership;
        incur substantial
  debt;
        incur significant
  acquisition-related expenses;
        assume contingent
  liabilities; or
        expend
  significant cash. These financing
activities or expenditures could harm our business, operating results and
financial condition or the price of our common stock. Alternatively, due to
difficulties in the capital and credit markets, we may be unable to secure
capital on acceptable terms, if at all, to complete acquisitions.
 
 Moreover, even if
we do obtain benefits from acquisitions in the form of increased sales and
earnings, there may be a delay between the time when the expenses associated
with an acquisition are incurred and the time when we recognize such
benefits.
 
 Further, if we
acquire a company, we could have difficulty in assimilating that company's
personnel, operations, technology and software. In addition, the key personnel
of the acquired company may decide not to work for us. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses.
 
 We have made and
may in the future make strategic investments in early-stage technology start-up
companies in order to gain experience in or exploit niche technologies. However,
our investments may not be successful. The lack of profitability of any of our
investments could have a material adverse effect on our operating
results.
 
 Risks
Related to Investments in Indian Companies and International Operations
Generally
 
 Our
net income would decrease if the Government of India reduces or withdraws tax
benefits and other incentives it provides to us or when our tax holidays expire
or terminate.
 
 Currently, we
benefit from the tax incentives the Government of India provides to the export
of software from specially designated software technology parks, or STPs, in
India and for facilities set up under the Special Economic Zones Act, 2005. The
STP tax holiday is available for ten consecutive years beginning from the
financial year when the unit started producing computer software or April 1,
1999, whichever is earlier. The Indian Government, through the Finance Act,
2009, has extended the tax holiday for STP units until March 31, 2011. Most of
our STP units have already completed the tax holiday period and for the
remaining STP units, the tax holiday will expire by the end of fiscal
2011.
 
 In the Finance Act,
2005, the Government of India introduced a separate tax holiday scheme for units
set up under designated special economic zones, or SEZs, engaged in manufacture
of articles or in provision of services. Under this scheme, units in designated
SEZs which begin providing services on or after April 1, 2005, will be eligible
for a deduction of 100 percent of profits or gains derived from the export of
services for the first five years from commencement of provision of services and
50 percent of such profits or gains for a further five years. Certain tax
benefits are also available for a further five years subject to the unit meeting
defined conditions. The expiration, modification or termination of any of our
tax benefits or holidays, including on account of non-extension of the tax
holidays relating to STPs in India, would likely increase our effective tax
rates significantly, and have a material and adverse effect on our net
income.
 
 As a result of
these tax incentives, a substantial portion of our pre-tax income has not been
subject to significant tax in recent years. These tax incentives resulted in a
decrease of $116 million, $325 million and $282 million in our income tax
expense for fiscal 2010, fiscal 2009 and fiscal 2008 respectively, compared to
the effective tax amounts that we estimate we would have been required to pay if
these incentives had not been available.
 
 Further, the
Finance Act, 2007, included income eligible for deductions under Section 10A of
the Indian Income Tax Act in the computation of book profits for the levy of a
Minimum Alternative Tax, or MAT. The rate of MAT, effective April 1, 2010, is
15% (excluding a surcharge and education cess) on our book profits determined
after including income eligible for deductions under Section 10A of the Indian
Income Tax Act. Through the Finance Bill, 2010 the rate of MAT is proposed to be
increased to 18% (excluding a surcharge and education cess). The Income Tax Act
provides that the MAT paid by us can be adjusted against our tax liability over
the next ten years. Although MAT paid by us can be set off against our future
tax liability, due to the introduction of MAT, our net income and cash flows for
intervening periods could be adversely affected.
 
 In
the event that the Government of India or the government of another country
changes its tax policies in a manner that is adverse to us, our tax expense may
materially increase, reducing our profitability.
 
 In the recent
years, the Government of India has introduced a tax on various services provided
within India including on the maintenance and repair of software. The Government
of India has in the Finance Act, 2008, included services provided in relation to
information technology software under the ambit of service tax, if it is in the
course or furtherance of the business. Under this tax, service providers are
required to pay a tax of 10% (excluding applicable education cess) on the value
of services provided to customers. The Government of India may expand the
services covered under the ambit of this tax to include various services
provided by us. This tax, if expanded, could increase our expenses, and could
adversely affect our operating margins and revenues. Although currently there
are no material pending or threatened claims against us for service taxes, such
claims may be asserted against us in the future. Defending these claims would be
expensive, time consuming and may divert our management's attention and
resources from operating our company.
 
 We
operate in jurisdictions that impose transfer pricing and other tax-related
regulations on us, and any failure to comply could materially and adversely
affect our profitability.
 
 We are required to
comply with various transfer pricing regulations in India and other countries.
Failure to comply with such regulations may impact our effective tax rates and
consequently affect our net margins. Additionally, we operate in several
countries and our failure to comply with the local and municipal tax regime may
result in additional taxes, penalties and enforcement actions from such
authorities. In the event that we do not properly comply with transfer pricing
and tax-related regulations, our profitability may be adversely
affected.
 
 Wage
pressures in India and the hiring of employees outside India may prevent us from
sustaining our competitive advantage and may reduce our profit
margins.
 
 Wage costs in India
have historically been significantly lower than wage costs in the United States
and Europe for comparably skilled professionals, which has been one of our
competitive strengths. Although, currently, a vast majority of our workforce
consists of Indian nationals, we expect to increase hiring in other
jurisdictions, including the United States and Europe. Any such recruitment of
foreign nationals is likely to be at wages higher than those prevailing in India
and may increase our operating costs and adversely impact our
profitability.
 
 Further, in certain
jurisdictions in which we operate, legislation has been adopted that requires
our non-resident alien employees working in such jurisdictions to earn the same
wages as similarly situated residents or citizens of such jurisdiction. In
jurisdictions where this is required, the compensation expenses for our
non-resident alien employees would adversely impact our results of
operations.
 
 Additionally, wage
increases in India may prevent us from sustaining this competitive advantage and
may negatively affect our profit margins. We have historically experienced
significant competition for employees from large multinational companies that
have established and continue to establish offshore operations in India, as well
as from companies within India. This competition has led to wage pressures in
attracting and retaining employees, and these wage pressures have led to a
situation where wages in India are increasing at a faster rate than in the
United States, which could result in increased costs for companies seeking to
employ technology professionals in India, particularly project managers and
other mid-level professionals. We may need to increase our employee compensation
more rapidly than in the past to remain competitive with other employers, or
seek to recruit in other low labor cost jurisdictions to keep our wage costs
low. For example, we established a long term retention bonus policy for our
senior executives and employees. Under this policy, certain senior executives
and employees will be entitled to a yearly cash bonus upon their continued
employment with us based upon seniority, their role in the Company and their
performance. Typically, we typically undertake an annual compensation review,
and, pursuant to such review, the average salaries of our employees have
increased significantly. Any compensation increases in the future may result in
a material adverse effect on our business, results of operations and financial
condition.
 
 Terrorist
attacks or a war could adversely affect our business, results of operations and
financial condition.
 
 Terrorist attacks,
such as the attacks of September 11, 2001 in the United States, the attacks
of July 25, 2008 in Bangalore, the attacks of November 26 to 29, 2008 in
Mumbai and other acts of violence or war, such as the continuing conflict in
Iraq, have the potential to have a direct impact on our clients or on us. To the
extent that such attacks affect or involve the United States or Europe, our
business may be significantly impacted, as the majority of our revenues are
derived from clients located in the United States and Europe. In addition, such
attacks may destabilize the economic and political situation in India, may make
travel more difficult, may make it more difficult to obtain work visas for many
of our technology professionals who are required to work in the United States or
Europe, and may effectively reduce our ability to deliver our services to our
clients. Such obstacles to business may increase our expenses and negatively
affect the results of our operations. Furthermore, any attacks in India could
cause a disruption in the delivery of our services to our clients, and could
have a negative impact on our business, personnel, assets and results of
operations, and could cause our clients or potential clients to choose other
vendors for the services we provide. Terrorist threats, attacks or war could
make travel more difficult, may disrupt our ability to provide services to our
clients and could delay, postpone or cancel our clients' decisions to use our
services.
 
 The
markets in which we operate are subject to the risk of earthquakes, floods and
other natural disasters.
 
 Some of the regions
that we operate in are prone to earthquakes, flooding and other natural
disasters. In the event that any of our business centers are affected by any
such disasters, we may sustain damage to our operations and properties, suffer
significant financial losses and be unable to complete our client engagements in
a timely manner, if at all. Further, in the event of a natural disaster, we may
also incur costs in redeploying personnel and property. In addition if there is
a major earthquake, flood or other natural disaster in any of the locations in
which our significant customers are located, we face the risk that our customers
may incur losses, or sustained business interruption, which may materially
impair their ability to continue their purchase of products or services from us.
A major earthquake, flood or other natural disaster in the markets in which we
operate could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
 
 Regional
conflicts in South Asia could adversely affect the Indian economy, disrupt our
operations and cause our business to suffer.
 
 South Asia has,
from time to time, experienced instances of civil unrest and hostilities among
neighboring countries, including between India and Pakistan. In recent years
there have been military confrontations between India and Pakistan that have
occurred in the region of Kashmir and along the India-Pakistan border. Further,
in recent months, Pakistan has been experiencing significant instability and
this has heightened the risks of conflict in South Asia. Military activity or
terrorist attacks in the future could influence the Indian economy by disrupting
communications and making travel more difficult and such political tensions
could create a greater perception that investments in Indian companies involve
higher degrees of risk. This, in turn, could have a material adverse effect on
the market for securities of Indian companies, including our equity shares and
our ADSs, and on the market for our services.
 
 Restrictions
on immigration may affect our ability to compete for and provide services to
clients in the United States, which could hamper our growth and cause our
revenues to decline.
 
 The vast majority
of our employees are Indian nationals. Most of our projects require a portion of
the work to be completed at the client's location. The ability of our technology
professionals to work in the United States, Europe and in other countries
depends on the ability to obtain the necessary visas and work
permits.
 
 As of March 31,
2010, the majority of our technology professionals in the United States held
either H-1B visas (approximately 8,900 persons, not including Infosys BPO
employees or employees of our wholly owned subsidiaries), which allow the
employee to remain in the United States for up to six years during the term of
the work permit and work as long as he or she remains an employee of the
sponsoring firm, or L-1 visas (approximately 1,800 persons, not including
Infosys BPO employees or employees of our wholly owned subsidiaries), which
allow the employee to stay in the United States only temporarily. Although there
is no limit to new L-1 visas, there is a limit to the aggregate number of new
H-1B visas that the U.S. Citizenship and Immigration Services, or CIS, may
approve in any government fiscal year which is 65,000 annually. In November
2004, the United States Congress passed a measure that increased the number of
available H-1B visas to 85,000 per year. The 20,000 additional visas are
only available to skilled workers who possess a Master's or higher degree from
institutions of higher education in the United States. Further, in response to
the terrorist attacks in the United States, the CIS has increased its level of
scrutiny in granting new visas. This may, in the future, also lead to limits on
the number of L-1 visas granted. In addition, the granting of L-1 visas
precludes companies from obtaining such visas for employees with specialized
knowledge: (1) if such employees will be stationed primarily at the
worksite of another company in the U.S. and the employee will not be controlled
and supervised by his employer, or (2) if such offsite placement is
essentially an arrangement to provide labor for hire rather than in connection
with the employee's specialized knowledge. Immigration laws in the United States
may also require us to meet certain levels of compensation, and to comply with
other legal requirements, including labor certifications, as a condition to
obtaining or maintaining work visas for our technology professionals working in
the United States.
 
 Immigration laws in
the United States and in other countries are subject to legislative change, as
well as to variations in standards of application and enforcement due to
political forces and economic conditions. It is difficult to predict the
political and economic events that could affect immigration laws, or the
restrictive impact they could have on obtaining or monitoring work visas for our
technology professionals. Our reliance on work visas for a significant number of
technology professionals makes us particularly vulnerable to such changes and
variations as it affects our ability to staff projects with technology
professionals who are not citizens of the country where the work is to be
performed. As a result, we may not be able to obtain a sufficient number of
visas for our technology professionals or may encounter delays or additional
costs in obtaining or maintaining the conditions of such visas. Additionally, we
may have to apply in advance for visas and this could result in additional
expenses during certain quarters of the fiscal year.
 
 Changes
in the policies of the Government of India or political instability could delay
the further liberalization of the Indian economy and adversely affect economic
conditions in India generally, which could impact our business and
prospects.
 
 Since 1991,
successive Indian governments have pursued policies of economic liberalization,
including significantly relaxing restrictions on the private sector.
Nevertheless, the role of the Central and State governments in the Indian
economy as producers, consumers and regulators has remained significant. The
current Government of India, formed in May 2009, has announced policies and
taken initiatives that support the continued economic liberalization policies
pursued by previous governments. However, these liberalization policies may not
continue in the future. The rate of economic liberalization could change, and
specific laws and policies affecting technology companies, foreign investment,
currency exchange and other matters affecting investment in our securities could
change as well. A significant change in India's economic liberalization and
deregulation policies could adversely affect business and economic conditions in
India generally, and our business in particular.
 
 For instance, in
April 2007, the Government of India announced a number of changes in its
policies applicable to Special Economic Zones, or SEZs, to provide for, among
other things, a cap on the size of land available for SEZs. The Indian
Government has also announced its intent to make further changes in the SEZ
policies. Some of our software development centers located at Chandigarh,
Chennai, Mangalore, Pune and Trivandrum currently operate in SEZs and many of
our proposed development centers are likely to operate in SEZs. If the
Government of India changes its policies affecting SEZs in a manner that
adversely impact the incentives for establishing and operating facilities in
SEZs, our business, results of operations and financial condition may be
adversely affected.
 
 Political
instability could also delay the reform of the Indian economy and could have a
material adverse effect on the market for securities of Indian companies,
including our equity shares and our ADSs, and on the market for our
services.
 
 Our
international expansion plans subject us to risks inherent in doing business
internationally.
 
 Currently, we have
global development centers in 15 countries around the world, with our largest
development centers located in India. We have recently established or intend to
establish new development facilities. During fiscal 2004, we established Infosys
China also acquired Infosys Australia to expand our operations in those
countries. In fiscal 2005, we formed Infosys Consulting to focus on consulting
services in the United States. In fiscal 2008, we established a wholly-owned
subsidiary, Infosys Technologies S. De RL De CV ("Infosys Mexico"), in
Monterrey, Mexico, to provide business consulting and information technology
services for clients in North America, Latin America and Europe. Also, during
fiscal 2008, as part of an outsourcing agreement with Philips, our
majority-owned subsidiary, Infosys BPO, acquired from Koninklijke Philips
Electronics N.V. certain shared services centers in India, Poland and Thailand
that are engaged in the provision of finance, accounting and procurement support
services to Philips' operations worldwide. In fiscal 2010, we established a
wholly-owned subsidiary, Infosys Tecnologia DO Brasil LTDA in Brazil to provide
information technology services in Latin America.
 
 We also have a very
large workforce spread across our various offices worldwide. As of March 31,
2010, we employed approximately 113,800 employees worldwide, and approximately
22,700 of those employees were located outside of India. Because of our global
presence, we are subject to additional risks related to our international
expansion strategy, including risks related to compliance with a wide variety of
treaties, national and local laws, including multiple and possibly overlapping
tax regimes, privacy laws and laws dealing with data protection, export control
laws, restrictions on the import and export of certain technologies and national
and local labor laws dealing with immigration, employee health and safety, and
wages and benefits, applicable to our employees located in our various
international offices and facilities. We may from time to time be subject to
litigation or administrative actions resulting from claims against us by current
or former employees, individually or as part of a class action, including for
claims of wrongful termination, discrimination (including on grounds of
nationality, ethnicity, race, faith, gender, marital status, age or disability),
misclassification, payment of redundancy payments under TUPE-type legislation,
or other violations of labor laws, or other alleged conduct. Our being held
liable for unpaid compensation, redundancy payments, statutory penalties, and
other damages arising out of such actions and litigations could adversely affect
our revenues and operating profitability. For example, in December 2007, we
entered into a voluntary settlement with the California Division of Labor
Standards Enforcement regarding the potential misclassification of certain of
our current and former employees, whereby we agreed to pay overtime wages that
may have been owed to such employees. The total settlement amount was
approximately $26 million, including penalties and taxes.
 
 In addition, we may
face competition in other countries from companies that may have more experience
with operations in such countries or with international operations generally. We
may also face difficulties integrating new facilities in different countries
into our existing operations, as well as integrating employees that we hire in
different countries into our existing corporate culture. As an international
company, our offshore and onsite operations may also be impacted by disease,
epidemics and local political instability. Our international expansion plans may
not be successful and we may not be able to compete effectively in other
countries.
 
 Any of these events
could adversely affect our revenues and operating profitability.
 
 It
may be difficult for holders of our ADSs to enforce any judgment obtained in the
United States against us or our affiliates.
 
 We are incorporated
under the laws of India and many of our directors and executive officers reside
outside the United States. Virtually all of our assets are located outside the
United States. As a result, holders of our ADSs may be unable to effect service
of process upon us outside the United States. In addition, holders of our ADSs
may be unable to enforce judgments against us if such judgments are obtained in
courts of the United States, including judgments predicated solely upon the
federal securities laws of the United States.
 
 The United States
and India do not currently have a treaty providing for reciprocal recognition
and enforcement of judgments (other than arbitration awards) in civil and
commercial matters. Therefore, a final judgment for the payment of money
rendered by any federal or state court in the United States on the basis of
civil liability, whether or not predicated solely upon the federal securities
laws of the United States, would not be enforceable in India. However, the party
in whose favor such final judgment is rendered may bring a new suit in a
competent court in India based on a final judgment that has been obtained in the
United States. The suit must be brought in India within three years from the
date of the judgment in the same manner as any other suit filed to enforce a
civil liability in India. It is unlikely that a court in India would award
damages on the same basis as a foreign court if an action is brought in India.
Furthermore, it is unlikely that an Indian court would enforce foreign judgments
if it viewed the amount of damages awarded as excessive or inconsistent with
Indian practice. A party seeking to enforce a foreign judgment in India is
required to obtain approval from the Reserve Bank of India under the Foreign
Exchange Management Act, 1999, to repatriate any amount recovered pursuant to
the execution of such a judgment.
 
 Holders
of ADSs are subject to the Securities and Exchange Board of India’s Takeover
Code with respect to their acquisitions of ADSs or the underlying equity shares,
and this may impose requirements on such holders with respect to disclosure and
offers to purchase additional ADSs or equity shares.
 Under the
Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, or the Takeover Code, upon the acquisition
of  5%, 10%, 14%, 54% or 74% (or more, in each case) of the
outstanding shares or voting rights of a publicly-listed Indian company, the
acquirer (meaning a person who directly or indirectly, acquires or agrees to
acquire shares or voting rights in a target company, or acquires or agrees to
acquire control over the target company, either by himself or together with any
person acting in concert) is required to disclose the aggregate of his
shareholding or voting rights in that target company to the company. The target
company and the said acquirer are required to notify all the stock exchanges on
which the shares of such company are listed. Further, the Takeover Code requires
any person holding more than 15% and less than 55% of the shares or voting
rights in a company to disclose to the Company and to the stock exchanges on
which the equity shares of the company are listed, the sale or acquisition of 2%
or more of the shares or voting rights of the company and his revised
shareholding to the company within two days of such acquisition or sale or
receipt of intimation of allotment of such shares. A person who holds more than
15% of the shares or voting rights in any company is required to make an annual
disclosure of his holdings to that company (which in turn is required to
disclose the same and to each of the stock exchanges on which the company's
shares are listed). Holders of our ADSs would be subject to these notification
requirements based on the thresholds prescribed under the Takeover
Code.
  Within 4 days of
the acquisition of or entering into an agreement (whether written or otherwise)
to acquire 15% or more of such shares or voting rights, or a change in control
of the company by an acquirer along with persons acting in concert, the acquirer
is required to make a public announcement to the other shareholders offering to
purchase from the other shareholders at least a further 20% of all the
outstanding shares of the company at a minimum offer price determined pursuant
to the Takeover Code. If an acquirer holding more than 15% but less than 55% of
shares acquires or agrees to acquire more than 5% shares during a fiscal year,
the acquirer is required to make a public announcement offering to purchase from
the other shareholders at least 20% of all the outstanding shares of the company
at a minimum offer price determined pursuant to the Takeover Code. Any further
acquisition of or agreement to acquire (other than the acquisition of up to 5%
of the shares or voting rights of the company on the stock market subject to the
post-acquisition holding being less than 75% of the shares or voting rights of
the company) outstanding shares or voting rights of a publicly listed company by
an acquirer who holds more than 55% but less than 75% of shares or voting rights
also requires the making of an open offer to acquire such number of shares as
would not result in the public shareholding being reduced to below the minimum
specified in the listing agreement. Since we are a listed company in India, the
provisions of the Takeover Code will apply to us and to any person acquiring our
equity shares or voting rights in our Company.
 Previously, the
Takeover Code contained a specific exemption from the above requirements in
relation to instruments (such as ADSs) which were convertible into equity shares
of a company. However, on November 6, 2009, SEBI amended the Takeover Code.
Pursuant to this amendment, the requirement to make an open offer of at least
20% of the shares of a company to the existing shareholders of the company would
be triggered where holders of such convertible instruments are entitled to
exercise voting rights in respect of the shares underlying the instruments, upon
the acquisition of such convertible instruments that entitle the holder to more
than 15% of the shares or voting rights in the company. Under the terms of our
Depositary Agreement, holders of our ADSs are entitled to voting rights. These
provisions could therefore materially and adversely impact our ADS
holders.
 
 The
laws of India do not protect intellectual property rights to the same extent as
those of the United States, and we may be unsuccessful in protecting our
intellectual property rights. We may also be subject to third party claims of
intellectual property infringement.
 
 We rely on a
combination of patent, copyright, trademark and design laws, trade secrets,
confidentiality procedures and contractual provisions to protect our
intellectual property. However, the laws of India do not protect proprietary
rights to the same extent as laws in the United States. Therefore, our efforts
to protect our intellectual property may not be adequate. Our competitors may
independently develop similar technology or duplicate our products or services.
Unauthorized parties may infringe upon or misappropriate our products, services
or proprietary information.
 
 The
misappropriation or duplication of our intellectual property could disrupt our
ongoing business, distract our management and employees, reduce our revenues and
increase our expenses. We may need to litigate to enforce our intellectual
property rights or to determine the validity and scope of the proprietary rights
of others. Any such litigation could be time consuming and costly. As the number
of patents, copyrights and other intellectual property rights in our industry
increases, and as the coverage of these rights increase, we believe that
companies in our industry will face more frequent infringement claims. Defense
against these claims, even if such claims are not meritorious, could be
expensive, time consuming and may divert our management's attention and
resources from operating our company. From time to time, third parties have
asserted, and may in the future assert, patent, copyright, trademark and other
intellectual property rights against us or our customers. Our business partners
may have similar claims asserted against them. A number of third parties,
including companies with greater resources than Infosys, have asserted patent
rights to technologies that we utilize in our business. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and be forced to develop
non-infringing technology, obtain a license or cease selling the applications or
products that contain the infringing technology. We may be unable to develop
non-infringing technology or to obtain a license on commercially reasonable
terms, or at all. An unfavorable outcome in connection with any infringement
claim against us as a result of litigation, other proceeding or settlement,
could have a material and adverse impact on our business, results of operations
and financial position.
 
 Our
ability to acquire companies organized outside India depends on the approval of
the Government of India and/or the Reserve Bank of India, and failure to obtain
this approval could negatively impact our business.
 
 Generally, the
Reserve Bank of India must approve any acquisition by us of any company
organized outside of India. The Reserve Bank of India permits acquisitions of
companies organized outside of India by an Indian party without approval if the
transaction consideration is paid in cash, the transaction value does not exceed
400% of the net worth of the acquiring company as on the date of the latest
audited balance sheet, or unless the acquisition is funded with cash from the
acquiring company's existing foreign currency accounts or with cash proceeds
from the issue of ADRs/GDRs.
 
 It is possible that
any required approval from the Reserve Bank of India or any other government
agency may not be obtained. Our failure to obtain approvals for acquisitions of
companies organized outside India may restrict our international growth, which
could negatively affect our business and prospects.
 
 Indian
laws limit our ability to raise capital outside India and may limit the ability
of others to acquire us, which could prevent us from operating our business or
entering into a transaction that is in the best interests of our
shareholders.
 
 Indian law relating
to foreign exchange management constrains our ability to raise capital outside
India through the issuance of equity or convertible debt securities. Generally,
any foreign investment in, or acquisition of an Indian company, subject to
certain exceptions, requires approval from relevant government authorities in
India, including the Reserve Bank of India. There are, however, certain
exceptions to this approval requirement for technology companies on which we are
able to rely. Changes to such policies may create restrictions on our capital
raising abilities. For example, a limit on the foreign equity ownership of
Indian technology companies or pricing restrictions on the issue of ADRs/GDRs
may constrain our ability to seek and obtain additional equity investment by
foreign investors. In addition, these restrictions, if applied to us, may
prevent us from entering into certain transactions, such as an acquisition by a
non-Indian company, which might otherwise be beneficial for us and the holders
of our equity shares and ADSs.
 
 Additionally, under
current Indian law, the sale of a technology services company can result in the
loss of the tax benefits for specially designed software technology parks in
India. The potential loss of this tax benefit may discourage others from
acquiring us or entering into a transaction with us that is in the best interest
of our shareholders.
 
 Risks
Related to the ADSs
 
 Historically,
our ADSs have traded at a significant premium to the trading prices of our
underlying equity shares, and may not continue to do so in the
future.
 
 Historically, our
ADSs have traded on NASDAQ at a premium to the trading prices of our underlying
equity shares on the Indian stock exchanges. We believe that this price premium
has resulted from the relatively small portion of our market capitalization
previously represented by ADSs, restrictions imposed by Indian law on the
conversion of equity shares into ADSs, and an apparent preference of some
investors to trade dollar-denominated securities. We have already completed
three secondary ADS offerings and the completion of any additional secondary ADS
offering will significantly increase the number of our outstanding ADSs. Also,
over time, some of the restrictions on the issuance of ADSs imposed by Indian
law have been relaxed and we expect that other restrictions may be relaxed in
the future. As a result, the historical premium enjoyed by ADSs as compared to
equity shares may be reduced or eliminated upon the completion of any additional
secondary offering of our ADSs or similar transactions in the future, a change
in Indian law permitting further conversion of equity shares into ADSs or
changes in investor preferences.
 
 Sales
of our equity shares may adversely affect the prices of our equity shares and
ADSs.
 
 Sales of
substantial amounts of our equity shares, including sales by our insiders in the
public market, or the perception that such sales may occur, could adversely
affect the prevailing market price of our equity shares or the ADSs or our
ability to raise capital through an offering of our securities. In the future,
we may also sponsor the sale of shares currently held by some of our
shareholders as we have done in the past, or issue new shares. We can make no
prediction as to the timing of any such sales or the effect, if any, that future
sales of our equity shares, or the availability of our equity shares for future
sale, will have on the market price of our equity shares or ADSs prevailing from
time to time.
  Negative
media coverage and public scrutiny may adversely affect the prices of our equity
shares and ADSs.
 
 Media coverage and
public scrutiny of our business practices, policies and actions has increased
dramatically over the past several years, particularly through the use of
Internet forums and blogs. Any negative media coverage in relation to our
business, regardless of the factual basis for the assertions being made, may
adversely impact our reputation. Responding to allegations made in the media may
be time consuming and could divert the time and attention of our senior
management from our business. Any unfavorable publicity may also adversely
impact investor confidence and result in sales of our equity shares and ADSs,
which may lead to a decline in the share price of our equity shares and our
ADSs.
 
 Indian
law imposes certain restrictions that limit a holder's ability to transfer the
equity shares obtained upon conversion of ADSs and repatriate the proceeds of
such transfer which may cause our ADSs to trade at a premium or discount to the
market price of our equity shares.
 
 Under certain
circumstances, the Reserve Bank of India must approve the sale of equity shares
underlying ADSs by a non-resident of India to a resident of India. The Reserve
Bank of India has given general permission to effect sales of existing shares or
convertible debentures of an Indian company by a resident to a non-resident,
subject to certain conditions, including the price at which the shares may be
sold. Additionally, except under certain limited circumstances, if an investor
seeks to convert the rupee proceeds from a sale of equity shares in India into
foreign currency and then repatriate that foreign currency from India, he or she
will have to obtain Reserve Bank of India approval for each such transaction.
Required approval from the Reserve Bank of India or any other government agency
may not be obtained on terms favorable to a non-resident investor or at
all.
 
 An
investor in our ADSs may not be able to exercise preemptive rights for
additional shares and may thereby suffer dilution of such investor's equity
interest in us.
 
 Under the Companies
Act, 1956, or the Indian Companies Act, a company incorporated in India must
offer its holders of equity shares preemptive rights to subscribe and pay for a
proportionate number of shares to maintain their existing ownership percentages
prior to the issuance of any new equity shares, unless such preemptive rights
have been waived by three-fourths of the shares voting on the resolution to
waive such rights. Holders of ADSs may be unable to exercise preemptive rights
for equity shares underlying ADSs unless a registration statement under the
Securities Act of 1933 as amended, or the Securities Act, is effective with
respect to such rights or an exemption from the registration requirements of the
Securities Act is available. We are not obligated to prepare and file such a
registration statement and our decision to do so will depend on the costs and
potential liabilities associated with any such registration statement, as well
as the perceived benefits of enabling the holders of ADSs to exercise their
preemptive rights, and any other factors we consider appropriate at the time. No
assurance can be given that we would file a registration statement under these
circumstances. If we issue any such securities in the future, such securities
may be issued to the Depositary, which may sell such securities for the benefit
of the holders of the ADSs. There can be no assurance as to the value, if any,
the Depositary would receive upon the sale of such securities. To the extent
that holders of ADSs are unable to exercise preemptive rights granted in respect
of the equity shares represented by their ADSs, their proportional interests in
us would be reduced.
 
 ADS
holders may be restricted in their ability to exercise voting
rights.
 
 At our request, the
Depositary will electronically mail to holders of our ADSs any notice of
shareholders' meeting received from us together with information explaining how
to instruct the Depositary to exercise the voting rights of the securities
represented by ADSs. If the Depositary receives voting instructions from a
holder of our ADSs in time, relating to matters that have been forwarded to such
holder, it will endeavor to vote the securities represented by such holder's
ADSs in accordance with such voting instructions. However, the ability of the
Depositary to carry out voting instructions may be limited by practical and
legal limitations and the terms of the securities on deposit. We cannot assure
that holders of our ADSs will receive voting materials in time to enable such
holders to return voting instructions to the Depositary in a timely manner.
Securities for which no voting instructions have been received will not be
voted. There may be other communications, notices or offerings that we only make
to holders of our equity shares, which will not be forwarded to holders of ADSs.
Accordingly, holders of our ADSs may not be able to participate in all
offerings, transactions or votes that are made available to holders of our
equity shares.




Item 4. Information on the Company




COMPANY
OVERVIEW




We define, design
and deliver IT enabled business solutions for our clients. We believe that our
solutions provide strategic differentiation and operational efficiency to our
clients.
  Our comprehensive
end-to-end business solutions leverage technology for our clients. Our suite of
business solutions includes business and technology consulting, custom
application development, infrastructure management services, maintenance and
production support, package enabled consulting and implementation including
enterprise solutions, product engineering and lifecycle solutions, systems
integration, validation solutions and Software-as-a-Service related solutions.
We also provide software products to the banking industry. Through Infosys BPO,
we provide business process management services such as offsite customer
relationship management, finance and accounting, and administration and sales
order processing.
  Our professionals
deliver high quality solutions through our Global Delivery Model. Using our
Global Delivery Model, we divide projects into components that we execute
simultaneously at client sites and at our development centers in India and
around the world. We optimize our cost structure by maintaining the flexibility
to execute project components where it is most cost effective. Our Global
Delivery Model, with its easily scalable infrastructure and ability to execute
project components around the clock and across time zones, enables us to reduce
project delivery times.
  We have organized
our sales, marketing and business development teams to focus on specific
geographies and industries, thus enabling us to customize our service offerings
to our clients' needs. Our primary geographic markets are North America, Europe,
and the Asia-Pacific region. We serve clients in banking and capital markets;
communications, media and entertainment; energy, utilities and services;
insurance; healthcare and life sciences; manufacturing; retail, consumer product
goods and logistics; and other industries.
  Our revenues grew
from $4,176 million in fiscal 2008 to $4,804 million in fiscal 2010,
representing an annualized growth of 7.3%. Our net income grew from $1,163
million to $1,313 million during the same period, representing an annualized
growth of 6.3%. Between March 31, 2008 and March 31, 2010, our total employees
grew from approximately 91,200 to approximately 113,800, representing a compound
annualized growth rate of approximately 11.7%.
  We believe we have
among the best talent in the Indian technology services industry, and we are
committed to remaining among the industry's leading employers.
  We were
incorporated on July 2, 1981 in Maharashtra, India, as Infosys Consultants
Private Limited, a private limited company under the Indian Companies Act, 1956.
We changed our name to Infosys Technologies Private Limited in April 1992 and to
Infosys Technologies Limited in June 1992, when we became a public limited
company. We completed our initial public offering of equity shares in India in
1993 and our initial public offering of ADSs in the United States in 1999. In
August 2003, June 2005 and November 2006, we completed sponsored secondary
offerings of ADSs in the United States on behalf of our shareholders. Our 2005
and 2006 offerings also each included a public offering without listing in
Japan, or POWL. In December 2006, we became the first Indian company to be added
to the NASDAQ - 100 index. In 2008, we were selected as an original component
member of 'The Global Dow', a world-wide stock index made up of 150 leading
blue-chip stocks.
  Infosys BPO is our
majority-owned and controlled subsidiary. Infosys Australia, Infosys Brazil,
Infosys China, Infosys Consulting, Infosys Mexico, Infosys Sweden and Infosys
Public Services, are our wholly-owned and controlled subsidiaries.
  The address of our
registered office is Electronics City, Hosur Road, Bangalore-560 100, Karnataka,
India. The telephone number of our registered office is +91-80-2852-0261. Our
agent for service of process in the United States is CT Corporation System, 1350
Treat Boulevard, Suite 100, Walnut Creek, CA 94597-2152. Our website address is
www.infosys.com
and the information contained in our website does not constitute a part of this
Annual Report.
  Principal
Capital Expenditures and Divestitures
  In fiscal 2010,
2009 and 2008, we spent $143 million, $285 million and $373 million,
respectively, on capital expenditure. As of March 31, 2010, we had contractual
commitments of approximately $67 million for capital expenditure. These
commitments included approximately $53 million in domestic purchases and $14
million in imports and overseas commitments for hardware, supplies and services.
All our capital expenditures were financed out of cash generated from
operations.
  On April 1, 2008,
Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty.
Limited (MSPL) for a cash consideration of $3 million.
  On October 1, 2007,
Infosys BPO acquired 100% of the equity shares of P-Financial Services Holding
B.V. This business acquisition was conducted by entering into a Sale and
Purchase Agreement with Koninklijke Philips Electronics N.V. (Philips), a
company incorporated under the laws of the Netherlands, for acquiring the shared
service centers of Philips for finance, accounting and procurement business in
Poland, Thailand and India for a cash consideration of $27 million, of which $1
million was paid during the year ended March 31, 2009. The acquisitions of
Poland and India centers were consummated on October 1, 2007 and Thailand center
on December 3, 2007.
  During the year
ended March 31, 2009, the investments held by P-Financial Services Holding B.V.
in its wholly owned subsidiaries Pan-Financial Shared Services India Private
Limited, Infosys BPO (Poland) Sp. Z.o.o., and Infosys BPO (Thailand) Limited
were transferred to Infosys BPO, consequent to which P-Financial Services
Holding B.V. was liquidated. Further, during the year ended March 31, 2009,
Infosys BPO merged its wholly owned subsidiary Pan-Financial Shared Services
India Private Limited, retrospectively with effect from April 1, 2008, via a
scheme of amalgamation sanctioned by the High Courts of Karnataka and Tamil
Nadu.
  On December 4,
2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC
(McCamish), a business process solutions provider based in Atlanta, Georgia, in
the United States. The business acquisition was conducted by entering into
Membership Interest Purchase Agreement for a cash consideration of $37 million
and a contingent consideration of up to $20 million. The fair value of the
contingent consideration on the date of acquisition was $9 million.
  During the year
ended March 31, 2009, the Company incorporated a wholly owned subsidiary,
Infosys Technologies (Sweden) AB.
  On August 7, 2009
the Company incorporated a wholly-owned subsidiary, Infosys Tecnologia DO Brasil
LTDA. On August 19, 2009 Infosys Consulting incorporated a wholly-owned
subsidiary, Infosys Consulting India Limited. Additionally, on October 9, 2009
the Company incorporated a wholly-owned subsidiary, Infosys Public Services,
Inc.
  INDUSTRY
OVERVIEW
  Changing economic
and business conditions, rapid technological innovation, proliferation of the
internet and globalization are creating an increasingly competitive market
environment that is driving corporations to transform the manner in which they
operate.
  Consumers of
products and services are increasingly demanding accelerated delivery times and
lower prices. To adequately address these needs, companies are focusing on their
core competencies and are using outsourced technology services providers to help
improve productivity, develop new products, conduct research and development
activities, reduce business risk, and manage operations more
effectively.
  The role of
technology has evolved from supporting corporations to transforming them. The
ability to design, develop, implement, and maintain advanced technology
platforms and solutions to address business and client needs has become a
competitive advantage and a priority for corporations worldwide. Concurrently,
the prevalence of multiple technology platforms and a greater emphasis on
network security and redundancy have increased the complexity and cost of IT
systems, and have resulted in greater technology-related risks. The need for
more dynamic technology solutions and the increased complexity, cost and risk
associated with these technology platforms has created a growing need for
specialists with experience in leveraging technology to help improve efficiency
and security.
  There is an
increasing need for highly skilled technology professionals in the markets in
which we operate. At the same time, corporations are reluctant to expand their
internal IT departments and increase costs. These factors have increased
corporations' reliance on their outsourced technology service providers and are
expected to continue to drive future growth for outsourced technology services.
According to
the U.S. and Global I.T.
Market Outlook: Q1 2010, an independent report published by Forrester
Research, Inc. in April 2010, purchases of IT goods and services by global
businesses and governments are estimated to grow by 7.7% in calendar year 2010,
when calculated in U.S. dollars.
 
 Increasing
trend towards Offshore Technology Services
  Outsourcing the
development, management and ongoing maintenance of technology platforms and
solutions has become increasingly important. Companies are increasingly turning
to offshore technology service providers to meet their need for high quality,
cost competitive technology solutions. As a result, offshore technology service
providers have become critical in the industry and continue to grow in
recognition and sophistication. The effective use of offshore technology
services offers a variety of benefits, including lower cost of ownership of IT
infrastructure, lower labor costs, improved quality and innovation, faster
delivery of technology solutions and more flexibility in scheduling. In
addition, technology companies are also recognizing the benefits of offshore
technology service providers in software research and development, and related
support functions and are outsourcing a greater portion of these activities. We
believe the range of services delivered offshore is also
increasing.
  The
India Advantage
  India is widely
recognized as the premier destination for offshore technology
services.
  According to the
NASSCOM Strategic Review 2010, IT services exports (excluding exports relating
to business process outsourcing (BPO), hardware, engineering design and product
development) from India are estimated to grow by 5.8 percent in fiscal 2010, to
record revenues of $27.3 billion. According to the NASSCOM Strategic Review
2010, BPO exports from India are estimated to have grown by 6 percent in fiscal
2010 to record revenues of $12.4 billion. There are several key factors
contributing to the growth of IT and IT-enabled services (ITES) in India and by
Indian companies.
  High Quality
Delivery. According to the Process Maturity Profile published by the
Carnegie Mellon Software Engineering Institute in September 2009, of the 460
appraisals conducted in India, approximately 172 companies were appraised at
SEI-CMMi Level 5, higher than any other country in the world. SEI-CMMi is
the Carnegie Mellon Software Engineering Institute's Capability Maturity Model,
which assesses the quality of organizations' management system processes and
methodologies. Level 5 is the highest level of the CMMi assessment.
  Significant Cost
Benefits. The NASSCOM Strategic Review 2010 indicates that India offers
the lowest cost of delivery as compared to other offshore locations, with
certain cities in India offering savings of about 70 percent over source
locations.
  Abundant Skilled
Resources.India has a large and highly skilled English-speaking labor
pool. According to the NASSCOM Strategic Review 2010, the total graduate outturn
in India has more than doubled in the last decade, with an additional 3.7
million students expected to have graduated from Indian universities in fiscal
2010, including a technical graduate outturn of over 571,000.
  The factors
described above also make India the premier destination for other services such
as IT-enabled services, which we refer to as business process
management.
  While these
advantages apply to many companies with offshore capabilities in India, we
believe that there are additional factors critical to a successful, sustainable
and scalable technology services business. These factors include the ability
to:
 effectively
  integrate onsite and offshore execution capabilities to deliver seamless,
  scalable services;
        increase depth
  and breadth of service offerings to provide a one-stop solution in an
  environment where corporations are increasingly reducing the number of
  technology services vendors they are using;
        develop and
  maintain knowledge of a broad range of existing and emerging
  technologies;
        demonstrate
  significant domain knowledge to understand business processes and
  requirements;
        leverage in-house
  industry expertise to customize business solutions for clients;
        attract and
  retain high quality technology professionals; and
        make strategic
  investments in human resources and physical infrastructure (or facilities)
  throughout the business cycle. Evolution
of Technology Outsourcing
  The nature of
technology outsourcing is changing. Historically, corporations either outsourced
their technology requirements entirely or on a standalone project-by-project
basis. In an environment of rapid technological change, globalization and
regulatory changes, the complete outsourcing model is often perceived to limit a
company's operational flexibility and not fully deliver potential cost savings
and efficiency benefits. Similarly, project-by-project outsourcing is also
perceived to result in increased operational risk and coordination costs, and as
failing to fully leverage technology service providers' full ranges of
capabilities. To address these issues, companies are looking at outsourcing
approaches that require their technology service providers to develop
specialized systems, processes and solutions along with cost-effective delivery
capabilities.
  OUR
COMPETITIVE STRENGTHS
  We believe our
competitive strengths include:
  Leadership in
sophisticated solutions that enable clients to optimize the efficiency of their
business. We bring together our expertise in consulting, IT services and
BPO to create solutions that allow our clients to increase their customer
loyalty through faster innovation and delivery, to restructure their cost base,
and help them achieve greater success through shifting business cycles. Our
expertise helps our clients improve their own efficiencies, create better value
for their end customers and to become more competitive. Our suite of
comprehensive, end-to-end business solutions leveraging technology enables us to
offer services through our broad network of relationships, increase our dialogue
with key decision makers within each client, and increase the points of sale for
new clients. As a result, we believe we are able to capture a greater share of
our clients' technology budgets. Our suite of solutions encompasses business and
technology consulting, custom application development, infrastructure management
services, maintenance and production support, package-enabled consulting and
implementation including enterprise solutions, product engineering and lifecycle
solutions, systems integration, validation solutions and Software-as-a-Service
(SaaS) related solutions. Through Infosys BPO, we provide business process
management services. Through our consulting group and software engineering and
technology lab, we research, develop and engineer new solutions tailored for our
clients and their respective industries. Through the creation of Infosys
Consulting, we have enhanced our ability to provide strategic and competitive
analysis and complex operational consulting services. We have a well-defined
methodology to update and extend our service offerings to meet the evolving
needs of the global marketplace.
  Proven Global
Delivery Model.We have a highly evolved Global Delivery Model which
enables us to execute services where it is most cost effective and sell services
where it is most profitable. Over the past decade, we have developed our onsite
and offshore execution capabilities to deliver high quality and scalable
services. In doing so, we have made substantial investments in our processes,
infrastructure and systems, and have refined our Global Delivery Model to
effectively integrate onsite and offshore technology services. Our Global
Delivery Model provides clients with seamless, high quality solutions in reduced
timeframes enabling our clients to achieve operating efficiencies. To address
changing industry dynamics, we continue to refine our Global Delivery Model.
Through our Modular Global Sourcing framework, we assist clients in segmenting
their internal business processes and applications, including IT processes, and
outsourcing these segments selectively on a modular basis to reduce risk and
cost and increase operational flexibility. We believe that this approach and
other ongoing refinements to our Global Delivery Model help us retain our
leadership position in the industry.
  Commitment to
Superior Quality and Process Execution.We have developed a sophisticated
project and program management methodology to ensure timely, consistent and
accurate delivery of superior quality solutions to maintain a high level of
client satisfaction. We constantly benchmark our services and processes against
globally recognized quality standards. Our Australia, Bangalore and Shanghai
centers have been assessed at SEI-CMMi Level 5. Certifications we have received
include TL 9000, ISO 9001:2008, AS EN 9100, ISO 20000, ISO 27001 and ISO 13485.
Infosys BPO has been certified for eSCM – SP v. 2.0 Level 5, the eSourcing
Capability Model for Service Providers developed by a consortium led by Carnegie
Mellon University's Information Technology Services Qualification
Center.
  Strong Brand and
Long-Standing Client Relationships.We have long-standing relationships
with large multinational companies built on successful prior engagements with
them. Our track record of delivering high quality solutions across the entire
software life cycle and our strong domain expertise helps us to solidify these
relationships and gain increased business from our existing clients. As a
result, we have a history of client retention and derive a significant
proportion of revenues from repeat clients.
  Status as an
Employer of Choice.We believe we have among the best talent in the
Indian technology services industry and we are committed to remaining among the
industry's leading employers. We have a presence in 12 cities in India, allowing
us to recruit technology professionals with specific geographic preferences. Our
diverse workforce includes employees of 83 nationalities. Our training programs
ensure that new hires enhance their skills in alignment with our requirements
and are readily deployable upon completion of their training programs. Our lean
organizational structure and strong unifying culture facilitate the sharing of
knowledge and best practices among our employees.
  Ability to Scale.We have successfully managed our growth by investing in infrastructure
and by rapidly recruiting, training and deploying new professionals. We
currently have 63 global development centers, the majority of which are
located in India. We also have development centers in various countries
including Australia, Brazil, Canada, China, Japan, Mauritius, Mexico, Poland,
Philippines, Thailand and at multiple locations in the United States and
Europe. Our financial position allows us to make the investments in
infrastructure and personnel required to continue growing our business. We can
rapidly deploy resources and execute new projects through the scalable network
of our global delivery centers. Between March 31, 2008 and March 31, 2010, our
total employees grew from approximately 91,200 to approximately
113,800.
  Innovation and
Leadership.We are a pioneer in the technology services industry. We were
one of the first Indian companies to achieve a number of significant milestones
which has enhanced our reputation in the marketplace. For example, we were one
of the first companies to develop and deploy a global delivery model and attain
SEI-CMMI Level 5 certification for both our offshore and onsite operations. More
recently, we established a business consulting practice in the United States
which leverages our Global Delivery Model. In addition, we were the first Indian
company to list on a U.S. stock exchange. We were also the first Indian company
to do a POWL in Japan. In December 2006, we became the first Indian company to
be added to the NASDAQ - 100 index. In 2008, we were selected as an original
component member of 'The Global Dow', a world-wide stock index made up of 150
leading blue-chip stocks.
  OUR
STRATEGY
  We seek to further
strengthen our position as a leading global 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.Our goal is to build enduring
relationships with both existing and new clients. With existing clients, we aim
to expand the nature and scope of our engagements by increasing the size and
number of projects and extending the breadth of our service offerings. For new
clients, we seek to provide value-added solutions by leveraging our in-depth
industry expertise and expanding the breadth of services offered to them beyond
those in the initial engagement. We manage first-time engagements by educating
clients about our Global Delivery Model, taking on smaller projects to minimize
client risk and demonstrating our execution capabilities. We also seek to
increase our recurring business with clients by providing product engineering,
maintenance, infrastructure management and business process management services
which are long-term in nature and require frequent client contact. In order to
further improve our business generation capabilities, we have established a
Strategic Global Sourcing Group which is comprised of senior professionals and
seeks to identify, secure and manage new, large, and long-term client
engagements.
  Expand
Geographically.We seek to selectively expand our global presence to
enhance our ability to service clients. We plan to accomplish this by
establishing new sales and marketing offices, representative offices and global
development centers to expand our geographical reach, particularly in Europe. We
intend to further increase our presence in China through Infosys China, in the
Czech Republic and Eastern Europe directly and through Infosys BPO, in Australia
through Infosys Australia and in Latin America, through Infosys Brazil and
Infosys Mexico. We intend to use our operations in these regions to eventually
support clients in the local market as well as our global clients.
  Continue to
Invest in Infrastructure and Employees.We intend to continue to invest
in physical and technological infrastructure to support our growing worldwide
development and sales operations and to increase our productivity. To enhance
our ability to hire and successfully deploy increasingly greater numbers of
technology professionals, we intend to continue investing in recruiting,
training and maintaining a challenging and rewarding work environment. During
fiscal 2010, we received approximately 400,800 employment applications, tested
approximately 77,000 applicants, interviewed approximately 61,000 applicants and
extended offers of employment to approximately 26,200 applicants. These
statistics do not include Infosys BPO or our other subsidiaries. We have also
completed the construction of an employee training facility, the Infosys Global
Education Center, in our campus in Mysore, India to further enhance our employee
training capabilities. The Infosys Global Education Center can train
approximately 14,000 employees at a time.
  Continue to
Enhance our Engagement Models and Offerings. We seek to continually
enhance our portfolio of solutions as a means of developing and growing our
business. To differentiate our services, we focus on emerging trends, new
technologies, specific industries and pervasive business issues that confront
our clients. We believe that there are certain business trends that will prove
to be critical in defining the success of enterprises in the future, such as
increasingly digital consumers, the growth of emerging economies, environmental
sustainability concerns, the desire to create smarter organizations, new
commercial opportunities, improvements in healthcare and pervasive computing. We
seek to align our offerings to enable our clients to take advantage of these
trends. In recent years, we have also added new services offerings to our
portfolio and have extended our capability to areas such as Platform-Based
Solutions and SaaS. We also established Infosys Consulting to add additional
operational and business consulting capabilities to our Global Delivery
Model.
  Continue to
Develop Deep Industry Knowledge.We continue to build specialized
industry expertise in the financial services, energy and utilities, healthcare
and life sciences, manufacturing, media and entertainment, telecommunications,
retail, transportation and logistics industries. We combine deep industry
knowledge with an understanding of our clients' needs and technologies to
provide high value, quality services. Our industry expertise can be leveraged to
assist other clients in the same industry, thereby improving quality and
reducing the cost of services to our clients. We will continue to build on our
extensive industry expertise and we plan to provide our services to new
industries in the future.
  Enhance Brand
Visibility.We continue to invest in the development of our premium brand
identity in the marketplace. Our branding efforts include participating in media
and industry analyst events, sponsorship of and participation in targeted
industry conferences, trade shows, recruiting efforts, community outreach
programs and investor relations. We have instituted the Wharton Infosys Business
Transformation Award, offered jointly with the Wharton School at the University
of Pennsylvania to recognize visionaries and Global 2000 organizations that use
technology innovatively to transform their industries. We also instituted the
ACM-Infosys Foundation Award jointly with the Association of Computing
Machinery, or ACM, for the recognition of young scientists and system developers
whose contemporary innovations have an impact on the computing field.
Additionally, in February 2009, the Infosys Science Foundation had instituted an
annual award of Rs. 5 million each in five categories to honor outstanding
contributions and achievements by Indians across various sciences. We believe
that a strong and recognizable Infosys brand will continue to facilitate the
new-business lead generation process and enhance our ability to attract talented
personnel globally.
  Pursue Alliances
and Strategic Acquisitions.We intend to continue to develop alliances
that complement our core competencies. Our alliance strategy is targeted at
partnering with leading technology providers, which allows us to take advantage
of emerging technologies in a mutually beneficial and cost-competitive manner.
We also intend to selectively pursue acquisitions that augment our existing
skill sets, industry expertise, client base or geographical presence. For
example, in December 2009, through Infosys BPO, we acquired US-based business
process solutions provider McCamish Systems LLC to enhance our capability to
deliver end-to-end business solutions for the insurance and financial services
industries.
  OUR
GLOBAL DELIVERY MODEL
  Our Global Delivery
Model allows us to execute services where it is most cost effective and sell
services where it is most profitable. The Global Delivery Model enables us to
derive maximum benefit from:
 access to our
  large pool of highly skilled technology professionals;
          24-hour execution
  capabilities across multiple time zones;
          the 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. In a typical
offshore development project, we assign a team of technology professionals to
visit a client's site to determine the scope and requirements of the project.
Once the initial specifications of the project have been established, our
project managers return to the relevant global development center to supervise a
larger team of technology professionals dedicated to the development or
implementation of the solution. Typically, a small team remains at the client's
site to manage project coordination and address changes in requirements as the
project progresses. Teams return to the client's site when necessary to ensure
seamless integration. To the extent required, a dedicated team provides ongoing
maintenance from our global development centers. The client's systems are linked
to our facilities enabling simultaneous processing in our global development
centers. Our model ensures that project managers remain in control of execution
throughout the life of the project regardless of their geographical
location.
  For the past 19
years, we have successfully executed projects at our global development centers.
We have 63 global development centers, of which 30 are located in India, 15 are
in North America, 11 are in the Asia-Pacific region and 7 are in Europe. Our
largest development centers are located in India. Approximately 75.8% of the
total billed person-months for our services rendered during fiscal 2010
originated from our global development centers in India, with the balance of the
work being performed at client sites and our global development centers located
outside India.
 Our quality control
processes and programs are designed to minimize defects and ensure adherence to
pre-determined project parameters. Additionally, software quality advisors help
individual teams establish appropriate processes for projects and adhere to
multi-level testing plans. The project manager is responsible for tracking
metrics, including actual effort spent versus initial estimates, project
budgeting and estimating the remainder of efforts required on a
project.
  Our Global Delivery
Model mitigates risks associated with providing offshore technology services to
our clients. For our communications needs, we use multiple service providers and
a mix of terrestrial and optical fiber links with alternate routing. In India,
we rely on two telecommunications carriers to provide high-speed links
inter-connecting our global development centers. Internationally, we rely on
multiple links on submarine cable paths provided by various service providers to
connect our Indian global development centers with network hubs in other parts
of the world. Our significant investment in redundant infrastructure enables us
to provide uninterrupted service to our clients.
  MODULAR
GLOBAL SOURCING
  The nature of
technology outsourcing is changing. Historically, corporations either outsourced
their technology requirements entirely or on a standalone project-by-project
basis. The complete outsourcing model is perceived to be deficient as a result
of:
 the increased
  pace of technological change;
          continuous change
  in the business environment due to globalization and
deregulation;
          the need to
  better manage risk in an evolving regulatory environment, such as ensuring
  compliance with the requirements of the Sarbanes-Oxley Act;
          the failure to
  deliver promised cost savings and expected benefits; and
          the changing role
  of technology from merely improving operational efficiency to becoming an
  integral part of a corporation's strategy.
 Similarly,
project-by-project outsourcing is also perceived to have its deficiencies,
resulting in increased operational risk and coordination costs, as well as the
failure to fully leverage service providers' full range of
capabilities.
  We have developed
our Modular Global Sourcing framework to address these issues and assist clients
in evaluating and defining, on both a modular and an enterprise-wide basis, the
client's business processes and applications that can be outsourced, and the
capabilities required to effectively deliver those processes and applications to
the organization. We then assist the client in assessing whether a particular
process, application or infrastructure is best retained within the organization
or is suitable for outsourcing based on various factors including third-party
capabilities, potential cost savings, risks to the organization and importance
of the function. Thereafter, we assist in sourcing decisions, the related risk
assessments, transitioning, and program management and execution.
  Our systematic
approach to evaluating an enterprise's IT systems and business processes under
the Modular Global Sourcing framework allows us to better align our solutions to
our clients' business, operations and IT platforms. As a result, our clients are
able to benefit from our Global Delivery Model and potentially realize cost
savings, enhanced efficiencies and lasting competitive advantages, while
retaining control and flexibility. Modular Global Sourcing also positions us to
offer the broadest range of services to the greatest number of clients and to
capture a greater share of our clients' technology budgets.
  OUR
END-TO-END SOLUTIONS
  We provide
comprehensive business solutions that leverage technology and our domain
expertise to help our clients gain market differentiation and competitive
advantage. Our service offerings include business and technology consulting,
custom application development, infrastructure maintenance services, maintenance
and production support, package enabled consulting and implementation including
enterprise solutions, product engineering solutions and product lifecycle
management, systems integration, re-engineering, independent testing and
validation solutions, business process management services and newer solutions
such as Software-as-a-Service (SaaS) related solutions.
  These offerings are
provided to clients located in various geographies and across multiple industry
verticals including banking and capital markets, insurance, communications,
media and entertainment, energy, utilities, manufacturing, aerospace,
pharmaceuticals and healthcare, and retail. We also provide a core banking
software solution, FinacleTM, for
the banking industry and provide customization and implementation services
around this solution.
  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 our knowledge
management system that enables us to leverage existing solutions across our
company, where appropriate, and develop in-house tools for project management
and software life-cycle support. We believe that these processes, methodologies,
knowledge management systems and tools reduce the overall cost to the client,
mitigate project-related risks, enhance the quality of our offerings and allow
our clients to improve the time-to-market for their solutions.
  Our engagements
with clients generally include more than one of the solutions listed below.
Revenues attributable to custom application development, maintenance and
production support, product engineering, package enabled consulting and
implementation and technology consulting services represented a majority of our
total revenues in fiscal 2010.
  Custom
Application Development
  We provide
customized software solutions for our clients. We aim to provide high-quality
solutions that are secure, easy-to-deploy and modular so as to facilitate
enhancements and extensions. We create new applications or enhance the
functionalities of our clients' existing software applications. Our projects
vary in size and duration. Each project typically involves all aspects of the
software development process including defining requirements, designing,
prototyping, programming and module integration, user acceptance testing, user
training, installation and maintenance and support of these
systems.
  We perform system
design and software coding and run pilots primarily at our global development
centers, while activities relating to the defining of requirements, transition
planning, user training, user acceptance testing and deployment are performed at
the client's site. Our application development services span the entire range of
mainframe, client server, Internet and mobile technologies. An increasing
proportion of our application development engagements are related to emerging
platforms such as Microsoft's .Net or open platforms such as J2EETM and
Linux®.
  As an example, we
were engaged by a client who administers an insurance program in the United
States, to develop a web application enabling the employees of the client’s end
customer to enroll for insurance services. The key objectives of the project
were to optimize the response time to ensure 100 percent system availability
during peak seasons and to create an intuitive and user-friendly system. Using
our performance-driven development approach, we assisted our client in deploying
a system with improved performance on all required parameters, including
significantly enhancing the capacity of the system to handle multiple concurrent
users. The re-architected application helped our client improve their business
performance by efficiently handling significantly higher volumes of enrollment
over previous years.
  Maintenance
and Production Support
  We provide
maintenance services for our clients' large software systems that cover a wide
range of technologies and businesses. We take a proactive approach to software
maintenance, by focusing on long-term functionality, stability and preventive
maintenance to avoid problems that typically arise from incomplete or short-term
solutions. This approach, coupled with our quality processes and global shared
services centers, allows our clients to reduce recurring maintenance costs and
focus on strategic business initiatives. We have also invested in knowledge
management and internal development of software processes and tools to increase
automation of our delivery systems and thereby enhance their
productivity.
  While we perform
most of the maintenance work at our global development centers using secure
communication links to our client's systems, we also maintain a team at the
client's facility to coordinate certain key interface and support functions and
provide any critical on-site support that may be required. Our teams leverage
the best of our Global Delivery Model capabilities, including our tools and
processes to provide added value to our clients.
  As an example, we
partnered with an investment banking firm with the objective of supporting its
trade clearances and settlement systems and improving the efficiency of its
application management processes globally, while reducing costs. We followed a
three-phased approach, where Phase 1 focused on providing a 24x7 service window
while ensuring a smooth transfer of support from the client’s internal IT team
to our team. Phase 2 focused on synchronizing the support process using industry
frameworks such as CMMI® and
Information Technology Infrastructure Library (ITIL®). Phase 3 focused on the
realization of synergies by eliminating multiple support locations. Over a
period of about three years, we enabled the client to transform its support
processes, significantly reduce incidents and achieve significant annual savings
despite a three-fold increase in transaction volumes.
 In another
instance, a leading pharmaceutical company required maintenance support for a
range of IT applications catering to various business functions, including
manufacturing, human resources, finance and other enabling functions. Over a
period of 12 months, our team of about 225 members worked with the client's IT
and business teams from multiple locations in Europe and the United States to
maintain these applications based on well defined service levels. We also
helped the client build a global shared services structure to consistently
deliver high quality services to its end users through the standardization of
processes across multiple business areas and continuous improvement to the
portfolio. The new structure enabled the client's business units to service
their end customers more effectively by ensuring better service delivery across
geographies and time zones and improved budgeting and system
optimization.
  Package
Enabled Consulting and Implementation
  We provide
solutions to help our clients implement and utilize software packages developed
by third party vendors. Our solutions largely relate to product suites from SAP
and Oracle and also extend to certain product suites from IBM, Microsoft,
Pegasystems, SalesForce, Software AG and TIBCO. Our portfolio of services
includes supporting the evaluation of these packages, providing training and
support in their implementation and global roll-out and supporting their
upgrades and maintenance on an ongoing basis. Our service offerings also enable
business transformation by leveraging packaged software through consulting
activities relating to process re-engineering, re-designing of application
architecture and organization change management. We provide services to clients
in areas such as customer relationship management, supply chain management,
human capital management, corporate performance management and business
analytics, business process management and enterprise application integration.
In response to changing business requirements, we also offer platform based
business process outsourcing services in functions such as human resources,
procurement and order management.
  As an example, a
large North American manufacturing company intended to integrate the various
enterprise resource planning (ERP) systems it had added through acquisitions in
previous years and enable intelligent real-time reporting to assist in effective
decision-making. Our team of 24 consultants implemented an SAP solution for the
client over a nine month period. Our solution helped the client significantly
reduce the closing time for reporting, thus improving responsiveness to market
demands. We also enabled real-time visibility by integrating all of the client’s
ERP systems.
  Business
Transformation Consulting
  We offer business
transformation services through the provision of IT, operations and business
process consulting services that leverage our business, domain and technology
expertise. Our professionals, many of whom have significant functional and
industry expertise and several years of experience with leading global
consulting firms, utilize our Global Delivery Model in offering these programs.
Our business transformation consulting services are organized around six major
domains:
  ·
              Core Process Excellence
      – We help clients transform their core processes and become more
      competitive by leveraging software packages developed by third party
      vendors such as SAP and Oracle through our package enabled consulting
      services relating to functions such as finance, supply chain
      management and quote-to-cash and through enterprise resource planning
      programs, enterprise content/asset management, and corporate performance
      management.
  ·
              Information Technology
      Strategies – We offer strategic consulting in relation to IT
      infrastructure assessment, IT cost reduction, IT transformation, merger
      integration and IT organizational
development.
  ·
              Technical Architecture and
      Design – We provide technical advice and services in relation to IT
      architecture, hardware and software design, migration planning,
      institution-wide IT implementation planning and technology roadmap
      development.
  ·
              Product Innovation – We
      help clients innovate and improve their product lifecycle through
      co-creation and innovation networks, ideation accelerators, concept labs,
      launch centers, product effectiveness analysis and product lifecycle
      management-enabled transformation.
  ·
              Next Generation Commerce
      – We help clients deliver more value to, and derive more value
      from, clients through multi-channel customer experience analysis, customer
      data collection and use, and sales and marketing process
      redesign.
  ·
              Learning and Complex Change
      – We help clients solve their people and organizational problems
      through our offerings relating to customized organizational change
      management, change management integration, training program design,
      development and delivery, human resources transformation and human
      resources value enhancement.
  Our offerings are
complemented by our Value Realization Method (VRM) for measuring business value
created during a business transformation program. Through VRM, we assist our
clients in quantifying the expected value (using free cash flow) derived by
measuring key processes and help guide design decisions that ultimately measure
the long-term success of a business transformation program. In addition our
proprietary IMPACTTM
framework helps us organize our work to minimize delivery risk in large scale
business transformation programs and allows our consultants to collaborate in a
seamless and integrated manner globally.
  For example, we
were recently selected as a business transformation partner by a leading
publisher of information and solutions for professional users. The engagement is
intended to transform the client’s core research business into a
customer-focused business model, underpinned by a flexible ‘enterprise’ business
processes and system platform that would be capable of effectively supporting
the new business model. As part of the initial phase of this engagement,
Infosys Consulting utilized its IMPACTTM
framework to map out the transformation approach, its VRM to focus the process
redefinition and system configuration efforts on the critical elements and the
Value Diagram and Decision Framework within its VRM to prioritize the decisions
that needed to be made and bring a value focused discipline to that
decision-making. Using this approach, we have identified 10 key operational
levers whose value for the program is estimated to result in significant
benefits. The new business model and associated business platform are currently
in the testing phase.
  OTHER
SOLUTIONS
  Validation
Services
  We offer
comprehensive testing solutions, including test strategy consulting,
setting up dedicated test organizations, enterprise test management, business
process testing, test environment hosting and management, test automation and
performance benchmarking. These solutions are provided across various industry
verticals in relation to custom application engagements, software products and
packaged software. Our solutions are designed to help clients' technology
systems meet required quality standards within a fixed time and at minimal cost
and ensure the delivery of improvements to clients in a predictable manner. Our
service professionals are trained on a five dimensional framework that covers
industry domains, testing methodologies, quality processes, project
management and technology.
  As an example, a
leader in the oil and gas industry engaged us to upgrade a complex SAP suite
covering multiple functional areas (including sales, materials/ warehouse
management, supply chain management, human capital management, finance,
production and plant maintenance) that had been deployed across 90
countries. The client also required a centralized Testing Center of
Excellence (TCoE) that would be scalable to meet the future testing needs
of their SAP and other IT programs. Initially, we established a large
centralized SAP TCoE for the upgrade program within the allocated budget and
stipulated timelines. The centralized TCoE was later extended to all
ongoing IT projects of the client. Over the last two years of this engagement,
we have successfully developed a coherent validation strategy for this complex
implementation, introduced automation in testing and delivered high-quality
implementation of SAP and other IT programs.
  Product
Engineering and Lifecycle Solutions
  We provide
engineering solutions across the product lifecycle, ranging from product
conceptualization to product realization and maintenance. Our offerings span
across diverse industry verticals including automotive, aerospace, banking,
chemicals, consumer products, energy, engineering, technology (hardware and
software), medical devices, pharmaceuticals, retail, telecommunications and
utilities. Our solution offerings include research and development services,
product conceptualization and design, development of mechanical, electronic and
embedded software systems, product testing and validation, prototyping and
sourcing, process automation and controls, manufacturing execution, plant
engineering and internationalization, knowledge-based engineering and
professional services and support and customer care for products. We also
provide solutions relating to product strategy and process consulting, lean
engineering and green engineering.
  As an example, a
global retailer with supply chain partners spread across three continents faced
issues relating to ineffective collaboration in its product development process.
We were engaged by the client to deploy an end-to-end product lifecycle
management solution, and our involvement extended from the defining of
requirements through to system implementation. We developed a system that was
rolled out across the client’s various product lines, locations and supply chain
partners and which provided a seamless exchange of product information among the
relevant stakeholders. The client experienced improved collaboration with
its value chain partners and a significant reduction in the time required to
complete product development cycle time, enabling the client’s teams to focus on
product and packaging development.
  Business Process Management
  We offer business
process management services through Infosys BPO. Infosys BPO enables clients to
outsource several process-intensive operations that relate to specific industry
vertical processes and specific functional horizontal processes. Infosys BPO's
industry-specific service offerings include the following:
 
 ·
              Banking and Capital
      Markets: credit card operations, collections, banking operations,
      mortgage and loan account servicing, payments processing, trade clearing
      and settlement services, registrar and transfer agency services, fund
      administration and reporting, reference data management, hedge fund
      servicing and platform solutions;
  ·
              Communications: order
      fulfillment, service assurance, billing and revenue assurance, data
      cleansing and validation services, telecom-specific analytic offerings,
      technology-led point solutions;
  ·
              Insurance, Healthcare and Life
      Sciences: new business fulfillment, pensions and annuities, policy
      maintenance, claims administration, reinsurance finance and accounting,
      underwriting, statutory reporting
services;
  ·
              Manufacturing: customer
      operations, master data management, material planning, mid-office support,
      product data management, quoting and demand fulfillment, supply chain and
      logistics support;
  ·
              Media and
      Entertainment: advertisement analytics, content development,
      content management and desktop
publishing;
  ·
              Retail and Consumer Packaged
      Goods (CPG): master data management, trade promotions management,
      store solutions, supply chain solutions, reporting and analytics;
      and
  ·
              Energy, Utilities and
      Services: master data management, supplier performance management
      and analytics, engineering documentation, advanced metering infrastructure
      support, data validation, new product/feature support and meter data
      analytics.
  The
function-specific service offerings of Infosys BPO include the
following:
  ·
              Customer Service:
      customer engagement solutions including sales, ongoing service and
      recoveries situations, and customer relationship management through
      various service channels;
  ·
              Finance and Accounting:
      accounts payable, accounts receivable, billing and invoicing, collections
      and credit management, general ledger operations, financial planning and
      control and compliance related
services;
  ·
              HR Outsourcing: payroll
      processing, benefits administration, learning and development, HR
      helpdesk, recruitment and staffing services, workforce
      administration;
  ·
              Knowledge Services:
      contract management services and solutions, credit analysis, economics
      research, legal process outsourcing, competitive intelligence, prospect
      research, equity research, business and financial analytics services and
      solutions, document review
services;
  ·
              Sales and Fulfillment
      Operations: sales support operations, customer data management,
      account planning, order administration, customer advocacy, returns
      management, warranty management, demand forecasting, material and
      inventory management, reverse logistics;
and
  ·
              Sourcing and
      Procurement: sourcing, category management, transactional
      procurement, performance and compliance management, eBusiness solutions
      and spend, demand and supply market
analytics.
  As an example, we
manage the end-to-end sales and fulfillment processes, including sales
operations, fulfillment operations and revenue operations, for a leading network
equipment manufacturer with operations in over 60 countries. By leveraging our
domain expertise, operational excellence and technology-focused approach, our
team of over 1,000 customer service representatives provide processing and
management support for the consolidation and integration of the client's sales
and fulfillment processes. Infosys BPO handles over 90 percent of the overall
service requests received from partners, resellers and end customers of the
client through voice and data support and has enabled a reduction in response
and resolution time from 56 hours to about 38 hours, leading to increased
working capital efficiency.
  Systems
Integration
  Our systems
integration services practice drives technology-enabled business transformation
programs for our global clientele and also undertakes delivery of large and
complex programs. We leverage existing and emerging technologies to provide
end-to-end business and systems integration in a cost-effective and efficient
manner. Typically, our engagements begin with the definition of a technology
roadmap to fit the client’s business strategy and end with the implementation of
the solution using our mature execution capabilities.
  Our systems
integration services are delivered through the following practices:
 
 ·
              Enterprise Technology
      Modernization,
      involving emerging technologies such as cloud computing, virtualization,
      high performance computing, service oriented architecture, and enterprise
      security consulting and
implementation;
  ·
              Enterprise Performance
      Management, through which we deliver end-to-end business
      intelligence and data warehouse solutions and
  services;
  ·
              Portals, Content and
      Commerce, which enable multi-channel client engagement strategies
      through the use of rich Internet applications, portals, enterprise content
      management and Web 2.0; and
  ·
              Microsoft®Focus, through which
      we deliver solutions focusing on SharePoint®,
      Windows®AzureTM,
      Microsoft®Business Productivity Online Standard Suite and Windows®7, in collaboration with
Microsoft.
 
 As an example, we
partnered with India’s Council of Scientific and Industrial Research (CSIR) to
define, design and develop the IT infrastructure needed to support its Open
Source Drug Discovery (OSDD) initiative, which aims to promote international
collaboration in the drug discovery process with the goal of providing better
healthcare in the developing world. As part of the OSDD initiative, we were
required to create a portal to host a first-of-its-kind detailed tuberculosis
gene map that had been developed by CSIR. We created a portal that enables
end-to-end process integration in the drug discovery process, from
conceptualization to drug formulation. The portal is available in the public
domain, facilitating collaboration and research in the field of public
health.
  Infrastructure
Management Services
  Through our
infrastructure management services offering, we manage the operations of our
clients' IT infrastructure. Our service offerings include data center
management, technical support services, application management services,
ITIL®
process implementation/enhancement services and IT infrastructure consulting.
Our end-to-end solutions leverage our technical expertise and benchmarked
operational processes to help our clients achieve technology-led business
transformation. We assist our clients with new IT operations’ process paradigms,
such as virtualization, cloud computing, grid computing,
infrastructure-as-utility, “green” IT and ITIL® V3,
and help transform our clients’ IT environments to leverage these next
generation technologies across their data centers, networks, production and
end-user computing environments.
  For example, a
leading mobile services provider based in Europe engaged us to deliver
end-to-end IT infrastructure management services. The client had multiple data
centers within a geography in Europe and required a consistent model for its
infrastructure operations. The client was faced with multiple challenges
relating to IT infrastructure availability, IT asset utilization, service levels
and cost of IT operations. We deployed an ITIL® based
infrastructure operations model and delivered an optimized IT infrastructure
environment through platform standardization, virtualization and consolidation,
which enabled the client to reduce its cost of operations and energy consumption
as part of the overall “green” IT initiative.
 Software-as-a-Service
  We provide to our
clients an integrated service offering, Software-as-a-Service, or SaaS, that
combines the supply of hardware, network infrastructure, application software
and associated professional services, maintenance and support. We currently
offer a Digital Consumer Platform in a SaaS model, which is aimed at delivering
an integrated social media, ecommerce and customer care infrastructure for
enterprises. We are currently developing four offerings as part of the Digital
Consumer Platform – Infosys®
Social Media Marketing Platform, Infosys®
eCommerce Platform, Infosys®
Customer Care Platform and Infosys®
Employee Engagement Platform. By combining our offerings with our associated
infrastructure, professional services, BPO and consulting offerings, we are able
to provide a vertically integrated value proposition to our clients. We also
offer the SaaS platform in a pay-as-you-go pricing model that enables our
clients to experience the benefits of our platform with minimal upfront
investment.
  Banking
Software Products
  We also develop,
market and license proprietary banking solutions for the banking industry. Our
principal banking technology offerings include the FinacleTM
universal banking solution and professional services.
  FinacleTMuniversal banking
solution: FinacleTM,
our universal banking solution, is a comprehensive, flexible, scalable 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 FinacleTM
universal banking solution include the FinacleTMcore
banking solution for regional rural banks, the FinacleTM alerts solution which
enables banks to alert end users on events recorded by diverse business systems,
FinacleTM
Advizor, which combines the convenience of human intervention with banking
self-service channels through the interplay of video, audio and data
communication and FinacleTM
WatchWiz, a comprehensive new generation monitoring
solution.
  Professional Services: Our
services complement the solutions portfolio and include consulting, package
implementation, independent validation, migration, application development and
maintenance, system integration, software performance engineering and
support.
 OUR
CLIENTS
  We market our
services to large corporations in North America, Europe and the APAC Region. We
have a strong market presence in North America and are working towards expanding
our presence in Europe.
  Our revenues for
the last three fiscal years by geographic area are as follows:
 Fiscal2010
              2009
              2008North
      America
              65.8%
              63.2%
              62.0%Europe
              23.0%
              26.4%
              28.1%India
              1.2%
              1.3%
              1.3%Rest of the
      World
              10.0%
              9.1%
              8.6%Total
              100.0%
              100.0%
              100.0%
  We have in-depth
expertise in the financial services, manufacturing, telecommunications and
retail industries, as well as, to a lesser extent, the utilities and logistics
industries. Our revenues for the last three fiscal years by market segment are
as follows:
 Fiscal2010
              2009
              2008Financial
      Services
              34.0%
              33.9%
              35.8%Manufacturing
              19.8%
              19.7%
              14.7%Telecommunications
              16.1%
              18.1%
              21.6%Retail
              13.3%
              12.5%
              11.8%Others
      (primarily utilities, logistics and services)
              16.8%
              15.8%
              16.1%Total
              100.0%
              100.0%
              100.0%
  For fiscal 2010,
2009 and 2008 our largest client contributed 4.6%, 6.9% and 9.1%, respectively,
of our total revenues.
  The volume of work
we perform for specific clients is likely to vary from year to year,
particularly since we are not the exclusive external IT services provider for
our clients. Thus, a major client in one year may not provide the same level of
revenues in a subsequent year. However, in any given year, a limited number of
clients tend to contribute a significant portion of our revenues.
  SALES
AND MARKETING
  Our sales and
marketing strategy is formulated to increase awareness and gain new business
from target clients and promote client loyalty and repeat business among
existing clients. Members of our executive management team are actively involved
in business development and in managing key client relationships through
targeted interaction with our clients' senior management. We have also
established a Strategic Global Sourcing Group consisting of senior professionals
to focus on identifying and securing large, long-term engagements from both new
and existing clients.
  New Business
Development.We use a cross-functional, integrated sales approach in
which our account managers, sales personnel and project managers analyze
potential projects and collaboratively develop strategies to sell our solutions
to potential clients. This approach allows for a smooth transition to execution
once the sale is completed. Through Infosys Consulting, we endeavor to develop
stronger strategic relationships with the senior management of our clients,
which we seek to leverage to provide other service offerings.
  Our sales
professionals located throughout the world proactively make contact with
potential clients. For larger projects, we typically bid against other
technology services providers in response to requests for proposals. Clients
often cite our Global Delivery Model, comprehensive end-to-end solutions,
ability to scale, superior quality and process execution, industry expertise,
experienced management team, talented professionals, track record and
competitive pricing as reasons for awarding us contracts. In addition, client
references and endorsements provide objective validation of our competitive
strengths.
  Promoting Client
Loyalty.We constantly seek to expand the nature and scope of our
engagements with existing clients by extending the breadth and volume of
services offered, with a focus on increasing our clients' competitiveness
through our proven and reliable Global Delivery Model. For existing clients, our
onsite project and account managers proactively identify client needs and work
with our sales team to structure solutions to address those needs. During fiscal
2010, 2009 and 2008, 97.3%, 97.6% and 97.0% of our revenue came as repeat
business from existing clients, respectively. We promote client loyalty through
a sales and marketing program that includes media and industry analyst events,
sponsorship of and participation in targeted industry conferences, trade shows,
recruiting efforts, community outreach and investor relations.
  Sales and
Marketing Organization.We sell and market our services from 65
sales and marketing offices located in 33 countries. With our global sales
operations spread across different parts of the world and our corporate
marketing group based in Bangalore, India, we target our efforts towards the
world's largest companies. Our sales efforts are complemented by our marketing
team, which assists in brand building and other corporate level marketing
efforts. As of March 31, 2010, we had 896 sales and marketing
employees.
  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.
  HUMAN
CAPITAL
  Our professionals
are our most important assets. We believe that the quality and level of service
that our professionals deliver are among the highest in the global technology
services industry. We are committed to remaining among the industry's leading
employers.
  As of March 31,
2010, we employed approximately 113,800 employees, of which approximately
106,900 are technology professionals, including trainees. During fiscal 2010, we
recorded approximately 8,900 new hires, net of attrition. Our culture and
reputation as a leader in the technology services industry enables us to recruit
and retain some of the best available talent in India. The key elements that
define our culture include:
  Recruitment
  We have built our
global talent pool by recruiting new students from premier universities,
colleges and institutes in India and through need-based hiring of project
leaders and middle managers. We typically recruit only students in India who
have consistently shown high levels of achievement. We have also begun selective
recruitment at campuses in the United States, the United Kingdom, Australia and
China. We rely on a rigorous selection process involving a series of aptitude
tests and interviews to identify the best applicants. This selection process is
continually assessed and refined based on performance tracking of past
recruits.
  Our reputation as a
premier employer enables us to select from a large pool of qualified applicants.
For example, during fiscal 2010, we received approximately 400,800 employment
applications, tested approximately 77,000 applicants, interviewed approximately
61,000 applicants and extended offers of employment to approximately 26,200
applicants. In fiscal 2010, we added approximately 6,800 new employees, net of
attrition. These statistics do not include Infosys BPO and our wholly-owned
subsidiaries, which together, recruited approximately 2,100 new hires, net of
attrition, during fiscal 2010.
  Training
and Development
 
 We have established
a world-class training facility, the Infosys Global Education Center, in our
campus in Mysore, India, with a view to consolidate learning activities across
the Company. With a total built-up area of 1.44 million square feet, the Infosys
Global Education Center can train approximately 14,000 employees at a
time.
  Our training,
continuing education and career development programs are designed to ensure our
technology professionals enhance their skill-sets in alignment with their
respective roles. Most new student hires complete approximately 20 to 29 weeks
of integrated on-the-job training prior to being assigned to a business
unit.
 
 As of March 31,
2010, we employed 610 full-time employees as faculty, including 208 with
doctorate or masters degrees. Our faculty conducts integrated training for our
new employees. We also have our employees undergo certification programs each
year to develop the skills relevant for their roles.
  Leadership
development is a core part of our training program. We established the Infosys
Leadership Institute in our 337-acre campus in Mysore, India, to enhance
leadership skills that are required to manage the complexities of the rapidly
changing marketplace and to further instill our culture through leadership
training.
  In addition, we
also have been working with several colleges across India through our Campus
Connect program, enabling their faculty to provide industry related training to
students at the colleges.
  We provide a
challenging, entrepreneurial and empowering work environment that rewards
dedication and a strong work ethic. We continually provide our technology
professionals with exposure to new skills, technologies and global
opportunities.
 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 our performance.
  Intellectual
Property
  Our intellectual
property rights are critical to our business. We rely on a combination of
patent, copyright, trademark and design laws, trade secrets, confidentiality
procedures and contractual provisions to protect our intellectual property. We
currently have 9 issued patents granted by the United States Patent and
Trademark Office. An aggregate of 224 patent applications are pending in the
U.S. Patent and Trademark Office and the Indian Patent Office. We have 9
registered trademarks and several unregistered trademarks across classes
identified for various goods and servicesin India and in other
countries. We require employees, independent contractors and, whenever possible,
vendors to enter into confidentiality agreements upon the commencement of their
relationships with us. These agreements generally provide that any confidential
or proprietary information developed by us or on our behalf be kept
confidential. These agreements also provide that any confidential or proprietary
information disclosed to third parties in the course of our business be kept
confidential by such third parties. However, our clients usually own the
intellectual property in the software we develop for them.
  Our efforts to
protect our intellectual property may not be adequate. Our competitors may
independently develop similar technology or duplicate our products and/or
services. Unauthorized parties may infringe upon or misappropriate our products,
services or proprietary information. In addition, the laws of India do not
protect intellectual property rights to the same extent as laws in the United
States. In the future, litigation may be necessary to enforce our intellectual
property rights or to determine the validity and scope of the proprietary rights
of others. Any such litigation could be time-consuming and
expensive.
  We could be subject
to intellectual property infringement claims as the number of our competitors
grows and our product or service offerings overlap with competitive offerings.
In addition, we may become subject to such claims since we may not always be
able to verify the intellectual property rights of third parties from whom we
license a variety of technologies. Defending against these claims, even if they
are not meritorious, could be expensive and divert our attention from operating
our company. If we become liable to third parties for infringing upon their
intellectual property rights, we could be required to pay substantial damage
awards and be forced to develop non-infringing technology, obtain licenses or
cease selling the applications that contain the infringing technology. The loss
of some of our existing licenses could delay the introduction of software
enhancements, interactive tools and other new products and services until
equivalent technology could be licensed or developed. We may be unable to
develop non-infringing technology or obtain licenses on commercially reasonable
terms, if at all.
  We regard our trade
name, trademarks, service marks and domain names as important to our success. We
rely on the law to protect our proprietary rights to them, and we have taken
steps to enhance our rights by filing trademark applications where appropriate.
We have obtained registration of our key brand 'INFOSYS' as a trademark in both
India and in the United States. We also aggressively protect these names and
marks from infringement by others.
  Research
and Development
  Our research and
development efforts focus on developing and refining our methodologies, tools
and techniques, improving estimation processes and adopting new technologies. We
have several groups engaged in our research and development activities. These
groups are listed below.
  Education and
Research Group.This group partners with world class academic
institutions to conduct research in the areas of knowledge management,
application of game theory, pattern recognition, grid computing and enhancement
of learning effectiveness.
  Software
Engineering and Technology Labs (SETLabs).This group is the
center for applied technology research in software engineering and enterprise
technology. SETLabs leverages emerging technology for improving engineering
effectiveness and developing client-focused business solutions. SETLabs builds
products, solutions, platforms, frameworks, tools and methodologies in the areas
of software engineering, high performance and grid computing, cloud computing,
digital convergence, sensor networks, knowledge driven information systems,
analytics, enterprise security and privacy and Web 2.0.
 
 We have also
established concept centers for several advanced technologies and have a
performance-testing center to develop solutions for a number of our development
projects.
  Our research and
development expenses for fiscal 2010, 2009 and 2008 were $92 million, $51
million and $50 million, respectively.
  EFFECT
OF GOVERNMENT REGULATION ON OUR BUSINESS
  Regulation of our
business by the Indian government affects our business in several ways. We
benefit from certain tax incentives promulgated by the Government of India,
including a ten-year tax holiday from Indian corporate income taxes for the
operation of our Indian facilities located in STPs and tax holidays for
operation of our Indian facilities located in SEZs. As a result of these
incentives, our operations have been subject to relatively insignificant Indian
tax liabilities. Most of our STP units have already completed the tax holiday
period and for the remaining STP units the tax holiday will expire by the end of
fiscal 2011. We have also benefited from the liberalization and deregulation of
the Indian economy by the successive Indian governments since 1991, including
the current Indian government. Further, there are restrictive Indian laws and
regulations that affect our business, including regulations that require us to
obtain approval from the Reserve Bank of India and/or the Ministry of Finance of
the Government of India to acquire companies organized outside India, and
regulations that require us, subject to some exceptions, to obtain approval from
relevant government authorities in India in order to raise capital outside
India. The conversion of our equity shares into ADSs is governed by guidelines
issued by the Reserve Bank of India.
  LEGAL
PROCEEDINGS
  We are subject to
legal proceedings and claims, which have arisen in the ordinary course of our
business. Our management does not reasonably expect that these legal actions,
when ultimately concluded and determined, will have a material and adverse
effect on our results of operations or financial condition.
  ORGANIZATIONAL
STRUCTURE
 
 We
hold a majority interest in the following company:
 
 Infosys
BPO. Infosys established Infosys BPO in April 2002, under the laws of
India. As of March 31, 2010, Infosys holds 99.98% of the outstanding equity
shares of Infosys BPO.
 
 Infosys is the sole
shareholder of the following companies:
 
 Infosys
Australia. In January 2004, we acquired, for cash, 100% of the equity in
Expert Information Services Pty. Limited, Australia for $14 million. The
acquired company was renamed as 'Infosys Technologies (Australia) Pty.
Limited'.
 
 Infosys
China. In October 2003, we established a wholly-owned subsidiary, Infosys
China in Shanghai, China, to expand our business operations in China. During
fiscal 2009 and 2008, we disbursed $2 million and $3 million, respectively, as
loans to Infosys China, each at an interest rate of 6.0% per annum. These loans
are repayable within five years from the date of disbursement at the discretion
of the subsidiary. Further, during fiscal 2009, we made an additional investment
of $4 million in Infosys China. As of March 31, 2010, we have invested $14
million as equity capital and $10 million as loans in the
subsidiary.
 
 Infosys
Consulting. In April 2004, we
incorporated a wholly-owned subsidiary, Infosys Consulting, in the State of
Texas to add high-end consulting capabilities to our Global Delivery Model.
During fiscal 2010, 2009 and 2008, we made an additional investment of $10
million, $5 million and $20 million, respectively, in Infosys Consulting. As of
March 31, 2010, we have invested an aggregate of $55 million in the subsidiary.
There is a further earnout payable to the eligible employees and directors of
Infosys Consulting subject to their continued
employment.
 
 Infosys Mexico.In June 2007, we established a wholly-owned subsidiary, Infosys Mexico to
expand our business operations in Latin America. During fiscal 2010 and 2008, we
made additional investments of $4 million and $5 million, respectively, in
Infosys Mexico. As of March 31, 2010, we have invested an aggregate of $9
million in the subsidiary.
 
 Infosys Sweden.In March 2009, we incorporated a wholly owned subsidiary, Infosys
Technologies (Sweden) AB to expand our operations in Europe.
 
 Infosys Brasil.On August 7, 2009, we incorporated a wholly owned subsidiary, Infosys
Tecnologia DO Brasil LTDA to expand our operations in South America. We have
invested an aggregate of $6 million in Infosys Brasil as of March 31,
2010.
 
 Infosys Public
Services.On October 9, 2009 we incorporated a wholly-owned subsidiary,
Infosys Public Services, to focus and expand our operations in the U.S public
services market. We have invested an aggregate of $5 million in Infosys Public
Services as of March 31, 2010.
 
 PROPERTY,
PLANTS AND EQUIPMENT
  Our principal
campus, "Infosys City" is located at Electronics City, Bangalore, India. Infosys
City consists of approximately 3.55 million square feet of land and 4 million
square feet of operational facilities. The campus features:
  ·
              1,200,000
      square feet of landscaped area;
  ·
              453
      conference rooms;
  ·
              An Education
      and Research unit consisting of 115,000 square feet of facilities space,
      including a library, 6 class rooms, 12 laboratories, computer-based
      learning and audio-visual aids, and 60 faculty
  rooms;
  ·
              A Management
      Development Center consisting of 75,500 square feet of facilities space,
      with 16 class rooms, 6 rooms with workstations and 24 faculty
      rooms;
  ·
              A world-class
      conference room with the capacity to simultaneously video-conference 24
      locations across the globe;
  ·
              A Convention
      Centre with a seating capacity of 1,400, state-of-the-art audio and video
      technology and basement car parking facilities with a capacity of 150
      cars;
  ·
              A banquet
      hall with a seating capacity of 900 with video conferencing
      facilities;
  ·
              Redundant
      power supply through captive
generators;
  ·
              Leisure
      facilities, including tennis courts, a miniature golf course, a basketball
      court, a swimming pool, health club and a
  bookstore;
  ·
              A multi-level
      parking lot with a capacity to park 1,600 cars and 800 two
      wheelers;
  ·
              A
      multi-cuisine restaurant, six food courts and accommodation facilities;
      and
  ·
              A store
      selling Infosys branded
merchandise.
  Additionally, we
have leased independent facilities measuring approximately 373,500 square feet
in Electronics City which accommodates approximately 4,100
employees.
  Our capital
expenditure on property, plant and equipment for fiscal 2010, 2009 and 2008 was
$143 million, $285 million and $373 million, respectively. As of March 31, 2010
we had contractual commitments for capital expenditure of $67 million. All our
capital expenditures are financed out of cash generated from operations. We will
construct, expand and improve our facilities through the course of fiscal
2011.
  Our software
development facilities are equipped with a world-class technology infrastructure
that includes networked workstations, servers, data communication links and
video-conferencing.
  We have 19 sales
and marketing offices in the United States, 4 each in India and Australia, 3 in
Germany, 2 each in Canada, China, the Czech Republic, France, Switzerland, the
United Arab Emirates and the United Kingdom and one each in Belgium,
Brazil,  Denmark, Finland, Hong Kong, Ireland, Italy, Japan, Malaysia,
Mauritius, Mexico, the Netherlands, New Zealand, Norway, Philippines, Poland,
Russia, Singapore, Spain, Sweden, Thailand. We believe our facilities are
adequately utilized. Appropriate expansion plans are being undertaken to meet
our expected future growth.
 Our most
significant leased and owned properties are listed in the table below. We have
only listed our leased and owned properties that are in excess of 100,000 square
feet, and each such facility is located in India.
 Location
              Building
              LandApprox.
      Sq. ft.
              Approx
      Sq. ft.
              OwnershipSoftware
      Development FacilitiesBangalore
      (Infosys City), Karnataka
              –
              172,063
              LeasedBangalore
      (Infosys City), Karnataka
              3,772,114
              3,375,707
              OwnedBangalore
      (Center Point, Electronics City), Karnataka
              148,300
              –
              LeasedBangalore
      (Salarpuria Building, Electronics City) Karnataka
              225,245
              –
              LeasedBangalore
      (Tower Office, Banerghatta Road), Karnataka
              120,906
              
              LeasedBhubaneswar
      (Chandaka Industrial Park), Orissa
              879,721
              1,999,455
              LeasedChandigarh
      (SEZ Campus)
              1,135,580
              1,316,388
              LeasedChennai
      (Sholinganallur), Tamil Nadu
              508,300
              578,043
              LeasedChennai
      (Maraimalai Nagar), Tamil Nadu
              2,061,719
              5,617,084
              LeasedHyderabad
      (Manikonda Village), Andhra Pradesh
              1,873,209
              2,194,997
              OwnedHyderabad
      (Pocharam Village), Andhra Pradesh
              –
              19,615,145
              OwnedMangalore
      (Kottara), Karnataka
              204,000
              119,790
              OwnedMangalore
      (Pajeeru and Kairangala Village), Karnataka
              489,213
              13,709,693
              LeasedMysore
      (Hebbal Electronic City), Karnataka
              8,511,042
              10,727,563
              OwnedMysore
      (Hebbal Electronic City), Karnataka
              
              3,986,849
              LeasedPune
      (Hinjewadi), Maharashtra
              589,647
              1,089,004
              LeasedPune
      (Hinjewadi Phase II), Maharashtra
              3,903,275
              4,965,005
              LeasedThiruvananthapuram
      (SEZ campus), Kerala
              286,743
              2,178,009
              LeasedThiruvananthapuram
      (Technopark), Kerala
              124,576
              –
              LeasedJaipur (BPO –
      SEZ Campus, M-City), Rajasthan
              374,139
              –
              LeasedBangalore
      (Devanahalli), Karnataka
              –
              418,178
              OwnedJaipur
      (Mahindra World City), Rajasthan
              –
              6,452,568
              LeasedProposed
      Software Development FacilitiesChennai
      (Maraimalai Nagar), Tamil Nadu
              680,440
              –
              LeasedHyderabad
      (Pocharam Village), Andhra Pradesh
              351,194
              –
              OwnedMangalore,
      Karnataka
              137,979
              –
              LeasedMysore
      (Hebbal Electronic City), Karnataka
              379,690
              –
              LeasedPune
      (Hinjewadi Phase II), Maharashtra
              131,248
              –
              LeasedThiruvananthapuram
      (Technopark), Kerala
              200,366
              –
              Leased
  Item 4 A. Unresolved Staff Comments
  None







Item 5. Operating and Financial Review and Prospects




The financial
statements of the Company included in this Annual Report on Form 20-F have been
prepared in accordance with International Financial Reporting Standards as
issued by International Accounting Standards Board. The discussion, analysis and
information presented in this section should be read in conjunction with our
financial statements included herein and the notes thereto.




OPERATING RESULTS




This information is
set forth under the caption entitled 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' below and is incorporated herein
by reference.




LIQUIDITY AND CAPITAL
RESOURCES




This information is
set forth under the caption entitled 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' below and is incorporated herein
by reference.




RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES, ETC.




We have committed
and expect to continue to commit in the future, a material portion of our
resources to research and development. Efforts towards research and development
are focused on refinement of methodologies, tools and techniques, implementation
of metrics, improvement in estimation process and the adoption of new
technologies.




Our research and
development expenses for the fiscal year ended March 31, 2010, 2009 and 2008
were $92 million, $51 million and $50 million, respectively.




TREND INFORMATION




This information is
set forth under the caption entitled “Management's Discussion and Analysis of
Financial Condition and Results of Operations” below and is incorporated herein
by reference.




MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Overview




We are a leading
global technology services company that provides comprehensive end-to-end
business solutions that leverage technology for our clients, including technical
consulting, design, development, product engineering, maintenance, systems
integration, package evaluation and implementation, validation and
infrastructure management services. We also provide software products to the
banking industry. Through Infosys BPO, we provide business process management
services such as offsite customer relationship management, finance and
accounting, and administration and sales order processing. Our clients rely on
our solutions to enhance their business performance.




Our professionals
deliver high quality solutions by leveraging our Global Delivery Model through
which we divide projects into components that we execute simultaneously at
client sites and at our development centers in India and around the world. We
seek to optimize our cost structure by maintaining the flexibility to execute
project components where it is most cost effective. Our sales, marketing and
business development teams are organized to focus on specific geographies and
industries and this helps us to customize our service offerings to our client's
needs. Our primary geographic markets are North America, Europe and the Asia
Pacific region. We serve clients in financial services, manufacturing,
telecommunications, retail, utilities, logistics and other
industries.




There is an
increasing need for highly skilled technology professionals in the markets in
which we operate and in the industries to which we provide services. At the same
time, companies are reluctant to expand their internal IT departments and
increase costs. These factors have increased the reliance of companies on their
outsourced technology service providers and are expected to continue to drive
future growth for outsourced technology services. We believe that because the
effective use of offshore technology services may offer lower total costs of
ownership of IT infrastructure, lower labor costs, improved quality and
innovation, faster delivery of technology solutions and more flexibility in
scheduling, companies are increasingly turning to offshore technology service
providers. India, in particular, has become a premier destination for offshore
technology services. The key factors contributing to the growth of IT and IT
enabled services in India include high quality delivery, significant cost
benefits and the availability of skilled IT professionals. Our proven Global
Delivery Model, our comprehensive end to end solutions, our commitment to
superior quality and process execution, our long standing client relationships
and our ability to scale make us one of the leading offshore technology service
providers in India.




There are numerous
risks and challenges affecting the business. These risks and challenges are
discussed in detail in the section entitled 'Risk Factors' and elsewhere in this
Annual Report on Form 20-F.




We were founded in
1981 and are headquartered in Bangalore, India. We completed our initial public
offering of equity shares in India in 1993 and our initial public offering of
ADSs in the United States in 1999. We completed three sponsored secondary ADS
offerings in the United States in August 2003, June 2005 and November 2006. We
did not receive any of the proceeds from any of our sponsored secondary
offerings.




During fiscal 2009,
Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty
Limited (MSPL) for a cash consideration of $3 million.




Also, during fiscal
2009, the investments held by P-Financial Services Holding B.V. in its wholly
owned subsidiaries Pan-Financial Shared Services India Private Limited, Infosys
BPO (Poland) Sp. Z.o.o., and Infosys BPO (Thailand) Limited were transferred to
Infosys BPO, consequent to which P-Financial Services Holding B.V. was
liquidated. Further, Infosys BPO merged its wholly owned subsidiary
Pan-Financial Shared Services India Private Limited, retrospectively with effect
from April 1, 2008, through a scheme of amalgamation sanctioned by the Karnataka
and Tamil Nadu High courts.




During fiscal 2009,
we incorporated a wholly owned subsidiary, Infosys Technologies (Sweden)
AB.




During fiscal 2010,
we also incorporated two wholly-owned subsidiaries, Infosys Tecnologia DO Brasil
LTDA and Infosys Public Services, Inc., and, Infosys Consulting incorporated a
wholly-owned subsidiary, Infosys Consulting India Limited.




On December 4,
2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC
(McCamish), a business process solutions provider based in Atlanta, Georgia, in
the United States. The business acquisition was conducted by entering into
Membership Interest Purchase Agreement for a cash consideration of $37 million
and a contingent consideration of up to $20 million. The fair value of the
contingent consideration on the date of acquisition was $9 million.




At our Annual
General Meeting held on June 20, 2009, our shareholders approved a final
dividend of $0.27 per equity share, which in the aggregate resulted in a cash
outflow of $188 million, inclusive of corporate dividend tax of $27 million. Our
Board of Directors, during its meeting held on October 9, 2009, approved payment
of an interim dividend of $0.21 per equity share for fiscal 2010 which in the
aggregate resulted in a cash outflow of $142 million, inclusive of corporate
dividend tax of $21 million.




Further, our Board
of Directors, in its meeting on April 13, 2010, proposed a final dividend of
approximately $0.33 per equity share (Rs. 15 per equity
share). The proposal is subject to the approval of shareholders at the
Annual General Meeting to be held on June 12, 2010, and if approved, would
result in a cash outflow of approximately $224 million, inclusive of corporate
dividend tax of $32 million.




The following table
illustrates our growth in revenues, net profit, earnings per equity share and
number of employees from fiscal 2008 to fiscal 2010:


(Dollars in millions except
      share data)2010
            2008
            Compound annual growth rateRevenues
            $4,804
            $4,176
            7.3%Net
      profit
            $1,313
            $1,163
            6.3%Earnings per
      equity share (Basic)
            $2.30
            $2.04
            6.3%Earnings per
      equity share (Diluted)
            $2.30
            $2.04
            6.3%Approximate
      number of employees at the end of the fiscal year
            113,800
            91,200
            11.7%




Our revenue growth
was attributable to a number of factors, including an increase in the size and
number of projects executed for clients, as well as an expansion in the
solutions that we provide to our clients. We added 141 new customers during
fiscal 2010 as compared to 156 new customers during fiscal 2009 and 170 new
customers during fiscal 2008. For fiscal 2010, 2009 and 2008, 97.3%, 97.6%
and 97.0%, respectively, of our revenues came from repeat business, which we
define as revenue from a client who also contributed to our revenue during the
prior fiscal year.




Our business is
designed to enable us to seamlessly deliver our onsite and offshore capabilities
using a distributed project management methodology, which we refer to as our
Global Delivery Model. We divide projects into components that we execute
simultaneously at client sites and at our geographically dispersed development
centers in India and around the world. Our Global Delivery Model allows us to
provide clients with high quality solutions in reduced time-frames enabling them
to achieve operational efficiencies.




Revenues




Our revenues are
generated principally from technology services provided on either a
time-and-materials or a fixed-price, fixed-timeframe basis. Revenues from
services provided on a time-and-materials basis are recognized as the related
services are performed. Revenues from services provided on a fixed-price,
fixed-timeframe basis are recognized pursuant to the percentage-of-completion
method. Most of our client contracts, including those that are on a fixed-price,
fixed-timeframe basis can be terminated by clients with or without cause,
without penalties and with short notice periods of between 0 and 90 days. Since
we collect revenues on contracts as portions of the contracts are completed,
terminated contracts are only subject to collection for portions of the contract
completed through the time of termination. Most of our contracts do not contain
specific termination-related penalty provisions. In order to manage and
anticipate the risk of early or abrupt contract terminations, we monitor the
progress on all contracts and change orders according to their characteristics
and the circumstances in which they occur. This includes a focused review of our
ability and our client's ability to perform on the contract, a review of
extraordinary conditions that may lead to a contract termination, as well as
historical client performance considerations. Since we also bear the risk of
cost overruns and inflation with respect to fixed-price, fixed-timeframe
projects, our operating results could be adversely affected by inaccurate
estimates of contract completion costs and dates, including wage inflation rates
and currency exchange rates that may affect cost projections. Losses on
contracts, if any, are provided for in full in the period when determined.
Although we revise our project completion estimates from time to time, such
revisions have not, to date, had a material adverse effect on our operating
results or financial condition. We also generate revenue from software
application products, including banking software. Such software products
represented 4.2%, 3.9% and 3.6% of our total revenues for fiscal 2010, 2009 and
2008, respectively.




We experience from
time to time, pricing pressure from our clients. For example, clients often
expect that as we do more business with them, they will receive volume
discounts. Additionally, clients may ask for fixed-price, fixed-time frame
arrangements or reduced rates. We attempt to use fixed-price arrangements for
engagements where the specifications are complete, so individual rates are not
negotiated.




Cost
of Sales




Cost of sales
represented 57.2%, 57.9% and 58.7% of total revenues for fiscal 2010, 2009 and
2008, respectively. Our cost of sales primarily consists of salary and other
compensation expenses, depreciation, amortization of intangible assets, overseas
travel expenses, cost of software purchased for internal use, cost of technical
subcontractors, rent and data communication expenses. We depreciate our personal
computers, mainframe computers and servers over two to five years and amortize
intangible assets over their estimated useful life. Third party software is
expensed over the estimated useful life. We recorded share-based compensation
expense of $1 million under cost of sales during each of fiscal 2009 and fiscal
2008 using the fair value recognition provisions contained in IFRS 2 Share-based
Payment. For fiscal 2010, the share-based compensation expense included in cost
of sales was less than $1 million. Amortization expense for fiscal 2010 and
fiscal 2009 included under cost of sales was $8 million and $4 million,
respectively. For fiscal 2008, the amortization expense included in cost of
sales was less than $1 million.




We typically assume
full project management responsibility for each project that we undertake.
Approximately 75.8%, 74.9% and 73.3% of the total billed person-months for our
services during fiscal 2010, 2009 and 2008, respectively, were performed at our
global development centers in India, and the balance of the work was performed
at client sites and global development centers located outside India. The
proportion of work performed at our facilities and at client sites varies from
quarter to quarter. We charge higher rates and incur higher compensation and
other expenses for work performed at client sites and global development centers
located outside India. Services performed at a client site or at a global
development center located outside India typically generate higher revenues
per-capita at a lower gross margin than the same services performed at our
facilities in India. As a result, our total revenues, cost of sales and gross
profit in absolute terms and as a percentage of revenues fluctuate from quarter-
to- quarter based in part on the proportion of work performed outside India. We
intend to hire more local employees in many of the overseas markets in which we
operate, which could decrease our gross profits due to increased wage and hiring
costs. Additionally, any increase in work performed at client sites or global
development centers located outside India may decrease our gross profits. We
hire subcontractors on a limited basis from time to time for our own technology
development needs, and we generally do not perform subcontracted work for other
technology service providers. For fiscal 2010, 2009 and 2008, approximately
2.9%, 3.1% and 2.7%, respectively, of our cost of sales was attributable to cost
of technical subcontractors. We do not anticipate that our subcontracting needs
will increase significantly as we expand our business.




Revenues and gross
profits are also affected by employee utilization rates. We define employee
utilization as the proportion of total billed person months to total available
person months, excluding administrative and support personnel. We manage
utilization by monitoring project requirements and timetables. The number of
software professionals that we assign to a project will vary according to the
size, complexity, duration, and demands of the project. An unanticipated
termination of a significant project could also cause us to experience lower
utilization of technology professionals, resulting in a higher than expected
number of unassigned technology professionals. In addition, we do not utilize
our technology professionals when they are enrolled in training programs,
particularly during our 20-29 week training course for new
employees.




Selling
and Marketing Expenses




Selling and
marketing expenses represented 5.2%, 5.1% and 5.5% of total revenues for fiscal
2010, 2009 and 2008, respectively. Our selling and marketing expenses primarily
consist of expenses relating to salaries and other compensation expenses of
sales and marketing personnel, travel expenses, brand building, commission
charges, rental for sales and marketing offices and telecommunications. We
recorded share-based compensation expense of $1 million in selling and marketing
expenses during fiscal 2008, using the fair value recognition provisions
contained in IFRS 2. For fiscal 2010 and fiscal 2009, share-based compensation
included in selling and marketing expenses was less than $1 million. We may
increase our selling and marketing expenses as we seek to increase brand
awareness among target clients and promote client loyalty and repeat business
among existing clients.




Administrative
Expenses




Administrative
expenses represented 7.2%, 7.5% and 8.0% of total revenues for fiscal 2010, 2009
and 2008, respectively. Our administrative expenses primarily consist of
expenses relating to salaries and other compensation expenses of senior
management and other support personnel, travel expenses, legal and other
professional fees, telecommunications, office maintenance, power and fuel
charges, insurance, other miscellaneous administrative costs and provisions for
doubtful accounts receivable. The factors which affect the fluctuations in our
provisions for bad debts and write offs of uncollectible accounts include the
financial health of our clients and of the economic environment in which they
operate. We recorded share-based compensation expense of $1 million in
administrative expenses during fiscal 2008 using the fair value recognition
provisions contained in IFRS 2. For fiscal 2010 and fiscal 2009, share-based
compensation included in administrative expenses was less than $1
million.




Other Income




Other income
includes interest income, income from certificates of deposit, income from
available-for-sale financial assets, foreign currency exchange gains / (losses)
on translation of other assets and liabilities, including marked to market gains
/ (losses) on foreign exchange forward and option contracts. For fiscal 2010,
the interest income on deposits was $164 million and income from
available-for-sale financial assets / investments was $34 million. In fiscal
2010, we also recorded a foreign exchange gain of $63 million on forward and
options contracts, partially offset by a foreign exchange loss of $57 million on
translation of other assets and liabilities. Income from available-for-sale
financials assets/investments includes $11 million of income from sale of an
unlisted equity instrument.  For fiscal 2009, the interest income on
deposits was $186 million and income from available-for-sale financial assets/
investments was $1 million. In fiscal 2009, we incurred a foreign exchange loss
of $165 million on forward and options contracts, partially offset by a foreign
exchange gain of $71 million on translation of other assets and liabilities. For
fiscal 2008, the interest income on deposits was $169 million and income from
available-for-sale financial assets/ investments was $2 million. In fiscal 2008,
we incurred a foreign exchange gain of $26 million on forward and options
contracts, partially offset by a foreign exchange loss of $24 million on
translation of other assets and liabilities.




Functional
Currency and Foreign Exchange




The functional
currency of Infosys and Infosys BPO is the Indian rupee. The functional
currencies for Infosys Australia, Infosys China, Infosys Consulting, Infosys
Mexico, Infosys Sweden, Infosys Brasil and Infosys Public Services are the
respective local currencies. The consolidated financial statements included in
this Annual Report on Form 20-F are presented in U.S. dollars (rounded off to
the nearest million) to facilitate global comparability. The translation of
functional currencies to U.S. dollars is performed for assets and liabilities
using the exchange rate in effect at the balance sheet date, and for revenue,
expenses and cash flow items using a monthly average exchange rate for the
respective periods. The gains or losses resulting from such translation are
included in currency translation reserves under other components of
equity.




Generally, Indian
law requires residents of India to repatriate any foreign currency earnings to
India to control the exchange of foreign currency. More specifically, Section 8
of the Foreign Exchange Management Act, or FEMA, requires an Indian company to
take all reasonable steps to realize and repatriate into India all foreign
currency earned by the company outside India, within such time periods and in
the manner specified by the Reserve Bank of India, or RBI. The RBI has
promulgated guidelines that require the company to repatriate any realized
foreign currency back to India, and either:




·
            sell it to an
      authorized dealer for rupees within seven days from the date of receipt of
      the foreign currency;




·
            retain it in
      a foreign currency account such as an Exchange Earners Foreign Currency,
      or EEFC, account with an authorized dealer;
or




·
            use it for
      discharge of debt or liabilities denominated in foreign
      currency.




We typically
collect our earnings and pay expenses denominated in foreign currencies using a
dedicated foreign currency account located in the local country of operation. In
order to do this, we are required to, and have obtained, special approval from
the RBI to maintain a foreign currency account in overseas countries like the
United States. However, the RBI approval is subject to limitations, including a
requirement that we repatriate all foreign currency in the account back to India
within a reasonable time, except an amount equal to our local monthly operating
cost for our overseas branch. We currently pay such expenses and repatriate the
remainder of the foreign currency to India on a regular basis. We have the
option to retain those in an EEFC account (foreign currency denominated) or an
Indian-rupee-denominated account. We convert substantially all of our foreign
currency to Indian rupees to fund operations and expansion activities in
India.




Our failure to
comply with these regulations could result in RBI enforcement actions against
us.




Income
Taxes




Our net profit
earned from providing software development and other services outside India is
subject to tax in the country where we perform the work. Most of our tax paid in
countries other than India can be applied as a credit against our Indian tax
liability to the extent that the same income is subject to tax in
India.




Currently, we
benefit from the tax incentives the Government of India gives to the export of
software from specially designated software technology parks, or STPs, in India
and for facilities set up under the Special Economic Zones Act, 2005. The STP
Tax Holiday is available for ten consecutive years beginning from the financial
year when the unit started producing computer software or April 1, 1999,
whichever is earlier. The Indian Government through the Finance Act, 2009 has
extended the tax holiday for the STP units until March 31, 2011. Most of our STP
units have already completed the tax holiday period and for the remaining STP
units the tax holiday will expire by the end of fiscal 2011. Under the Special
Economic Zones Act, 2005 scheme, units in designated special economic zones
which begin providing services on or after April 1, 2005 are eligible for a
deduction of 100 percent of profits or gains derived from the export of services
for the first five years from commencement of provision of services and 50
percent of such profits or gains for a further five years. Certain tax benefits
are also available for a further five years subject to the unit meeting defined
conditions. When our tax holidays expire or terminate, our tax expense will
materially increase, reducing our profitability.




As a result of
these tax incentives, a substantial portion of our pre-tax income has not been
subject to significant tax in recent years. These tax incentives resulted in a
decrease in our income tax expense of $116 million, $325 million and $282
million for fiscal 2010, 2009 and 2008, respectively, compared to the effective
tax amounts that we estimate we would have been required to pay if these
incentives had not been available.




Further, as a
result of such tax incentives our effective tax rate fiscal 2010, 2009 and 2008
was 21.3%, 13.2% and 12.8%, respectively. The increase in the effective tax rate
to 21.3% for fiscal 2010 is mainly due to the expiration of the tax holiday
period for the majority of our STP units. Our Indian statutory tax rate for the
same period was 33.99%.




Pursuant to the
enacted changes in the Indian Income Tax Laws effective April 1, 2007, a Minimum
Alternate Tax (MAT) has been extended to income in respect of which a deduction
may be claimed under sections 10A and 10AA of the Income Tax Act; consequently,
we have calculated our tax liability for current domestic taxes after
considering MAT. The excess tax paid under MAT provisions being over and above
regular tax liability can be carried forward and set off against future tax
liabilities computed under regular tax provisions. We are required to pay MAT,
and, accordingly, a deferred tax asset of $9 million has been recognized on the
balance sheet as of March 31, 2010, which can be carried forward for a period of
ten years from the year of recognition.




Results of
Operations




The following table
sets forth certain financial information as a percentage of
revenues:


Fiscal2010
            2009
            2008Revenues
            100.0%
            100.0%
            100.0%Cost of
      sales
            57.2%
            57.9%
            58.7%Gross
      profit
            42.8%
            42.1%
            41.3%Operating
      expenses:Selling and
      marketing expenses
            5.2%
            5.1%
            5.5%Administrative
      expenses
            7.2%
            7.5%
            8.0%Total
      operating expenses
            12.4%
            12.6%
            13.5%Operating
      profit
            30.4%
            29.5%
            27.8%Other income,
      net
            4.3%
            2.2%
            4.2%Profit before
      income taxes
            34.7%
            31.7%
            32.0%Income tax
      expense
            7.4%
            4.2%
            4.2%Net
      profit
            27.3%
            27.5%
            27.8%




Results
for Fiscal 2010 compared to Fiscal 2009




Revenues




The following table
sets forth the growth in our revenues from fiscal 2009 to fiscal
2010:


(Dollars in
      millions)Fiscal
      2010
            Fiscal
    2009
            Change
            Percentage
      ChangeRevenues
            $4,804
            $4,663
            $141
            3.0%




Revenues increased
in almost all segments of our business. The increase in revenues was
attributable primarily to an increase in business from existing clients,
particularly in industries such as financial services, manufacturing and
retail.




During fiscal 2010,
the U.S. dollar depreciated against a majority of the currencies in which we
transact business. The U.S. dollar depreciated by 5.6%, 1.5% and 33.3% against
the United Kingdom Pound Sterling, Euro and Australian dollar, respectively.





There were
significant currency movements during fiscal 2010. Had the average exchange rate
between each of these currencies and the U.S. dollar remained constant, during
fiscal 2010 in comparison to fiscal 2009, our revenues in constant currency
terms for fiscal 2010 would have been lower by $5 million at $4,799 million as
against our reported revenues of $4,804 million, resulting in a growth of 2.9%
as against a reported growth of 3.0%.




The following table
sets forth our revenues by industry segments for fiscal 2010 and fiscal
2009:


Percentage of
      RevenuesIndustry
      Segments
            Fiscal
      2010
            Fiscal
    2009Financial
      services
            34.0%
            33.9%Manufacturing
            19.8%
            19.7%Telecommunication
            16.1%
            18.1%Retail
            13.3%
            12.5%Others
      including utilities, logistics and services
            16.8%
            15.8%




The increase in the
percentage of revenues from the retail segment during fiscal 2010 as compared to
fiscal 2009 is due to addition of new clients and the decline in the percentage
of revenues from the telecommunication segment during fiscal 2010 as compared to
fiscal 2009 is due to decrease of business from European clients.




There were
significant currency movements during fiscal 2010. The following table sets
forth our revenues by industry segments for fiscal 2010, had the average
exchange rate between each of the currencies namely, the United Kingdom Pound
Sterling, Euro and Australian dollar, and the U.S. dollar remained constant,
during fiscal 2010 in comparison to fiscal 2009, in constant currency
terms:


Industry
      Segments
            Fiscal
      2010Financial
      services
            34.0%Manufacturing
            19.8%Telecommunication
            16.0%Retail
            13.4%Others
      including utilities, logistics and services
            16.8%




The following table
sets forth our industry segment profit (revenues less identifiable operating
expenses and allocated expenses) as a percentage of industry segment revenue for
fiscal 2010 and fiscal 2009 (refer note 2.20.1 under item 18):


Industry
      Segments
            Fiscal
      2010
            Fiscal
      2009Financial
      services
            35.1%
            32.0%Manufacturing
            30.5%
            30.9%Telecommunication
            39.6%
            37.0%Retail
            33.8%
            32.5%Others
      including utilities, logistics and services
            34.1%
            33.6%




Our revenues are
also segmented into onsite and offshore revenues. Onsite revenues are for those
services which are performed at client sites or at our global
development centres outside India,as part of software projects, while
offshore revenues are for services which are performed at our software
development centers located in India. The table below sets forth the percentage
of our revenues by location for fiscal 2010 and fiscal 2009:


Percentage
      of revenuesFiscal
      2010
            Fiscal
      2009Onsite
            46.1%
            46.7%Offshore
            53.9%
            53.3%




The services
performed onsite typically generate higher revenues per-capita, but at lower
gross margins in percentage as compared to the services performed at our own
facilities. The table below sets forth details of billable hours expended as a
percentage of revenue for onsite and offshore for fiscal 2010 and fiscal
2009:


Fiscal
      2010
            Fiscal
      2009Onsite
            22.6%
            23.6%Offshore
            77.4%
            76.4%




Revenues from
services represented 95.8% of total revenues for fiscal 2010 as compared to
96.1% for fiscal 2009. Sale of our software products represented 4.2% of our
total revenues for fiscal 2010 as compared to 3.9% for fiscal 2009.




The following table
sets forth the revenues from fixed-price, fixed-timeframe contracts and
time-and-materials contracts as a percentage of total services revenues for
fiscal 2010 and fiscal 2009:


Percentage of total services
      revenuesFiscal
      2010
            Fiscal
      2009Fixed-price,
      fixed-time frame contracts
            38.5%
            35.4%Time-and-materials
      contracts
            61.5%
            64.6%




The following table
sets forth our revenues by geographic segments for fiscal 2010 and fiscal
2009:


Geographic
      Segments
            Percentage of
      revenuesFiscal
      2010
            Fiscal
      2009North
      America
            65.8%
            63.2%Europe
            23.0%
            26.4%India
            1.2%
            1.3%Rest of the
      World
            10.0%
            9.1%




A focus of our
growth strategy is to expand our business to parts of the world outside North
America, including Europe, Australia and other parts of Asia, as we expect that
increases in the proportion of revenues generated from customers outside of
North America would reduce our dependence upon our sales to North America and
the impact on us of economic downturns in that region.




There were
significant currency movements during fiscal 2010. The following table sets
forth our revenues by geographic segments for fiscal 2010, had the average
exchange rate between each of the currencies namely, the United Kingdom Pound
Sterling, Euro and Australian dollar, and the U.S. dollar remained constant,
during fiscal 2010 in comparison to fiscal 2009, in constant currency
terms:


Geographic
      Segments
            Fiscal
      2010North
      America
            65.9%Europe
            23.5%India
            1.2%Rest of the
      World
            9.4%




The following table
sets forth our geographic segment profit (revenues less identifiable operating
expenses and allocated expenses) as a percentage of geographic segment revenue
for fiscal 2010 and fiscal 2009 (refer note 2.20.2 under item 18):


Geographic
      Segments
            Fiscal
      2010
            Fiscal
      2009North
      America
            34.2%
            31.8%Europe
            34.8%
            33.6%India
            44.8%
            51.7%Rest of the
      World
            35.1%
            37.5%





The decline in
geographic segment profit as a percentage of geographic segment revenue in the
Indian segment in fiscal 2010 as compared to fiscal 2009 is due to the initial
operational costs being incurred in connection with certain projects in this
segment.




During
fiscal 2010 the total billed person-months for our services other than business
process management grew by 6.7% compared to fiscal 2009. The onsite and offshore
billed person-months growth for our services other than business process
management were 1.5% and 9.0% during fiscal 2010 compared to fiscal 2009. During
fiscal 2010 there was 5.1% decrease in offshore rates compared to fiscal 2009
for our services other than business process management. There was no material
change in the onsite rates of fiscal 2010 when compared to fiscal 2009. On a blended basis,
the billing rates declined by 4.0% in fiscal 2010 when compared to fiscal
2009.




Cost
of sales




The following table
sets forth our cost of sales for fiscal 2010 and fiscal 2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeCost of
      sales
            $2,749
            $2,699
            $50
            1.9%As a
      percentage of revenues
            57.2%
            57.9%








(Dollars in
      millions)Fiscal
      2010
            Fiscal
      2009
            ChangeEmployee
      benefit costs
            $2,241
            $2,177
            $64Depreciation
      and amortization
            199
            165
            34Travelling
      costs
            103
            133
            (30)Cost of
      software packages
            74
            77
            (3)Provision for
      post-sales client support
            –
            8
            (8)Operating
      lease payments
            15
            16
            (1)Communication
      costs
            18
            20
            (2)Cost of
      technical sub-contractors
            79
            85
            (6)Repairs and
      maintenance
            6
            5
            1Other
      expenses
            14
            13
            1Total
            $2,749
            $2,699
            $50




The decrease in
cost of sales as a percentage of revenues for fiscal 2010 from fiscal 2009 was
attributable primarily to a decrease in our travelling costs and cost of
technical sub-contractors. The increase in employee benefit costs commensurate
with the increase in employee strength. Further, during
fiscal 2010, the offshore and onsite wages of our employees increased on an
average by 8% and 2%, respectively, with effect from October 2010, as against
the average offshore and onsite wage increase of 11% to 13% and 4% to 5%,
respectively, during fiscal 2009. The reduction in travelling costs is primarily
due to reduction in non-billable travel costs. The reduction in the cost of
technical sub-contractors is due to decreased engagements of technical
sub-contractors.




Gross
profit




The following table
sets forth our gross profit for fiscal 2010 and fiscal 2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeGross
      profit
            $2,055
            $1,964
            $91
            4.6%As a
      percentage of revenues
            42.8%
            42.1%




The increase in
gross profit for fiscal 2010 from fiscal 2009 was attributable to a 3.0%
increase in revenue and a 0.7% decrease in cost of sales as a percentage of
revenue in the same period as compared to fiscal 2009.




Revenues and gross
profits are also affected by employee utilization rates. The following table
sets forth the utilization rates of billable employees for services and software
application products, excluding business process outsourcing
services:


Fiscal2010
            2009Including
      trainees
            67.5%
            68.9%Excluding
      trainees
            74.2%
            73.9%




Selling
and marketing expenses




The following table
sets forth our selling and marketing expenses for fiscal 2010 and fiscal
2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeSelling and
      marketing expenses
            $251
            $239
            $12
            5.0%As a
      percentage of revenues
            5.2%
            5.1%








(Dollars in
      millions)Fiscal
      2010
            Fiscal
      2009
            ChangeEmployee
      benefit costs
            $198
            $179
            $19Travelling
      costs
            23
            25
            (2)Branding and
      marketing
            16
            19
            (3)Commission
            3
            3
            –Operating
      lease payments
            3
            3
            –Consultancy
      and professional charges
            5
            5
            –Other
      expenses
            3
            5
            (2)Total
            $251
            $239
            $12




The number of our
sales and marketing personnel increased from 821 as of March 31, 2009 to 896 as
of March 31, 2010. The increase in selling and marketing expenses during fiscal
2010 from fiscal 2009 was primarily attributable to an increase in employee
benefit costs, which was partially offset by a decrease in our travelling costs
and in our branding and marketing expenses.




Administrative
expenses




The following table
sets forth our administrative expenses for fiscal 2010 and fiscal
2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeAdministrative
      expenses
            $344
            $351
            $(7)
            (2.0)%As a
      percentage of revenues
            7.2%
            7.5%








(Dollars in
      millions)Fiscal
      2010
            Fiscal
      2009
            ChangeEmployee
      benefit costs
            $114
            $100
            $14Consultancy
      and professional charges
            54
            51
            2Repairs and
      maintenance
            49
            49
            –Power and
      fuel
            30
            32
            (2)Communication
      costs
            27
            34
            (7)Travelling
      costs
            21
            26
            (5)Allowance for
      impairment of trade receivables
            –
            16
            (16)Rates and
      taxes
            7
            7
            –Insurance
      charges
            7
            6
            1Operating
      lease payments
            8
            6
            2Postage and
      courier
            2
            2
            –Printing and
      stationery
            2
            3
            (1)Other
      expenses
            23
            19
            4Total
            $344
            $351
            $(7)




The decrease in
administrative expense and administrative expense as a percentage of revenue for
fiscal 2010 compared to fiscal 2009 was primarily due to a decrease in the
allowance for impairment of trade receivables, communication costs and
travelling costs, partially offset by an increase in employee benefit
costs.




The factors which
affect the fluctuations in our allowance for impairment of trade receivables
include the financial health of our clients and the economic environment in
which they operate. No one client has contributed significantly to a loss, and
we have had no significant changes in our collection policies or payment terms.
Allowance for impairment of trade receivables as a percentage of revenue was
zero and 0.34% in fiscal 2010 and fiscal 2009, respectively.




Operating profit




The following table
sets forth our operating profit for fiscal 2010 and fiscal 2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeOperating
      profit
            $1,460
            $1,374
            $86
            6.3%As a
      percentage of revenues
            30.4%
            29.5%




The increase in
operating profit and operating profit as a percentage of revenues for fiscal
2010 from fiscal 2009 was attributable to a 4.6% increase in gross profit and a
2.0% decrease in administrative expenses for fiscal 2010, which was partially
offset by a 5.0% increase in selling and marketing expenses, respectively, in
fiscal 2010 compared to fiscal 2009.




Other
income




The following table
sets forth our other income for fiscal 2010 and fiscal 2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeOther income,
      net
            $209
            $101
            $108
            106.9%




Other income for
fiscal 2010 includes interest income on deposits of $164 million, income from
available-for-sale financial assets/investments of $34 million and foreign
exchange gain of $63 million on forward and options contracts, partially offset
by a foreign exchange loss of $57 million on translation of other assets and
liabilities. Income from available-for-sale financials assets/investments
includes $11 million of income from sale of an unlisted equity instrument. Other
income for fiscal 2009 includes interest income on deposits of $186 million,
income from available-for-sale financial assets/investments of $1 million and a
foreign exchange gain of $71 million on translation of other assets and
liabilities, partially offset by a foreign exchange loss of $165 million on
forward and options contracts. Other income for fiscal 2009 includes a net
amount of $4 million, consisting of $7 million received from Axon Group Plc as
inducement fees offset by $3 million of expenses incurred towards the
transaction.




We generate
substantially all of our revenues in foreign currencies, particularly the U.S.
dollar, the United Kingdom Pound Sterling, Euro and the Australian dollar,
whereas we incur a majority of our expenses in Indian rupees. The exchange rate
between the rupee and the U.S. dollar has changed substantially in recent years
and may fluctuate substantially in the future. Consequently, the results of our
operations are adversely affected as the rupee appreciates against the U.S.
dollar. Foreign exchange gains and losses arise from the appreciation and
depreciation of the rupee against other currencies in which we transact business
and from foreign exchange forward and option contracts.




The following table
sets forth the currency in which our revenues for fiscal 2010 and fiscal 2009
were denominated:


Currency
            Percentage of
      RevenuesFiscal
    2010
            Fiscal
    2009U.S.
      dollar
            73.3%
            71.1%United
      Kingdom Pound Sterling
            9.2%
            12.7%Euro
            6.9%
            7.1%Australian
      dollar
            5.8%
            4.6%Others
            4.8%
            4.5%




The following table
sets forth information on the foreign exchange rates in rupees per U.S. dollar,
United Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2010 and
fiscal 2009:


Fiscal
            Appreciation  /  (Depreciation)
              in
      percentage2010(Rs.)
            2009(Rs.)Average
      exchange rate during the period:U.S.
      dollar
            47.43
            46.54
            (1.9)%United
      Kingdom Pound Sterling
            75.74
            78.43
            3.4%Euro
            67.02
            65.54
            (2.3)%Australian
      dollar
            40.30
            36.24
            (11.2)%








Fiscal2010
      (Rs.)
            2009
      (Rs.)Exchange
      rate at the beginning of the period:U.S.
      dollar
            50.72
            40.02United
      Kingdom Pound Sterling
            72.49
            79.46Euro
            67.44
            63.25Australian
      dollar
            35.03
            36.55Exchange
      rate at the end of the period:U.S.
      dollar
            44.90
            50.72United
      Kingdom Pound Sterling
            67.96
            72.49Euro
            60.45
            67.44Australian
      dollar
            41.16
            35.03Appreciation  /  (Depreciation)
      of the rupee against the relevant currency during the period (as a
      percentage):U.S.
      dollar
            11.5%
            (26.7)%United
      Kingdom Pound Sterling
            6.2%
            8.8%Euro
            10.4%
            (6.6)%Australian
      dollar
            (17.5)%
            4.2%




The following table
sets forth information on the foreign exchange rates in U.S. dollar per United
Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2010 and fiscal
2009:


Fiscal
            Appreciation  /  (Depreciation)
              in
      percentage2010($)
            2009($)Average
      exchange rate during the period:United
      Kingdom Pound Sterling
            1.60
            1.69
            5.2%Euro
            1.41
            1.41
            -Australian
      dollar
            0.85
            0.78
            (9.1)%






Fiscal2010
      ($)
            2009
      ($)Exchange
      rate at the beginning of the period:United
      Kingdom Pound Sterling
            1.43
            1.99Euro
            1.33
            1.58Australian
      dollar
            0.69
            0.91Exchange
      rate at the end of the period:United
      Kingdom Pound Sterling
            1.51
            1.43Euro
            1.35
            1.33Australian
      dollar
            0.92
            0.69Appreciation  /  (Depreciation)
      of U.S. dollar against the relevant currency during the
      period:United
      Kingdom Pound Sterling
            (5.6)%
            28.0%Euro
            (1.5)%
            15.9%Australian
      dollar
            (33.3)%
            24.4%




For fiscal 2010,
every percentage point depreciation/appreciation in the exchange rate between
the Indian rupee and the U.S. dollar has affected our operating margins by
approximately 0.6%. The exchange rate between the rupee and U.S. dollar has
fluctuated substantially in recent years and may continue to do so in the
future. We are unable to predict the impact that future fluctuations may have on
our operating margins.




Income tax
expense




The following table
sets forth our income tax expense and effective tax rate for fiscal 2010 and
fiscal 2009:


(Dollars in
      millions)Fiscal
            Change
            Percentage
      Change2010
            2009Income tax
      expense
            $356
            $194
            $162
            83.5%Effective tax
      rate
            21.3%
            13.2%





The increase in the effective tax rate is primarily
due to the expiration of the tax holiday period for approximately 64.8% of our
revenues from STP units that were benefiting from a tax holiday in fiscal 2009.
Further, we are subject to 15% Branch Profit Tax (BPT) in the U.S. to the extent
our U.S. branch’s profits during the year is greater than the increase in the
net assets of our U.S. branch, computed in accordance with the Internal Revenue
Code. During the year ended March 31, 2010, we provided for branch profit tax of
$44 million, as we estimate that these branch profits are expected tobe distributed in the foreseeable
future.





Net profit




The following table
sets forth our net profit for fiscal 2010 and fiscal 2009:


(Dollars in
      millions)Fiscal
    2010
            Fiscal
    2009
            Change
            Percentage
      ChangeNet
      profit
            $1,313
            $1,281
            $32
            2.5%As a
      percentage of revenues
            27.3%
            27.5%




The increase in net
profit and net profit as a percentage of revenues for fiscal 2010 from fiscal
2009 was attributable to a 6.3% increase in operating profit and 106.9% increase
in other income, which were partially offset by an 83.5% increase in income tax
expense during the same period.




Results
for Fiscal 2009 compared to Fiscal 2008




Revenues




The following table
sets forth the growth in our revenues from fiscal 2008 to fiscal
2009:


(Dollars in
      millions)Fiscal
      2009
            Fiscal
    2008
            Change
            Percentage
      ChangeRevenues
            $4,663
            $4,176
            $487
            11.7%




Revenues increased
in almost all segments of our business. The increase in revenues was
attributable primarily to an increase in business from existing clients,
particularly in industries such as manufacturing and retail.





During fiscal 2009,
majority of the currencies in which we transact business have depreciated
significantly against the U.S. dollar, with the United Kingdom Pound Sterling,
Euro and Australian dollar depreciating by 28.0%, 15.9% and 24.4%, respectively.





There were
significant currency movements during fiscal 2009. Had the average exchange rate
between each of these currencies and the U.S. dollar remained constant, during
fiscal 2009 in comparison to fiscal 2008, our revenues in constant currency
terms for fiscal 2009 would have been higher by $148 million at $4,811 million
as against our reported revenues of $4,663 million, resulting in a growth of
15.2% as against a reported growth of 11.7%.




The following table
sets forth our revenues by industry segments for fiscal 2009 and fiscal
2008:


Industry
      Segments
            Percentage of
      RevenuesFiscal
      2009
            Fiscal
    2008Financial
      services
            33.9%
            35.8%Manufacturing
            19.7%
            14.7%Telecommunication
            18.1%
            21.6%Retail
            12.5%
            11.8%Others
      including utilities, logistics and services
            15.8%
            16.1%




The increase in the
percentage of revenues from the manufacturing segment during fiscal 2009 as
compared to fiscal 2008 is due to addition of new clients and the decline in the
percentage of revenues from the financial services and telecommunication segment
during fiscal 2009 as compared to fiscal 2008 is due to decrease of business
from European clients.




There were
significant currency movements during fiscal 2009. The following table sets
forth our revenues by industry segments for fiscal 2009, had the average
exchange rate between each of the currencies namely, the United Kingdom Pound
Sterling, Euro and Australian dollar, and the U.S. dollar remained constant,
during fiscal 2009 in comparison to fiscal 2008, in constant currency
terms:


Industry
      Segments
            Fiscal
      2009Financial
      services
            33.6%Manufacturing
            19.1%Telecommunication
            19.3%Retail
            12.5%Others
      including utilities, logistics and services
            15.5%




The following table
sets forth our industry segment profit (revenues less identifiable operating
expenses and allocated expenses) as a percentage of industry segment revenue for
fiscal 2009 and fiscal 2008 (refer note 2.20.1 under item 18):


Industry
      Segments
            Fiscal
      2009
            Fiscal
      2008Financial
      services
            32.0%
            30.9%Manufacturing
            30.9%
            28.1%Telecommunication
            37.0%
            35.6%Retail
            32.5%
            30.1%Others
      including utilities, logistics and services
            33.6%
            31.0%




Our revenues are
also segmented into onsite and offshore revenues. Onsite revenues are for those
services which are performed at client sites or at our global
development centres outside India,as part of software projects, while
offshore revenues are for services which are performed at our software
development centers located in India. The table below sets forth the percentage
of our revenues by location for fiscal 2009 and fiscal 2008:


Percentage
      of RevenuesFiscal
      2009
            Fiscal
      2008Onsite
            46.7%
            48.4%Offshore
            53.3%
            51.6%




The services
performed onsite typically generate higher revenues per-capita, but at lower
gross margins in percentage as compared to the services performed at our own
facilities. The table below sets forth details of billable hours expended as a
percentage of revenue for onsite and offshore for fiscal 2009 and fiscal
2008:


Fiscal
      2009
            Fiscal
      2008Onsite
            23.6%
            25.4%Offshore
            76.4%
            74.6%




Revenues from
services represented 96.1% of total revenues for fiscal 2009 as compared to
96.4% for fiscal 2008. Sale of our software products represented 3.9% of our
total revenues for fiscal 2009 as compared to 3.6% for fiscal 2008.




The following table
sets forth the revenues from fixed-price, fixed-timeframe contracts and
time-and-materials contracts as a percentage of total services revenues for
fiscal 2009 and fiscal 2008:


Percentage of total services
      revenuesFiscal
      2009
            Fiscal
      2008Fixed-price,
      fixed-time frame contracts
            35.4%
            31.0%Time-and-materials
      contracts
            64.6%
            69.0%




The following table
sets forth our revenues by geographic segments for fiscal 2009 and fiscal
2008:


Geographic
      Segments
            Percentage of
      RevenuesFiscal
      2009
            Fiscal
    2008North
      America
            63.2%
            62.0%Europe
            26.4%
            28.1%India
            1.3%
            1.3%Rest of the
      World
            9.1%
            8.6%




A focus of our
growth strategy is to expand our business to parts of the world outside North
America, including Europe, Australia and other parts of Asia, as we expect that
increases in the proportion of revenues generated from customers outside of
North America would reduce our dependence upon our sales to North America and
the impact on us of economic downturns in that region.




There were
significant currency movements during fiscal 2009. The following table sets
forth our revenues by geographic segments for fiscal 2009, had the average
exchange rate between each of the currencies namely, the United Kingdom Pound
Sterling, Euro and Australian dollar, and the U.S. dollar remained constant,
during fiscal 2009 in comparison to fiscal 2008, in constant currency
terms:


Geographic
      Segments
            Fiscal
      2009North
      America
            61.8%Europe
            27.9%India
            1.3%Rest of the
      World
            9.0%




The following table
sets forth our geographic segment profit (revenues less identifiable operating
expenses and allocated expenses) as a percentage of geographic segment revenue
for fiscal 2009 and fiscal 2008 (refer note 2.20.2 under item 18):


Geographic
      Segments
            Fiscal
      2009
            Fiscal
      2008North
      America
            31.8%
            29.7%Europe
            33.6%
            33.4%India
            51.7%
            50.9%Rest of the
      World
            37.5%
            35.0%




During fiscal 2009
the total billed person-months for our services other than business process
management grew by 14.3% compared to fiscal 2008. The onsite and offshore billed
person-months growth for our services other than business process management
were 9.8% and 16.3% during fiscal 2009 compared to fiscal 2008. During fiscal
2009 there was 1.8% decrease in onsite rates and 1.8% decrease in offshore rates
compared to fiscal 2008 for our services other than business process management.
On a blended
basis, the billing rates declined by 3.0% in fiscal 2009 when compared to fiscal
2008.




Cost
of sales




The following table
sets forth our cost of sales for fiscal 2009 and fiscal 2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeCost of
      sales
            $2,699
            $2,453
            $246
            10.0%As a
      percentage of revenues
            57.9%
            58.7%








(Dollars in
      millions)Fiscal
      2009
            Fiscal
      2008
            ChangeEmployee
      benefit costs
            $2,177
            $1,976
            $201Depreciation
      and amortization
            165
            149
            16Travelling
      costs
            133
            126
            7Cost of
      software packages
            77
            56
            21Provision for
      post-sales client support
            8
            12
            (4)Operating
      lease payments
            16
            13
            3Communication
      costs
            20
            19
            1Cost of
      technical sub-contractors
            85
            66
            19Repairs and
      maintenance
            5
            6
            (1)Other
      expenses
            13
            30
            (17)Total
            $2,699
            $2,453
            $246





The increase in
cost of sales in absolute dollar terms from fiscal 2008 to fiscal 2009 was in
line with the growth of our operations. The increase in employee benefit costs
can be attributed to an increase in the number of employees and the compensation
review affected in April 2008.




Gross
profit




The following table
sets forth our gross profit for fiscal 2009 and fiscal 2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeGross
      profit
            $1,964
            $1,723
            $241
            14.0%As a
      percentage of revenues
            42.1%
            41.3%




The increase in
gross profit as a percentage of revenues for fiscal 2009 from fiscal 2008 was
attributable to a 11.7% increase in revenues for fiscal 2009, which was
partially offset by a 10.0% increase in cost of sales in the same period
compared to fiscal 2008.




Revenues and gross
profits are also affected by employee utilization rates. The following table
sets forth the utilization rates of billable employees for total services,
excluding business process outsourcing services:


Fiscal2009
            2008Including
      trainees
            68.9%
            70.7%Excluding
      trainees
            73.9%
            76.9%




Selling
and marketing expenses




The following table
sets forth our selling and marketing expenses for fiscal 2009 and fiscal
2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeSelling and
      marketing expenses
            $239
            $230
            $9
            3.9%As a
      percentage of revenues
            5.1%
            5.5%








(Dollars in
      millions)Fiscal
      2009
            Fiscal
      2008
            ChangeEmployee
      benefit costs
            $179
            $153
            $26Travelling
      costs
            25
            26
            (1)Branding and
      marketing
            19
            19
            –Commission
            3
            15
            (12)Operating
      lease payments
            3
            3
            –Consultancy
      and professional charges
            5
            5
            –Other
      expenses
            5
            9
            (4)Total
            $239
            $230
            $9




The number of our
sales and marketing personnel increased from 604 as of March 31, 2008 to 821 as
of March 31, 2009. The increase in employee benefit costs was attributable to an
increase in the number of employees and the compensation review affected in
April 2008. Commission charges for fiscal 2008 primarily comprised of earnout
charges provided and paid for during the same period.




Administrative
expenses




The following table
sets forth our administrative expenses for fiscal 2009 and fiscal
2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeAdministrative
      expenses
            $351
            $334
            $17
            5.1%As a
      percentage of revenues
            7.5%
            8.0%








(Dollars in
      millions)Fiscal
      2009
            Fiscal
      2008
            ChangeEmployee
      benefit costs
            $100
            $89
            $11Consultancy
      and professional charges
            51
            48
            3Repairs and
      maintenance
            49
            39
            10Power and
      fuel
            32
            30
            2Communication
      costs
            34
            33
            1Travelling
      costs
            26
            25
            1Allowance for
      impairment of trade receivables
            16
            11
            5Rates and
      taxes
            7
            9
            (2)Insurance
      charges
            6
            7
            (1)Operating
      lease payments
            6
            6
            –Postage and
      courier
            2
            3
            (1)Printing and
      stationery
            3
            5
            (2)Other
      expenses
            19
            29
            (10)Total
            $351
            $334
            $17




The increase in
administrative expenses in absolute U.S. dollar terms from fiscal 2008 to fiscal
2009 was in line with the growth of our operations. The increase in
employee benefit costs can be attributed to an increase in the number of
employees and the compensation review affected in April 2008. The factors which
affect the fluctuations in our allowance for impairment of trade receivables
include the financial health of our clients and the economic environment in
which they operate. No one client has contributed significantly to a loss, and
we have had no significant changes in our collection policies or payment terms.
Allowance for impairment of trade receivables as a percentage of revenue was
0.34% and 0.26% in fiscal 2009 and fiscal 2008, respectively.




Operating profit




The following table
sets forth our operating profit for fiscal 2009 and fiscal 2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeOperating
      profit
            $1,374
            $1,159
            $215
            18.6%As a
      percentage of revenues
            29.5%
            27.8%




The increase in
operating profit as a percentage of revenues for fiscal 2009 from fiscal 2008
was attributable to a 14.0% increase in gross profit for fiscal 2009, which was
partially offset by a 3.9% and 5.1% increase in selling and marketing expenses
and administrative expenses, respectively, in the same period compared to fiscal
2008.




Other income




The following table
sets forth our other income for fiscal 2009 and fiscal 2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeOther income,
      net
            $101
            $175
            $
      (74)
            (42.3)%




Other income for
fiscal 2009 includes interest income on deposits of $186 million, income from
available-for-sale financial assets/ investments of $1 million and foreign
exchange loss of $165 million on forward and options contracts and a foreign
exchange gain of $71 million on translation of other assets and liabilities.
Other income for fiscal 2008 includes interest income on deposits of $169
million, income from available-for-sale financial assets/ investments of $2
million and a foreign exchange gain of $26 million on forward and options
contracts and a foreign exchange loss of $24 million on translation of other
assets and liabilities.





Other income for
fiscal 2009 includes a net amount of $4 million, consisting of $7 million
received from Axon Group Plc as inducement fees offset by $3 million of expenses
incurred towards the transaction.




We generate a major
portion of our revenues in foreign currencies, particularly the U.S. dollar, the
United Kingdom Pound Sterling, Euro and the Australian dollar, whereas we incur
a majority of our expenses in Indian rupees. The exchange rate between the
Indian rupee and the U.S. dollar has changed substantially in recent years and
may fluctuate substantially in the future. Consequently, the results of our
operations are adversely affected as the Indian rupee appreciates against the
U.S. dollar. Foreign exchange gains and losses arise from the appreciation and
depreciation of the Indian rupee against other currencies in which we transact
business and from foreign exchange forward and option contracts.




The following table
sets forth the currency in which our revenues for fiscal 2009 and fiscal 2008
were denominated:


Currency
            Percentage of
      RevenuesFiscal
    2009
            Fiscal
    2008U.S.
      dollar
            71.1%
            69.5%United
      Kingdom Pound Sterling
            12.7%
            14.9%Euro
            7.1%
            5.7%Australian
      dollar
            4.6%
            4.8%Others
            4.5%
            5.1%




The following table
sets forth information on the foreign exchange rates in Indian rupees per U.S.
dollar, United Kingdom Pound Sterling, Euro and Australian dollar for fiscal
2009 and fiscal 2008:


Fiscal
            Appreciation  /  (Depreciation)
              in
      percentage2009(Rs.)
            2008(Rs.)Average
      exchange rate during the period:U.S.
      dollar
            46.54
            40.00
            (16.4)%United
      Kingdom Pound Sterling
            78.43
            80.52
            2.6%Euro
            65.54
            57.24
            (14.5)%Australian
      dollar
            36.24
            35.01
            (3.5)%





Fiscal2009
      (Rs.)
            2008
    (Rs.)Exchange
      rate at the beginning of the period:U.S.
      dollar
            40.02
            43.10United
      Kingdom Pound Sterling
            79.46
            84.84Euro
            63.25
            57.64Australian
      dollar
            36.55
            34.93Exchange
      rate at the end of the period:U.S.
      dollar
            50.72
            40.02United
      Kingdom Pound Sterling
            72.49
            79.46Euro
            67.44
            63.25Australian
      dollar
            35.03
            36.55Appreciation  /  (Depreciation)
      of the rupee against the relevant currency during the period (as a
      percentage):U.S.
      dollar
            (26.7)%
            7.1%United
      Kingdom Pound Sterling
            8.8%
            6.3%Euro
            (6.6)%
            (9.7)%Australian
      dollar
            4.2%
            (4.6)%




The following table
sets forth information on the foreign exchange rates in U.S. dollar per United
Kingdom Pound Sterling, Euro and Australian dollar for fiscal 2009 and fiscal
2008:


Fiscal
            Appreciation  /  (Depreciation)
              in
      percentage2009($)
            2008($)Average
      exchange rate during the period:United
      Kingdom Pound Sterling
            1.69
            2.01
            15.9%Euro
            1.41
            1.43
            1.4%Australian
      dollar
            0.78
            0.88
            11.4%






Fiscal2009
      ($)
            2008
  ($)Exchange
      rate at the beginning of the period:United
      Kingdom Pound Sterling
            1.99
            1.97Euro
            1.58
            1.34Australian
      dollar
            0.91
            0.81Exchange
      rate at the end of the period:United
      Kingdom Pound Sterling
            1.43
            1.99Euro
            1.33
            1.58Australian
      dollar
            0.69
            0.91Appreciation  /  (Depreciation)
      of U.S. dollar against the relevant currency during the
      period:United
      Kingdom Pound Sterling
            28.0%
            (0.9)%Euro
            15.9%
            (18.2)%Australian
      dollar
            24.4%
            (12.7)%




For fiscal 2009,
every percentage point depreciation / appreciation in the exchange rate between
the Indian rupee and the U.S. dollar has affected our operating margins by
approximately 0.4%. The exchange rate between the rupee and U.S. dollar has
fluctuated substantially in recent years and may continue to do so in the
future. We are unable to predict the impact that future fluctuations may have on
our operating margins.




Income tax
expense




The following table
sets forth our income tax expense and effective tax rate for fiscal 2009 and
fiscal 2008:


(Dollars in
      millions)Fiscal
            Change
            Percentage
      Change2009
            2008Income tax
      expense
            $194
            $171
            $23
            13.5%Effective tax
      rate
            13.2%
            12.8%




The marginal
increase in the effective tax rate to 13.2% for fiscal 2009 from 12.8% for
fiscal 2008 is due to the expiration of the tax holiday period for few of our
STP units that were benefiting from a tax holiday in fiscal 2008.




Net profit




The following table
sets forth our net profit for fiscal 2009 and fiscal 2008:


(Dollars in
      millions)Fiscal
    2009
            Fiscal
    2008
            Change
            Percentage
      ChangeNet
      profit
            $1,281
            $1,163
            $118
            10.1%As a
      percentage of revenues
            27.5%
            27.8%





The decrease in net
profit as a percentage of revenues for fiscal 2009 from fiscal 2008 was
attributable to a significant decrease in other income, primarily as a result of
losses from foreign currency exchange transactions.




Liquidity
and capital resources




Our growth has been
financed largely by cash generated from operations and, to a lesser extent, from
the proceeds from the issuance of equity. In 1993, we raised approximately $4.4
million in gross aggregate proceeds from our initial public offering of equity
shares in India. In 1994, we raised an additional $7.7 million through private
placements of our equity shares with foreign institutional investors, mutual
funds, Indian domestic financial institutions and corporations. On March 11,
1999, we raised $70.4 million in gross aggregate proceeds from our initial
public offering of ADSs in the United States.




As of March 31,
2010, 2009 and 2008, we had $3,951 million, $2,583 million and $2,578 million in
working capital, respectively, including $2,698 million in cash and cash
equivalents, $569 million in available-for-sale financial assets and $265
million in Investments in certificates of deposit as of March 31, 2010, $2,167
million in cash and cash equivalents as of March 31, 2009 and $2,058 million in
cash and cash equivalents and $18 million in available-for-sale financial assets
as of March 31, 2008. We have no outstanding bank borrowings. We believe that
our current working capital is sufficient to meet our requirements for the next
12 months. We believe that a sustained reduction in IT spending, a longer sales
cycle, or a continued economic downturn in any of the various geographic
locations or industry segments in which we operate, could result in a decline in
our revenue and negatively impact our liquidity and cash resources.




Our principal
sources of liquidity are our cash and cash equivalents and the cash flow that we
generate from our operations. Our cash and cash equivalents comprise of cash and
bank deposits and deposits with corporations which can be withdrawn at any point
of time without prior notice or penalty. These cash and cash equivalents
included a restricted cash balance of $16 million and $1 million as of March 31,
2010 and March 31, 2008, respectively. The restricted cash balance as of March
31, 2009 was less than $1 million. These restrictions are primarily on account
of unclaimed dividends and cash balances held by irrevocable trusts controlled
by us.




In summary, our
cash flows were:


(Dollars in
      millions)Fiscal2010
            2009
            2008Net cash
      provided by operating activities
            $1,457
            $1,409
            $1,157Net cash used
      in investing activities
            $(930)
            $(290)
            $(420)Net cash used
      in financing activities
            $(310)
            $(545)
            $(194)




Net cash provided
by operations consisted primarily of net profit adjusted for depreciation and
amortization, deferred taxes and income taxes and changes in working
capital.




Trade receivables
decreased by $41 million during fiscal 2010, compared to an increase of $81
million and $211 million during fiscal 2009 and fiscal 2008, respectively. Trade
receivables as a percentage of last 12 months revenues were 16.2%, 15.5% and
19.7% as of March 31, 2010, 2009 and 2008, respectively. Days sales outstanding
on the basis of last 12 months revenues were 59 days, 57 days and 72 days as of
March 31, 2010, 2009 and 2008, respectively. Prepayments and other assets
increased by $49 million during fiscal 2010, compared to a decrease of $11
million during fiscal 2009 and an increase of $49 million during fiscal 2008.
There was an increase in unbilled revenues of $19 million during fiscal 2010, of
$58 million during fiscal 2009 and of $41 million during fiscal 2008. Unbilled
revenues represent revenues that are recognized but not yet invoiced. Other
liabilities and provisions decreased by $18 million during fiscal 2010 as
compared to an increase of $89 million during fiscal 2009 and $109 million
during fiscal 2008. Unearned revenues increased by $42 million during fiscal
2010 and $10 million during fiscal 2009, compared to a decrease of $6 million
during fiscal 2008. Unearned revenue resulted primarily from advance client
billings on fixed-price, fixed-timeframe contracts for which related efforts
have not been expended. Revenues from fixed-price, fixed-timeframe contracts
represented 38.5%, 35.4% and 31.0% of total services revenues for fiscal 2010,
2009 and 2008, respectively, whereas revenues from time-and-materials contracts
represented 61.5%, 64.6% and 69.0% of total services revenues for fiscal 2010,
2009 and 2008, respectively.




Net cash used in
investing activities, relating to our acquisition of additional property, plant
and equipment for fiscal 2010, 2009 and 2008 was $143 million, $285 million and
$373 million, respectively for our software development centers. During fiscal
2010 we invested $2,091 million in available-for-sale financial assets, $249
million in certificates of deposit, $6 million in non-current deposits with
corporations and redeemed available-for-sale financial assets of $1,559 million.
During fiscal 2009, we invested $186 million in available-for-sale financial
assets, $41 million in certificates of deposit, and $20 million in non-current
deposits with corporations, and redeemed available-for-sale financial assets of
$202 million and certificates of deposit of $41 million. During fiscal 2008, we
invested $511 million in available-for-sale financial assets and $7 million in
non-current deposits with corporations, and redeemed available-for-sale
financial assets of $500 million. The proceeds realized from the redemption of
available-for-sale financial assets were used in our day to day business
activities.




On December 4,
2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC
(McCamish), a business process solutions provider based in Atlanta, Georgia, in
the United States. The business acquisition was conducted by entering into
Membership Interest Purchase Agreement for a cash consideration of $37
million.




During fiscal 2009,
Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty.
Limited (MSPL) for a cash consideration of $3 million, of which $1 million was
outstanding as of March 31, 2009.




During fiscal 2008,
Infosys BPO had acquired 100% of the equity shares of P-Financial Services
Holding B.V. This business acquisition was conducted by entering into a Sale and
Purchase Agreement with Koninklijke Philips Electronics N.V. (Philips), a
company incorporated under the laws of the Netherlands, for acquiring the shared
service centres of Philips for finance, accounting and procurement business in
Poland, Thailand and India for a cash consideration of $27 million of which $1
million was paid during the year ended March 31, 2009. Further, in February
2008, the committed purchase of Infosys BPO shares from minority shareholders of
Infosys BPO was completed by paying an amount of $6 million.




Previously, we
provided various loans to employees including car loans, home loans, personal
computer loans, telephone loans, medical loans, marriage loans, personal loans,
salary advances, education loans and loans for rental deposits. These loans were
provided primarily to employees in India who were not executive officers or
directors. Housing and car loans were available only to middle level managers,
senior managers and non-executive officers. These loans were generally
collateralized against the assets of the loan and the terms of the loans ranged
from 1 to 100 months.




We have
discontinued fresh disbursements under all of these loan schemes except for
personal loans and salary advances which we continue to provide primarily to
employees in India who are not executive officers or directors.




The annual rates of
interest for these loans vary between 0% and 4%. Loans aggregating $24 million
each were outstanding as of March 31, 2010 and 2009. The loan outstanding
as of March 31, 2008 was $29 million.




The timing of
required repayments of employee loans outstanding as of March 31, 2010 are as
detailed below.


(Dollars in
      millions)12
      months ending March 31,
            Repayment2011
            $232012
            1$24




Net cash used in
financing activities for fiscal 2010 was $310 million, which comprised primarily
of dividend payments of $330 million, partially offset by $20 million of
proceeds received from the issuance of 995,149 equity shares on exercise of
share options by employees. Net cash used in financing activities for fiscal
2009 was $545 million, which comprised primarily of dividend payments of $559
million, partially offset by $14 million of proceeds received from the issuance
of 834,285 equity shares on exercise of share options by employees. Net cash
used in financing activities for fiscal 2008 was $194 million, which comprised
primarily of dividend payments of $209 million, partially offset by $15 million
of proceeds received from the issuance of 785,896 equity shares on exercise of
share options by employees.




As of March 31,
2010, we had contractual commitments for capital expenditure of $67 million, as
compared to $73 million and $166 million of contractual commitments as of March
31, 2009 and 2008, respectively. These commitments include approximately $53
million in commitments for domestic purchases as of March 31, 2010, as compared
to compared to $64 million and $150 million as of March 31, 2009 and 2008,
respectively, and $14 million in commitments for imports of hardware, supplies
and services to support our operations generally as of March 31, 2010, as
compared to $9 million and $16 million as of March 31, 2009 and 2008,
respectively. We expect our outstanding contractual commitments as of March 31,
2010 to be significantly completed by September 2010.




Reconciliation between Indian GAAP
and IFRS




All financial
information in this Annual Report on Form 20-F is presented in accordance with
IFRS, although we also report for Indian statutory purposes under Indian GAAP.
The material differences that affect us are primarily attributable to IFRS
requirements for the:




·
            accounting
      for share-based compensation under IFRS 2
and




·
            amortization
      of intangible assets




Reconciliation of Net
Profit


(Dollars in
      millions)Fiscal2010
            2009
            2008Net
      profit as per Indian GAAP (Consolidated)
            $1,323
            $1,284
            $1,166Share-based
      compensation
            –
            (1)
            (3)Amortization
      of intangible assets and others
            (10)
            (2)
            –Net
      profit as per IFRS
            $1,313
            $1,281
            $1,163




Quantitative and Qualitative
Disclosures about Market Risk




General




Market risk is
attributable to all market sensitive financial instruments including foreign
currency receivables and payables. The value of a financial instrument may
change as a result of changes in the interest rates, foreign currency exchange
rates, commodity prices, equity prices and other market changes that affect
market risk sensitive instruments.




Our exposure to
market risk is a function of our revenue generating activities and any future
borrowing activities in foreign currency. The objective of market risk
management is to avoid excessive exposure of our earnings and equity to loss.
Most of our exposure to market risk arises out of our foreign currency accounts
receivable.




Risk Management
Procedures




We manage market
risk through treasury operations. Our treasury operations' objectives and
policies are approved by senior management and our Audit Committee. The
activities of treasury operations include management of cash resources,
implementing hedging strategies for foreign currency exposures, borrowing
strategies, if any, and ensuring compliance with market risk limits and
policies.




Components of Market
Risk




Exchange rate risk. Our
exposure to market risk arises principally from exchange rate risk. Even though
our functional currency is the Indian rupee, we generate a major portion of our
revenues in foreign currencies, particularly the U.S. dollar, the United Kingdom
Pound Sterling, Euro and the Australian dollar, whereas we incur a majority of
our expenses in Indian rupees. The exchange rate between the Indian rupee and
the U.S. dollar has changed substantially in recent years and may fluctuate
substantially in the future. Consequently, the results of our operations are
adversely affected as the Indian rupee appreciates against the U.S. dollar. For
fiscal 2010, 2009 and 2008, U.S. dollar denominated revenues represented 73.3%,
71.1% and 69.5% of total revenues, respectively. For the same periods, revenues
denominated in United Kingdom Pound Sterling represented 9.2%, 12.7% and 14.9%
of total revenues, revenues denominated in the Euro represented 6.9%, 7.1% and
5.7% of total revenues while revenues denominated in the Australian dollar
represented 5.8%, 4.6% and 4.8% of total revenues. Our exchange rate risk
primarily arises from our foreign currency revenues, receivables and
payables.




We use derivative
financial instruments such as foreign exchange forward and option contracts to
mitigate the risk of changes in foreign exchange rates on accounts receivable
and forecasted cash flows denominated in certain foreign currencies. The
counterparty for these contracts is generally a bank.




As of March 31,
2010, we had outstanding forward contracts of $267 million, Euro 22 million,
United Kingdom Pound Sterling 11 million and Australian dollar $3 million and
option contracts of $200 million. As of March 31, 2009 we had outstanding
forward contracts of $278 million, Euro 27 million and United Kingdom Pound
Sterling 21 million and option contracts of $173 million. As of March 31, 2008
we had outstanding forward contracts of $586 million, Euro 15 million and United
Kingdom Pound Sterling 3 million and option contracts of $100 million and United
Kingdom Pound Sterling 8 million and Euro 17 million. The forward contracts
typically mature within one to twelve months, must be settled on the day of
maturity and may be cancelled subject to the payment of any gains or losses in
the difference between the contract exchange rate and the market exchange rate
on the date of cancellation. We use these derivative instruments only as a
hedging mechanism and not for speculative purposes. We may not purchase adequate
instruments to insulate ourselves from foreign exchange currency risks. In
addition, any such instruments may not perform adequately as a hedging
mechanism. The policies of the Reserve Bank of India may change from time to
time which may limit our ability to hedge our foreign currency exposures
adequately. We may, in the future, adopt more active hedging policies, and have
done so in the past.




Fair value.The fair value of
our market rate risk sensitive instruments approximates their carrying
value.




Recent Accounting
Pronouncements




Standards early adopted by the
company






1.
            IFRS 8,
      Operating Segments is applicable for annual periods beginning on or after
      January 1, 2009. We have early adopted this standard as of April 1, 2007.
      IFRS 8 replaces IAS 14, Segment Reporting. The new standard requires a
      'management approach', under which segment information is presented on the
      same basis as that used for internal reporting provided to the chief
      operating decision maker. The application of this standard did not result
      in any change in the number of reportable segments. Allocation of goodwill
      was not required under Previous GAAP and hence goodwill has been allocated
      in accordance to the requirements of this
  Standard.




2.
            IFRS 3
      (Revised), Business Combinations, as amended, is applicable for annual
      periods beginning on or after July 1, 2009. We have early adopted this
      standard as of April 1, 2009. Business Combinations consummated after
      April 1, 2009 will be impacted by this standard. IFRS 3 (Revised)
      primarily requires the acquisition-related costs to be recognized as
      period expenses in accordance with the relevant IFRS. Costs incurred to
      issue debt or equity securities are required to be recognized in
      accordance with IAS 39. Consideration, after this amendment, will include
      fair values of all interests previously held by the acquirer.
      Re-measurement of such interests to fair value would be carried out
      through net profit in the statement of comprehensive income. Contingent
      consideration is required to be recognized at fair value even if not
      deemed probable of payment at the date of
  acquisition.




IFRS 3 (Revised)
provides an explicit option on a transaction-by-transaction basis, to measure
any Non-controlling interest (NCI) in the entity acquired at fair value of their
proportion of identifiable assets and liabilities or at full fair value. The
first method will result in a marginal difference in the measurement of goodwill
from the existing IFRS 3; however the second approach will require recording
goodwill on NCI as well as on the acquired controlling interest. Upon
consummating a business transaction in future we are likely to adopt the first
method of measuring NCI.




3.
            IAS 27, as
      amended, is applicable for annual periods beginning on or after July 1,
      2009. We have early adopted this standard as of April 1, 2009. It requires
      a mandatory adoption of economic entity model which treats all providers
      of equity capital as shareholders of the entity. Consequently, a partial
      disposal of interest in a subsidiary in which the parent company retains
      control does not result in a gain or loss but in an increase or decrease
      in equity. Additionally purchase of some or all of the NCI is treated as
      treasury transaction and accounted for in equity and a partial disposal of
      interest in a subsidiary in which the parent company loses control
      triggers recognition of gain or loss on the entire interest. A gain or
      loss is recognized on the portion that has been disposed off and a further
      holding gain is recognized on the interest retained, being the difference
      between the fair value and carrying value of the interest retained. This
      Standard requires an entity to attribute their share of net profit and
      reserves to the NCI even if this results in the NCI having a deficit
      balance.




Recently
adopted accounting pronouncements




1.
            IAS 1,
      Presentation of Financial Statements is applicable for annual periods
      beginning on or after January 1, 2009. We have adopted this standard as of
      April 1, 2009. Consequent to the adoption of the standard, the title for
      cash flows has been changed to ‘Statement of cash flows’. Further, we have
      included in our complete set of financial statements, a single ‘Statement
      of comprehensive income’.




2.
            IFRIC
      Interpretation 18, Transfers of Assets from Customers defines the
      treatment for property, plant and equipment transferred by customers to
      companies or for cash received to be invested in property, plant and
      equipment that must be used either to connect the customer to a network or
      to provide the customer with ongoing access to a supply of goods or
      services, or to do both.




The item of
property, plant and equipment is to be initially recognised at fair value with a
corresponding credit to revenue. If an ongoing service is identified as a part
of the agreement, the period over which revenue shall be recognised for that
service would be determined by the terms of the agreement with the customer. If
the period is not clearly defined, then revenue should be recognized over a
period no longer than the useful life of the transferred asset used to provide
the ongoing service. This interpretation is to be applied prospectively to
transfers of assets from customers received on or after July 1, 2009. We have
adopted this interpretation prospectively for all assets transferred after July
1, 2009. There has been no material impact on the company as a result of the
adoption of this interpretation.




Critical
Accounting Policies




We consider the
policies discussed below to be critical to an understanding of our financial
statements as their application places the most significant demands on
management's judgment, with financial reporting results relying on estimation
about the effect of matters that are inherently uncertain. Specific risks for
these critical accounting policies are described in the following paragraphs.
For all of these policies, future events rarely develop exactly as forecast, and
the best estimates routinely require adjustment.




Estimates




We prepare
financial statements in conformity with IFRS, which requires us to make
estimates, judgments and assumptions. These estimates, judgements and
assumptions affect the application of accounting policies and the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the period. Application of accounting policies
which require critical accounting estimates involving complex and subjective
judgments and the use of assumptions in the consolidated financial statements
have been disclosed below. However, accounting estimates could change from
period to period and actual results could differ from those estimates.
Appropriate changes in estimates are made as and when we become aware of changes
in circumstances surrounding the estimates. Changes in estimates are reflected
in the period in which changes are made and, if material, their effects are
disclosed in the notes to the consolidated financial statements.




a.
Revenue recognition




We use the
percentage-of-completion method in accounting for fixed-price contracts. Use of
the percentage-of-completion method requires us to estimate the efforts expended
to date as a proportion of the total efforts to be expended. Efforts expended
have been used to measure progress towards completion as there is a direct
relationship between input and productivity. Provisions for estimated losses, if
any, on uncompleted contracts are recorded in the period in which such losses
become probable based on the expected contract estimates at the reporting
date.




b. Income taxes




Our two major tax
jurisdictions are India and the U.S., though we also file tax returns in other
foreign jurisdictions. Significant judgments are involved in determining the
provision for income taxes, including amount expected to be paid/recovered for
uncertain tax positions.




c.
Business combinations and Intangible assets




Our
business combinations are accounted for using IFRS 3 (Revised), Business
Combinations. IFRS 3 requires us to fair value identifiable intangible assets
and contingent consideration to ascertain the net fair value of identifiable
assets, liabilities and contingent liabilities of the acquiree. Significant
estimates are required to be made in determining the value of contingent
consideration and intangible assets. These valuations are conducted by
independent valuation experts.




Revenue
Recognition




We derive our
revenues primarily from software development and related services, business
process management services and the licensing of software products. Arrangements
with customers for software development and related services and business
process management services are either on a fixed-price, fixed-timeframe or on a
time-and-material basis.





We recognize
revenue on time-and-material contracts as the related services are performed.
Revenue from the end of the last billing to the balance sheet date is recognized
as unbilled revenues. Revenue from fixed-price, fixed-timeframe contracts, where
there is no uncertainty as to measurement or collectability of consideration, is
recognized as per the percentage-of-completion method. When there is uncertainty
as to measurement or ultimate collectability revenue recognition is postponed
until such uncertainty is resolved. Efforts expended have been used to measure
progress towards completion as there is a direct relationship between input and
productivity. Provisions for estimated losses, if any, on uncompleted contracts
are recorded in the period in which such losses become probable based on the
current contract estimates. Costs and earnings in excess of billings have been
classified as unbilled revenue while billings in excess of costs and earnings
have been classified as unearned revenue.




At the end of every
reporting period, we evaluate each project for estimated revenue and estimated
efforts. Any revisions or updates to existing estimates are made wherever
required by obtaining approvals from officers having the requisite authority.
Management regularly reviews and evaluates the status of each contract in
progress to estimate the profit or loss. As part of the review, detailed actual
efforts and a realistic estimate of efforts to complete all phases of the
project is compared with the details of the original estimate and the total
contract price. To date, we have not had any fixed-price, fixed-timeframe
contracts that resulted in a material loss. We evaluate change orders according
to their characteristics and the circumstances in which they occur. If such
change orders are considered by the parties to be a normal element within the
original scope of the contract, no change in the contract price is made.
Otherwise, the adjustment to the contract price may be routinely negotiated.
Contract revenue and costs are adjusted to reflect change orders approved by the
client and us, regarding both scope and price. Changes are reflected in revenue
recognition only after the change order has been approved by both parties. The
same principle is also followed for escalation clauses.




In arrangements for
software development and related services and maintenance services, the company
has applied the guidance in IAS 18, Revenue, by applying the revenue recognition
criteria for each separately identifiable component of a single transaction. The
arrangements generally meet the criteria for considering software development
and related services as separately identifiable components. For allocating the
consideration, the company has measured the revenue in respect of each separable
component of a transaction at its fair value, in accordance with principles
given in IAS 18. The price that is regularly charged for an item when sold
separately is the best evidence of its fair value. In cases where the company is
unable to establish objective and reliable evidence of fair value for the
software development and related services, the company has used a residual
method to allocate the arrangement consideration. In these cases the balance
consideration after allocating the fair values of undelivered components of a
transaction has been allocated to the delivered components for which specific
fair values do not exist.




License fee
revenues have been recognized when the general revenue recognition criteria
given in IAS 18 are met. Arrangements to deliver software products generally
have three elements: license, implementation and Annual Technical Services
(ATS). We have applied the principles given in IAS 18 to account for revenues
from these multiple element arrangements. Objective and reliable evidence of
fair value has been established for ATS. Objective and reliable evidence of fair
value is the price charged when the element is sold separately. When other
services are provided in conjunction with the licensing arrangement and
objective and reliable evidence of their fair values have been established, the
revenue from such contracts are allocated to each component of the contract in a
manner, whereby revenue is deferred for the undelivered services and the
residual amounts are recognized as revenue for delivered elements. In the
absence of objective and reliable evidence of fair value for implementation, the
entire arrangement fee for license and implementation is recognized using the
percentage-of-completion method as the implementation is performed. Revenue from
client training, support and other services arising due to the sale of software
products is recognized as the services are performed. ATS revenue is recognized
ratably over the period in which the services are rendered.




Advances received
for services and products are reported as client deposits until all conditions
for revenue recognition are met.




We account for
volume discounts and pricing incentives to customers by reducing the amount of
discount from the amount of revenue recognized at the time of sale. In some
arrangements, the level of discount varies with increases in the levels of
revenue transactions. The discounts are passed on to the customer either as
direct payments or as a reduction of payments due from the customer. Further, we
recognize discount obligations as a reduction of revenue based on the ratable
allocation of the discount to each of the underlying revenue transactions that
result in progress by the customer toward earning the discount. We recognize the
liability based on an estimate of the customer's future purchases. If it is
probable that the criteria for the discount will not be met, or if the amount
thereof cannot be estimated reliably, then discount is not recognized until the
payment is probable and the amount can be estimated reliably. We recognize
changes in the estimated amount of obligations for discounts using a cumulative
catch-up adjustment. We present revenues net of sales and value-added taxes in
our consolidated statement of comprehensive income.




Income
Tax




Our income tax
expense comprises current and deferred income tax and is recognized in net
profit in the statement of comprehensive income except to the extent that it
relates to items recognized directly in equity, in which case it is recognized
in equity. Current income tax for current and prior periods is recognized at the
amount expected to be paid to or recovered from the tax authorities, using the
tax rates and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred income tax assets and liabilities are recognized
for all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements except when
the deferred income tax arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business combination and
affects neither accounting nor taxable profit or loss at the time of the
transaction. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realized.




Deferred income tax
assets and liabilities are measured using tax rates and tax laws that have been
enacted or substantially enacted by the balance sheet date and are expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of changes in tax rates on
deferred income tax assets and liabilities is recognized as income or expense in
the period that includes the enactment or the substantive enactment date. A
deferred income tax asset is recognized to the extent that it is probable that
future taxable profit will be available against which the deductible temporary
differences and tax losses can be utilized. Deferred income taxes are not
provided on the undistributed earnings of subsidiaries and branches outside
India where it is expected that the earnings of the foreign subsidiary or branch
will not be distributed in the foreseeable future. We offset current tax assets
and current tax liabilities, where we have a legally enforceable right to set
off the recognized amounts and where we intend either to settle on a net basis,
or to realise the asset and settle the liability simultaneously. Tax benefits of
deductions earned on exercise of employee share options in excess of
compensation charged to income are credited to share premium.




Business
Combinations, Goodwill and Intangible Assets




Business
combinations have been accounted for using the acquisition method under the
provisions of IFRS 3 (Revised), Business Combinations. The cost of an
acquisition is measured at the fair value of the assets transferred, equity
instruments issued and liabilities incurred or assumed at the date of
acquisition. The cost of acquisition also includes the fair value of any
contingent consideration. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially
at their fair value on the date of acquisition. Transaction costs that we incur
in connection with a business combination such as finders’ fees, legal fees, due
diligence fees, and other professional and consulting fees are expensed as
incurred.




Goodwill represents
the cost of business acquisition in excess of our interest in the net fair value
of identifiable assets, liabilities and contingent liabilities of the acquiree.
When the net fair value of the identifiable assets, liabilities and contingent
liabilities acquired exceed the cost of the business acquisition, we recognize a
gain immediately in net profit in the statement of comprehensive income.
Goodwill arising on the acquisition of a non-controlling interest in a
subsidiary represents the excess of the cost of the additional investment over
the fair value of the net assets acquired at the acquisition date and is
measured at cost less accumulated impairment losses.


Intangible assets
are stated at cost less accumulated amortization and impairments. They are
amortized over their respective individual estimated useful lives on a
straight-line basis, from the date that they are available for use. The
estimated useful life of an identifiable intangible asset is based on a number
of factors including the effects of obsolescence, demand, competition, and other
economic factors (such as the stability of the industry, and known technological
advances), and the level of maintenance expenditures required to obtain the
expected future cash flows from the asset.




We expense research
costs as and when the same are incurred. Software product development costs are
expensed as incurred unless technical and commercial feasibility of the project
is demonstrated, future economic benefits are probable, we have the intention
and ability to complete and use or sell the software and the costs can be
measured reliably. The costs which can be capitalized include the cost of
material, direct labour, overhead costs that are directly attributable to
preparing the asset for its intended use. Research and development costs and
software development costs incurred under contractual arrangements with
customers are accounted as cost of sales.




OFF-BALANCE SHEET
ARRANGEMENTS




None




CONTRACTUAL
OBLIGATIONS




Set forth below are
our outstanding contractual obligations as of March 31, 2010.


(Dollars
      in millions)Contractual
      obligations
            Total
            Less than 1
      year
            1-3
years
            3-5
years
            More than 5
      yearsOperating
      lease obligations
            $88
            $19
            $33
            $22
            $14Purchase
      obligations
            68
            68
            –
            –
            –Other
      liabilities
            17
            4
            7
            4
            2Unrecognized
      tax benefits
            131
            –
            –
            –
            –Post
      retirement benefits obligations
            97
            7
            17
            22
            51Total
            $401
            $229
            $57
            $48
            $67




We have various
operating leases, mainly for office buildings, that are renewable on a periodic
basis. The operating lease arrangements extend up to a maximum of ten years from
their respective dates of inception and relate to rented overseas
premises.


Purchase obligation
means an agreement to purchase goods or services that are enforceable and
legally binding on the Company that specifies all significant terms, including
fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction.




Other liabilities
comprises of earnout charges, incentive accruals and liability towards
acquisition of business.





Unrecognized tax
benefits relate to liability towards uncertain tax positions taken in various
tax jurisdictions. The period in which these uncertain tax positions will
be settled is not practically determinable.





Post retirement
benefits obligations are the benefit payments, which are expected to be paid
under our gratuity plans.




Item 6. Directors, Senior Management and Employees




DIRECTORS AND EXECUTIVE
OFFICERS
  Set forth below are
the respective ages and positions of our directors and executive officers as of
the date of this Annual Report on Form 20-F.
 Name
              Age
              PositionN. R.
      Narayana Murthy (1)
              63
              Chairperson
      of the Board and Chief MentorS.
      Gopalakrishnan (8)
              55
              Chief
      Executive Officer and Managing Director, Head of the Executive
      CouncilS. D.
      Shibulal(8)
              55
              Director,
      Chief Operating OfficerMarti G.
      Subrahmanyam (2)(3)(6)
              63
              Lead
      Independent DirectorDeepak
      Satwalekar (2)(3)(5)(6)
              61
              DirectorOmkar Goswami
      (2)(4)(6)(7)
              53
              DirectorClaude Smadja
      (2)
              64
              DirectorSridar A.
      Iyengar (2)(3)(7)
              62
              DirectorDavid L.
      Boyles (2)(4)(7)
              61
              DirectorJeffrey Sean
      Lehman (2)(4)(5)(7)
              53
              DirectorK V Kamath(2)(3)(4)(5)
              62
              DirectorK. Dinesh
      (8)
              56
              Director and
      Head - Communication Design Group , Information Systems, and Quality and
      ProductivityT. V.
      Mohandas Pai (8)
              51
              Director and
      Head - Administration, Education and Research, Finacle, Human Resources
      Development, and Infosys Leadership InstituteSrinath Batni
      (8)
              55
              Director and
      Head-Delivery ExcellenceV.
      Balakrishnan(8)
              45
              Chief
      Financial OfficerAshok
      Vemuri(8)
              42
              Senior Vice
      President - Banking and Capital MarketsB G
      Srinivas(8)
              49
              Senior Vice
      President - ManufacturingChandrasekhar
      Kakal (8)
              50
              Senior Vice
      President - Enterprise SolutionsSubhash Dhar
      (8)
              44
              Senior Vice
      President - Communication, Media and
  Entertainment
  (1)
Non Executive Director
 (2)
Independent Director
 (3)
Member of the Audit Committee
 (4)
Member of the Compensation Committee
 (5)
Member of the Nominations Committee
 (6)
Member of the Investors' Grievance Committee
 (7)
Member of the Risk Management Committee
 (8)
Member of Executive Council
  N. R. Narayana
Murthy is the Chairman of our Board and Chief Mentor. Mr. Murthy founded
Infosys in 1981 and has served on our Board since then. Mr. Murthy served as our
CEO for over 20 years between 1981 and 2002, and as the Executive Chairperson of
our Board from 2002 to 2006. He retired from employment with Infosys in August
2006. Mr. Murthy also serves as a director on the boards of Infosys China and
Infosys Consulting.
  Mr. Murthy serves
as a director on the boards of HSBC Holdings PLC, Unilever NV and Unilever PLC.
He is an IT advisor to the governments of several Asian countries. Additionally,
during the past five years, Mr. Murthy has served as a director on the boards of
DBS Bank Limited, DBS Group Holdings Limited and New Delhi Television
Limited.
 
 Mr. Murthy is a
member of the advisory boards and councils of several educational and
philanthropic institutions, including Cornell University; Ford Foundation;
INSEAD; Indian Institute of Management Technology, Bangalore; Indian School of
Business, Hyderabad; Singapore Management University; United Nations Foundation;
and the University of Pennsylvania's Wharton School. He is a Fellow of the
Indian National Academy of Engineering and a foreign member of the U.S. National
Academy of Engineering.
  Mr. Murthy was
ranked as India's most powerful CEO for three consecutive years between 2004 and
2006 by the Economic Times. In 2004, TIME Magazine identified him as one of ten
global leaders who are helping shape the future of technology. In 2005, The
Economist magazine ranked him  among the ten most admired global
business leaders.  Mr. Murthy has won the Max Schmidheiny Liberty 2001
prize and Ernst and Young’s World Entrepreneur of the Year 2003 award. He has
appeared in the rankings of businessmen and innovators in several publications,
including those by Business Standard, Business Week, CNN, Financial Times,
Forbes, Fortune, India Today and TIME Magazine.
  Mr. Murthy was
awarded the Padma Vibhushan, India's second highest civilian award, by the
Government of India in 2008. The Government of France conferred on him the
Officer of the Legion of Honor in 2008. Mr. Murthy has also been conferred with
the title of CBE by the British government.
  Mr. Murthy received
a B. E. in Electrical Engineering from the University of Mysore and an M. Tech.
in Electrical Engineering from the Indian Institute of Technology, or IIT,
Kanpur.
 S.
Gopalakrishnan has served as our Chief Executive Officer and Managing
Director since June 2007. Mr. Gopalakrishnan is one of our co-founders, and has
previously served as our Chief Operating Officer, and as our President and Joint
Managing Director. Mr. Gopalakrishnan has served as a director on our Board
since 1981. Mr. Gopalakrishnan's initial responsibilities at Infosys included
management of design, development, implementation and support of information
systems for clients in the consumer products industry in the U.S. From 1987 to
1994, he headed the technical operations of KSA / Infosys, a former joint
venture between Infosys and Kurt Salmon Associates. Mr. Gopalakrishnan has also
headed our Customer Delivery and Technology function.
  Mr. Gopalakrishnan
is currently the Chairman of the Indian Institute of Information Technology and
Management, Kerala, and Vice Chairman of the board for Information Technology
Education Standards established by the Government of Karnataka. Mr.
Gopalakrishnan serves as the Chairman of the Confederation of Indian Industries
(CII) Southern Regional Council. Mr. Gopalakrishnan is also a member of the
Association for Computing Machinery, the Institute of Electrical and Electronic
Engineers (IEEE) and the IEEE Computer Society.
  Mr. Gopalakrishnan
received an M.Tech in Physics and in Computer Science from IIT,
Madras.
  S. D.
Shibulal has served as our Chief Operating Officer since 2007. Mr.
Shibulal has been a director on our Board since 1997 and also serves as a
director on the boards of Infosys BPO and Infosys Public Services, Inc. He is
also the Chairman of the boards of Infosys Consulting, Infosys China and
Infosys Sweden.
  Prior to 2007, Mr.
Shibulal served at Infosys as Group Head – Worldwide Sales and Customer
Delivery, and previously, as Worldwide Head of Customer Delivery, and as Head of
our Manufacturing, Distribution and our Internet Consulting
practice.
  Mr. Shibulal
received an M.Sc. in Physics from the University of Kerala and an M.S. in
Computer Science from Boston University.
  Marti G.
Subrahmanyam has served as one of the directors on our Board since April
1998. Prof. Subrahmanyam is the Lead Independent Director on our
Board.
  Prof. Subrahmanyam
is the Charles E. Merrill Professor of Finance, Economics and International
Business in the Stern School of Business at New York University.
 
 Prof. Subrahmanyam
has published numerous articles and books in the areas of corporate finance,
capital markets and international finance. He has been a visiting professor at
leading academic institutions around the world, including, most recently, at the
University of Melbourne, LUISS Guido Carli and Singapore Management University.
He has served and continues to serve on the editorial boards of many academic
journals and was the founding editor of the Review of Derivatives
Research. Prof. Subrahmanyam has won many teaching awards, including New
York University's Distinguished Teaching Medal. He has served and continues to
serve as a consultant to several corporations, industrial groups and financial
institutions around the world. Prof. Subrahmanyam serves as an advisor to
several international and government organizations.
  Prof. Subrahmanyam
also serves as a director on the boards of ICICI Bank Limited, ICICI Prudential
Life Insurance Company Limited and Nomura Asset Management (U.S.A.) Inc.
Additionally, during the past five years, Prof. Subrahmanyam has served as a
director on the boards of Animi Offshore Fund Limited, Animi Concentrated Risk
Fund Limited, Nexgen Financial Holdings Limited, Nexgen Re Limited, SupplyChange
Inc. and Usha Communications Inc.
 Prof. Subrahmanyam
received a B.Tech. in Mechanical Engineering from IIT, Madras, a post-graduate
diploma in Management from the Indian Institute of Management, or IIM, Ahmedabad
and a Ph.D in Finance and Economics from the Massachusetts Institute of
Technology.
  Deepak M.
Satwalekar has served as one of the directors on our Board since October
1997 and is the Chairman of our Audit Committee.
  Mr. Satwalekar
served as the Managing Director and Chief Executive Officer of HDFC Standard
Life Insurance Company Limited between 2000 and 2008. Prior to that, he served
as the Managing Director of HDFC between 1993 and 2000.
  Mr. Satwalekar has
been a consultant to the World Bank, the Asian Development Bank, the United
States Agency for International Development (USAID), and the United Nations
Centre for Human Settlements (HABITAT). He is on the Advisory Council of IIT,
Bombay and has chaired and is a member of several expert groups related to
industry, government and the Reserve Bank of India. Mr. Satwalekar has been
honored as a "Distinguished Alumnus" of IIT, Bombay. He is currently active on
the Board of Trustees of two organizations engaged in the field of primary
education for the low income and socially disadvantaged members of society in
rural and urban India.
 Mr. Satwalekar also
serves as a director on the boards of Asian Paints Limited, Entertainment
Network (India) Limited, Housing Development Finance Corporation Limited,
Piramal Healthcare Limited, The Tata Power Company Limited, ILFS
Transportation Networks Limited and National Stock Exchange of India Limited.
Additionally, during the past five years, Mr. Satwalekar has served as a
director on the boards of Arvind Mills Limited, HDFC Investments Limited, HDFC
Holdings Limited and HDFC Standard Life Insurance Company Limited.
 
 Mr. Satwalekar
received a B.Tech. in Mechanical Engineering from IIT, Bombay and an M.B.A. from
The American University, Washington, D.C.
  Dr. Omkar
Goswamihas
served as one of the directors on our Board since November 2000.
  Dr. Goswami is the
founder and chairman of CERG Advisory Private Limited. Before that, from 1998 to
2004, Dr. Goswami served as the Chief Economist to the Confederation of Indian
Industries (CII). Between 1997 and 1998, he was the Editor of Business India
magazine. From 1981 to 1996, Mr. Goswami taught and researched economics at
Oxford University, Delhi School of Economics, Harvard University, Tufts
University, Jawaharlal Nehru University, Rutgers University and the Indian
Statistical Institute.
  Dr. Goswami has
served on several government committees in India. He was the chairman of the
Committee on Industrial Sickness and Corporate Restructuring; a member of the
Working Group on the Companies Act; the CII Committee on Corporate Governance;
the Vijay Kelkar Committee on Direct Tax Reforms; the Naresh Chandra Committee
on Auditor-Company Relationship and the N.R. Narayana Murthy SEBI Committee on
Corporate Governance Reforms. He has been a consultant to the World Bank, the
International Monetary Fund, the Asian Development Bank and the Organization for
Economic Co-operation and Development.
  Dr. Goswami also
serves as a director on the boards of Ambuja Cements Limited, Cairn India
Limited, Crompton Greaves Limited, Dr. Reddy's Laboratories Limited, DSP
BlackRock Fund Managers Limited, Infrastructure Development and Finance Company
Limited, Godrej Consumer Products Limited, Avantha Power and Infrastructure
Limited, Max India Limited and Max New York Life Insurance Co. Limited.
Additionally, during the past five years, Dr. Goswami has served as a director
on the boards of SRF Limited and Sona Koyo Steering Systems
Limited.
  Dr. Goswami
received his M.A. in Economics from the Delhi School of Economics and his D.
Phil. in Economics from Oxford University.
  Claude
Smadja has served as one of the directors on our Board since October
2001.
  Mr. Smadja is the
President of Smadja & Associates, a strategic advisory firm he founded in
2001. From January 1996 to June 2001, he was the Managing Director of the World
Economic Forum, with overall responsibility on the Davos annual meeting and the
World Economic Forum's activities in Asia. Prior to that, Mr. Smadja served as
the director for the News and Current Affairs Department of the Swiss
Broadcasting Corporation.
  Mr. Smadja is the
vice chairman of the board of the Kudelski Group and also serves as a director
on the boards of Edipresse Group and OpenTV. He also serves as a member of the
international board of overseers of the Illinois Institute of Technology. Mr.
Smadja also serves as the chairman of the audit committee and as a member of the
compensation committee of the Kudelski Group. He chairs the compensation
committee of the Edipresse Group and is a member of the compensation committee
of OpenTV.
  Mr. Smadja received
a B.A. in Political Science from the University of Lausanne.
  Sridar A.
Iyengar has served as one of the directors on our Board since April 2003.
Mr. Iyengar also serves as a director on the board of Infosys BPO
Limited.
  Mr. Iyengar is
associated with Bessemer Venture Partners and is also an independent investor in
early stage entrepreneurs and companies. Between 1978 and 2002, Mr. Iyengar was
a senior partner with KPMG in the U.S. and the U.K. and he has also served as
Chairperson and CEO of KPMG's operations in India between 1997 and 2000. Mr.
Iyengar serves as a director of Foundation for Economic Reforms in India and the
American Indian Foundation, both of which are U.S.-based non-profit
organizations.
 Mr. Iyengar serves
as a director on the boards of several other companies, including AverQ Inc.,
Career Launcher Limited, ICICI Bank Limited, Kovair Software Inc., Mahindra
Holidays and Resorts Limited, OnMobile Global Limited, Rediff.com India Limited
and Rediff Holding Inc.
  Mr. Iyengar
received a B.Com. (Honors) degree from the University of Calcutta and is a
Fellow of the Institute of Chartered Accountants in England and
Wales.
  David L.
Boyleshas
served as one of the directors on our Board since July 2005. Mr. Boyles is the
Chairman of our Risk Management Committee.
  Mr. Boyles
currently operates a boutique consulting practice focused on IT strategy /
governance, risk management and business innovation. Mr. Boyles also chairs the
State of Victoria TAFE ICT Board.
  Mr. Boyles has held
senior leadership positions at large multinational corporations, including
American Express, Bank of America and ANZ Banking Group (ANZ). In December 2003,
he retired from his position as Chief Operations Officer at ANZ, where he was
responsible for technology, payments, property, strategic sourcing and other
shared services. Prior to joining ANZ, from 1991 to 1998, Mr. Boyles held
various positions at American Express, the most recent being that of Senior Vice
President, eCommerce.
  Mr. Boyles received
an M.B.A. from Washington State University and an M.A. and B.A. (summa cum
laude) in Psychology from the University of Northern Colorado and A.A. from Mesa
State College.
  Jeffrey Sean
Lehmanhas
served as one of the directors on our Board since April 2006. Mr. Lehman is
the Chairman of our Nominations Committee and also serves as the
Chairman of Infosys Public Services, Inc.
  Mr. Lehman,
chancellor and founding dean of the Peking University School of Transnational
Law, is also professor of law and former president at Cornell University and a
Senior Scholar at the Woodrow Wilson International Center for Scholars. Mr.
Lehman is also an honorary professor at China Agricultural University and at
Xiamen University.
  Mr. Lehman taught
tax law and public policy at the University of Michigan before becoming dean of
the University of Michigan Law School in 1994. During his last two years as
dean, he also served as president of the American Law Deans Association. Prior
to entering academia, Mr. Lehman practiced tax law in Washington,
D.C.
  In 2005, Peking
University awarded Mr. Lehman an honorary doctorate degree in recognition of his
service as a bridge between scholars in the United States and China. Mr. Lehman
chairs the board of the University Consortium for Advanced Internet Development,
also known as Internet2.
  Mr. Lehman received
an A.B. in Mathematics from Cornell University, and M.P.P. and J.D. degrees from
the University of Michigan.
  K. V.
Kamath has served as one of the directors on our Board since May
2009.
  Mr. Kamath is the
non-executive Chairman of the Board of Directors of ICICI Bank Limited, India's
second largest bank. He started his career in 1971 at ICICI, an Indian financial
institution that founded ICICI Bank and merged with it in 2002. In 1988, he
moved to the Asian Development Bank and spent several years in South-east Asia
before returning to ICICI as its Managing Director and CEO in 1996. He retired
as Managing Director and CEO of ICICI Bank Limited in April 2009.
  Mr. Kamath serves
as a director on the boards of ICICI Bank Limited, Lupin Limited and
Schlumberger Limited.
  Mr. Kamath was
awarded the Padma Bhushan, one of India’s highest civilian honors, in 2008. He
has been conferred with the Lifetime Achievement Award at the NDTV Profit
Business Leadership Awards 2008 and was named Forbes Asia’s 'Businessman of the
Year' and The Economic Times ‘Business Leader of the Year' in 2007; Business
Standard's 'Banker of the Year' and CNBC-TV18's 'Outstanding Business Leader of
the Year’ in 2006; Business India's 'Businessman of the Year' in 2005; and
CNBC's 'Asian Business Leader of the Year' in 2001. He was conferred with an
honorary Ph.D. by the Banaras Hindu University. Mr. Kamath has also served as
the president of the Confederation of Indian Industry between 2008 and
2009.
  Mr. Kamath received
a degree in mechanical engineering from Karnataka Regional Engineering College
and a post graduate diploma in management from the Indian Institute of
Management, Ahmedabad.
  K.
Dineshhas
served as one of the directors on our Board since 1985. Mr. Dinesh is one of our
co-founders, and is currently Head - Quality, Information Systems and the
Communication Design Group. Mr. Dinesh is also the Chairman of Infosys
Australia.
  From 1991 to 1996,
Mr. Dinesh served in various project management capacities and was responsible
for worldwide software development efforts for Infosys. From 1981 to 1990, he
managed our software projects in the United States. Mr. Dinesh has also
headed the Human Resources Development and Education and Research functions at
Infosys.
  Mr. Dinesh received
an M.S. in Mathematics from Bangalore University and a Ph.D in Literature from
the Karnataka State Open University.
  T. V. Mohandas
Paihas
served as one of the directors on our Board since 2000. Mr. Pai is currently
Head - Administration, Education & Research, Finacle, Human Resources
Development, and also heads the Infosys Leadership Institute. He is also the
Chairman of Infosys BPO and serves as a director on the boards of Infosys China
and Infosys Public Services, Inc. Mr. Pai joined Infosys in 1994 and served as
our Chief Financial Officer from 1994 to 2006.
  Mr. Pai serves as a
member of several committees constituted by the Government of India, the Reserve
Bank of India and the Securities and Exchange Board of India (SEBI), and serves
on the Board of SEBI. He is also a trustee of the International Accounting
Standards Committee Foundation, the body that oversees the International
Accounting Standards Board. Mr. Pai also works with the central and state
governments of India in the field of education, IT and business. Mr. Pai has won
the ‘Best CFO in India’ award from Finance Asia in 2002 and was named as ‘Best
Chief Financial Officer in India’ in the Best Managed Companies poll conducted
by AsiaMoney in 2004.
 Mr. Pai received a
B.Com. from St. Joseph's College of Commerce, Bangalore and a LL.B. from
Bangalore University. He is a Fellow Chartered Accountant (FCA).
  Srinath
Batni has served as one of the directors on our Board since May 2000. Mr.
Batni is currently Head - Delivery Excellence at Infosys. He serves as a
director on the boards of Infosys China and Infosys Australia.
  Mr. Batni joined
Infosys in June 1992 as Project Manager. Since then, he has held several senior
positions in our Customer Delivery function.
  Mr. Batni is also a
Member of the Executive Council of NASSCOM.
  Mr. Batni received
a B.E. in Mechanical Engineering from the University of Mysore and an M.E. in
Mechanical Engineering from the Indian Institute of Science,
Bangalore.
  V.
Balakrishnanis a Member of our
Executive Council and Chief Financial Officer.
  Mr. Balakrishnan
was our Company Secretary and Senior Vice President - Finance from 2001 to 2006.
Since he joined us in 1991, Mr. Balakrishnan has served in various capacities in
our Finance department.
  Prior to joining
Infosys, Mr. Balakrishnan was Senior Accounts Executive with Amco Batteries
Limited.
  Mr. Balakrishnan
was conferred with the ‘CNBC TV 18 Best Performing CFO’ award for the IT and
ITES sector in 2008 and 2009. He was voted the Best CFO by Finance Asia in its
Asia’s Best Companies Poll for 2008 and 2009. He won the ‘Best CFO (Information
Technology, Media, Communication and Entertainment)’ award from the Institute of
Chartered Accountants of India in 2008.
  Mr. Balakrishnan
received a B.Sc. from the University of Madras. He is an Associate Member of the
Institute of Chartered Accountants of India, the Institute of Company
Secretaries of India and the Institute of Cost and Works Accountants of
India.
  Ashok
Vemuri is a Member of our Executive Council and Senior Vice President and
heads the Banking and Capital Markets business unit at Infosys. Mr. Vemuri also
serves as a director on the board of Infosys Consulting, Infosys China, Infosys
Public Services, Inc. and is the sole manager of Infosys Mexico.
  Mr. Vemuri joined
Infosys in 1999, and has headed Infosys' operations in Canada and the Eastern
North America region. He has previously worked in the investment banking
industry with Bank of America and Deutsche Bank.
  In 2009, Mr. Vemuri
was named by the World Economic Forum as a Young Global Leader.
  Mr. Vemuri received
a B.Sc. with honors in Physics from St. Stephens College, Delhi, and a
post-graduate diploma in Management from IIM, Ahmedabad.
  B.G.
Srinivas is a Member of our Executive Council and Senior Vice President
and heads the Manufacturing, Product Engineering and Product Lifecycle and
Engineering Solutions business units at Infosys. Mr. Srinivas also serves as a
director on the board of Infosys BPO, Infosys Consulting and Infosys
Sweden.
  Mr. Srinivas was
previously the head of European operations for Infosys. He also set up the
Enterprise Solutions practice in Infosys.
  Before joining
Infosys in 1999, Mr. Srinivas had worked with ABB Limited for 14 years in
various roles including as Head – Manufacturing. He had also led corporate
process and systems at ABB Limited.
  Mr. Srinivas
received a B.E. in Mechanical Engineering from Bangalore
University.
  Chandrashekhar
Kakalis a
Member of our Executive Council and Senior Vice President and heads the
Enterprise Solutions business unit at Infosys. Mr. Kakal serves as a director on
the board of Infosys Consulting.
  Mr. Kakal joined
Infosys in 1999. He was part of the group that started the Enterprise Solutions
practice. Mr. Kakal also established Infosys' Hyderabad Development Center in
2000, which he headed until 2004.
  Prior to joining
Infosys, Mr. Kakal had worked with several manufacturing and IT companies,
including Ashok Leyland Limited, Wipro Technologies Limited, Larsen & Toubro
Limited and Ramco Systems Limited.
  Mr. Kakal received
a B.E. in Mechanical Engineering from Bangalore University and an M.B.A. from
the Asian Institute of Technology, Bangkok.
  Subhash
Dhar is a Member of
our Executive Council and Senior Vice President and heads the Communications,
Media and Entertainment business unit at Infosys. He is also responsible for the
sales and marketing function of the Infosys group. Mr. Dhar serves on the
board of Infosys Australia.
  Mr.
Dhar joined Infosys in 1997 as member of its E-Business practice.
  In
2007, Mr. Dhar was chosen by the World Economic Forum as one of the 25 Young
Global Leaders from India. He is also on the executive board of the
International Telecommunication Union's ‘Connect the World' initiative. Mr. Dhar
is also on the Board of Governors of IIM, Bangalore.
  Mr.
Dhar received a bachelor’s degree in Computer Science from Birla Institute of
Technology, Mesra, India and a master’s degree from IIM, Bangalore.
 COMPENSATION
 
 Our Compensation
Committee determines and recommends to the Board of Directors the compensation
payable to the directors. All Board-level compensation is approved by
shareholders. The annual compensation of the executive directors is approved by
the Compensation Committee, within the parameters set by the shareholders at the
shareholders meetings. Remuneration of the executive directors consists of a
fixed component, bonus and a variable performance linked incentive. The
Compensation Committee makes a quarterly appraisal of the performance of the
employee directors based on a detailed performance-related matrix.
 
 We have a variable
compensation structure for all of our employees. Each employee's compensation
consists of performance incentives payable upon the achievement by the company
of certain financial performance targets and is also based on individual
performance. Our Board of Directors aligned the compensation structure of our
employee directors in line with that applicable to all of our other employees.
All of our executive directors are entitled to a bonus of up to 20% of their
fixed salary. All of our executive directors are entitled to receive
company-linked performance incentives payable on our achievement of certain
financial performance targets. All our executive directors are entitled to
receive individual performance-linked incentives. The bonus and various
incentives are payable quarterly or at other intervals as may be decided by our
Board of Directors.
 
 In fiscal 2010, our
non-executive directors were paid an aggregate of $1,248,750. Directors are also
reimbursed for certain expenses in connection with their attendance at Board and
committee meetings. Executive directors do not receive any additional
compensation for their service on the Board.
 
 We operate in
numerous countries and compensation for our officers and employees may vary
significantly from country to country. As a general matter, we seek to pay
competitive salaries in all the countries in which we operate.
 
 The table below
describes the compensation for our officers and directors, for the fiscal year
ended March 31, 2010.
 Name
                Salary
      ($)
                Bonus/
      Incentive ($)
                Other
      Annual Compensation ($)
                Amount
      accrued for long term benefits ($)N. R.
      Narayana Murthy
                –
                –
                125,000
                –Nandan M.
      Nilekani*
                19,534
                45,463
                7,360
                5,242S.
      Gopalakrishnan
                71,241
                108,571
                27,566
                17,637K.
      Dinesh
                71,241
                108,571
                27,566
                17,637S. D.
      Shibulal
                68,801
                104,657
                21,931
                17,267Deepak M
      Satwalekar
                –
                –
                133,750
                –Marti G
      Subrahmanyam
                –
                –
                143,750
                –Omkar
      Goswami
                –
                –
                115,000
                –Rama
      Bijapurkar**
                –
                –
                107,500
                –Claude
      Smadja
                –
                –
                130,000
                –Sridar
      Iyengar
                –
                –
                137,500
                –David
      Boyles
                –
                –
                132,500
                –Jeffrey
      Lehman
                –
                –
                135,000
                –K V
      Kamath***
                –
                –
                88,750
                –T. V.
      Mohandas Pai
                80,178
                566,987
                31,302
                19,570Srinath
      Batni
                80,178
                408,734
                31,302
                19,570V.
      Balakrishnan
                67,729
                375,284
                80,540
                16,870Ashok
      Vemuri
                440,432
                491,161
                94,715
                –B G
      Srinivas
                360,596
                170,396
                271,056
                102,191Chandrasekhar
      Kakal
                61,189
                316,226
                71,562
                14,603Subhash
      Dhar
                53,954
                257,514
                57,859
                13,892
 *
Mr. Nilekani resigned from our Board effective July 9, 2009. This reflects the
compensation paid to him during the period April 1, 2009 to July 9,
2009.
 **
Ms. Bijapurkar resigned from our Board effective April 13, 2010.
 ***
Mr. Kamath was appointed as a director on our Board effective May 2, 2009. This
reflects the compensation paid to him for the period May 2, 2009 to March 31,
2010.
 All compensation to
directors and officers disclosed in the table above that was paid in Indian
rupees has been converted, for the purposes of the presentation in such table,
at an exchange rate of Rs. 44.90 per U.S. dollar.
  Option grants
  There were no
option grants to our Chairperson, CEO, CFO or COO in the fiscal years ended
March 31, 2010, 2009 and 2008. Details of options granted to other senior
executives are reported elsewhere in Item 6 in the section titled
"Compensation".
  Option exercises and
holdings
  Our Chairperson,
CEO, CFO and COO did not hold or exercise any options during the fiscal year
ended March 31, 2010. The details of stock options held and exercised with
respect to other senior executives are reported elsewhere in Item 6 in the
section titled "Share Ownership".
  All executive
directors are also liable to retire by rotation. The terms of office of the
directors are given below:
 Name
              Date Current Term of Office
      Began (2)
              Expiration/Renewal Date of
      Current Term of Office (3)
              Whether Term of Office is
      subject to retirement by rotationN. R.
      Narayana Murthy(1)
              June 22,
      2007
              –
              YesS.
      Gopalakrishnan (1)
              June 22,
      2007
              June 21,
      2012
              YesK.
      Dinesh
              May 1,
      2007
              April 30,
      2012
              YesS. D.
      Shibulal (1)
              January 10,
      2007
              January 09,
      2012
              YesT. V.
      Mohandas Pai (1)
              May 27,
      2005
              May 26,
      2010
              YesSrinath
      Batni
              May 27,
      2005
              May 26,
      2010
              YesDeepak M.
      Satwalekar
              June 20,
      2009
              –
              YesMarti G.
      Subrahmanyam(1)
              June 22,
      2007
              –
              YesOmkar
      Goswami
              June 20,
      2009
              –
              YesClaude
      Smadja
              June 14,
      2008
              –
              YesSridar A.
      Iyengar
              June 14,
      2008
              –
              YesDavid L
      Boyles
              June 20,
      2009
              –
              YesJeffrey Sean
      Lehman
              June 20,
      2009
              –
              YesK V
      Kamath
              June 20,
      2009
              –
              Yes
  (1).
                Is a
      director who is retiring by rotation in the ensuing Annual General Meeting
      scheduled for June 12, 2010 and is seeking re-appointment.(2).
                For
      executive directors, this date is the date they were appointed by our
      shareholders as executive directors. For non-executive directors, this
      date is the date they were appointed/re-appointed as directors liable to
      retire by rotation by our shareholders. The term of office of a non-whole
      time director, i.e. a non-executive director is determined by rotation and
      may not be more than three years.(3).
                For
      executive directors, this date is the date when their current term of
      appointment as an executive director
expires.
 Employment and indemnification
contracts
  Under the Indian
Companies Act, our shareholders must approve the salary, bonus and benefits of
all executive directors at a General Meeting of shareholders. Each of our
executive directors has signed an agreement containing the terms and conditions
of employment, including a monthly salary, bonus and benefits including
vacation, medical reimbursement and gratuity contributions. There are no
benefits payable upon termination of this agreement. These agreements are made
for a five-year period, but either we or the executive director may terminate
the agreement upon six months notice to the other party. The form of the
employment agreement for our executive directors has been filed previously and
is incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  We have also
entered into agreements to indemnify our directors and officers for claims
brought under U.S. laws to the fullest extent permitted by Indian law. These
agreements, among other things, indemnify our directors and officers for certain
expenses, judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Infosys
Technologies Limited, arising out of such person's services as our director or
officer. The form of the indemnification agreement for our directors and
officers has been filed previously and is incorporated by reference as an
exhibit to this Annual Report on Form 20-F. Other than the indemnification
agreements referred to in this paragraph, we have not entered in to any
agreements with our non-executive directors.
  Board composition
  Our Articles of
Association provide that the minimum number of directors shall be 3 and the
maximum number of directors shall be 18. Currently, we have 14 directors, 8 of
whom are independent as defined by NASDAQ Rule 4200(a)(15). Our Articles of
Association and the Indian Companies Act require that at least two-thirds of our
directors be subject to retirement by rotation. One-third of these directors
must retire from office at each Annual General Meeting of the shareholders. A
retiring director is eligible for re-election. Our executive directors are
appointed for five-year terms by the shareholders. They customarily retire every
three years and are eligible for re-election at that time. Executive directors
are required to retire at age 60 in accordance with our employee retirement
policies. Other Board members must retire from the Board at age 65. Independent
chairperson must retire from the board at the age of 70.
  Board
leadership structure
 
 Our Board
leadership is comprised of a non-executive Chairman, Mr. N.R. Narayana Murthy, a
Chief Executive Officer (CEO), Mr. S. Gopalakrishnan, and a Lead Independent
Director, Prof. Marti G.
Subrahmanyam. In the current structure, the roles of CEO and Chairman of the
Board are separated.
 
 The Chairman of the
Board presides over all meetings of the Board, sets the agenda for Board
meetings in consultation with the CEO and other members of the Board, mentors
our senior management team,
deals with broad industry issues, provides global thought leadership,
contributes to strategy and is a brand ambassador for the Company. The Chairman
is also responsible for all
Board governance matters and presides over all meetings of
shareholders.
 
 The CEO is
responsible for planning corporate strategy, brand equity, acquisitions and
other management matters. The CEO is also responsible for executing the annual
business plan.
 
 The Lead
Independent Director represents and acts as spokesperson for the independent
directors as a group. The Lead Independent Director presides over all executive
sessions of the Board’s independent
directors, liaises between the Chairman, the CEO and the independent directors,
and takes a lead role in the Board evaluation process along with the Chairman of
the Board.
 
 The Board believes
that this structure is most appropriate for the Company as it allows the CEO to
focus on day to day leadership, performance and strategy and enables the
Chairman to focus on board and corporate governance matters, while also
benefitting from his experience as former CEO of the
Company.
 
 Board’s
Role in Risk Oversight
  Our Board as a
whole is responsible for overall oversight of risk management. The Risk
Management Committee, comprising of four independent directors, assists the
Board in fulfilling its corporate governance oversight responsibilities with
regard to the identification, evaluation and mitigation of operational,
strategic and external risks. The Risk Management Committee also monitors
and approves our risk policies and associated practices. The Risk Management
Committee is also responsible for reviewing and approving risk disclosure
statements in any public documents or disclosures. Our senior management,
including a risk council comprising our Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer is tasked with the direct management of
enterprise risks, initiating mitigation actions, identifying owners for such
actions and reviewing progress. Our senior management also provides regular
reports and updates to the Risk Management Committee and our Board from time to
time on the enterprise risks and actions taken.
 
 Board committee
information
  Details relating to
the Audit, Compensation, Nominations and Risk Management Committees of our Board
are provided below.
  Audit Committee
  During fiscal 2010,
our Audit Committee was comprised of four independent directors, each of whom
was determined by our Board to be an independent director under applicable
NASDAQ rules. They were:
  Mr. Deepak M.
Satwalekar, Chairperson;
 Prof. Marti G.
Subrahmanyam;
 Dr. Omkar Goswami;
and
 Mr. Sridar A.
Iyengar (Audit Committee Financial Expert).
 
 Effective April 13,
2010, the Audit Committee was re-constituted as follows:
  Mr. Deepak M.
Satwalekar, Chairperson;
 Prof. Marti G.
Subrahmanyam;
 Mr. K. V. Kamath;
and
 Mr. Sridar A.
Iyengar (Audit Committee Financial Expert).
  Our Board has
determined that each of the current members of the Audit Committee are
independent directors under applicable NASDAQ rules.
  The primary
objective of the Audit Committee is to monitor and provide effective supervision
of our financial reporting process with a view towards ensuring accurate, timely
and proper disclosures and the transparency, integrity and quality of financial
reporting. Our Audit Committee oversees the work carried out in the financial
reporting process - by our management, the internal auditors and the independent
auditor - and reviews the processes and safeguards employed by each. In
addition, our Audit Committee has the responsibility of oversight and
supervision over our system of internal control over financial reporting, our
audit process, and process for monitoring the compliance with related laws and
regulations. The Audit Committee recommends to our shareholders the appointment
of our independent auditors and approves the scope of both audit and non-audit
services. The Audit Committee held 4 meetings in person and 2 meetings via
conference calls during fiscal 2010. The Audit Committee has adopted a charter.
The charter has been filed previously and is incorporated by reference as an
exhibit to this Annual Report on Form 20-F.
  See Item 18 for the
report of the Audit Committee.
  Compensation
Committee
  During fiscal 2010,
our Compensation Committee was comprised of four non-executive independent
directors, each of whom was determined by our Board to be an independent
director under applicable NASDAQ rules. They were:
  Prof. Marti G.
Subrahmanyam, Chairperson;
 Mr. Claude
Smadja;
 Mr. David
Boyles; and
 Prof. Jeffrey
Lehman.
  Effective April 13,
2010, the Compensation Committee was re-constituted as follows:
  Mr. K. V. Kamath,
Chairperson;
 Dr. Omkar
Goswami;
 Mr. David
Boyles; and
 Prof. Jeffrey
Lehman.
  Our Board has
determined that each of the current members of the Compensation Committee are
independent directors under applicable NASDAQ rules.
  The purpose of our
Compensation Committee is to discharge the Board of Directors' responsibilities
relating to compensation of our executive directors and senior management. The
Compensation Committee has overall responsibility for approving and evaluating
our compensation plans, policies and programs for executive directors and senior
management.
  The Compensation
Committee held 5 meetings in person and 2 meetings via conference calls during
fiscal 2010.
  The Compensation
Committee has adopted a charter. The charter has been filed previously and is
incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  Nominations
Committee
  During fiscal 2010,
our Nominations Committee was comprised of three independent directors, each of
whom was determined by our Board to be an independent director under applicable
NASDAQ rules. They were:
  Prof. Jeffrey
Lehman, Chairperson;
 Mr. Deepak M.
Satwalekar; and
 Dr. Omkar
Goswami.
  Effective April 13,
2010, the Nominations Committee was re-constituted as follows:
  Prof. Jeffrey
Lehman, Chairperson;
 Mr. Deepak M.
Satwalekar; and
 Mr. K. V.
Kamath.
  Our Board has
determined that each of the current members of the Nominations Committee are
independent directors under applicable NASDAQ rules.
  The purpose of our
Nominations Committee is to oversee our nomination process for our top level
management and specifically to identify, screen and review individuals qualified
to serve as our Executive Directors, Non Executive Directors and Independent
Directors consistent with criteria approved by our Board and to recommend, for
approval by our Board, nominees for election at our annual meeting of
shareholders.
  The Nominations
Committee held 5 meetings in fiscal 2010.
  The Nominations
Committee has adopted a charter. The charter has been filed previously and is
incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  Risk Management
Committee
  During fiscal 2010,
our Risk Management Committee was comprised of four independent directors, each
of whom was determined by our Board to be an independent director under
applicable NASDAQ rules. They were:
 
 David L. Boyles,
Chairperson;
 Mr. Sridar A.
Iyengar;
 Ms. Rama
Bijapurkar; and
 Prof. Jeffrey
Lehman.
  Effective April 13,
2010, the committee was re-constituted as follows:
  David L. Boyles,
Chairperson;
 Mr. Sridar A.
Iyengar;
 Prof. Jeffrey
Lehman; and
 Dr. Omkar
Goswami.
 
 Our Board has
determined that each of the current members of the Risk Management Committee are
independent directors under applicable NASDAQ rules.
  The purpose of the
Risk Management Committee is to assist our Board in fulfilling its corporate
governance oversight responsibilities with regard to the identification,
evaluation and mitigation of operational, strategic and external risks. The Risk
Management Committee has overall responsibility for monitoring and approving our
risk policies and associated practices. The Risk Management Committee is also
responsible for reviewing and approving risk disclosure statements in any public
documents or disclosures.
  The Risk Management
Committee held 4 meetings in person and 3 meetings via conference call during
fiscal 2010.
  The Risk Management
Committee has adopted a charter. The charter has been filed previously and is
incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  EMPLOYEES
  As of March 31,
2010, we employed approximately 113,800 employees, of which approximately
106,900 were IT professionals. We employed approximately 104,900 employees, including
approximately 97,300 IT
professionals, as of March 31, 2009. We employed approximately 91,200 employees
as of March 31, 2008, including approximately 85,000 IT professionals. We seek
to attract and motivate IT professionals by offering:
  ·
              an
      entrepreneurial environment that empowers IT
  professionals;
  ·
              programs that
      recognize and reward performance;
  ·
              challenging
      assignments;
  ·
              constant
      exposure to new skills and technologies;
and
  ·
              a culture
      that emphasizes openness, integrity and respect for the
      employee.
  Some of our
employees in jurisdictions across Europe, including employees located in France,
Spain, Sweden and Belgium are covered by collective bargaining agreements that
have been adopted at a government level, across the information technology
sector or otherwise. We believe that our management maintains good relations
with our employees, including those employees covered under collective
bargaining agreements.
  Recruiting
  We focus our
recruiting on the top 20% of students from engineering departments of Indian
schools and rely on a rigorous selection process involving a series of tests and
interviews to identify the best applicants. Our reputation as a premier employer
enables us to select from a large pool of qualified applicants. For example, in
fiscal 2010, we received approximately 400,800 employment applications, tested
approximately 77,000 applicants, interviewed approximately 61,000 applicants and
extended offers of employment to approximately 26,200 applicants. In fiscal
2010, we hired approximately 6,800 new employees, net of attrition. These
statistics do not include Infosys BPO or our wholly-owned subsidiaries, which
recorded approximately 2,100 new hires, net of attrition, in fiscal 2010. We do
not have significant recruiting activities outside India.
  Performance
appraisals
  We have instituted
an appraisal program that incorporates a 360-degree feedback system recognizing
high performers and providing constructive feedback and coaching to
underperformers.
  Training
and development
  We have established
a world-class training facility, the Infosys Global Education Center, in our
campus in Mysore, India, with a view to consolidate learning activities across
the Company. With a total built-up area of 1.44 million square feet, the Infosys
Global Education Center can train approximately 14,000 employees at a
time.
  Our training,
continuing education and career development programs are designed to ensure our
technology professionals enhance their skill-sets in alignment with their
respective roles. Most new student hires complete approximately 20 to 29 weeks
of integrated on-the-job training prior to being assigned
to a business unit.
  As of March 31,
2010, we employed 610 full-time employees as faculty, including 208 with
doctorate or masters degrees. Our faculty conducts integrated training for our
new employees. We also have our employees undergo certification programs each
year to develop the skills relevant for their roles.
  Leadership
development is a core part of our training program. We established the Infosys
Leadership Institute in our 337-acre campus in Mysore, India, to enhance
leadership skills that are required to manage the complexities of the rapidly
changing marketplace and to further instill our culture through leadership
training.
  In addition, we
also have been working with several colleges across India through our Campus
Connect program, enabling their faculty to provide industry related training to
students at the colleges.
  We provide a
challenging, entrepreneurial and empowering work environment that rewards
dedication and a strong work ethic. We continually provide our technology
professionals with exposure to new skills, technologies and global
opportunities.
 Compensation
  Our IT
professionals receive competitive salaries and benefits. We have also adopted a
variable compensation program which links compensation to company, team and
individual performance.
  Visas
  As of March 31,
2010, the majority of our technology professionals in the United States held
either H-1B visas (approximately 8,900 persons, not including Infosys BPO
employees or employees of our wholly owned subsidiaries), or L-1 visas
(approximately 1,800 persons, not including Infosys BPO employees or employees
of our wholly owned subsidiaries).
  SHARE OWNERSHIP
  The following table
sets forth as of March 31, 2010, for each director and executive officer, the
total number of equity shares, ADSs and options to purchase equity shares and
ADSs exercisable within 60 days from March 31, 2010. Beneficial ownership is
determined in accordance with rules of the Securities and Exchange Commission.
All information with respect to the beneficial ownership of any principal
shareholder has been furnished by such shareholder and, unless otherwise
indicated below, we believe that persons named in the table have sole voting and
sole investment power with respect to all the shares shown as beneficially
owned, subject to community property laws, where applicable. The shares
beneficially owned by the directors include the equity shares owned by their
family members to which such directors disclaim beneficial
ownership.
  The stock option
grant price has been translated into U.S. dollars from Indian rupees based on
fixing rate in the City of Mumbai on March 31, 2010 for cable transfers in
Indian rupees as published by the FEDAI, which was Rs. 44.90 per $1.00. The
share numbers and percentages listed below are based on 570,991,592 Equity
Shares outstanding as of March 31, 2010. Percentage of shareholders representing
less than 1% are indicated with an '*'.
 Name beneficially
      owned
              Equity Shares beneficially
      owned
              % of equity
      shares
              Equity Shares underlying
      options granted
              Exercise
      price
              Date of
      ExpirationN. R.
      Narayana Murthy (1)
              25,750,526
              4.51
              –
              –
              –S.
      Gopalakrishnan (2)
              19,555,617
              3.42
              –
              –
              –K. Dinesh
      (3)
              14,394,279
              2.52
              –
              –
              –S. D.
      Shibulal (4)
              12,628,911
              2.21
              –
              –
              –T. V.
      Mohandas Pai
              802,053
              *
              –
              –
              –Srinath Batni
      (5)
              662,225
              *
              –
              –
              –Deepak
      Satwalekar
              56,000
              *
              –
              –
              –Marti G.
      Subrahmanyam
              17,500
              *
              –
              –
              –Sridar A.
      Iyengar
              –
              *
              –
              –
              –Omkar
      Goswami
              12,300
              *
              –
              –
              –Rama
      Bijapurkar
              7,100
              *
              –
              –
              –Claude
      Smadja
              3,900
              *
              –
              –
              –David
      Boyles
              2,000
              *
              –
              –
              –Jeffrey
      Lehman
              –
              *
              –
              –
              –K. V.
      Kamath
              –
              *
              –
              –
              –V.
      Balakrishnan (6)
              476,600
              *
              –
              –
              –Ashok
      Vemuri
              –
              *
              –
              –
              –B G
      Srinivas
              60,000
              *
              –
              –
              –Chandrasekhar
      Kakal
              42,360
              *
              –
              –
              –Subhash
      Dhar
              50,000
              *
              –
              –
              –Total (all
      directors and executive officers)
              74,521,371
              13.05
              –
              –
              –
 1.
                Shares beneficially owned by
      Mr. Murthy include 23,370,854 Equity Shares owned by members of Mr.
      Murthy's immediate family. Mr. Murthy disclaims beneficial ownership of
      such shares.2.
                Shares beneficially owned by
      Mr. Gopalakrishnan include 12,898,891 Equity Shares owned by members of
      Mr.
      Gopalakrishnan’s immediate family. Mr. Gopalakrishnan disclaims beneficial
      ownership of such shares.3.
                Shares beneficially owned by
      Mr. Dinesh include 9,797,742 Equity Shares owned by members of Mr.
      Dinesh's immediate family. Mr. Dinesh disclaims beneficial ownership of
      such shares.4.
                Shares beneficially owned by
      Mr. Shibulal include 10,159,200 Equity Shares owned by members of Mr.
      Shibulal's immediate family. Mr. Shibulal disclaims beneficial ownership
      of such shares.5.
                Shares beneficially owned by
      Mr. Batni include 72,400 Equity Shares owned by members of Mr. Batni's
      immediate family. Mr. Batni disclaims beneficial ownership of such
      shares.6.
                Shares beneficially owned by
      Mr. Balakrishnan include 150,000 Equity Shares owned by members of Mr.
      Balakrishnan's immediate family. Mr. Balakrishnan disclaims beneficial
      ownership of such
shares.
 Option plans
  1998 Stock Option
Plan
 
 Our 1998 Stock
Option Plan, or the 1998 Plan, provides for the grant of two types of options to
our employees and directors: incentive stock options, which may provide our
employees with beneficial tax treatment, and non-qualified stock options. The
1998 Plan was approved by our Board of Directors in December 1997 and by our
shareholders in January 1998. The term of the 1998 Plan ended on January 6,
2008, and consequently no further shares will be issued to employees under this
plan. A total of 11,760,000 ADSs, representing 11,760,000 Equity
Shares, were reserved for issuance under the 1998 Plan. All options granted
under the 1998 Plan are exercisable for our ADSs.
 
 Our Compensation
Committee administers the 1998 Plan. The Compensation Committee has the power to
determine the terms of the options granted, including exercise prices, the
number of ADSs subject to each option, the exercisability thereof, and the form
of consideration payable upon such exercise. In addition, the committee has the
authority to amend, suspend, or terminate the 1998 Plan, provided that no such
action may affect any ADS previously issued and sold or any option to purchase
an ADS previously granted under the 1998 Plan.
 
 The 1998 Plan
generally does not allow for transfer of options, and only the optionee may
exercise an option during his or her lifetime. An optionee generally must
exercise an option within three months of termination of service. If an
optionee's termination is due to death or disability, his or her option will
fully vest and become exercisable and the option must be exercised within twelve
months after such termination. The exercise price of incentive stock options
granted under the 1998 Plan must at least equal the fair market value of the
ADSs on the date of grant. The exercise price of nonstatutory stock options
granted under the 1998 Plan must at least equal 90% of the fair market value of
the ADSs on the date of grant. The term of options granted under the 1998 Plan
may not exceed 10 years.
 
 The 1998 Plan
provides that in the event of our merger with or into another corporation or a
sale of substantially all of our assets, the successor corporation shall either
assume the outstanding options or grant equivalent options to the holders. If
the successor corporation neither assumes the outstanding options nor grants
equivalent options, such outstanding options shall vest immediately, and become
exercisable in full.
 
 1999 Stock Option
Plan
 
 In fiscal 2000, we
instituted the 1999 Stock Option Plan, or the 1999 Plan. Our shareholders and
Board of Directors approved the 1999 Plan in June 1999. The 1999 Plan provides
for the issue of 52,800,000 Equity Shares to employees. The 1999 Plan is
administered by our Compensation Committee. Under the 1999 Plan, options will be
issued to employees at an exercise price, which shall not be less than the fair
market value, or FMV. Under the 1999 Plan, options may also be issued to
employees at exercise prices that are less than FMV only if specifically
approved by our members in a General Meeting. All options under the 1999 Plan
are exercised for equity shares.
 
 The 1999 Plan
generally does not allow for transfer of options, and only the optionee may
exercise an option during his or her lifetime. An optionee generally must
exercise an option within three months of termination of service. If an
optionee's termination is due to death or disability, his or her option will
fully vest and become exercisable and the option must be exercised within twelve
months after such termination. Unless a prior shareholder approval has been
obtained, the exercise price of stock options granted under the 1999 Plan must
at least equal the fair market value of the equity shares on the date of
grant.
 
 The 1999 Plan
provides that in the event of our merger with or into another corporation or a
sale of substantially all of our assets, the successor corporation shall either
assume the outstanding options or grant equivalent options to the holders. If
the successor corporation neither assumes the outstanding options nor grants
equivalent options, such outstanding options shall vest immediately, and become
exercisable in full.
  During the fiscal
year ended March 31, 2010, there were no options to purchase ADSs or equity
shares granted to our executive officers and directors.
  Item 7. Major
Shareholders and Related Party Transactions
 
 MAJOR
SHAREHOLDERS
 
 The following table
sets forth as of March 31, 2010, certain information with respect to beneficial
ownership of our equity shares by each shareholder or group known by us to be
the beneficial owner of 5% or more of our outstanding equity
shares.
 
 Beneficial
ownership is determined in accordance with rules of the Securities and Exchange
Commission, which generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power or investment power with respect
to those securities and includes equity shares issuable pursuant to the exercise
of stock options or warrants that are immediately exercisable or exercisable
within 60 days of March 31, 2010. These shares are deemed to be outstanding and
to be beneficially owned by the person holding those options or warrants for the
purpose of computing the percentage ownership of that person, but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person. Unless otherwise indicated, all information with respect to
the beneficial ownership of any principal shareholder has been furnished by such
shareholder and, unless otherwise indicated, we believe that persons named in
the table have sole voting and sole investment power with respect to all the
equity shares shown as beneficially owned, subject to community property laws
where applicable. The shares beneficially owned by the directors include equity
shares owned by their family members to which such directors disclaim beneficial
ownership.
 
 The share numbers
and percentages listed below are based on 570,991,592 Equity Shares outstanding,
as of March 31, 2010.
 Name of the beneficial
      owner
              Class of
      security
              No. of shares beneficially
      held
              % of class of
      shares
              No.
      of shares
                beneficially
      held
              % of class of
      shares
              No. of shares beneficially
      held
              % of class of
      sharesMarch 31,
      2010
              March
      31, 2009
              March
      31, 2008Shareholding
      of all directors and officers as a group and officers as a
      group
              –
              74,521,371
      13.04(1)
              
              96,805,116
              16.85
      (2)
              96,817,916
              16.86
      (3)
  1.
              Comprised of
      2,192,038 shares owned by non-founder directors and officers. The
      percentage ownership of the group is calculated on a base of 571,438,320
      equity shares which includes 446,728 options that are currently
      exercisable or exercisable by all optionees within 60 days of March 31,
      2010.
  2.
              Comprised of
      2,313,138 shares owned by non-founder directors and officers and 7,000
      options that are currently exercisable within 60 days of March 31, 2009 by
      our various officers and directors. These have been deemed to be
      outstanding and to be beneficially owned by the person holding such
      options for calculating the total shareholding of all directors and
      officers as a group. Accordingly, the percentage ownership of the group is
      calculated on a base of 574,666,878 equity shares which includes 1,836,835
      options that are currently exercisable or exercisable by all optionees
      within 60 days of March 31, 2009.
  3.
              Comprised of
      2,368,336 shares owned by non-founder directors and officers and 7,602
      options that are currently exercisable within 60 days of March 31, 2008 by
      our various officers and directors. These have been deemed to be
      outstanding and to be beneficially owned by the person holding such
      options for calculating the total shareholding of all directors and
      officers as a group. Accordingly, the percentage ownership of the group is
      calculated on a base of 574,634,206 equity shares which includes 2,638,448
      options that are currently exercisable or exercisable by all optionees
      within 60 days of March 31, 2008.
  Our American
Depository Shares are listed on the NASDAQ Global Select Market. Each ADS
currently represents one equity share of par value Rs. 5 per share. Our ADSs are
registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 and
as of March 31, 2010 are held by 35,565 holders of record in the United
States.
  Our equity shares
can be held by Foreign Institutional Investors or FIIs, and Non Resident Indians
or NRIs, who are registered with the Securities and Exchange Board of India, or
SEBI, and the Reserve Bank of India, or RBI. As of March 31, 2010, 37.17% of our
equity shares were held by these FIIs and NRIs, some of which may be
residents or bodies corporate registered in the United States and elsewhere. We
are not aware of which FIIs and NRIs hold our equity shares as residents or as
corporate entities registered in the United States.
  Our major
shareholders do not have differential voting rights with respect to the equity
shares. To the best of our knowledge, we are not owned or controlled directly or
indirectly by any government, by any other corporation or by any other natural
or legal person. We are not aware of any arrangement, the operation of which may
at a subsequent date result in a change in control.
  RELATED PARTY
TRANSACTIONS
  Infosys BPO. Infosys
established Infosys BPO in April 2002, under the laws of India.
  As of March 31,
2010, Infosys holds 99.98% of the outstanding equity shares of Infosys
BPO.
  During fiscal 2010
and 2009, we engaged Infosys BPO and its subsidiaries for management services
for which we have been billed approximately $12 million and $7 million. We did
not engage Infosys BPO for management services during fiscal 2008. Further,
during fiscal 2010, fiscal 2009 and fiscal 2008, Infosys BPO and its
subsidiaries engaged us for certain management services for which we billed them
approximately $15 million, $12 million and $11 million,
respectively.
  Infosys
Australia. In
January 2004 we acquired, for cash, 100% of the equity in Expert Information
Services Pty. Limited, Australia for $14 million. The acquired company was
renamed as Infosys Technologies (Australia) Pty. Limited. During fiscal 2009,
Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty.
Limited (MSPL) for a cash consideration of $3 million. During fiscal 2010,
fiscal 2009 and fiscal 2008, we engaged Infosys Australia for software
development services for which we have been billed approximately $134 million,
$101 million and $121 million, respectively. Further, during fiscal 2010, fiscal
2009 and fiscal 2008, Infosys Australia engaged us for certain software
development services for which we billed them approximately $5 million, $2
million and $1 million, respectively.
  Infosys
China. In
October 2003, we established a wholly-owned subsidiary, Infosys China, to expand
our business operations in China. During fiscal 2009 and 2008, we disbursed an
amount of $2 million and $3 million, respectively, as loans to Infosys China,
for expansion of business operations, each at an interest rate of 6.0% per
annum. The loans are repayable within five years from the date of disbursement
at the discretion of the subsidiary. The largest amount outstanding during the
fiscal year 2010 was $10 million. Further, during the year ended March 31, 2009,
we made an additional investment of $4 million in Infosys China. As of March 31,
2010, we have invested an aggregate of $14 million as equity capital and $10
million as loans in Infosys China. During fiscal 2010, 2009 and 2008, we engaged
Infosys China for software development services for which we have been billed
approximately $28 million, $17 million and $14 million, respectively. Further,
during fiscal 2010 Infosys China engaged us for certain software development
services for which we billed them approximately $2 million.
  Infosys
Consulting.
In April
2004, we incorporated a wholly-owned subsidiary, Infosys Consulting, in the
State of Texas to add high-end consulting capabilities to our Global Delivery
Model. During fiscal 2010, 2009 and 2008, we made an additional investment of
$10 million, $5 million and $20 million, respectively, in Infosys Consulting. As
of March 31, 2010, we have invested an aggregate of $55 million in the
subsidiary. During fiscal 2010, 2009 and 2008, we engaged Infosys Consulting for
consulting services for which we have been billed approximately $80 million, $59
million and $58 million, respectively. Further, during fiscal 2010 and 2009
Infosys Consulting engaged us for certain software development services for
which we billed them approximately $5 million and $1 million,
respectively.
 
 Infosys
Mexico.In
June 2007, we established a wholly-owned subsidiary, Infosys Mexico, to expand
our business operations in Latin America. During fiscal 2010 and 2008, we made
an additional investment of $4 million and $5 million, respectively, in Infosys
Mexico. As of March 31, 2010, we have invested an aggregate of $9 million in the
subsidiary. During fiscal 2010, 2009 and 2008, we engaged Infosys Mexico for
software development services for which we have been billed approximately $9
million, $7 million and $1 million, respectively.
  Infosys
Sweden. In March 2009, we established a wholly-owned subsidiary, Infosys
Technologies (Sweden) AB to expand our business operations in Europe. During
fiscal 2010 we engaged Infosys Sweden for software development services for
which we have been billed approximately $2 million.
  Infosys Brasil.In August 2009, we established a wholly-owned subsidiary, Infosys
Tecnologia DO Brasil LTDA, to expand our operations in South America. We have
invested an aggregate of $6 million in Infosys Brasil as of March 31, 2010.
During fiscal 2010 we engaged Infosys Brasil for software development services
for which we have been billed approximately $1 million.
  Infosys Public
Services.In October 2009 we incorporated a wholly-owned subsidiary,
Infosys Public Services, Inc., to focus and expand our operations in the U.S
public services market. We have invested an aggregate of $5 million in Infosys
Public Services as of March 31, 2010.
  Employment and indemnification
agreements
  We have entered
into agreements with our executive directors that provide for a monthly salary,
bonuses, and benefits including, vacation, medical reimbursements and gratuity
contributions. These agreements have a five-year term and either party may
terminate the agreement with six months notice. The form of the employment
agreement for our executive directors has been filed previously and is
incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  We have also
entered into agreements to indemnify our directors and officers for claims
brought under U.S. laws to the fullest extent permitted by Indian law. These
agreements, among other things, indemnify our directors and officers for certain
expenses, judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Infosys
Technologies Limited, arising out of such person's services as our director or
officer. The form of the indemnification agreement for our directors and
officers has been filed previously and is incorporated by reference as an
exhibit to this Annual Report on Form 20-F.
  Loans to
employees
  We provide personal
loans and salary advances to our employees in India who are not executive
officers or directors.
  The annual rates of
interest for these loans vary between 0% and 4%. Loans aggregating $24 million each were
outstanding as of March 31, 2010 and 2009. The aggregate loans outstanding as of
March 31, 2008 were $29 million.




Item 8. Financial Information




CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION




The following
financial statements and auditors' report appear under Item 18 in this Annual
Report on Form 20-F and are incorporated herein by reference:




·
            Report of
      Independent Registered Public Accounting
Firm


·
            Consolidated
      balance sheets as of March 31, 2010 and
2009


·
            Consolidated
      statements of comprehensive income for the years ended March 31, 2010,
      2009 and 2008


·
            Consolidated
      statements of changes in equity for the years ended March 31, 2010, 2009
      and 2008


·
            Consolidated
      statements of cash flows for the years ended March 31, 2010, 2009 and
      2008


·
            Notes to the
      consolidated financial statements


·
            Financial
      Statement Schedule II- Valuation and qualifying
  accounts




Export revenue




For the fiscal year
ended March 31, 2010, 2009 and 2008, we generated $4,746 million, $4,603 million
and $4,121 million, or 98.8%, 98.7% and 98.7% of our total revenues of $4,804
million, $4,663 million and $4,176 million, respectively, from the export of our
products and rendering of services outside of India.




Legal proceedings




This information is
set forth under Item 4 under the heading “Legal proceedings” and such
information is incorporated herein by reference.




Dividends




Under Indian law, a
corporation pays dividends upon a recommendation by the board of directors and
approval by a majority of the shareholders, who have the right to decrease but
not increase the amount of the dividend recommended by the board of directors.
Dividends may be paid out of profits of an Indian company in the year in which
the dividend is declared or out of the undistributed profits of previous fiscal
years.




In fiscal 2010,
2009 and 2008, we paid cash dividends of approximately $0.48, $0.89 and $0.31
per equity share, respectively. Holders of ADSs will be entitled to receive
dividends payable on equity shares represented by such ADSs. Cash dividends on
equity shares represented by ADSs are paid to the Depositary in Indian rupees
and are generally converted by the Depositary into U.S. dollars and distributed,
net of Depositary fees, taxes, if any, and expenses, to the holders of such
ADSs. Although we have no current intention to discontinue dividend payments,
future dividends may not be declared or paid and the amount, if any, thereof may
be decreased.




Translations from
Indian rupees to U.S. dollars effected on or after April 1, 2008 are based on
the fixing rate in the City of Mumbai for cable transfers in Indian rupees as
published by the FEDAI.


Fiscal
            Dividend
      per Equity Share (Rs.)
            Dividend
      per Equity Share ($)
            Dividendper
      ADS ($)2010
            23.50
            0.48
            0.482009*
            37.25
            0.89
            0.892008
            12.50
            0.31
            0.31


* Includes a Special dividend of Rs. 20 ($0.50) per
share.




SIGNIFICANT
CHANGES




None.




Item 9. The Offer and
Listing
 
 PRICE HISTORY
  Our equity shares
are traded in India on the Bombay Stock Exchange Limited, or BSE, and the
National Stock Exchange of India Limited, or NSE, or collectively, the Indian
stock exchanges. Our ADSs are traded on NASDAQ Global Select Market under the
ticker symbol 'INFY'. Each ADS represents one equity share. Our ADSs began
trading on the NASDAQ on March 11, 1999. The Deutsche Bank Trust Company
Americas serves as a depositary with respect to our ADSs traded on the market
pursuant to the Deposit Agreement dated March 10, 1999, as amended and restated.
Our equity shares were previously traded on the Bangalore Stock Exchange, or
BgSE. There have been no trades of our shares on the BgSE since August 2002, and
we delisted from the BgSE on June 22, 2004.
  As of March 31,
2010, we had 570,991,592 equity shares issued and outstanding. There were 35,565
record holders of ADRs, evidencing 106,875,947 ADSs (equivalent to 106,875,947
equity shares). As of March 31, 2010, there were 381,716 record holders of our
equity shares listed and traded on the Indian stock exchanges.
  The following
tables set forth for the periods indicated the price history of the equity
shares and the ADSs on the Indian stock exchanges and the NASDAQ. Each ADS
currently represents one equity share. All translations from Indian rupees to
U.S. dollars are based on fixing rate in the City of Mumbai on March 31, 2010
for cable transfers in Indian rupees as published by the FEDAI, which was Rs.
44.90 per $1.00. The high and low prices for the Indian stock exchanges and
NASDAQ are based on the closing prices for each day of the relevant
period.
 BSEPrice per Equity
      Share
              NSEPrice per Equity
      Share
              NASDAQPrice per
    ADSHigh
              Low
              High
              Low
              High
              LowFiscal2010
              $62.49
              $29.87
              $62.67
              $29.98
              $62.32
              $26.812009
              44.38
              24.52
              44.40
              24.55
              49.37
              21.112008
              47.40
              29.24
              47.41
              29.28
              55.84
              33.012007
              52.95
              27.66
              53.07
              27.67
              60.55
              32.852006
              34.02
              21.01
              34.02
              21.01
              41.26
              28.30Fiscal
      2010First
      Quarter
              40.68
              29.87
              40.38
              29.98
              37.66
              26.81Second
      Quarter
              53.58
              37.34
              53.68
              37.36
              49.29
              34.29Third
      Quarter
              58.02
              47.65
              57.93
              47.73
              55.99
              46.00Fourth
      Quarter
              62.49
              52.39
              62.67
              52.40
              62.32
              50.69Fiscal
      2009First
      Quarter
              44.38
              31.66
              44.40
              31.67
              49.37
              35.81Second
      Quarter
              40.56
              31.00
              40.58
              31.03
              43.99
              29.35Third
      Quarter
              32.38
              24.52
              32.28
              24.55
              32.40
              21.11Fourth
      Quarter
              30.75
              25.19
              30.72
              25.21
              29.34
              22.78
 
 Fiscal
      2008First
      Quarter
              47.40
              42.41
              47.41
              42.45
              55.84
              47.49Second
      Quarter
              45.32
              39.22
              45.31
              39.23
              54.47
              44.50Third
      Quarter
              47.32
              34.12
              47.33
              34.11
              55.29
              38.66Fourth
      Quarter
              38.97
              29.24
              38.94
              29.28
              44.43
              33.01MonthMarch-2010
              62.49
              58.24
              62.67
              58.26
              62.32
              58.19February-2010
              58.18
              52.39
              58.29
              52.40
              56.90
              50.69January-2010
              59.89
              54.89
              59.91
              54.88
              58.75
              51.91December-2009
              58.02
              52.93
              57.93
              52.94
              55.99
              51.65November-2009
              54.20
              47.65
              54.31
              47.73
              52.64
              46.38October-2009
              51.47
              48.23
              52.04
              48.50
              49.59
              46.00
  Source for all
tables above: www.bseindia.com for
BSE quotes, www.nasdaq.com for
NASDAQ quotes and www.nse-india.com for
NSE quotes.
  On April 30, 2010,
the closing price of equity shares on the BSE was Rs. 2,736.15 equivalent
to $61.56 per equity share based on the exchange rate on that date.
  The Indian securities trading
market
  The information in
this section has been extracted from publicly available documents from various
sources, including officially prepared materials from the Securities and
Exchange Board of India, the BSE, and the NSE.
  Indian
Stock Exchanges
  The major stock
exchanges in India, the BSE and the NSE, account for a majority of trading
volumes of securities in India. The BSE and NSE together dominate the stock
exchanges in India in terms of number of listed companies, market capitalization
and trading.
  The stock exchanges
in India operate on a trading day plus two, or T+2, rolling settlement system.
At the end of the T+2 period, obligations are settled with buyers of securities
paying for and receiving securities, while sellers transfer and receive payment
for securities. For example, trades executed on a Monday would typically be
settled on a Wednesday. The SEBI has proposed to move to a T settlement system.
In order to contain the risk arising out of the transactions entered into by the
members of various stock exchanges either on their own account or on behalf of
their clients, the Stock Exchanges have designed risk management procedures,
which include compulsory prescribed margins on the individual broker members,
based on their outstanding exposure in the market, as well as stock-specific
margins from the members.
  To restrict
abnormal price volatility, SEBI has instructed stock exchanges to apply the
following price bands calculated at the previous day's closing price (there are
no restrictions on price movements of index stocks):
  Market Wide Circuit Breakers.
Market wide circuit breakers are applied to the market for movement by 10%, 15%
and 20% for two prescribed market indices: the BSE Sensex for the BSE and the
Nifty for the NSE. If any of these circuit breaker thresholds are reached,
trading in all equity and equity derivatives markets nationwide is
halted.
  Price Bands. Price bands are
circuit filters of up to 20% movements either up or down, and are applied to
most securities traded in the markets, excluding securities included in the BSE
Sensex and the NSE Nifty and derivatives products. The equity shares of Infosys
are included in the BSE Sensex and the NSE Nifty.
  The National Stock Exchange of India
Limited
  The market
capitalization of the capital markets (equities) segment of the NSE as of March
31, 2010 was approximately Rs. 60.09 trillion or approximately $1,338.35
billion. The clearing and settlement operations of the NSE are managed by the
National Securities Clearing Corporation Limited. Funds settlement takes place
through designated clearing banks. The National Securities Clearing Corporation
Limited interfaces with the depositaries on the one hand and the clearing banks
on the other to provide delivery versus payment settlement for
depositary-enabled trades.
  Bombay Stock Exchange
Limited
  The estimated
aggregate market capitalization of stocks trading on the BSE as of March 31,
2010 was approximately Rs. 61.64 trillion or approximately $1,372.83 billion.
The BSE began allowing online trading in May 1995. As of March 31, 2010, the BSE
had 1,010 members, comprised of 173 individual members, 814 Indian companies and
23 foreign institutional investors. Only a member of the stock exchange has the
right to trade in the stocks listed on the stock exchange.
  Trading on both the
NSE and the BSE occurs Monday through Friday, between 9:00 a.m. and 3:30 p.m.
(Indian Standard Time).
  Derivatives
  Trading in
derivatives in India takes place either on separate and independent derivatives
exchanges or on a separate segment of an existing stock exchange. The derivative
exchange or derivative segment of a stock exchange functions as a self
regulatory organization under the supervision of the SEBI.
  Depositories
  The National
Securities Depository Limited and Central Depositary Services (India) Limited
are the two depositories that provide electronic depositary facilities for
trading in equity and debt securities in India. The Securities and Exchange
Board of India (SEBI) mandates that a company which proposes to make an offer of
its securities (by way of an initial public offering or rights issue or further
public offering) to the public and list them on a recognised stock exchange in
India must enter into an agreement with a depository for dematerialisation of
securities already issued or proposed to be issued to the public or existing
shareholders. The SEBI has also provided that the issue and allotment of shares
in initial public offerings or private placements and/or the trading of shares
shall only be in electronic form.
  Securities Transaction
Tax
  In October 2004, a
securities transaction tax was implemented in India. A securities transaction
tax is levied on delivery-based transactions in equity shares in a company or in
units of an equity oriented fund on recognized stock exchanges at the rate of
0.125% of the value of the security. The securities transaction tax is required
to be paid by both the buyer and the seller. For non-delivery based
transactions, a lower rate of 0.025% to be adjusted against business profits is
applicable and is payable by the seller. For derivatives, the securities
transaction tax is 0.0133%. Debt market transactions have been exempted from the
securities transaction tax. Sale of a unit of an equity-oriented fund to a
mutual fund will attract a securities transaction tax of 0.20%. See 'Taxation'
for a further description of the securities transaction tax and capital gains
treatment under Indian law.
  Item 10. Additional
Information
  MEMORANDUM AND ARTICLES OF
ASSOCIATION
  Set forth below is
the material information concerning our share capital and a brief summary of the
material provisions of our Articles of Association, Memorandum of Association
and the Indian Companies Act, all as currently in effect. The following
description of our equity shares and the material provisions of our Articles of
Association and Memorandum of Association does not purport to be complete and is
qualified in its entirety by our Articles of Association and Memorandum of
Association that are incorporated by reference to this Annual Report on Form
20-F. The summary below is not intended to constitute a complete analysis of the
Indian Companies Act and is not intended to be a substitute for professional
legal advice.
  Our Articles of
Association provide that the minimum number of directors shall be 3 and the
maximum number of directors shall be 18. Currently, we have 14 directors. As per
the Indian Companies Act, unless the articles of association of a company
provide for all directors to retire at every Annual General Meeting, not less
than two-third of the directors of a public company must retire by rotation,
while the remaining one-third may remain on the Board until they resign or are
removed. Our Articles of Association require two thirds of our directors to
retire by rotation. One-third of the directors who are subject to retirement by
rotation must retire at each Annual General Meeting. A retiring director is
eligible for re-election.
  Executive directors
are required to retire at age 60 in accordance with our employee retirement
policies. Other Board members must retire from the Board at age 65. The
retirement age for the independent chairperson of the board is 70 years. Our
Articles of Association do not require that our directors have to hold shares of
our company in order to serve on our Board of Directors.
  Our Articles of
Association and the Indian Companies Act provide that any director who has a
personal interest in a transaction being discussed by the board of directors
must disclose such interest, must abstain from voting on such a transaction and
may not be counted for the purposes of determining whether a quorum is present
at the meeting at the time of discussing the transaction. Such director's
interest in any such transaction must be reported at the next meeting of Board
of Directors. The remuneration payable to our directors may be fixed by the
Board of Directors in accordance with the Indian Companies Act and provisions
prescribed by the Government of India. Our Articles of Association provide that
our Board of Directors may generally borrow any sum of money for the Company’s
business purposes, provided, that the consent of the shareholders is required
where any amounts to be borrowed, when combined with any already outstanding
debt (excluding temporary loans from the Company’s bankers in the ordinary cause
of business), exceeds the aggregate of our paid-up capital and free reserves, we
cannot borrow such amounts without the consent of our shareholders.
  Objects and Purposes of our
Memorandum of Association
  The following is a
summary of our Objects as set forth in Section 3 of our Memorandum of
Association:
  ·
              To provide
      services of every kind including commercial, statistical, financial,
      accountancy, medical, legal, management, educational, engineering, data
      processing, communication and other technological, social or other
      services;
  ·
              To carry on
      all kinds of business as importer, exporter, buyers, sellers and lessors
      of and dealers in all types of components and equipments necessary to
      provide the services our objects
enlist;
  ·
              To
      manufacture, export, import, buy, sell, rent, hire or lease or otherwise
      acquire or dispose or deal in all kinds of digital equipments, numerical
      controller, flexible manufacturing systems, robots, communication systems,
      computers, computer peripherals, computer software, computer hardware,
      computer technology, machines, computer software, computer hardware,
      computer technology, machines, computer aided teaching aids, energy saving
      devices, alternative sources of energy, electrical and electronics
      components, devices, instruments, equipments and controls for any
      engineering applications, and all other related components, parts and
      products used in communication and
computers;
  ·
              To conduct or
      otherwise subsidize or promote research and experiments for scientific,
      industrial, commercial economic, statistical and technical purposes;
      and
  ·
              To carry on
      any other trade or business whatsoever as can in our opinion can be
      advantageously or conveniently carried on by
us.
  General
  Our authorized
share capital is Rs. 3,000,000,000 divided into 600,000,000 Equity Shares,
having a par value of Rs. 5/- per share. As of March 31, 2010, 570,991,592
Equity Shares were issued, outstanding and fully paid. The equity shares are our
only class of share capital. We currently have no convertible debentures or
warrants outstanding. As of March 31, 2010, we had outstanding options to
purchase 204,464 Equity Shares and 242,264 ADSs. For the purposes of this Annual
Report on Form 20-F, "shareholder" means a shareholder who is registered as a
member in our register of members or whose name appears in the beneficiary
position maintained by the depositories.
  Dividends
  Under the Indian
Companies Act, our Board of Directors recommends the payment of a dividend which
is then declared by our shareholders in a general meeting. However, the Board is
not obliged to recommend a dividend.
  Under our Articles
of Association and the Indian Companies Act, our shareholders may, at the Annual
General Meeting, declare a dividend of an amount less than that recommended by
the Board of Directors, but they cannot increase the amount of the dividend
recommended by the Board of Directors. In India, dividends are generally
declared as a percentage of the par value of a company's equity shares and are
to be distributed and paid to shareholders in cash and in proportion to the paid
up value of their shares, within 30 days of the Annual General Meeting at
which the dividend is approved by shareholders. Pursuant to our Articles of
Association, our Board of Directors has the discretion to declare and pay
interim dividends without shareholder approval. As per the terms of our listing
of the equity shares of ADSs of the Company, we are required to inform the stock
exchanges on which our equity shares and ADSs are listed the rate of dividend
declared and the record date for determining the shareholders who are entitled
to receive dividends. Under the Indian Companies Act, dividend can be paid only
in cash to registered shareholders as of the record date. Dividend may also be
paid in cash to the shareholder’s order or the shareholder’s banker’s
order.
  The Indian
Companies Act provides that any dividends that remain unpaid or unclaimed after
the 30-day period from the date of declaration of a dividend are to be
transferred to a special bank account opened by the company at an approved bank.
We transfer any dividends that remain unclaimed for seven years from the date of
the transfer to an Investor Education and Protection Fund established by the
Government of India under the provisions of the Indian Companies Act. After the
transfer to this fund, such unclaimed dividends may not be claimed by the
shareholders entitled to receive such dividends.
  Under the Indian
Companies Act, dividends may be paid out of profits of a company in the year in
which the dividend is declared or out of the undistributed profits of previous
fiscal years after providing for depreciation. Before declaring a dividend
greater than 10% of the paid-up capital, a company is required to transfer to
its reserves a minimum percentage of its profits for that year, ranging from
2.5% to 10% depending upon the dividend to be declared in such
year.
  The Indian
Companies Act further provides that in the event of an inadequacy or absence of
profits in any year, a dividend may be declared for such year out of the
company's accumulated profits that have been transferred to its reserves,
subject to the following conditions:
  ·
              the rate of
      dividend to be declared may not exceed 10% of its paid up capital or the
      average of the rate at which dividends were declared by the company in the
      prior five years, whichever is
less;
  ·
              the total
      amount to be drawn from the accumulated profits earned in the previous
      years and transferred to the reserves may not exceed an amount equivalent
      to 10% of the sum of its paid up capital and free reserves, and the amount
      so drawn is to be used first to set off the losses incurred in the fiscal
      year before any dividends in respect of preference or equity shares are
      declared; and
  ·
              the balance
      of reserves after such withdrawals shall not fall below 15% of the
      company's paid up capital.
  Bonus Shares
  In addition to
permitting dividends to be paid out of current or retained earnings as described
above, the Indian Companies Act permits a company to distribute an amount
transferred from the reserves or surplus in the company's profit and loss
account to its shareholders in the form of bonus shares (similar to a stock
dividend). The Indian Companies Act also permits the issuance of bonus shares
from capitalization of the securities premium account. Bonus shares are
distributed to shareholders in the proportion recommended by the Board of
Directors. Shareholders of the company on a fixed record date are entitled to
receive such bonus shares.
  Any issue of bonus
shares would be subject to the guidelines issued by the SEBI in this regard. The
relevant SEBI guidelines prescribe that no company shall, pending conversion of
convertible debt securities, issue any shares by way of bonus unless similar
benefit is extended to the holders of such convertible debt securities, through
reservation of shares in proportion to such conversion (which bonus shares may
be issued at the time of conversion of the debt securities). The bonus issue
must be made out of free reserves built out of the genuine profits or share
premium collected in cash only. The bonus issue cannot be made unless the partly
paid shares, if any existing, are made fully paid-up. Further, for the issuance
of such bonus shares a company should not have defaulted in the payment of
interest or principal in respect of fixed deposits and interest on existing
debentures or principal on redemption of such debentures. The declaration of
bonus shares in lieu of dividend cannot be made. Further a company should have
sufficient reason to believe that it has not defaulted in respect of the payment
of statutory dues of the employees such as contribution to provident fund,
gratuity, bonus, etc. The issuance of bonus shares must be implemented within
two months from the date of approval by the Board of Directors and cannot be
withdrawn after the decision to make a bonus issue has been made.
  Consolidation
and Subdivision of Shares
  The Indian
Companies Act permits a company to split or combine the par value of its shares
with the approval of its shareholders, provided such split or combination is not
made in fractions. Shareholders of record on a fixed record date are entitled to
receive the split or combination.
  Preemptive
Rights and Issue of Additional Shares
  The Indian
Companies Act gives shareholders the right to subscribe for new shares in
proportion to their respective existing shareholdings in the event of a further
issue of shares by a company, unless otherwise determined by a special
resolution passed by a General Meeting of the shareholders. Under the Indian
Companies Act, in the event of a pre-emptive issuance of shares, subject to the
limitations set forth above, a company must first offer the new shares to the
shareholders on a fixed record date. The offer must include: (i) the right,
exercisable by the shareholders on record, to renounce the shares offered in
favor of any other person; and (ii) the number of shares offered and the
period of the offer, which may not be less than 15 days from the date of
offer. If the offer is not accepted it is deemed to have been declined and
thereafter the Board of Directors is authorized under the Indian Companies Act
to distribute any new shares not purchased by the pre-emptive rights holders in
the manner that it deems most beneficial to the company.
  Meetings
of Shareholders
  We must convene an
Annual General Meeting of shareholders each year within 15 months of the
previous annual general meeting or within six months of the end of the previous
fiscal year, whichever is earlier. In certain circumstances a three month
extension may be granted by the Registrar of Companies to hold the Annual
General Meeting. The Annual General Meeting of the shareholders is generally
convened by our Secretary pursuant to a resolution of the Board of Directors. In
addition, the Board may convene an Extraordinary General Meeting of shareholders
when necessary or at the request of a shareholder or shareholders holding at
least 10% of our paid up capital carrying voting rights. Written notice setting
out the agenda of any meeting must be given at least 21 days prior to the
date of any General Meeting to the shareholders of record, excluding the days of
mailing and date of the meeting. Shareholders who are registered as shareholders
on the date of the General Meeting are entitled to attend or vote at such
meeting. The Annual General Meeting of shareholders must be held at our
registered office or at such other place within the city in which the registered
office is located, and meetings other than the Annual General Meeting may be
held at any other place if so determined by the Board of Directors.
  Voting
Rights
  At any General
Meeting, voting is by show of hands unless a poll is demanded by a shareholder
or shareholders present in person or by proxy holding at least 10% of the total
shares entitled to vote on the resolution or by those holding shares with an
aggregate paid up capital of at least Rs. 50,000. Upon a show of hands,
every shareholder entitled to vote and present in person has one vote and, on a
poll, every shareholder entitled to vote and present in person or by proxy has
voting rights in proportion to the paid up capital held by such shareholders.
The Chairperson has a casting vote in the case of any tie. Any shareholder of
the company entitled to attend and vote at a meeting of the company may appoint
a proxy. The instrument appointing a proxy must be delivered to the company at
least 48 hours prior to the meeting. Unless the articles of association
otherwise provide, a proxy may not vote except on a poll. A corporate
shareholder may appoint an authorized representative who can vote on behalf of
the shareholder, both upon a show of hands and upon a poll. An authorized
representative is also entitled to appoint a proxy.
  Ordinary
resolutions may be passed by simple majority of those present and voting at any
General Meeting for which the required period of notice has been given. However,
special resolutions such as amendments of the articles of association,
commencement of a new line of business, the waiver of preemptive rights for the
issuance of any new shares and a reduction of share capital, require that votes
cast in favor of the resolution (whether by show of hands or on a poll) are not
less than three times the number of votes, if any, cast against the resolution
by members so entitled and voting. Further, the Indian Companies Act requires
certain resolutions such as those listed below to be voted on only by a postal
ballot:
  ·
              amendments of
      the memorandum of association to alter the objects of the company and to
      change the registered office of the company under section 146 of the
      Indian Companies Act;
  ·
              the issuance
      of shares with differential rights with respect to voting, dividend or
      other provisions of the Indian Companies
Act;
  ·
              the sale of
      the whole or substantially the whole of an undertaking or facilities of
      the company;
  ·
              providing
      loans, extending guarantees or providing a security in excess of the
      limits allowed under Section 372A of the Indian Companies
      Act;
  ·
              varying the
      rights of the holders of any class of shares or
  debentures;
  ·
              the election
      of a director by minority shareholders;
and
  ·
              the buy back
      of shares.
  Register
of Shareholders; Record Dates; Transfer of Shares
  We maintain a
register of shareholders held in electronic form through National Securities
Depository Limited and the Central Depositary Services (India) Limited. To
determine which shareholders are entitled to specified shareholder rights such
as a dividend or a rights issue, we may close the register of shareholders for a
specified period. The date on which this period begins is the record date. The
Indian Companies Act requires us to give at least seven days prior notice to the
public before such closure. We may not close the register of shareholders for
more than thirty consecutive days, and in no event for more than forty-five days
in a year. Trading of our equity shares, however, may continue while the
register of shareholders is closed.
  Following the
introduction of the Depositories Act, 1996, and the repeal of Section 22A
of the Securities Contracts (Regulation) Act, 1956, which enabled companies to
refuse to register transfers of shares in some circumstances, the equity shares
of a public company are freely transferable, subject only to the provisions of
Section 111A of the Indian Companies Act and the listing agreement entered
into between the company and the relevant stock exchange on which the shares of
the company are listed. Since we are a public company, the provisions of
Section 111A will apply to us. In accordance with the provisions of
Section 111A(2) of the Indian Companies Act, our Board of Directors may
refuse to register a transfer of shares if they have sufficient cause to do so.
If our Board of Directors refuses to register a transfer of shares, the
shareholder wishing to transfer his, her or its shares may file a civil suit or
an appeal with the Company Law Board/Tribunal.
  Pursuant to
Section 111A (3), if a transfer of shares contravenes any of the provisions
of the Indian Companies Act and Securities and Exchange Board of India Act, 1992
or the regulations issued thereunder or any other Indian laws, the Tribunal may,
on application made by the relevant company, a depository incorporated in India,
an investor, a participant, or the Securities and Exchange Board of India,
direct the rectification of the register, record of members and/or beneficial
owners. Pursuant to Section 111A(4) the Company Law Board/Tribunal may, in
its discretion, issue an interim order suspending the voting rights attached to
the relevant shares before making or completing its investigation into the
alleged contravention.
  Under the Indian
Companies Act, unless the shares of a company are held in a dematerialized form,
a transfer of shares is effected by an instrument of transfer in the form
prescribed by the Indian Companies Act and the rules thereunder, together with
delivery of the share certificates. A stamp duty to the extent of 0.25% of the
value of the shares (regardless of the consideration paid) is due and payable on
the transfer of shares in physical form. Our transfer agent for our equity
shares is Karvy Computershare Private Limited located in Hyderabad,
India.
  Disclosure
of Ownership Interest
  Section 187C
of the Indian Companies Act requires holders of record who do not hold
beneficial interests in shares of Indian companies to declare to the company
certain details, including the nature of the holder's interest and details of
the beneficial owner. Any person who fails to make the required declaration
within 30 days may be liable for a fine of up to Rs. 1,000 for each
day that the declaration is not made. Any charge, promissory note or other
collateral agreement created, executed or entered into with respect to any share
by the ostensible owner thereof, or any hypothecation by the ostensible owner of
any share, pursuant to which a declaration is required to be made under
Section 187C, shall not be enforceable by the beneficial owner or any
person claiming through the beneficial owner if such declaration is not made.
Failure to comply with Section 187C will not affect the obligation of the
company to register a transfer of shares or to pay any dividends to the
registered holder of any shares pursuant to which such declaration has not been
made. While it is unclear under Indian law whether Section 187C applies to
holders of ADSs of the company, investors who exchange ADSs for the underlying
equity shares of the company will be subject to the restrictions of
Section 187C. Additionally, holders of ADSs may be required to comply with
such notification and disclosure obligations pursuant to the provisions of the
Deposit Agreement to be entered into by such holders, the company and a
depositary.
  Audit
and Annual Report
  Under the Indian
Companies Act, a company must file its annual accounts with the Registrar of
Companies within 30 days from the date of the Annual General Meeting.
Copies of the annual report are also required to be simultaneously sent to stock
exchanges on which the company's shares are listed under the applicable listing
agreements. At least 21 days before the Annual General Meeting of
shareholders, a company must distribute a detailed version of the company's
audited balance sheet and profit and loss account and the reports of the Board
of Directors and the auditors thereon.
  A company must also
file an annual return containing a list of the company's shareholders and other
company information, within 60 days of the conclusion of the Annual General
Meeting.
  Company
Acquisition of Equity Shares
  Under the Indian
Companies Act, approval by way of a special resolution of a company's
shareholders voting on the matter (votes cast in favor should be three times the
votes cast against) and approval of the Court/ Tribunal of the state in which
the registered office of the company is situated is required to reduce the share
capital of a company, provided such reduction is authorized by the articles of
association of the company. A company is not permitted to acquire its own shares
for treasury operations.
  A company may,
under some circumstances, acquire its own equity shares without seeking the
approval of the Court/Tribunal in compliance with prescribed rules, regulations
and conditions of the Indian Companies Act. In addition, public companies which
are listed on a recognized stock exchange in India must comply with the
provisions of the Securities and Exchange Board of India (Buy-back of
Securities) Regulations, 1998, or Buy-back Regulations. Since we are a public
company listed on two recognized stock exchanges in India, we would have to
comply with the relevant provisions of the Indian Companies Act and the
provisions of the Buy-back Regulations. Any ADS holder may participate in a
company's purchase of its own shares by withdrawing his or her ADSs from the
depository facility, acquiring equity shares upon the withdrawal and then
selling those shares back to the company.
  There can be no
assurance that equity shares offered by an ADS investor in any buyback of shares
by us will be accepted by us. The regulatory approvals required for ADS holders
to participate in a buyback are not entirely clear. ADS investors are advised to
consult their legal advisors for advice prior to participating in any buyback by
us, including advice related to any related regulatory approvals and tax
issues.
  Liquidation
Rights
  As per the Indian
Companies Act, certain payments have preference over payments to be made to
equity shareholders. These payments having preference include payments to be
made by the Company to its employees, taxes, payments to secured lenders and
payments to holders of any shares entitled by their terms to preferential
repayment over the equity shares. In the event of our winding-up, the holders of
the equity shares are entitled to be repaid the amounts of paid up capital or
credited as paid upon those equity shares after payments have been made by the
company as set out above. Subject to such payments having been made by the
company, any surplus assets are paid to holders of equity shares in proportion
to their shareholdings.
  Redemption
of Equity Shares
  Subject to the
buy-back of shares as set out in the section titled “Company Acquisition of
Equity Shares”, under the Indian Companies Act, equity shares are not
redeemable.
  Discriminatory
Provisions in Articles
  There are no
provisions in our Articles of Association discriminating against any existing or
prospective holder of such securities as a result of such shareholder owning a
substantial number of shares.
  Alteration
of Shareholder Rights
  Under the Indian
Companies Act, and subject to the provisions of the articles of association of a
company, the rights of any class of shareholders can be altered or varied
(i) with the consent in writing of the holders of not less than
three-fourths of the issued shares of that class; or (ii) by special
resolution passed at a separate meeting of the holders of the issued shares of
that class. In the absence of any such provision in the articles, such
alteration or variation is permitted as long as it is not prohibited by the
terms of the issue of shares of such a class.
  Under the Indian
Companies Act, the articles of association may be altered by a special
resolution of the shareholders.
  Limitations
on the Rights to Own Securities
  The limitations on
the rights to own securities of Indian companies, including the rights of
non-resident or foreign shareholders to hold securities, are discussed in the
sections entitled 'Currency Exchange Controls' and 'Risk Factors' in this Annual
Report on Form 20-F.
  Provisions
on Changes in Capital
  Our authorized
capital can be altered by an ordinary resolution of the shareholders in a
General Meeting. The additional issue of shares is subject to the preemptive
rights of the shareholders. In addition, a company may increase its share
capital, consolidate its share capital into shares of larger face value than its
existing shares or sub-divide its shares by reducing their par value, subject to
an ordinary resolution of the shareholders in a General Meeting.
  Takeover
Code and Listing Agreements
  Under the
Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, or the Takeover Code, upon the acquisition of 5%,
10%, 14%, 54% or 74% (or more, in each case) of the outstanding shares or voting
rights of a publicly-listed Indian company, the acquirer (meaning a person who
directly or indirectly, acquires or agrees to acquire shares or voting rights in
a target company, or acquires or agrees to acquire control over the target
company, either by himself or together with any person acting in concert) is
required to disclose the aggregate of his shareholding or voting rights in that
target company to the company. The target company and the said acquirer are
required to notify all the stock exchanges on which the shares of such company
are listed. Further, the Takeover Code requires any person holding more than 15%
and less than 55% of the shares or voting rights in a company to disclose to the
Company and to the stock exchanges on which the equity shares of the company are
listed, the sale or acquisition of 2% or more of the shares or voting rights of
the company and his revised shareholding to the company within two days of such
acquisition or sale or receipt of intimation of allotment of such shares. A
person who holds more than 15% of the shares or voting rights in any company is
required to make an annual disclosure of his holdings to that company (which in
turn is required to disclose the same and to each of the stock exchanges on
which the company's shares are listed). Holders of ADSs would be subject to
these notification requirements based on the thresholds prescribed under the
Takeover Code.
  Within 4 days of
the acquisition of or entering into an agreement (whether written or otherwise)
to acquire 15% or more of such shares or voting rights, or a change in control
of the company by an acquirer along with persons acting in concert, the acquirer
is required to make a public announcement to the other shareholders offering to
purchase from the other shareholders at least a further 20% of all the
outstanding shares of the company at a minimum offer price determined pursuant
to the Takeover Code. If an acquirer holding more than 15% but less than 55% of
shares acquires or agrees to acquire more than 5% shares during a fiscal year,
the acquirer is required to make a public announcement offering to purchase from
the other shareholders at least 20% of all the outstanding shares of the company
at a minimum offer price determined pursuant to the Takeover Code. Any further
acquisition of or agreement to acquire (other than the acquisition of up to 5%
of the shares or voting rights of the company on the stock market subject to the
post-acquisition holding being less than 75% of the shares or voting rights of
the company) outstanding shares or voting rights of a publicly listed company by
an acquirer who holds more than 55% but less than 75% of shares or voting rights
also requires the making of an open offer to acquire such number of shares as
would not result in the public shareholding being reduced to below the minimum
specified in the listing agreement. Where the public shareholding in the target
company is reduced to a level below the limit specified in the listing agreement
on account of shares or being rights acquired pursuant to an open offer, the
acquirer is required to take necessary steps to facilitate compliance with the
public shareholding threshold within the time prescribed in the listing
agreement or cause a delisting of the Company in accordance with the Securities
& Exchange Board of India (Delisting of Existing shares) Regulations 2009.
Since we are a listed company in India, the provisions of the Takeover Code will
apply to us and to any person acquiring our equity shares or voting rights in
our Company.
  Previously, the
Takeover Code contained a specific exemption from the above requirements in
relation to instruments (such as ADSs) which were convertible into equity shares
of a company. However, on November 6, 2009, SEBI amended the Takeover Code.
Pursuant to this amendment, the requirement to make an open offer of at least
20% of the shares of a company to the existing shareholders of the company would
be triggered (a) where holders of such convertible instruments are entitled to
exercise voting rights in respect of the shares underlying the instruments, upon
the acquisition of such convertible instruments that entitle the holder to more
than 15% of the shares or voting rights in the company; and (b) where holders of
such convertible instruments are not entitled to exercise voting rights in
respect of the underlying shares, upon their conversion with the underlying
shares carrying voting rights, if such underlying shares represent 15% or more
of the shares or voting rights of the company.
  The ADSs entitle
ADS holders to exercise voting rights in respect of the Deposited Equity Shares
(as described in the section titled “Voting Rights of Deposited Equity
Shares Represented by ADSs“). Accordingly, the requirement to make an open
offer of at least 20% of the shares of a company to the existing shareholders of
the company would be triggered by an ADS holder where the shares that underlie
the holder’s ADSs represent 15% or more of the shares or voting rights of the
company.
  We have entered
into listing agreements with each of the Indian stock exchanges on which our
equity shares are listed. Each of the listing agreements provides that if a
person acquires or agrees to acquire 5% or more of the voting rights of our
equity shares, the purchaser and we must, in accordance with the provisions of
the Takeover Code, report its holding to us and the relevant stock exchange(s).
The agreements also provide that if any person (along with persons acting in
concert) acquires or agrees to acquire our equity shares exceeding 15% of voting
rights in our Company or if any person (along with persons acting in concert)
who holds our equity shares (which in the aggregate carries less than 15% of the
voting rights) seeks to acquire our equity shares exceeding 15% of voting rights
in our Company, then the acquirer/ purchaser must, in accordance with the
provisions of the Takeover Code, before acquiring such equity shares, make an
offer on a uniform basis to all of our remaining shareholders to acquire equity
shares that have at least an additional 20% of the voting rights of our total
outstanding equity shares at a prescribed price as per the Takeover
Code.
  Although the
provisions of the listing agreements entered into between us and the Indian
stock exchanges on which our equity shares are listed will not apply to equity
shares represented by ADSs, holders of ADSs may be required to comply with such
notification and disclosure obligations pursuant to the provisions of the
Deposit Agreement entered into by such holders, our Company and the
depositary.
  Voting
Rights of Deposited Equity Shares Represented by ADSs
  Under Indian law,
voting of the equity shares is by show of hands unless a poll is demanded by a
member or members present in person or by proxy holding at least 10% of the
total shares entitled to vote on the resolution or by those holding shares with
an aggregate paid up capital of at least Rs. 50,000. A proxy (other than a
body corporate represented by an authorized representative) may not vote except
on a poll.
  As soon as
practicable after receipt of notice of any general meetings or solicitation of
consents or proxies of holders of shares or other deposited securities, our
Depositary shall fix a record date for determining the holders entitled to give
instructions for the exercise of voting rights. The Depositary shall then mail
to the holders of ADSs a notice stating (i) such information as is
contained in such notice of meeting and any solicitation materials,
(ii) that each holder on the record date set by the Depositary will be
entitled to instruct the Depositary as to the exercise of the voting rights, if
any pertaining to the deposited securities represented by the ADSs evidenced by
such holder's ADRs, (iii) the manner in which such instruction may be
given, including instructions to give discretionary proxy to a person designated
by us, and (iv) if the Depositary does not receive instructions from a
holder, he would be deemed to have instructed the Depositary to give a
discretionary proxy to a person designated by us to vote such deposited
securities, subject to satisfaction of certain conditions.
  On receipt of the
aforesaid notice from the Depositary, our ADS holders may instruct the
Depositary on how to exercise the voting rights for the shares that underlie
their ADSs. For such instructions to be valid, the Depositary must receive them
on or before a specified date.
  The Depositary will
try, as far as is practical, and subject to the provisions of Indian law and our
Memorandum of Association and our Articles of Association, to vote or to have
its agents vote the shares or other deposited securities as per our ADS holders'
instructions. The Depositary will only vote or attempt to vote as per an ADS
holder's instructions. The Depositary will not itself exercise any voting
discretion.
  Neither the
Depositary nor its agents are responsible for any failure to carry out any
voting instructions, for the manner in which any vote is cast, or for the effect
of any vote. There is no guarantee that our shareholders will receive voting
materials in time to instruct the Depositary to vote and it is possible that ADS
holders, or persons who hold their ADSs through brokers, dealers or other third
parties, will not have the opportunity to exercise a right to vote.
  Insider
Trading Regulations
  Under the SEBI
(Prohibition of Insider Trading) Regulations, 1992, or the Insider Trading
Regulations, any person who holds more than 5% of the shares or of the voting
rights in any listed company is required to disclose to the company the number
of shares or voting rights held by such person and any change in shareholding or
voting rights (even if such change results in the shareholding falling below 5%)
if there has been change in such holdings from the last disclosure made, if such
change exceeds 2% of the total shareholding or voting rights in the company.
Such disclosure is required to be made within two working days of: (i) the
receipt of intimation of allotment of the shares; or (ii) the acquisition or the
sale of the shares or voting rights. As a result of a clarification issued by
SEBI on June, 22 2009 under the SEBI (Informal Guidance) Scheme, 2003,
disclosures would be required to be made by a holder of ADSs under the Insider
Trading Regulations as set out above where the shares that underlie that
holder’s ADSs represent 5% or more of the shares or voting rights of the
Company.
  MATERIAL
CONTRACTS
  We have entered
into agreements with our employee directors that provide for a monthly salary,
bonuses, and benefits including, vacation, medical reimbursements and gratuity
contributions. These agreements have a five-year term and either party may
terminate the agreement with six months notice. The form of the employment
agreement for our executive directors has been filed previously and is
incorporated by reference as an exhibit to this Annual Report on Form
20-F.
  We have also
entered into agreements to indemnify our directors and officers for claims
brought under U.S. laws to the fullest extent permitted by Indian law. These
agreements, among other things, indemnify our directors and officers for certain
expenses, judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Infosys
Technologies Limited, arising out of such person's services as our director or
officer. The form of the indemnification agreement for our directors and
officers has been filed previously and is incorporated by reference as an
exhibit to this Annual Report on Form 20-F.
  CURRENCY EXCHANGE
CONTROLS
  General
  The subscription,
purchase and sale of shares of an Indian company are governed by various Indian
laws restricting the issuance of shares by the company to non-residents or
subsequent transfer of shares by or to non-residents. These restrictions have
been relaxed in recent years. Set forth below is a summary of various forms of
investment, and the restrictions applicable to each, including the requirements
under Indian law applicable to the issuance of ADSs.
  Foreign
Direct Investment Issuances by the Company
  Subject to certain
conditions, under current regulations, foreign direct investment in most
industry sectors does not require prior approval of the Foreign Investment
Promotion Board, or FIPB, or the Reserve Bank of India, or RBI, if the
percentage of equity holding by all foreign investors does not exceed specified
industry-specific thresholds. These conditions include certain minimum pricing
requirements, compliance with the Takeover Code (as described below), and
ownership restrictions based on the nature of the foreign investor (as described
below). Purchases by foreign investors of ADSs are treated as direct foreign
investment in the equity issued by Indian companies for such offerings. Foreign
investment of up to 100% of our share capital is currently permitted by Indian
laws.
  Subsequent
Transfers
  Restrictions for
subsequent transfers of shares of Indian companies between residents and
non-residents were relaxed significantly as of October 2004. As a result, for a
transfer by way of a private arrangement between a resident and a non-resident
of securities of an Indian company in the IT sector, such as ours, no prior
approval of either the RBI or the Government of India is required, as long as
certain conditions are met. These conditions include compliance, as applicable,
with pricing guidelines, the Takeover Code (as described below), and the
ownership restrictions based on the nature of the foreign investor (as described
below). If a sale or purchase is conducted on a stock exchange at prevailing
market prices, the pricing guidelines will be deemed satisfied. A non-resident,
other than a non-resident registered as a financial institutional investor with
the Securities and Exchange Board of India, cannot acquire shares on a stock
exchange. For off-market, negotiated transactions between residents and
non-residents, the guidelines stipulate pricing norms, which are based on the
prevailing market price.
  Transfers of shares
or convertible debentures of the company, by way of sale or gift, between two
non-residents are not subject to RBI approvals or pricing restrictions. However,
for industries other than the technology sector, approval from the Government of
India may be required for a transfer between two non-residents.
  Portfolio
Investment by Non-Resident Indians
  Investments by
persons of Indian nationality or origin residing outside of India, or NRIs, or
registered Foreign Institutional Investors, or FIIs (as described below) made
through a stock exchange are known as portfolio investments, or Portfolio
Investments.
  NRIs are permitted
to make Portfolio Investments on favorable tax and other terms under India's
Portfolio Investment Scheme. Under the scheme, an NRI can purchase up to 5% of
the paid up value of the shares issued by a company, subject to the condition
that the aggregate paid up value of shares purchased by all NRIs does not exceed
10% of the paid up capital of the company. The 10% ceiling may be exceeded if a
special resolution is passed in a General Meeting of the shareholders of a
company, subject to an overall ceiling of 24%. In addition to Portfolio
Investments in Indian companies, NRIs may also make foreign direct investments
in Indian companies pursuant to the foreign direct investment route discussed
above.
  Overseas corporate
bodies controlled by NRIs, or OCBs, were previously permitted to invest on
favorable terms under the Portfolio Investment Scheme. The RBI no longer
recognizes OCBs as an eligible class of investment vehicle under various routes
and schemes under the foreign exchange regulations.
  Investment
by Foreign Institutional Investors
  Currently, FIIs
such as pension funds, investment trusts, and asset management companies are
eligible to make Portfolio Investments on favorable terms in all the securities
traded on the primary and secondary markets in India. Investments by FIIs in
certain sectors, such as the retail sector, are prohibited.
  SEBI regulations
provide that no single FII may hold more than 10% of a company's total equity
shares.
  In most cases,
under SEBI and the RBI regulations, unless shareholders' approval has been
obtained, FIIs in aggregate may hold no more than 24% of an Indian company's
equity shares. However, we have obtained the required shareholders' approval and
our shares may be owned completely by FIIs, subject to the 10% individual
holding limitation described above.
  There is
uncertainty under Indian law about the tax regime applicable to FIIs that hold
and trade ADSs. FIIs are urged to consult with their Indian legal and tax
advisers about the relationship between the FII guidelines and the ADSs and any
equity shares withdrawn upon surrender of the ADSs.
  Takeover
Code
  Please refer to the
detailed description of the Takeover Code is provided under 'Takeover Code and
Listing Agreements' above.
  ADSs
  Issue
of ADSs
  Shares of Indian
companies represented by ADSs may be approved for issuance to foreign investors
by the Government of India under the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993, or the
1993 Regulations, as modified from time to time. The 1993 Regulations are in
addition to the other policies or facilities, as described above, relating to
investments in Indian companies by foreign investors.
  Fungibility
of ADSs
  In March 2001, the
RBI amended the Foreign Exchange Management (Transfer or Issue of Securities by
a Person Resident Outside India) Regulations, 2000 and established two
alternative methods to allow equity shares to be converted into and sold as
ADSs.
  First, a registered
broker in India (registered with SEBI) can purchase shares of an Indian company
that has issued ADSs on behalf of a person resident outside India, for the
purposes of converting the shares into ADSs. However, such conversion of equity
shares into ADSs is possible only if the following conditions are
satisfied:
  ·
              the shares
      are purchased on a recognized stock
exchange;
  ·
              the shares
      are purchased with the permission of the custodian to the ADS offering of
      the Indian company and are deposited with the
  custodian;
  ·
              the shares
      purchased for conversion into ADSs do not exceed the number of shares that
      have been released by the custodian pursuant to conversions of ADSs into
      equity shares under the Depositary
  Agreement; and
  ·
              a
      non-resident investor, broker, the custodian and the Depository comply
      with the provisions of the 1993 Regulations and any related guidelines
      issued by the Central Government from time to
  time.
  Second, the
amendment to the regulations permit an issuer in India to sponsor the issue of
ADSs through an overseas depositary against underlying equity shares accepted
from holders of its equity shares in India for offering outside of India. The
sponsored issue of ADSs is possible only if the following conditions are
satisfied:
  ·
              the price of
      the offering is determined by the managing underwriters of the offering.
      The price shall not be less than the average of the weekly high and low
      prices of the shares of the company during the 2 weeks preceding the
      relevant date (i.e. the date on which the Board of Directors of the
      company decides to open the issue);
  ·
              the ADS
      offering is approved by the FIPB;
  ·
              the ADS
      offering is approved by a special resolution of the shareholders of the
      issuer in a general meeting;
  ·
              the facility
      is made available to all the equity shareholders of the
      issuer;
  ·
              the proceeds
      of the offering are repatriated into India within one month of the closing
      of the offering;
  ·
              the sales of
      the existing equity shares are made in compliance with the Foreign Direct
      Investment Policy (as described above) in
India;
  ·
              the number of
      shares offered by selling shareholders are subject to limits in proportion
      to the existing holdings of the selling shareholders when the offer is
      oversubscribed; and
  ·
              the offering
      expenses do not exceed 7% of the offering proceeds and are paid by
      shareholders on a pro-rata basis.
  The issuer is also
required to furnish a report to the RBI specifying the details of the offering,
including the amount raised through the offering, the number of ADSs issued, the
underlying shares offered and the percentage of equity in the issuer represented
by the ADSs.
  Transfer
of ADSs and Surrender of ADSs
  A person resident
outside India may transfer the ADSs held in Indian companies to another person
resident outside India without any permission. An ADS holder is permitted to
surrender the ADSs held by him in an Indian company and to receive the
underlying equity shares under the terms of the Deposit Agreement. Under Indian
regulations, the re-deposit of these equity shares with the Depositary for ADSs
may not be permitted, other than as set out above.
  Government of India
Approvals
  Pursuant to the
RBI's regulations relating to sponsored ADS offerings, an issuer in India can
sponsor the issue of ADSs through an overseas depositary against underlying
equity shares accepted from holders of its equity shares in India. The
guidelines specify, among other conditions, that:
  ·
              the ADSs must
      be offered at a price determined by the lead manager of such offering. The
      price shall not be less than the average of the weekly high and low prices
      of the shares of the company during the 2 weeks preceding the relevant
      date (i.e. the date on which the Board of Directors of the company decides
      to open the issue);
  ·
              all equity
      holders may participate;
  ·
              the issuer
      must obtain special shareholder approval;
and
  ·
              the proceeds
      must be repatriated to India within one month of the closure of the
      issue.
  TAXATION
  Indian
Taxation
  General.
The following summary is based on the law and practice of the Income-tax Act,
1961, or Income-tax Act, including the special tax regime contained in
Sections 115AC and 115ACA of the Income-tax Act read with the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares (through Depository
Receipt Mechanism) Scheme, 1993, or the Scheme, as amended. The Income-tax Act
is amended every year by the Finance Act of the relevant year. Some or all of
the tax consequences of Sections 115AC and 115ACA may be amended or changed
by future amendments to the Income-tax Act.
  We believe this
information is materially complete as of the date hereof. However, this summary
is not intended to constitute a complete analysis of the individual tax
consequences to non-resident holders or employees under Indian law for the
acquisition, ownership and sale of ADSs and equity shares.
  EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISORS WITH
RESPECT TO INDIAN AND LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING
OF EQUITY SHARES OR ADSs.
  Residence. For purposes of the
Income-tax Act, an individual is considered to be a resident of India during any
fiscal year if he or she is in India in that year for a period or periods
amounting to at least 182 days; or at least 60 days and, within the
four preceding years has been in India for a period or periods amounting to at
least 365 days.
  The period of
60 days referred to above shall be read as 182 days (i) in case
of a citizen of India who leaves India in a previous year for the purposes of
employment outside of India or (ii) in the case of a citizen of India or a
person of Indian origin living abroad who visits India.
  A company is a
resident of India if it is incorporated in India or the control and the
management of its affairs is situated wholly in India. Individuals and companies
that do not fulfil the above criteria would be treated as non-residents for
purposes of the Income-tax Act.
  Taxation of
Distributions.
Dividend income is currently exempt from tax for shareholders. Domestic
companies are currently liable to pay a dividend distribution tax at the rate of
16.99% inclusive of applicable surcharge and education cess. The Finance Bill
2010 has proposed to reduce the surcharge applicable from 10% to 7.5% pursuant
to which the rate of dividend distribution tax would be reduced to 16.61%
inclusive of applicable surcharge and education cess. The Finance Act, 2008
introduced Section 115 O (1A) effective April 1, 2008 under which a domestic
company, subject to certain conditions, can set off the dividend income received
from its subsidiary from the amount of dividend income declared by it to its
shareholders and would therefore be liable to dividend distribution tax only on
the balance dividend after such set-off. Any distributions of additional ADSs or
equity shares to resident or non-resident holders will not be subject to Indian
tax.
  Minimum Alternate
Tax. The Indian
Government had introduced Section 115JA to the Income Tax Act which came into
effect in April 1, 1997, to bring certain zero tax companies under the ambit of
a Minimum Alternative Tax, or MAT. If the taxable income of a company computed
under this Act, in respect of a previous year was less than 30% of its book
profits, the total income of such company chargeable to tax for the relevant
previous year shall be deemed to be an amount equal to 30% of such book profits.
Effective April 1, 2001, Finance Act, 2000 introduced Section 115JB, pursuant to
which the income of companies eligible for tax holiday under section 10A of the
Act was exempted from MAT. The amount of income to which any of the provisions
of section 10A apply, was reduced from the book profit for the purposes of
calculation of income tax payable under the aforesaid section. The Finance Act,
2007 however included income eligible for deductions under sections 10A of the
Act in the computation of book profits for the levy of MAT. Income earned by an
SEZ developer and SEZ operating units under Section 10AA of the Act is however
exempt from MAT under section 115JB. The rate of MAT for domestic companies, is
currently 16.99% (inclusive of applicable surcharge and education cess) and
levied on its book profits. The Finance Bill, 2010 has proposed to increase the
rate of MAT to 19.93% (inclusive of surcharge and education cess).
  The Income Tax Act
provides that the MAT paid by companies can be adjusted against its tax
liability over the next ten years.
  Taxation of
Employee Stock Options. Through the Finance Act,
2009, Section 17 (2) of the Income Tax Act was amended to provide that any
specified securities or sweat equity shares allotted or transferred, directly or
indirectly, by a company free of cost or at concessional rate to its current or
former employees are taxable in the hands of employees as a “perquisite. This
treatment extends to all options granted under a company's stock option plan,
where such option is exercised on or after April 1, 2009. The value of the
perquisite is the fair market value, or FMV, of the specified security or share
as on the date of exercise of the option by the employee as reduced by the
amount actually paid by, or recovered from the employee in respect of such
security or share. The value of the perquisite so computed is added to the
income chargeable to tax in the hands of the employee under the head “salaries”
and subject to tax at the maximum marginal rate applicable to the individual
employee. Securities or sweat equity shares allotted or transferred by a company
free of cost or at concessional rate to its employees were earlier subject to a
fringe benefit tax, which now stands abolished.
  Taxation of
Capital Gains.
The following is a brief summary of capital gains taxation of non-resident
holders and resident employees relating to the sale of ADSs and equity shares
received upon conversion of ADSs. The relevant provisions are contained mainly
in sections 45, 47(viia), 115AC and 115ACA, of the Income-tax Act, in
conjunction with the Scheme. Effective April 1, 2002, the Finance Act, 2001
introduced a new section 115AC in place of the prevailing
section 115AC of the Income-tax Act. You should consult your own tax
advisor concerning the tax consequences of your particular
situation.
  Capital gains
arising to a non-resident investor on the transfer of the shares (whether in
India or outside India to a non-resident investor) will not be liable to income
tax under the provisions of the Income Tax Act in certain circumstances. Shares
(including shares issuable on the conversion of the ADSs) held by the
non-resident investor for a period of more than 12 months is treated as
long term capital assets. If the shares are held for a period of less than
12 months from the date of conversion, the capital gains arising on the
sale thereof is to be treated as short term capital gains.
  Capital gains are
taxed as follows:
  ·
              gains from a
      sale of ADSs outside India by a non-resident to another non-resident are
      not taxable in India;
  ·
              long-term
      capital gains realized by a resident from the transfer of the ADSs will be
      subject to tax at the rate of 10% excluding the applicable surcharge and
      education cess; short-term capital gains on such a transfer will be taxed
      at graduated rates with a maximum of 30%, excluding the applicable
      surcharge and education cess;
  ·
              long-term
      capital gains realized by a non-resident upon the sale of equity shares
      obtained from the conversion of ADSs are subject to tax at a rate of 10%
      excluding the applicable surcharge and education cess; and short-term
      capital gains on such a transfer will be taxed at the maximum marginal
      rate of tax applicable to the seller, excluding surcharges and education
      cess, if the sale of such equity shares is settled off a recognized stock
      exchange;
  ·
              long-term
      capital gain realized by a non-resident upon the sale of equity shares
      obtained from the conversion of ADSs is exempt from tax if the sale of
      such shares is made on a recognized stock exchange and Securities
      Transaction Tax, or STT (described below) is paid;
  and
  ·
              any short
      term capital gain is taxed at 15% excluding the applicable surcharge and
      education cess, if the sale of such equity shares is settled on a
      recognized stock exchange and STT is paid on such
  sale.
  The rate of
surcharge is currently 10% in the case of domestic companies whose taxable
income is greater than Rs. 10,000,000. For foreign companies, the rate of
surcharge is 2.5% if the taxable income exceeds Rs. 10,000,000. The Finance Bill
2010 has proposed to reduce the rate of applicable surcharge to 7.5% in the case
of domestic companies whose taxable income is greater than Rs.
10,000,000.
  Since June 1,
2006, with respect to a sale and purchase of equity shares entered into on a
recognized stock exchange, (i) both the buyer and seller are required to
pay a STT at the rate of 0.125% of the transaction value of the securities, if
the transaction is a delivery based transaction, i.e. the transaction involves
actual delivery or transfer of shares; (ii) the seller of the shares is
required to pay a STT at the rate of 0.025% of the transaction value of the
securities if the transaction is a non-delivery based transaction, i.e. a
transaction settled without taking delivery of the shares. STT has been
introduced, effective from April 1 2008, with respect to a sale and purchase of
a derivative in a recognized stock exchange as follows: (i) in case of sale of
an option in securities, the seller is required to pay an STT at the rate of
0.017% of the option premium; (ii)in case of a sale of an option in securities,
where the option is exercised, the buyer is required to pay a STT at the rate of
0.125% of the settlement price; and (iii) in case of sale of futures in
securities, the seller is required to pay STT at 0.017% on transaction
value.
  Any resulting taxes
on capital gains arising out of such transaction may be offset by the applicable
credit mechanism allowed under double tax avoidance agreements in the case of
non-residents. The capital gains tax is computed by applying the appropriate tax
rates to the difference between the sale price and the purchase price of the
ADSs or equity shares. Under the Scheme, the purchase price of equity shares in
an Indian listed company received in exchange for ADSs will be the market price
of the underlying shares on the date that the Depositary gives notice to the
custodian of the delivery of the equity shares in exchange for the corresponding
ADSs, or the "stepped up" basis purchase price. The market price will be the
price of the equity shares prevailing on the Bombay Stock Exchange or the
National Stock Exchange, as applicable. There is no corresponding provision
under the Income-tax Act in relation to the "stepped up" basis for the purchase
price of equity shares. However, the tax department in India has not denied this
benefit. In the event that the tax department denies this benefit, the original
purchase price of ADSs would be considered the purchase price for computing the
capital gains tax.
  According to the
Scheme, a non-resident holder's holding period for the purposes of determining
the applicable Indian capital gains tax rate relating to equity shares received
in exchange for ADSs commences on the date of the notice of the redemption by
the Depositary to the custodian. However, the Scheme does not address this issue
in the case of resident employees, and it is therefore unclear when the holding
period for the purposes of determining capital gains tax commences for such a
resident employee.
  The Scheme provides
that if the equity shares are sold on a recognized stock exchange in India
against payment in Indian rupees, they will no longer be eligible for the
preferential tax treatment.
  It is unclear
whether section 115AC and the Scheme are applicable to a non-resident who
acquires equity shares outside India from a non-resident holder of equity shares
after receipt of the equity shares upon conversion of the ADSs.
  It is unclear
whether capital gains derived from the sale of subscription rights or other
rights by a non-resident holder not entitled to an exemption under a tax treaty
will be subject to Indian capital gains tax. If such subscription rights or
other rights are deemed by the Indian tax authorities to be situated within
India, the gains realized on the sale of such subscription rights or other
rights will be subject to Indian taxation. The capital gains realized on the
sale of such subscription rights or other rights, which will generally be in the
nature of short-term capital gains, will be subject to tax at variable rates
with a maximum rate of 40% excluding the applicable surcharge and education
cess, in case of a foreign company, and 30% excluding the applicable surcharge
and education cess, in case of resident employees, and non-resident individuals
with taxable income over Rs. 500,000. The Finance Bill 2010 has proposed to
increase the above threshold from Rs. 500,000 to Rs. 800,000.
  Withholding Tax
on Capital Gains.Any taxable gain
realized by a non-resident on the sale of ADSs or equity shares is to be
withheld at the source by the buyer. However, as per the provisions of
Section 196D(2) of the Income Tax Act, no withholding tax is required to be
deducted from any income by way of capital gains arising to Foreign
Institutional Investors as defined in Section 115AD of the Income Tax Act
on the transfer of securities defined in Section 115AD of the Income Tax
Act.
  Buy-back of
Securities.
Indian companies are not subject to any tax on the buy-back of their shares.
However, the shareholders will be taxed on any resulting gains. We would be
required to deduct tax at source according to the capital gains tax liability of
a non-resident shareholder.
  Stamp Duty and
Transfer Tax. A
transfer of ADSs is not subject to Indian stamp duty. A sale of equity shares in
physical form by a non-resident holder will be subject to Indian stamp duty at
the rate of 0.25% of the market value of the equity shares on the trade date,
although customarily such tax is borne by the transferee. Shares must be traded
in dematerialized form. The transfer of shares in dematerialized form is
currently not subject to stamp duty.
  Wealth
Tax. The holding
of the ADSs and the holding of underlying equity shares by resident and
non-resident holders is not subject to Indian wealth tax. Non-resident holders
are advised to consult their own tax advisors regarding this issue.
  Gift Tax and
Estate Duty.
Currently, there are no gift taxes or estate duties. These taxes and duties
could be restored in future. Non-resident holders are advised to consult their
own tax advisors regarding this issue.
  Service
Tax. Brokerage
or commission paid to stock brokers in connection with the sale or purchase of
shares is subject to a service tax of 10%, excluding surcharges and education
cess. The stock broker is responsible for collecting the service tax from the
shareholder and paying it to the relevant authority.
  Material United States Federal Tax
Consequences
  The following is a
summary of the material U.S. federal income and estate tax consequences that may
be relevant with respect to the ownership and disposition of equity shares or
ADSs and is for general information only. This summary addresses the U.S.
federal income and estate tax considerations of holders that are U.S. holders.
U.S. holders are beneficial holders of equity shares or ADSs who are citizens or
residents of the United States, or corporations (or other entities treated as
corporations for U.S. federal tax purposes) created in or under the laws of the
United States or any political subdivision thereof or therein, estates, the
income of which is subject to U.S. federal income taxation regardless of its
source, and trusts for which a U.S. court exercises primary supervision and a
U.S. person has the authority to control all substantial decisions or that has a
valid election under applicable U.S. Treasury regulation to be treated as a U.S.
person. This summary is limited to U.S. holders who will hold equity shares or
ADSs as capital assets for U.S. federal income tax purposes, generally for
investment. In addition, this summary is limited to U.S. holders who are not
resident in India for purposes of the Convention Between the Government of the
United States of America and the Government of the Republic of India for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect
to Taxes on Income. If a partnership, including any entity treated as a
partnership for U.S. federal income tax purposes, holds the equity shares or
ADSs, the tax treatment of a partner will generally depend upon the status of
the partner and upon the activities of the partnership. A partner in a
partnership holding equity shares or ADSs should consult his, her or its own tax
advisor.
  This summary does
not address tax considerations applicable to holders that may be subject to
special tax rules, such as banks, insurance companies, financial institutions,
dealers in securities or currencies, tax-exempt entities, persons that will hold
equity shares or ADSs as a position in a 'straddle' or as part of a 'hedging' or
'conversion' transaction for tax purposes, persons that have a 'functional
currency' other than the U.S. dollar or holders of 10% or more, by voting power
or value, of the shares of our company. This summary is based on the Internal
Revenue Code of 1986, as amended and as in effect on the date of this Annual
Report on Form 20-F and on United States Treasury Regulations in effect or, in
some cases, proposed, as of the date of this Annual Report on Form 20-F, as well
as judicial and administrative interpretations thereof available on or before
such date, and is based in part on the assumption that each obligation in the
deposit agreement and any related agreement will be performed in accordance with
its terms. All of the foregoing are subject to change, which change could apply
retroactively, or the Internal Revenue Service may interpret existing
authorities differently, any of which could affect the tax consequences
described below. This summary does not address U.S. federal tax laws other than
income or estate tax or U.S. state or local or non-U.S. tax laws.
  EACH
PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT
TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING,
OWNING OR DISPOSING OF EQUITY SHARES OR ADSs.
  Ownership of ADSs. For U.S.
federal income tax purposes, holders of ADSs will be treated as the holders of
equity shares represented by such ADSs.
  Dividends. Subject to the
passive foreign investment company rules described below, the gross amount of
any distributions of cash or property with respect to ADSs or equity shares
(before reduction for any Indian withholding taxes) generally will be included
in income by a U.S. holder as ordinary dividend income at the time of receipt,
which in the case of a U.S. holder of ADSs generally should be the date of
receipt by the Depositary, to the extent such distributions are made from the
current or accumulated earnings and profits (as determined under U.S. federal
income tax principles) of our company. Such dividends will not be eligible for
the dividends received deduction generally allowed to corporate U.S. holders. To
the extent, if any, that the amount of any distribution by our company exceeds
our company's current and accumulated earnings and profits (as determined under
U.S. federal income tax principles) such excess will be treated first as a
tax-free return of capital to the extent of the U.S. holder's tax basis in the
equity shares or ADSs, and thereafter as capital gain.
  Subject to certain
limitations, dividends paid to non-corporate U.S. holders, including
individuals, may be eligible for a reduced rate of taxation if we are deemed to
be a 'qualified foreign corporation' for United States federal income tax
purposes. A qualified foreign corporation includes a foreign corporation if (1)
its shares (or, according to legislative history, its ADSs) are readily tradable
on an established securities market in the United States or (2) it is eligible
for the benefits under a comprehensive income tax treaty with the United States.
In addition, a corporation is not a qualified foreign corporation if it is a
passive foreign investment company (as discussed below). The ADSs are traded on
the NASDAQ Global Select Market. Due to the absence of specific statutory
provisions addressing ADSs, however, there can be no assurance that we are a
qualified foreign corporation solely as a result of our listing on NASDAQ Global
Select Market. Nonetheless, we may be eligible for benefits under the
comprehensive income tax treaty between India and the United States. The reduced
rate of taxation will not apply to dividends received in taxable years beginning
after December 31, 2010. Each U.S. holder should consult its own tax advisor
regarding the treatment of dividends and such holder's eligibility for a reduced
rate of taxation.
  Subject to certain
conditions and limitations, any Indian withholding tax imposed upon
distributions paid to a U.S. holder with respect to ADSs or equity shares should
be eligible for credit against the U.S. holder's federal income tax liability.
Alternatively, a U.S. holder may claim a deduction for such amount, but only for
a year in which a U.S. holder does not claim a credit with respect to any
foreign income taxes. The overall limitation on foreign taxes eligible for
credit is calculated separately with respect to specific classes of income. For
this purpose, distributions on ADSs or ordinary shares generally will be foreign
source income for purposes of computing the United States foreign tax credit
allowable to a U.S. holder.
  If dividends are
paid in Indian rupees, the amount of the dividend distribution included in the
income of a U.S. holder will be in the U.S. dollar value of the payments made in
Indian rupees, determined at a spot exchange rate between Indian rupees and U.S.
dollars applicable to the date such dividend is included in the income of the
U.S. holder, regardless of whether the payment is in fact converted into U.S.
dollars. Generally, gain or loss, if any, resulting from currency exchange
fluctuations during the period from the date the dividend is paid to the date
such payment is converted into U.S. dollars will be treated as U.S. source
ordinary income or loss.
  Sale or exchange of equity shares or
ADSs. Subject to the passive foreign investment company rules described
below, a U.S. holder generally will recognize gain or loss on the sale or
exchange of equity shares or ADSs equal to the difference between the amount
realized on such sale or exchange and the U.S. holder's adjusted tax basis in
the equity shares or ADSs, as the case may be. Such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the equity shares or
ADSs, as the case may be, were held for more than one year. Gain or loss, if
any, recognized by a U.S. holder generally will be treated as U.S. source
passive category income or loss for U.S. foreign tax credit purposes. Capital
gains realized by a U.S. holder upon the sale of equity shares (but not ADSs)
may be subject to certain tax in India. See 'Taxation - Indian Taxation -
Taxation of Capital Gains.' Due to limitations on foreign tax credits, however,
a U.S. holder may not be able to utilize such taxes as a credit against the U.S.
holder's federal income tax liability.
  Estate taxes. An individual
U.S. holder will have the value of the equity shares or ADSs held by such holder
included in his or her gross estate for U.S. federal estate tax purposes. An
individual holder who actually pays Indian estate tax with respect to the equity
shares will, however, be entitled to credit the amount of such tax against his
or her U.S. federal estate tax liability, subject to a number of conditions and
limitations.
  Backup withholding tax and
information reporting requirements. Any dividends paid, or proceeds on a
sale of, equity shares or ADSs to or by a U.S. holder may be subject to U.S.
information reporting, and a backup withholding tax (currently at a rate of 28%)
may apply unless the holder is an exempt recipient or provides a U.S. taxpayer
identification number and certifies under penalty of perjury that such number is
correct and that such holder is not subject to backup withholding and otherwise
complies with any applicable backup withholding requirements. Any amount
withheld under the backup withholding rules will be allowed as a refund or
credit against the holder's U.S. federal income tax liability, provided that the
required information is timely furnished to the Internal Revenue
Service.
  Passive foreign investment
company. A non-U.S. corporation generally will be classified as a passive
foreign investment company for U.S. federal income tax purposes if
either:
  ·
              75% or more
      of its gross income for the taxable year is passive income;
    or
  ·
              on average
      for the taxable year by value, or, if it is not a publicly traded
      corporation and so elects, by adjusted basis, if 50% or more of its assets
      produce or are held for the production of passive
  income.
  We do not believe
that we satisfy either of the tests for passive foreign investment company
status for the fiscal year ended March 31, 2010. Because this determination is
made on an annual basis, however, no assurance can be given that we will not be
considered a passive foreign investment company in future taxable years. If we
were to be a passive foreign investment company for any taxable year, U.S.
holders:
  ·
              may be
      required to pay an interest charge together with tax calculated at
      ordinary income rates on 'excess distributions,' as the term is defined in
      relevant provisions of the U.S. tax laws and on any gain on a sale or
      other disposition of equity shares;
  ·
              may avoid the
      ‘excess distribution’ rules described above by making a 'qualified
      electing fund election' (as the term is defined in relevant provisions of
      the U.S. tax laws) and including in their taxable income their pro rata
      share of undistributed amounts of our income. We do not plan to provide
      information necessary for U.S. holders to make a 'qualified electing fund'
      election;
  ·
              may avoid the
      ‘excess distribution rules described above if the equity shares are
      'marketable' by making a mark-to-market election, in which case the U.S.
      holder must mark-to-market the equity shares each taxable year and
      recognize ordinary gain and, to the extent of prior ordinary gain,
      ordinary loss for the increase or decrease in market value for such
      taxable year; or
  ·
              may be
      subject to additional annual return requirements under Treasury
      Regulations to be promulgated.
  THE ABOVE SUMMARY IS NOT INTENDED TO
CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP
OF EQUITY SHARES OR ADSS. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE
TAX CONSEQUENCES TO YOU BASED ON YOUR PARTICULAR SITUATION.
  DOCUMENTS ON
DISPLAY
  This report and
other information filed or to be filed by Infosys Technologies Limited can be
inspected and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20459.
  The SEC
maintains a web site at www.sec.gov that
contains reports, proxy and information statements, and other information
regarding registrants that make electronic filings with the SEC using its EDGAR
system.
  Additionally,
documents referred to in this Form 20-F may be inspected at our corporate
offices which are located at Electronics City, Hosur Road, Bangalore-560
100.







Item 11. Quantitative
and Qualitative Disclosure About Market Risk




This information is
set forth under the caption “Operating and Financial Review and Prospects” is
set out above in this Annual Report on Form 20-F and such information is
incorporated herein by reference.


Item 12. Description of Securities Other Than Equity
Securities




Fees
and charges payable by holders of our ADSs




The fees and
charges payable by holders of our ADSs include the following:
 
 (i)
              a fee not in
      excess of US $0.05 per ADS is charged for each issuance of ADSs including
      issuances resulting from distributions of shares, share dividends, share
      splits, bonuses and rights
distributions;
 
 (ii)
              a fee not in
      excess of US $0.05 per ADS is charged for each surrender of ADSs in
      exchange for the underlying deposited
  securities;
 
 (iii)
              a fee not in
      excess of US $0.02 per ADS for each cash distribution pursuant to the
      deposit agreement; and
 
 (iv)
              a fee for the
      distribution of the deposited securities pursuant to the deposit
      agreement, such fee being an amount equal to the fee for the execution and
      delivery of ADSs referred to in item (i) above which would have been
      charged as a result of the deposit of such securities, but which
      securities were instead distributed by the depositary to ADR
      holders.
 
 Additionally, under
the terms of our deposit agreement, the depositary is entitled to charge each
registered holder the following:
 
 (i)
              taxes and
      other governmental charges incurred by the depositary or the custodian on
      any ADS or an equity share underlying an
ADS;
 
 (ii)
              transfer or
      registration fees for the registration or transfer of deposited securities
      on any applicable register in connection with the deposit or withdrawal of
      deposited securities, including those of a central depository for
      securities (where applicable);
 
 (iii)
              any cable,
      telex, facsimile transmission and delivery expenses incurred by the
      depositary; and
 
 (iv)
              customary
      expenses incurred by the depositary in the conversion of foreign currency,
      including, without limitation, expenses incurred on behalf of registered
      holders in connection with compliance with foreign exchange control
      restrictions and other applicable regulatory
  requirements.
 
 In the case of cash
distributions, fees are generally deducted from the cash being
distributed. Other fees may be collected from holders of ADSs in a manner
determined by the depositary with respect to ADSs registered in the name of
investors (whether certificated or in book-entry form) and ADSs held in
brokerage and custodian accounts (via DTC). In the case of distributions other
than cash (i.e., stock dividends, etc.), the depositary charges the applicable
ADS record date holder concurrent with the distribution. In the case of ADSs
registered in the name of the investor (whether certificated or in book-entry
form), the depositary sends invoices to the applicable record date ADS
holders.
 
 If any tax or other
governmental charge is payable by the holders and/or beneficial owners of ADSs
to the depositary, the depositary, the custodian or the Company may withhold or
deduct from any distributions made in respect of deposited securities and may
sell for the account of the holder and/or beneficial owner any or all of the
deposited securities and apply such distributions and sale proceeds in payment
of such taxes (including applicable interest and penalties) or charges, with the
holder and the beneficial owner thereof remaining fully liable for any
deficiency.
 
 Fees
and other payments made by the depositary


·
              $3,300
      towards payments made to Tri State Financial LLC, a financial printing
      firm for printing the Company’s notice, proxy card and other interim
      communications distributed to our ADS
holders;
 
 ·
              $106,500
      towards payments made to proxy processing firms for mailing the Company’s
      notice, proxy card and other interim communications to ADS holders or
      their brokers, of which approximately:
 ·
              $104,400 was
      made to Broadridge Financial Solutions,
Inc.;
 ·
              $1,200 was
      made to FOLIOFn Invesments, Inc;
and
 ·
              $900 was made
      to ICE Systems, Inc;
 
 ·
              $40,000
      towards payments made to Ipreo Holdings LLC as subscription fees for BD Corporate, a market
      intelligence tool which allows the Company to maintain its investor
      database, disseminate information to investors and monitor investor
      positions;
 
 ·
              $10,700
      towards payments made to Thomson Reuters as the annual subscription fee
      for Reuters
      Knowledge, a web-based information and analytics tool;
      and
 
 ·
              $5,000
      towards payments made to Ipreo Holdings LLC as subscription fees for Bigdough IR, an investor relations
      service used by the Company’s
management.
 
 The Company has not
received any other reimbursements or payments from the depositary, either
directly or indirectly, during fiscal 2010.




Part
II




Item 13. Defaults,
Dividend Arrearages and Delinquencies




None




Item 14. Material
Modifications to the Rights of Security Holders and Use of
Proceeds




None




Item 15. Controls and
Procedures




DISCLOSURE
CONTROLS AND PROCEDURES




As of the end of
the period covered by this Annual Report on Form 20-F, our management, with the
participation of our Chief Executive Officer and Chief Financial Officer, has
carried out an evaluation of the effectiveness of our disclosure controls and
procedures. The term “disclosure controls and procedures” means controls and
other procedures that are designed to ensure that information required to be
disclosed in the reports we file or submit under the Securities Exchange Act of
1934, as amended, or the Exchange Act, is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
our reports that we file or submit under the Exchange Act is accumulated and
communicated to management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding our
required disclosure. In designing and evaluating our disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well conceived and operated, can only provide reasonable assurance that the
objectives of the disclosure controls and procedures are met.




Based on their
evaluation as of the end of the period covered by this Annual Report on Form
20-F, our Chief Executive Officer and Chief Financial Officer have concluded
that our disclosure controls and procedures were effective to provide reasonable
assurance that the information required to be disclosed in filings and
submissions under the Exchange Act, is recorded, processed, summarized, and
reported within the time periods specified by the SEC's rules and forms, and
that material information related to us and our consolidated subsidiaries is
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
about required disclosure.




Management's
Annual Report on Internal Control Over Financial Reporting




Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting is a process to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with International Financial Reporting Standards, as issued by the International
Accounting Standards Board. Our internal control over financial reporting
includes those policies and procedures that:




·
            pertain to
      the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;


·
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with applicable
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and


·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.




Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




Management assessed
the effectiveness of our internal control over financial reporting as of March
31, 2010. In conducting its assessment of internal control over financial
reporting, management based its evaluation on the framework in Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based on our assessment, management has
concluded that our internal control over financial reporting was effective as of
March 31, 2010.




Our independent
registered public accounting firm, KPMG, has audited the consolidated financial
statements included in this Annual Report on Form 20-F, and as part of their
audit, has issued their report, included herein, on the effectiveness of our
internal control over financial reporting as of March 31, 2010.




Report
of Independent Registered Public Accounting Firm




The Board of
Directors and Shareholders




Infosys
Technologies Limited:




We have audited
Infosys Technologies Limited’s internal control over financial reporting as of
March 31, 2010, based on criteria established inInternal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Infosys Technologies Limited’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Annual Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our
audit.




We conducted our
audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.




A company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
International Financial Reporting Standards as issued by International
Accounting Standards Board. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.




Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




In our opinion,
Infosys Technologies Limited maintained, in all material respects, effective
internal control over financial reporting as of March 31, 2010, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.





We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Infosys
Technologies Limited and subsidiaries as of March 31, 2010 and 2009, and the
related consolidated statements of comprehensive income, changes in equity and
cash flows for each of the years in the three-year period ended March 31, 2010,
and the related financial statement schedule II, and our report dated April 30,
2010 expressed an unqualified opinion on those consolidated financial statements
and financial statement schedule II.




KPMG


Bangalore,
India


April 30,
2010




CHANGES IN INTERNAL CONTROL OVER
FINANCIAL REPORTING




During the period
covered by this Annual Report on Form 20-F, there were no changes in our
internal control over financial reporting that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.




Item 16A. Audit Committee Financial
Expert




Mr. Sridar A.
Iyengar is a member of our board of directors and is a member of its audit
committee. Our board of directors has determined that Mr. Sridar A. Iyengar is
an audit committee financial expert as defined in Item 401(h) of Regulation S-K,
and is independent pursuant to applicable NASDAQ rules.




Item 16B. Code of
Ethics




Our Audit Committee
has adopted a written Code of Ethics, as defined in Item 406 of Regulation S-K,
applicable to our principal executive officer, principal financial officer,
principal accounting officer and all officers working in our finance,
accounting, treasury, internal audit, tax, legal, purchase, financial analyst,
investor relations functions, disclosure committee members, and senior
management, as well as members of the Audit Committee and the board of
directors. The code of ethics is posted on our website at www.infosys.com.




Our Audit Committee
has also adopted a Whistleblower Policy wherein it has established procedures
for receiving, retaining and treating complaints received, and procedures for
the confidential, anonymous submission by employees of complaints regarding
questionable accounting or auditing matters, conduct which results in a
violation of law by Infosys or in a substantial mismanagement of company
resources. Under this policy, our employees are encouraged to report
questionable accounting matters, any reporting of fraudulent financial
information to our shareholders, the government or the financial markets any
conduct that results in a violation of law by Infosys to our management (on an
anonymous basis, if employees so desire). Under this policy, we have prohibited
discrimination, retaliation or harassment of any kind against any employee who,
based on the employee's reasonable belief that such conduct or practices have
occurred or are occurring, reports that information or participates in an
investigation.




We have also
adopted a Code of Conduct, applicable to all officers, directors and employees.
The Code of Conduct is available on our website, www.infosys.com.




Item 16C. Principal Accountant Fees
and Services




The following table
sets forth fees for professional audit services for the audit of our annual
financial statements, and fees for other services rendered by our principal
accountant and their associated entities for fiscal 2010 and 2009:


Type
      of Service
            Fiscal
      2010
            Fiscal
    2009
            Description of
      Services(a) Audit
      Fees
            $745,621
            $598,568
            Audit and
      review of financial statements(b) Tax
      Fees
            –
            5,111
            Tax returns
      and filing and advisory services(c) All Other
      Fees
            8,379
            139,654
            Statutory
      certifications, quality registrar, work permit related services, IFRS
      related advisory services and other advisory servicesTotal
            $754,000
            $743,333




Our Audit Committee
charter requires us to take the prior approval of our Audit Committee on every
occasion we engage our principal accountants or their associated entities to
provide us any non-audit services. We disclose to our Audit Committee the nature
of services that are provided and the fees to be paid for the services. All of
the non-audit services provided by our principal accountants or their associated
entities in the previous two fiscal years have been pre-approved by our Audit
Committee.




Item 16D. Exemptions from the Listing
Standards for Audit Committees




We have not sought
any exemption from the listing standards for audit committees applicable to us
as a foreign private issuer, pursuant to Rule 10(A)-3(d) of the Securities
Exchange Act of 1934.




Item 16E. Purchase of Equity
Securities by the Issuer and Affiliated Purchasers




None




Item 16F. Change in Registrant’s Certifying
Accountant




Not
applicable.




Item 16G. Corporate Governance




NASDAQ
Rule 5615(a)(3) provides that a foreign private issuer may follow its home
country practice in lieu of the requirements of Rule 5600 series of the NASDAQ,
provided such foreign private issuer shall disclose in its annual reports filed
with the SEC or on its website each requirement that it does not follow and
describe the home country practice followed by the issuer in lieu of such
requirements.
  Under the NASDAQ
Rule 5620(c), companies, other than limited partnerships, that maintain a
listing on NASDAQ are required to provide for a quorum as specified in its
by-laws for any meeting of its stockholders, and in no case shall the quorum be
less than 33-1/3% of the outstanding shares of a company's common voting stock.
In India, the requirement for a quorum is the presence of at least five
shareholders in person. Our Articles of Association provide that a quorum for a
General Meeting of our shareholders is constituted by the presence of at least
five shareholders in person. Hence, we do not meet the quorum requirements under
Rule 5620(c), and instead we follow our home country practice. Under the
NASDAQ Rule 5620(b), companies, other than limited partnerships, that
maintain a listing on NASDAQ are required to solicit proxies and provide proxy
statements for all meetings of shareholders and also provide copies of such
proxy solicitation to NASDAQ. However, Section 176 of the Indian Companies
Act prohibits a company incorporated under that Act from soliciting proxies.
Because we are prohibited from soliciting proxies under Indian law, we will not
meet the proxy solicitation requirement of Rule 5620(b). However, as
described above, we give written notices of all our shareholder meetings to all
the shareholders and we also file such notices with the SEC.




Part III




Item 17. Financial
statements




See Item
18.




Item 18. Financial
statements




CONSOLIDATED STATEMENTS AND OTHER
FINANCIAL INFORMATION




Report
of the Audit Committee




To the
members of Infosys Technologies Limited




In
connection with the March 31, 2010 consolidated financial statements prepared
under International Financial Reporting Standards as issued by the International
Accounting Standards Board, the Audit Committee: (1) reviewed and discussed the
consolidated financial statements with management; (2) discussed with the
auditors the matters required by Statement on Auditing Standards No. 114, and
the Sarbanes-Oxley Act of 2002; and (3) reviewed and discussed with the auditors
the matters required by Independence Standards Board Statement No. 1. Based upon
these reviews and discussions, the Audit Committee recommended to the board of
directors that the audited consolidated financial statements be included in the
Annual Report on Form 20-F to be filed with the Securities and Exchange
Commission of the United States of America.




Bangalore,
      India
              April 30,
      2010
            Deepak M.
      Satwalekar
              Chairperson,
      Audit committee
            Prof. Marti
      G.Subrahmanyam
              Member,
      Audit committee
            K.V.
      Kamath
              Member,
      Audit committeeSridar A.
      Iyengar
              Member,
      Audit committee




Report
of management




The
management is responsible for preparing the company's consolidated financial
statements and related information that appears in this annual report. The
management believes that the consolidated financial statements fairly reflect
the form and substance of transactions, and reasonably present the financial
condition and results of operations of Infosys Technologies Limited and
subsidiaries in conformity with International Financial Reporting Standards as
issued by the International Accounting Standards Board. The management has
included, in the company's consolidated financial statements, amounts that are
based on estimates and judgments, which it believes are reasonable under the
circumstances.




The
company maintains a system of internal procedures and controls intended to
provide reasonable assurance, at appropriate cost, that transactions are
executed in accordance with company authorization and are properly recorded and
reported in the consolidated financial statements, and that assets are
adequately safeguarded.




KPMG
audits the company's consolidated financial statements in accordance with the
Standards of the Public Company Accounting Oversight Board (United
States).




The
Board of Directors has appointed an Audit Committee composed of outside
directors. The committee meets with the management, internal auditors, and the
independent auditors to review internal accounting controls and accounting,
auditing, and financial reporting matters.




Bangalore,
      India
              April 30,
      2010
            V.
      Balakrishnan
              Chief
      Financial Officer
            S.
      D. Shibulal
              Chief
      Operating Officer
            S.
      Gopalakrishnan
              Chief
      Executive Officer




Report
of Independent Registered Public Accounting Firm




The Board of Directors and
Shareholders




Infosys
Technologies Limited:




We have audited the
accompanying consolidated balance sheets of Infosys Technologies Limited
and subsidiaries as of March 31, 2010 and 2009, and the related
consolidated statements of comprehensive income, changes in equity and cash
flows for each of the years in the three-year period ended March 31, 2010.
In connection with our audits of the consolidated financial statements, we also
have audited financial statement schedule II. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.




We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Infosys Technologies Limited and
subsidiaries as of March 31, 2010 and 2009, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 2010, in conformity with International Financial Reporting
Standards as issued by International Accounting Standards Board (“IFRS”). Also
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.





We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Infosys Technologies Limited’s internal control
over financial reporting as of March 31, 2010, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated April 30,
2010 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.





KPMG


Bangalore,
India


April 30,
2010




Infosys Technologies Limited and
subsidiaries




Consolidated
Balance Sheets as of March 31,


(Dollars in millions except
      share data)Note
            2010
            2009ASSETSCurrent
      assetsCash and cash
      equivalents
            2.1
            $2,698
            $2,167Available-for-sale
      financial assets
            2.2
            569
            –Investment in
      certificates of deposit
            
            265
            –Trade
      receivables
            
            778
            724Unbilled
      revenue
            
            187
            148Derivative
      financial instruments
            2.7
            21
            –Prepayments
      and other current assets
            2.4
            143
            81Total
      current assets
            
            4,661
            3,120Non-current
      assetsProperty,
      plant and equipment
            2.5
            989
            920Goodwill
            2.6
            183
            135Intangible
      assets
            2.6
            12
            7Deferred
      income tax assets
            2.17
            78
            81Income tax
      assets
            2.17
            148
            54Other
      non-current assets
            2.4
            77
            52Total
      non-current assets
            
            1,487
            1,249Total
      assets
            
            $6,148
            $4,369LIABILITIES AND
      EQUITYCurrent
      liabilitiesTrade
      payables
            
            $2
            $5Derivative
      financial instruments
            2.7
            –
            22Current
      income tax liabilities
            2.17
            161
            115Client
      deposits
            
            2
            1Unearned
      revenue
            
            118
            65Employee
      benefit obligations
            2.8
            29
            21Provisions
            2.9
            18
            18Other current
      liabilities
            2.10
            380
            290Total
      current liabilities
            
            710
            537Non-current
      liabilitiesDeferred
      income tax liabilities
            2.17
            26
            –Employee
      benefit obligations
            2.8
            38
            37Other
      non-current liabilities
            2.10
            13
            11Total
      liabilities
            
            787
            585EquityShare
      capital-Rs. 5 ($0.16) par value 600,000,000 equity shares authorized,
      issued and outstanding 570,991,592, net of treasury shares and
      572,830,043  as of March 31, 2010 and 2009,
      respectively
            
            64
            64Share
      premium
            
            694
            672Retained
      earnings
            
            4,611
            3,618Other
      components of equity
            
            (8)
            (570)Total
      equity attributable to equity holders of the company
            
            5,361
            3,784Total liabilities and
      equity
            
            $6,148
            $4,369


The
accompanying notes form an integral part of the consolidated financial
statements




Infosys Technologies Limited and
subsidiaries




Consolidated
Statements of Comprehensive Income for the years ended March 31,


(Dollars in millions except
      share data)Note
            2010
            2009
            2008Revenues
            
            $4,804
            $4,663
            $4,176Cost of
      sales
            
            2,749
            2,699
            2,453Gross
      profit
            
            2,055
            1,964
            1,723Operating
      expenses:Selling and
      marketing expenses
            
            251
            239
            230Administrative
      expenses
            
            344
            351
            334Total
      operating expenses
            
            595
            590
            564Operating
      profit
            
            1,460
            1,374
            1,159Other income,
      net
            2.14
            209
            101
            175Profit
      before income taxes
            
            1,669
            1,475
            1,334Income tax
      expense
            2.17
            356
            194
            171Net
      profit
            
            $1,313
            $1,281
            $1,163Other
      comprehensive incomeReversal of
      impairment loss on available-for-sale financial asset
            
            $2
            –
            –Gain
      transferred to net profit on sale of available-for-sale financial
      asset
            
            (1)
            –
            –Unrealized
      holding gains on available-for-sale financial asset, net of tax effect of
      $2 million (refer note 2.2)
            
            6
            –
            –Exchange
      differences on translating foreign operations
            
            555
            (871)
            216Total
      other comprehensive income
            
            $562
            $(871)
            $216Total
      comprehensive income
            
            $1,875
            $410
            $1,379Profit
      attributable to:Owners of the
      company
            
            $1,313
            $1,281
            $1,163Non-controlling
      interest
            
            –
            –
            –$1,313
            $1,281
            $1,163Total
      comprehensive income attributable to:Owners of the
      company
            
            $1,875
            $410
            $1,379Non-controlling
      interest
            
            –
            –
            –$1,875
            $410
            $1,379Earnings
      per equity shareBasic
      ($)
            
            2.30
            2.25
            2.04Diluted
      ($)
            
            2.30
            2.25
            2.04Weighted
      average equity shares used in computing earnings per equity
      share
            2.18Basic
            
            570,475,923
            569,656,611
            568,564,740Diluted
            
            571,116,031
            570,629,581
            570,473,287


The
accompanying notes form an integral part of the consolidated financial
statements




Infosys Technologies Limited and
subsidiaries




Consolidated
Statements of Changes in Equity


(Dollars in millionsexceptshare)Shares
            Share
      capital
            Share
      premium
            Retained
      earnings
            Other
      components of equity
            Total
      equity attributable to equity holders of the companyBalance
      as of  April 1, 2007
            571,209,862
            $64
            $631
            $1,942
            $85
            $2,722Changes
      in equity for the year ended March 31, 2008Shares issued
      on exercise of employee stock options
            785,896
            —
            15
            —
            —
            15Share-based
      compensation
            —
            —
            3
            —
            —
            3Income tax
      benefit arising on exercise of share options
            —
            —
            6
            —
            —
            6Dividends
      (including corporate dividend tax)
            —
            —
            —
            (209)
            —
            (209)Net
      profit
            —
            —
            —
            1,163
            —
            1,163Exchange
      differences on translating foreign operations
            —
            —
            —
            —
            216
            216Balance
      as of  March 31, 2008
            571,995,758
            $64
            $655
            $2,896
            $301
            $3,916Changes
      in equity for the year ended March 31, 2009Shares issued
      on exercise of employee stock options
            834,285
            —
            14
            —
            —
            14Share-based
      compensation
            —
            —
            1
            —
            —
            1Income tax
      benefit arising on exercise of share options
            —
            —
            2
            —
            —
            2Dividends
      (including corporate dividend tax)
            —
            —
            —
            (559)
            —
            (559)Net
      profit
            —
            —
            —
            1,281
            —
            1,281Exchange
      differences on translating foreign operations
            —
            —
            —
            —
            (871)
            (871)Balance
      as of  March 31, 2009
            572,830,043
            $64
            $672
            $3,618
            $(570)
            $3,784Changes
      in equity for the year ended March 31, 2010Shares issued
      on exercise of employee stock options
            995,149
            —
            20
            —
            —
            20Treasury
      shares*
            (2,833,600)
            —
            —
            —
            —
            —Reserves on
      consolidation of trusts
            —
            —
            —
            10
            —
            10Income tax
      benefit arising on exercise of share options
            —
            —
            2
            —
            —
            2Dividends
      (including corporate dividend tax)
            —
            —
            —
            (330)
            —
            (330)Reversal of
      impairment loss on available-for-sale financial asset
            —
            —
            —
            —
            2
            2Gain
      transferred to net profit on sale of available-for-sale financial
      asset
            —
            —
            —
            —
            (1)
            (1)Unrealized
      holding gains, net of tax effect of $2 million (refer note
      2.2)
            —
            —
            —
            —
            6
            6Net
      profit
            —
            —
            —
            1,313
            —
            1,313Exchange
      differences on translating foreign operations
            —
            —
            —
            —
            555
            555Balance
      as of  March 31, 2010
            570,991,592
            $64
            $694
            $4,611
            $(8)
            $5,361


The accompanying notes form an
integral part of the consolidated financial statements


*Effective
fiscal 2010 treasury shares held by controlled trusts were
consolidated




Infosys Technologies Limited and
subsidiaries




Consolidated
Statements of Cash Flows for the years ended March 31,


(Dollars in
      millions)Note
            2010
            2009
            2008Operating
      activities:Net
      profit
            
            $1,313
            $1,281
            $1,163Adjustments
      to reconcile net profit to net cash provided by operating
      activities:Depreciation
      and amortization
            2.5 and
      2.6
            199
            165
            149Share based
      compensation
            2.16
            –
            1
            3Income on
      investments
            
            (36)
            (3)
            (2)Income tax
      expense
            2.17
            356
            194
            171Other non
      cash item
            
            1
            –
            –Changes
      in working capitalTrade
      receivables
            
            41
            (81)
            (211)Prepayments
      and other assets
            
            (49)
            11
            (49)Unbilled
      revenue
            
            (19)
            (58)
            (41)Trade
      payables
            
            (4)
            (6)
            7Client
      deposits
            
            1
            –
            1Unearned
      revenue
            
            42
            10
            (6)Other
      liabilities and provisions
            
            (18)
            89
            109Cash
      generated from operations
            
            1,827
            1,603
            1,294Income taxes
      paid
            2.17
            (370)
            (194)
            (137)Net
      cash provided by operating activities
            
            1,457
            1,409
            1,157Investing
      activities:Payment for
      acquisition of business, net of cash acquired
            2.3
            (37)
            (3)
            (26)Expenditure
      on property, plant and equipment
            2.5
            (143)
            (285)
            (373)Proceeds on
      sale of property, plant and equipment
            
            1
            –
            –Loans to
      employees
            
            2
            (1)
            1Non-current
      deposits placed with corporation
            
            (6)
            (20)
            (7)Acquisition
      of minority interest in subsidiary
            
            –
            –
            (6)Income on
      investments
            
            22
            3
            2Proceeds from
      sale of available-for-sale financial asset
            
            12
            –
            –Investment in
      certificates of deposit
            
            (249)
            (41)
            –Redemption of
      certificates of deposit
            
            –
            41
            –Investment in
      available-for-sale financial assets
            
            (2,091)
            (186)
            (511)Redemption of
      available-for-sale financial assets
            
            1,559
            202
            500Net
      cash used in investing activities
            
            (930)
            (290)
            (420)Financing
      activities:Proceeds from
      issuance of common stock on exercise of employee stock
    options
            
            20
            14
            15Payment of
      dividends (including corporate dividend tax)
            
            (330)
            (559)
            (209)Net
      cash used in financing activities
            
            (310)
            (545)
            (194)Effect of
      exchange rate changes on cash and cash equivalents
            
            304
            (465)
            121Net increase
      in cash and cash equivalents
            
            217
            574
            543Cash and cash
      equivalents at the beginning
            2.1
            2,167
            2,058
            1,394Opening
      balance of cash and cash equivalents of controlled trusts
            
            10
            –
            –Cash
      and cash equivalents at the end
            2.1
            $2,698
            $2,167
            $2,058Supplementary
      information:Restricted
      cash balance
            2.1
            $16
            –
            $1


The
accompanying notes form an integral part of the consolidated financial
statements




Notes
to the Consolidated Financial Statements




1. Company Overview and Significant
Accounting Policies




1.1 Company
overview




Infosys
Technologies Limited (Infosys or the company) along with its controlled trusts,
majority owned and controlled subsidiary, Infosys BPO Limited (Infosys BPO) and
wholly owned and controlled subsidiaries, Infosys Technologies (Australia) Pty.
Limited (Infosys Australia), Infosys Technologies (China) Co. Limited (Infosys
China), Infosys Consulting, Inc. (Infosys Consulting), Infosys Technologies S.
DE R.L. de C.V. (Infosys Mexico), Infosys Technologies (Sweden) AB (Infosys
Sweden), Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) and Infosys Public
Services, Inc,  (Infosys Public Services), is a leading global
technology services company. The Infosys group of companies (the Group) provides
end-to-end business solutions that leverage technology thereby enabling its
clients to enhance business performance. The Group's operations are to provide
solutions that span the entire software life cycle encompassing technical
consulting, design, development, re-engineering, maintenance, systems
integration, package evaluation and implementation, testing and infrastructure
management services. In addition, the Group offers software products for the
banking industry and business process management services.




The company is a
public limited company incorporated and domiciled in India and has its
registered office at Bangalore, Karnataka, India. The company has its primary
listing on the Bombay Stock Exchange and National Stock Exchange in India. The
company’s American Depositary Shares representing equity shares are also listed
on NASDAQ Global Select Market. The company’s consolidated financial statements
were authorized for issuance by the company’s Board of Directors on April 30,
2010.




1.2 Basis of preparation of financial
statements




These consolidated
financial statements have been prepared in compliance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS), under the historical cost convention on the accrual
basis except for certain financial instruments and prepaid gratuity
benefits which have been measured at fair values. Accounting policies have
been applied consistently to all periods presented in these financial
statements.




1.3 Basis of
consolidation




Infosys
consolidates entities which it owns or controls. Control exists when the Group
has the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, potential voting
rights that are currently exercisable are also taken into account. Subsidiaries
are consolidated from the date control commences until the date control
ceases.




The financial
statements of the Group companies are consolidated on a line-by-line basis and
intra-group balances and transactions including unrealized gain / loss from such
transactions are eliminated upon consolidation. These financial statements are
prepared by applying uniform accounting policies in use at the Group.
Non-controlling interests which represent part of the net profit or loss and net
assets of subsidiaries that are not, directly or indirectly, owned or controlled
by the company, are excluded.




1.4 Use of
estimates




The preparation of
the financial statements in conformity with IFRS requires management to make
estimates, judgments and assumptions. These estimates, judgments and assumptions
affect the application of accounting policies and the reported amounts of assets
and liabilities, the disclosures of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the period. Application of accounting policies that require critical
accounting estimates involving complex and subjective judgments and the use of
assumptions in these financial statements have been disclosed in Note 1.5.
Accounting estimates could change from period to period. Actual results could
differ from those estimates. Appropriate changes in estimates are made as
management becomes aware of changes in circumstances surrounding the estimates.
Changes in estimates are reflected in the financial statements in the period in
which changes are made and, if material, their effects are disclosed in the
notes to the unaudited condensed consolidated interim financial
statements.




1.5 Critical accounting
estimates




a.
Revenue recognition




The company uses
the percentage-of-completion method in accounting for its fixed-price contracts.
Use of the percentage-of-completion method requires the company to estimate the
efforts expended to date as a proportion of the total efforts to be expended.
Efforts expended have been used to measure progress towards completion as there
is a direct relationship between input and productivity. Provisions for
estimated losses, if any, on uncompleted contracts are recorded in the period in
which such losses become probable based on the expected contract estimates at
the reporting date.




b. Income taxes




The company's two
major tax jurisdictions are India and the U.S., though the company also files
tax returns in other foreign jurisdictions. Significant judgments are involved
in determining the provision for income taxes, including amount expected to be
paid/recovered for uncertain tax positions. Also refer to Note
2.17.




c.
Business combinations and Intangible assets
  Business
combinations are accounted for using IFRS 3 (Revised), Business Combinations.
IFRS 3 requires the identifiable intangible assets and contingent consideration
to be fair valued in order to ascertain the net fair value of identifiable
assets, liabilities and contingent liabilities of the acquiree. Significant
estimates are required to be made in determining the value of contingent
consideration and intangible assets. These valuations are conducted by
independent valuation experts.




The company derives
revenues primarily from software development and related services, from business
process management services and from the licensing of software products.
Arrangements with customers for software development and related services and
business process management services are either on a fixed-price,
fixed-timeframe or on a time-and-material basis.




Revenue on
time-and-material contracts are recognized as the related services are performed
and revenue from the end of the last billing to the balance sheet date is
recognized as unbilled revenues. Revenue from fixed-price, fixed-timeframe
contracts, where there is no uncertainty as to measurement or collectability of
consideration, is recognized as per the percentage-of-completion method. When
there is uncertainty as to measurement or ultimate collectability revenue
recognition is postponed until such uncertainty is resolved. Efforts expended
have been used to measure progress towards completion as there is a direct
relationship between input and productivity. Provisions for estimated losses, if
any, on uncompleted contracts are recorded in the period in which such losses
become probable based on the current contract estimates. Costs and earnings in
excess of billings are classified as unbilled revenue while billings in excess
of costs and earnings are classified as unearned revenue. Maintenance revenue is
recognized ratably over the term of the underlying maintenance
arrangement.


In arrangements for
software development and related services and maintenance services, the company
has applied the guidance in IAS 18, Revenue, by applying the revenue recognition
criteria for each separately identifiable component of a single transaction. The
arrangements generally meet the criteria for considering software development
and related services as separately identifiable components. For allocating the
consideration, the company has measured the revenue in respect of each separable
component of a transaction at its fair value, in accordance with principles
given in IAS 18. The price that is regularly charged for an item when sold
separately is the best evidence of its fair value. In cases where the company is
unable to establish objective and reliable evidence of fair value for the
software development and related services, the company has used a residual
method to allocate the arrangement consideration. In these cases the balance of
the consideration, after allocating the fair values of undelivered components of
a transaction has been allocated to the delivered components for which specific
fair values do not exist.




License fee
revenues are recognized when the general revenue recognition criteria given in
IAS 18 are met. Arrangements to deliver software products generally have three
elements: license, implementation and Annual Technical Services (ATS). The
company has applied the principles given in IAS 18 to account for revenues from
these multiple element arrangements. Objective and reliable evidence of fair
value has been established for ATS. Objective and reliable evidence of fair
value is the price charged when the element is sold separately. When other
services are provided in conjunction with the licensing arrangement and
objective and reliable evidence of their fair values have been established, the
revenue from such contracts are allocated to each component of the contract in a
manner, whereby revenue is deferred for the undelivered services and the
residual amounts are recognized as revenue for delivered elements. In the
absence of objective and reliable evidence of fair value for implementation, the
entire arrangement fee for license and implementation is recognized using the
percentage-of-completion method as the implementation is performed. Revenue from
client training, support and other services arising due to the sale of software
products is recognized as the services are performed. ATS revenue is recognized
ratably over the period in which the services are rendered.




Advances received
for services and products are reported as client deposits until all conditions
for revenue recognition are met.




The company
accounts for volume discounts and pricing incentives to customers as a reduction
of revenue based on the ratable allocation of the discounts/ incentives amount
to each of the underlying revenue transaction that results in progress by the
customer towards earning the discount/ incentive. Also, when the level of
discount varies with increases in levels of revenue transactions, the company
recognizes the liability based on its estimate of the customer's future
purchases. If it is probable that the criteria for the discount will not be met,
or if the amount thereof cannot be estimated reliably, then discount is not
recognized until the payment is probable and the amount can be estimated
reliably. The company recognizes changes in the estimated amount of obligations
for discounts in the period in which the change occurs. The discounts are passed
on to the customer either as direct payments or as a reduction of payments due
from the customer.




The company
presents revenues net of value-added taxes in its statement of comprehensive
income.




1.7
Property, plant and equipment




Property, plant and
equipment are stated at cost, less accumulated depreciation and impairments, if
any. The direct costs are capitalized until the property, plant and equipment
are ready for use, as intended by management. The company depreciates property,
plant and equipment over their estimated useful lives using the straight-line
method. The estimated useful lives of assets for current and comparative periods
are as follows:




Buildings
            15
      yearsPlant and
      machinery
            5
      yearsComputer
      equipment
            2-5
      yearsFurniture and
      fixtures
            5
      yearsVehicles
            5
      years




Depreciation
methods, useful lives and residual values are reviewed at each reporting
date.




Advances paid
towards the acquisition of property, plant and equipment outstanding at each
balance sheet date and the cost of assets not put to use before such date are
disclosed under "Capital work-in-progress". Subsequent expenditures relating to
property, plant and equipment is capitalized only when it is probable that
future economic benefits associated with these will flow to the Group and the
cost of the item can be measured reliably. Repairs and maintenance costs are
recognized in net profit in the statement of comprehensive income when incurred.
The cost and related accumulated depreciation are eliminated from the financial
statements upon sale or retirement of the asset and the resultant gains or
losses are recognized in net profit in the statement of comprehensive income.
Assets to be disposed off are reported at the lower of the carrying value or the
fair value less cost to sell.


1.8 Business
combinations




Business
combinations have been accounted for using the acquisition method under the
provisions of IFRS 3 (Revised), Business Combinations.




The cost of an
acquisition is measured at the fair value of the assets transferred, equity
instruments issued and liabilities incurred or assumed at the date of
acquisition. The cost of acquisition also includes the fair value of any
contingent consideration. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially
at their fair value on the date of acquisition.




Transaction costs
that the Group incurs in connection with a business combination such as finders’
fees, legal fees, due diligence fees, and other professional and consulting fees
are expensed as incurred.




1.9
Goodwill





Goodwill represents
the cost of business acquisition in excess of the Group's interest in the net
fair value of identifiable assets, liabilities and contingent liabilities of the
acquiree. When the net fair value of the identifiable assets, liabilities and
contingent liabilities acquired exceeds the cost of business acquisition, a gain
is recognized immediately in net profit in the statement of comprehensive
income. Goodwill is measured at cost less accumulated impairment
losses.




1.10 Intangible
assets




Intangible assets
are stated at cost less accumulated amortization and impairments. Intangible
assets are amortized over their respective individual estimated useful lives on
a straight-line basis, from the date that they are available for use. The
estimated useful life of an identifiable intangible asset is based on a number
of factors including the effects of obsolescence, demand, competition, and other
economic factors (such as the stability of the industry, and known technological
advances), and the level of maintenance expenditures required to obtain the
expected future cash flows from the asset.




Research costs are
expensed as incurred. Software product development costs are expensed as
incurred unless technical and commercial feasibility of the project is
demonstrated, future economic benefits are probable, the company has an
intention and ability to complete and use or sell the software and the costs can
be measured reliably. The costs which can be capitalized include the cost of
material, direct labour, overhead costs that are directly attributable to
preparing the asset for its intended use. Research and development costs and
software development costs incurred under contractual arrangements with
customers are accounted as cost of sales.




1.11 Financial
instruments




Financial
instruments of the Group are classified in the following categories:
non-derivative financial instruments comprising of loans and receivables,
available-for-sale financial assets and trade and other payables; derivative
financial instruments under the category of financial assets or financial
liabilities at fair value through profit or loss; share capital and treasury
shares. The classification of financial instruments depends on the purpose for
which those were acquired. Management determines the classification of its
financial instruments at initial recognition.




a. Non-derivative financial
instruments




(i) Loans and
receivables




Loans and
receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are presented as current
assets, except for those maturing later than 12 months after the balance sheet
date which are presented as non-current assets. Loans and receivables are
measured initially at fair value plus transaction costs and subsequently carried
at amortized cost using the effective interest method, less any impairment loss
or provisions for doubtful accounts. Loans and receivables are represented by
trade receivables, net of allowances for impairment, unbilled revenue, cash and
cash equivalents, prepayments, certificates of deposit and other assets. Cash
and cash equivalents comprise cash and bank deposits and deposits with
corporations. The company considers all highly liquid investments with a
remaining maturity at the date of purchase of three months or less and that are
readily convertible to known amounts of cash to be cash equivalents.
Certificates of deposit is a negotiable money market instrument for funds
deposited at a bank or other eligible financial institution for a specified time
period.


(ii) Available-for-sale financial
assets




Available-for-sale
financial assets are non-derivatives that are either designated in this category
or are not classified in any of the other categories. Available-for-sale
financial assets are recognized initially at fair value plus transactions costs.
Subsequent to initial recognition these are measured at fair value and changes
therein, other than impairment losses and foreign exchange gains and losses on
available-for-sale monetary items are recognized directly in other comprehensive
income. When an investment is derecognized, the cumulative gain or loss in other
comprehensive income is transferred to net profit in the statement of
comprehensive income. These are presented as current assets unless management
intends to dispose off the assets after 12 months from the balance sheet
date.




(iii) Trade and other
payables




Trade and other
payables are initially recognized at fair value, and subsequently carried at
amortized cost using the effective interest method.




b.
Derivative financial instruments




Financial assets or
financial liabilities, at fair value through profit or loss.




This category has
two sub-categories wherein, financial assets or financial liabilities are held
for trading or are designated as such upon initial recognition. A financial
asset is classified as held for trading if it is acquired principally for the
purpose of selling in the short term. Derivatives are categorized as held for
trading unless they are designated as hedges.




The company holds
derivative financial instruments such as foreign exchange forward and option
contracts to mitigate the risk of changes in foreign exchange rates on trade
receivables and forecasted cash flows denominated in certain foreign currencies.
The counterparty for these contracts is generally a bank or a financial
institution. Although the company believes that these financial instruments
constitute hedges from an economic perspective, they do not qualify for hedge
accounting under IAS 39, Financial Instruments: Recognition and Measurement. Any
derivative that is either not designated a hedge, or is so designated but is
ineffective per IAS 39, is categorized as a financial asset, at fair value
through profit or loss.




Derivatives are
recognized initially at fair value and attributable transaction costs are
recognized in net profit in the statement of comprehensive income when incurred.
Subsequent to initial recognition, derivatives are measured at fair value
through profit or loss and the resultant exchange gains or losses are included
in other income. Assets/ liabilities in this category are presented as current
assets/current liabilities if they are either held for trading or are expected
to be realized within 12 months after the balance sheet date.


c. Share capital and treasury
shares




Ordinary
Shares




Ordinary shares are
classified as equity. Incremental costs directly attributable to the issuance of
new ordinary shares and share options are recognized as a deduction from equity,
net of any tax effects.




Treasury
Shares




When any entity
within the Group purchases the company's ordinary shares, the consideration paid
including any directly attributable incremental cost is presented as a deduction
from total equity, until they are cancelled, sold or reissued. When treasury
shares are sold or reissued subsequently, the amount received is recognized as
an increase in equity, and the resulting surplus or deficit on the transaction
is transferred to/ from retained earnings.




1.12
Impairment




a. Financial
assets




The Group assesses
at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. A financial asset is
considered impaired if objective evidence indicates that one or more events have
had a negative effect on the estimated future cash flows of that asset.
Individually significant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.




(i) Loans and
receivables




Impairment loss in
respect of loans and receivables measured at amortized cost are calculated as
the difference between their carrying amount, and the present value of the
estimated future cash flows discounted at the original effective interest rate.
Such impairment loss is recognized in net profit in the statement of
comprehensive income.




(ii) Available-for-sale
financial assets




Significant or
prolonged decline in the fair value of the security below its cost and the
disappearance of an active trading market for the security are objective
evidence that the security is impaired. An impairment loss in respect of an
available-for-sale financial asset is calculated by reference to its fair value
and is recognized in net profit in the statement of comprehensive income. The
cumulative loss that was recognized in other comprehensive income is transferred
to net profit in the statement of comprehensive income upon
impairment.




b.
Non-financial assets




(i) Goodwill




Goodwill is tested
for impairment on an annual basis and whenever there is an indication that
goodwill may be impaired, relying on a number of factors including operating
results, business plans and future cash flows. For the purpose of impairment
testing, goodwill acquired in a business combination is allocated to the Group's
cash generating units (CGU) expected to benefit from the synergies arising from
the business combination. A CGU is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the cash inflows
from other assets or group of assets. Impairment occurs when the carrying amount
of a CGU including the goodwill, exceeds the estimated recoverable amount of the
CGU. The recoverable amount of a CGU is the higher of its fair value less cost
to sell and its value-in-use. Value-in-use is the present value of future cash
flows expected to be derived from the CGU.




Total impairment
loss of a CGU is allocated first to reduce the carrying amount of goodwill
allocated to the CGU and then to the other assets of the CGU pro-rata on the
basis of the carrying amount of each asset in the CGU. An impairment loss on
goodwill is recognized in net profit in the statement of comprehensive income
and is not reversed in the subsequent period.




(ii) Intangible assets and property, plant
and equipment




Intangible assets
and property, plant and equipment are evaluated for recoverability whenever
events or changes in circumstances indicate that their carrying amounts may not
be recoverable. For the purpose of impairment testing, the recoverable amount
(i.e. the higher of the fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the asset does not generate cash
flows that are largely independent of those from other assets. In such cases,
the recoverable amount is determined for the CGU to which the asset
belongs.




If such assets are
considered to be impaired, the impairment to be recognized in net profit in the
statement of comprehensive income is measured by the amount by which the
carrying value of the assets exceeds the estimated recoverable amount of the
asset.




c. Reversal of impairment
loss




An impairment loss
for financial assets is reversed if the reversal can be related objectively to
an event occurring after the impairment loss was recognized. An impairment loss
in respect of goodwill is not reversed. In respect of other assets, an
impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. The carrying amount of an asset other than
goodwill is increased to its revised recoverable amount, provided that this
amount does not exceed the carrying amount that would have been determined (net
of any accumulated amortization or depreciation) had no impairment loss been
recognized for the asset in prior years. A reversal of impairment loss for an
asset other than goodwill and available- for-sale financial assets that are
equity securities is recognized in net profit in the statement of comprehensive
income. For available-for-sale financial assets that are equity securities, the
reversal is recognized in other comprehensive income.




1.13 Fair value of financial
instruments




In determining the
fair value of its financial instruments, the company uses a variety of methods
and assumptions that are based on market conditions and risks existing at each
reporting date. The methods used to determine fair value include discounted cash
flow analysis, available quoted market prices and dealer quotes. All methods of
assessing fair value result in general approximation of value, and such value
may never actually be realized.




For all other
financial instruments the carrying amounts approximate fair value due to the
short maturity of those instruments. The fair value of securities, which do not
have an active market and where it is not practicable to determine the fair
values with sufficient reliability, are carried at cost less
impairment.




1.14 Provisions




A provision is
recognized if, as a result of a past event, the Group has a present legal or
constructive obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability.




a.
Post sales client support




The company
provides its clients with a fixed-period post sales support for corrections of
errors and telephone support on all its fixed-price, fixed-timeframe contracts.
Costs associated with such support services are accrued at the time related
revenues are recorded and included in cost of sales. The company estimates such
costs based on historical experience and estimates are reviewed on a periodic
basis for any material changes in assumptions and likelihood of
occurrence.




b.Onerous contracts




Provisions for
onerous contracts are recognized when the expected benefits to be derived by the
Group from a contract are lower than the unavoidable costs of meeting the future
obligations under the contract. The provision is measured at the present value
of the lower of the expected cost of terminating the contract and the expected
net cost of continuing with the contract. Before a provision is established the
Group recognizes any impairment loss on the assets associated with that
contract.




1.15
Foreign currency




Functional and
presentation currency




The functional
currency of Infosys and Infosys BPO is the Indian rupee. The functional
currencies for Infosys Australia, Infosys China, Infosys Consulting, Infosys
Mexico, Infosys Sweden, Infosys Brasil and Infosys Public Services are the
respective local currencies. These financial statements are presented in U.S.
dollars (rounded off to the nearest million) to facilitate global
comparability.




Transactions and
translations




Foreign-currency
denominated monetary assets and liabilities are translated into the relevant
functional currency at exchange rates in effect at the balance sheet date. The
gains or losses resulting from such translations are included in net profit in
the statement of comprehensive income. Non-monetary assets and non-monetary
liabilities denominated in a foreign currency and measured at fair value are
translated at the exchange rate prevalent at the date when the fair value was
determined. Non-monetary assets and non-monetary liabilities denominated in a
foreign currency and measured at historical cost are translated at the exchange
rate prevalent at the date of transaction.




Transaction gains
or losses realized upon settlement of foreign currency transactions are included
in determining net profit for the period in which the transaction is settled.
Revenue, expense and cash-flow items denominated in foreign currencies are
translated into the relevant functional currencies using the exchange rate in
effect on the date of the transaction.




The translation of
financial statements of the foreign subsidiaries to the functional currency of
the company is performed for assets and liabilities using the exchange rate in
effect at the balance sheet date and for revenue, expense and cash-flow items
using the average exchange rate for the respective periods. The gains or losses
resulting from such translation are included in currency translation reserves
under other components of equity. When a subsidiary is disposed off, in part or
in full, the relevant amount is transferred to net profit in the statement of
comprehensive income.




Goodwill and fair
value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the exchange rate
in effect at the balance sheet date.




1.16
Earnings per equity share




Basic earnings per
equity share is computed by dividing the net profit attributable to the equity
holders of the company by the weighted average number of equity shares
outstanding during the period. Diluted earnings per equity share is computed by
dividing the net profit attributable to the equity holders of the company by the
weighted average number of equity shares considered for deriving basic earnings
per share and also the weighted average number of equity shares that could have
been issued upon conversion of all dilutive potential equity shares. The diluted
potential equity shares are adjusted for the proceeds receivable had the equity
shares been actually issued at fair value (i.e. the average market value of the
outstanding equity shares). Dilutive potential equity shares are deemed
converted as of the beginning of the period, unless issued at a later date.
Dilutive potential equity shares are determined independently for each period
presented.
  The number of
equity shares and potentially dilutive equity shares are adjusted
retrospectively for all periods presented for any share splits and bonus shares
issues including for changes effected prior to the approval of the financial
statements by the Board of Directors.


1.17
Income taxes




Income tax expense
comprises current and deferred income tax. Income tax expense is recognized in
net profit in the statement of comprehensive income except to the extent that it
relates to items recognized directly in equity, in which case it is recognized
in other comprehensive income. Current income tax for current and prior periods
is recognized at the amount expected to be paid to or recovered from the tax
authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date. Deferred income tax assets and
liabilities are recognized for all temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial
statements except when the deferred income tax arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not a
business combination and affects neither accounting nor taxable profit or loss
at the time of the transaction. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized.




Deferred income tax
assets and liabilities are measured using tax rates and tax laws that have been
enacted or substantively enacted by the balance sheet date and are expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of changes in tax rates on
deferred income tax assets and liabilities is recognized as income or expense in
the period that includes the enactment or the substantive enactment date. A
deferred income tax asset is recognized to the extent that it is probable that
future taxable profit will be available against which the deductible temporary
differences and tax losses can be utilized. Deferred income taxes are not
provided on the undistributed earnings of subsidiaries and branches where it is
expected that the earnings of the subsidiary or branch will not be distributed
in the foreseeable future. The company offsets current tax assets and current
tax liabilities, where it has a legally enforceable right to set off the
recognized amounts and where it intends either to settle on a net basis, or to
realize the asset and settle the liability simultaneously. Tax benefits of
deductions earned on exercise of employee share options in excess of
compensation charged to income are credited to share premium.




1.18
Employee benefits




1.18.1
Gratuity




In accordance with
the Payment of Gratuity Act, 1972, Infosys provides for gratuity, a defined
benefit retirement plan (the Gratuity Plan) covering eligible employees. The
Gratuity Plan provides a lump-sum payment to vested employees at retirement,
death, incapacitation or termination of employment, of an amount based on the
respective employee's salary and the tenure of employment.




Liabilities with
regard to the Gratuity Plan are determined by actuarial valuation, performed by
an independent actuary, at each balance sheet date using the projected unit
credit method. The company fully contributes all ascertained liabilities to the
Infosys Technologies Limited Employees' Gratuity Fund Trust (the Trust). In case
of Infosys BPO, contributions are made to the Infosys BPO's Employees' Gratuity
Fund Trust. Trustees administer contributions made to the Trusts and
contributions are invested in specific designated instruments as permitted by
law and investments are also made in mutual funds that invest in the specific
designated instruments.




The Group
recognizes the net obligation of a defined benefit plan in its balance sheet as
an asset or liability, respectively in accordance with IAS 19, Employee
benefits. The discount rate is based on the Government securities yield.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to net profit in the statement of
comprehensive income in the period in which they arise. When the computation
results in a benefit to the Group, the recognized asset is limited to the net
total of any unrecognized past service costs and the present value of any future
refunds from the plan or reductions in future contributions to the
plan.




1.18.2
Superannuation




Certain employees
of Infosys are also participants in a defined contribution plan. Until March
2005, the company made monthly contributions under the superannuation plan (the
Plan) to the Infosys Technologies Limited Employees' Superannuation Fund Trust
(Infosys Superannuation Trust) based on a specified percentage of each covered
employee's salary. The company has no further obligations to the Plan beyond its
monthly contributions. Effective April 1, 2005, a portion of the monthly
contribution amount is being paid directly to the employees as an allowance and
the balance amount is contributed to the Infosys Superannuation
Trust.




Certain employees
of Infosys BPO are also eligible for superannuation benefit. Infosys BPO has no
further obligations to the superannuation plan beyond its monthly contribution
which are periodically contributed to a trust fund, the corpus of which is
invested with the Life Insurance Corporation of India.




Certain employees
of Infosys Australia are also eligible for superannuation benefit. Infosys
Australia has no further obligations to the superannuation plan beyond its
monthly contribution.




1.18.3 Provident
fund




Eligible employees
of Infosys receive benefits from a provident fund, which is a defined benefit
plan. Both the employee and the company make monthly contributions to the
provident fund plan equal to a specified percentage of the covered employee's
salary. The company contributes a part of the contributions to the Infosys
Technologies Limited Employees' Provident Fund Trust. The remaining portion is
contributed to the government administered pension fund. The rate at which the
annual interest is payable to the beneficiaries by the trust is being
administered by the government. The company has an obligation to make good the
shortfall, if any, between the return from the investments of the Trust and the
notified interest rate.




In respect of
Infosys BPO, eligible employees receive benefits from a provident fund, which is
a defined contribution plan. Both the employee and Infosys BPO make monthly
contributions to this provident fund plan equal to a specified percentage of the
covered employee's salary. Amounts collected under the provident fund plan are
deposited in a government administered provident fund. The company has no
further obligation to the plan beyond its monthly contributions.




1.18.4 Compensated
absences




The Group has a
policy on compensated absences which are both accumulating and non-accumulating
in nature. The expected cost of accumulating compensated absences is measured
based on the additional amount expected to be paid/availed as a result of the
unused entitlement that has accumulated at the balance sheet date. Expense on
non-accumulating compensated absences is recognized in the period in which the
absences occur.




1.19 Share-based
compensation




The Group
recognizes compensation expense relating to share-based payments in net profit
using a fair-value measurement method in accordance with IFRS 2, Share-Based
Payment. Under the fair value method, the estimated fair value of awards is
charged to income on a straight-line basis over the requisite service period for
each separately vesting portion of the award as if the award was in-substance,
multiple awards. The Group includes a forfeiture estimate in the amount of
compensation expense being recognized.




The fair value of
each option is estimated on the date of grant using the Black-Scholes-Merton
valuation model. The expected term of an option is estimated based on the
vesting term and contractual term of the option, as well as expected exercise
behaviour of the employee who receives the option. Expected volatility during
the expected term of the option is based on historical volatility, during a
period equivalent to the expected term of the option, of the observed market
prices of the company's publicly traded equity shares. Expected dividends during
the expected term of the option are based on recent dividend activity. Risk-free
interest rates are based on the government securities yield in effect at the
time of the grant over the expected term.




1.20 Dividends




Final dividends on
shares are recorded as a liability on the date of approval by the shareholders
and interim dividends are recorded as a liability on the date of declaration by
the company's Board of Directors.




1.21
Operating profit




Operating profit
for the Group is computed considering the revenues, net of cost of sales,
selling and marketing expenses and administrative expenses.




1.22
Other income




Other income is
comprised primarily of interest income and dividend income. Interest income is
recognized using the effective interest method. Dividend income is recognized
when the right to receive payment is established.




1.23
Leases




Leases under which
the company assumes substantially all the risks and rewards of ownership are
classified as finance leases. When acquired, such assets are capitalized at fair
value or present value of the minimum lease payments at the inception of the
lease, whichever is lower. Lease payments under operating leases are recognised
as an expense on a straight line basis in net profit in the statement of
comprehensive income over the lease term.




1.24
Government grants




The Group
recognizes government grants only when there is reasonable assurance that the
conditions attached to them shall be complied with, and the grants will be
received. Government grants related to depreciable fixed assets are treated as
deferred income and are recognized in net profit in the statement of
comprehensive income on a systematic and rational basis over the useful life of
the asset. Government grants related to revenue are recognized on a systematic
basis in net profit in the statement of comprehensive income over the periods
necessary to match them with the related costs which they are intended to
compensate.




1.25 Recent
accounting pronouncements




1.25.1 Standards early adopted by the
company




1.
            IFRS 8,
      Operating Segments is applicable for annual periods beginning on or after
      January 1, 2009. This standard was early adopted by the company as of
      April 1, 2007. IFRS 8 replaces IAS 14, Segment Reporting. The new standard
      requires a 'management approach', under which segment information is
      presented on the same basis as that used for internal reporting provided
      to the chief operating decision maker. The application of this standard
      did not result in any change in the number of reportable segments.
      Allocation of goodwill was not required under Previous GAAP and hence
      goodwill has been allocated in accordance to the requirements of this
      Standard.


2.
            IFRS 3
      (Revised), Business Combinations, as amended, is applicable for annual
      periods beginning on or after July 1, 2009. This standard was early
      adopted by the company as of April 1, 2009. Business combinations
      consummated after April 1, 2009 will be impacted by this standard. IFRS 3
      (Revised) primarily requires the acquisition-related costs to be
      recognized as period expenses in accordance with the relevant IFRS. Costs
      incurred to issue debt or equity securities are required to be recognized
      in accordance with IAS 39. Consideration, after this amendment, will
      include fair values of all interests previously held by the acquirer.
      Re-measurement of such interests to fair value would be carried out
      through net profit in the statement of comprehensive income. Contingent
      consideration is required to be recognized at fair value even if not
      deemed probable of payment at the date of
  acquisition.




IFRS 3 (Revised)
provides an explicit option on a transaction-by-transaction basis, to measure
any non-controlling interest (NCI) in the entity acquired at fair value of their
proportion of identifiable assets and liabilities or at full fair value. The
first method will result in a marginal difference in the measurement of goodwill
from the existing IFRS 3; however the second approach will require recording
goodwill on NCI as well as on the acquired controlling interest. Upon
consummating a business transaction in future the company is likely to adopt the
first method for measuring NCI.




3.
            IAS 27
      Consolidated and Separate Financial Statements, as amended, is applicable
      for annual periods beginning on or after July 1, 2009. This standard was
      early adopted by the company as of April 1, 2009. It requires a mandatory
      adoption of economic entity model which treats all providers of equity
      capital as shareholders of the entity. Consequently, a partial disposal of
      interest in a subsidiary in which the parent company retains control does
      not result in a gain or loss but in an increase or decrease in equity.
      Additionally purchase of some or all of the NCI is treated as treasury
      transaction and accounted for in equity and a partial disposal of interest
      in a subsidiary in which the parent company loses control triggers
      recognition of gain or loss on the entire interest. A gain or loss is
      recognized on the portion that has been disposed off and a further holding
      gain is recognized on the interest retained, being the difference between
      the fair value and carrying value of the interest retained. This Standard
      requires an entity to attribute their share of net profit and reserves to
      the NCI even if this results in the NCI having a deficit
      balance.




1.25.2 Recently
adopted accounting pronouncements




1.
            IAS 1,
      Presentation of Financial Statements is applicable for annual periods
      beginning on or after January 1, 2009. This Standard was adopted by the
      company as of April 1, 2009. Consequent to the adoption of the standard,
      the title for cash flows has been changed to ‘Statement of Cash Flow’.
      Further, the company has included in its complete set of financial
      statements, a single ‘Statement of Comprehensive
  Income’.


2.
            IFRIC
      Interpretation 18, Transfers of Assets from Customers defines the
      treatment for property, plant and equipment transferred by customers to
      companies or for cash received to be invested in property, plant and
      equipment that must be used either to connect the customer to a network or
      to provide the customer with ongoing access to a supply of goods or
      services, or to do both.




The item of
property, plant and equipment is to be initially recognised by the company at
fair value with a corresponding credit to revenue. If an ongoing service is
identified as a part of the agreement, the period over which revenue shall be
recognised for that service would be determined by the terms of the agreement
with the customer. If the period is not clearly defined, then revenue should be
recognized over a period no longer than the useful life of the transferred asset
used to provide the ongoing service. This interpretation is applicable
prospectively to transfers of assets from customers received on or after July 1,
2009. The company has adopted this interpretation prospectively for all assets
transferred after July 1, 2009. There has been no material impact on the company
as a result of the adoption of this interpretation.




2
Notes to the consolidated financial statements




2.1
Cash and cash equivalents




Cash and cash
equivalents consist of the following:


(Dollars in
      millions)As
      of March 31,2010
            2009Cash and bank
      deposits
            $2,351
            $1,911Deposits with
      corporations
            347
            256$2,698
            $2,167




Cash and cash
equivalents as of March 31, 2010 include restricted cash and bank balances of
$16 million. The restricted cash and bank balances as of March 31, 2009 were
less than $1 million. The restrictions are primarily on account of cash and bank
balances held by irrevocable trusts controlled by the company and unclaimed
dividends.




The deposits
maintained by the Group with corporations comprise of time deposits, which can
be withdrawn by the Group at any point without prior notice or penalty on the
principal.




The table below
provides details of cash and cash equivalents:


(Dollars
      in millions)As
      of March 31,2010
            2009Current
      accountsABN Amro
      Bank, China
            $7
            $1ABN Amro
      Bank, China (U.S. dollar account)
            3
            3Bank of
      America, USA
            153
            116Bank of
      America, Mexico
            4
            –Citibank
      N.A., Australia
            6
            7Citibank
      N.A., Brazil
            2
            –Citibank
      N.A., Czech Republic (Euro account)
            –
            1Citibank
      N.A., Czech Republic (U.S. dollar account)
            –
            1Citibank
      N.A., Japan
            1
            –Citibank
      N.A., Singapore
            –
            2Citibank
      N.A., India
            1
            –Deutsche
      Bank, Belgium
            4
            1Deutsche
      Bank, Germany
            3
            1Deutsche
      Bank, India
            3
            2Deutsche
      Bank, Netherlands
            2
            –Deutsche
      Bank, Switzerland
            2
            –Deutsche
      Bank, Thailand
            1
            –Deutsche
      Bank, Philippines (U.S. dollar account)
            1
            –Deutsche
      Bank, Poland
            1
            –Deutsche
      Bank, United Kingdom
            7
            11Deutsche
      Bank-EEFC, India (Euro account)
            1
            5Deutsche
      Bank-EEFC, India (Swiss Franc account)
            –
            1Deutsche
      Bank-EEFC, India (U.S. dollar account)
            2
            2HSBC Bank,
      United Kingdom
            1
            2ICICI Bank,
      India
            30
            4ICICI
      Bank-EEFC, India (United Kingdom Pound Sterling account)
            –
            1ICICI
      Bank-EEFC, India (U.S. dollar account)
            2
            8National
      Australia Bank Limited, Australia
            5
            6National
      Australia Bank Limited, Australia (U.S. dollar account)
            3
            2Royal Bank of
      Canada, Canada
            4
            1Wachovia
      Bank, USA
            2
            –$251
            $178Deposit
      accountsAndhra Bank,
      India
            $22
            $16Allahabad
      Bank
            33
            –Bank of
      Baroda, India
            67
            163Bank of
      India
            196
            –Bank of
      Maharashtra, India
            111
            106Barclays
      Bank, Plc. India
            22
            28Canara Bank,
      India
            214
            157Central Bank
      of India
            22
            –Citibank
      N.A., Czech Republic
            2
            1Citibank
      (Euro account)
            1
            –Citibank
      (U.S. dollar account)
            1
            –Corporation
      Bank, India
            62
            68DBS Bank,
      India
            11
            5Deutsche Bank
      , Poland
            2
            –HSBC Bank,
      India
            108
            56ICICI Bank,
      India
            320
            110IDBI Bank,
      India
            202
            108ING Vysya
      Bank, India
            6
            10Indian
      Overseas Bank
            31
            –Jammu and
      Kashmir Bank
            2
            –Kotak
      Mahindra Bank
            14
            –National
      Australia Bank Limited, Australia
            69
            45Oriental Bank
      of Commerce
            22
            –Punjab
      National Bank, India
            221
            95Standard
      Chartered Bank, India
            –
            7State Bank of
      Hyderabad, India
            52
            39State Bank of
      India, India
            28
            416State Bank of
      Mysore, India
            111
            99Syndicate
      Bank, India
            106
            99The Bank of
      Nova Scotia, India
            –
            69Union Bank of
      India, India
            21
            17Vijaya Bank,
      India
            21
            19$2,100
            $1,733Deposits
      with corporationsHDFC Limited,
      India
            $346
            $256Sundaram BNP
      Paribus Home Finance Limited
            1
            –$347
            $256Total
            $2,698
            $2,167




2.2
Available-for-sale financial assets




Investments in
liquid mutual fund units and unlisted equity instruments are classified as
available-for-sale financial assets.




Investment in
liquid mutual fund units is as follows:


(Dollars
      in millions)As
      of March 31,2010
            2009Cost and fair
      value
            $561
            –




Investment in
unlisted equity instruments is as follows:


(Dollars
      in millions)As
      of March 31,2010
            2009Cost
            –
            –Gross
      unrealised holding gains
            8
            –Fair
      value
            $8
            –




During February
2010, Infosys sold 3,231,151 shares of OnMobile Systems Inc, U.S.A, at a price
of $3.64 per share (Rs. 166.58 per share), derived from quoted prices of the
underlying marketable equity instruments. The total consideration amounted to
$12 million, net of taxes and transaction costs. The resultant income of $11
million is included under other income. Additionally, the remaining 2,154,100
shares have been fair valued at $8 million and the resultant unrealized gain of
$6 million, net of taxes of $2 million has been recognized in other
comprehensive income. The fair value of $8 million has been derived based on an
agreed upon exchange ratio between these unlisted equity instruments and quoted
prices of the underlying marketable equity instruments.




2.3
Business combinations




On April 1, 2008,
Infosys Australia acquired 100% of the equity shares of Mainstream Software Pty
Limited (MSPL) for a cash consideration of $3 million. Consequent to this
acquisition, intellectual property rights amounting to $3 million were recorded.
Considering the economic benefits expected to be obtained from the intellectual
property rights this amount has been fully amortized during the previous
year.





On December 4,
2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC
(McCamish), a business process solutions provider based in Atlanta, Georgia, in
the United States. The business
acquisition was conducted by entering into Membership Interest Purchase
Agreement for a cash consideration of $37 million and a contingent consideration
of up to $20 million. The fair value of the contingent consideration and its
undiscounted value on the date of acquisition were $9 million and $15 million,
respectively.


This business
acquisition is expected to enable Infosys BPO to deliver growth in
platform-based services in the insurance and financial services industry and is
also expected to enable McCamish to service larger portfolios of transactions
for clients and expand into global markets. Consequently, the excess of the
purchase consideration paid over the fair value of assets acquired has been
accounted for as goodwill.





The purchase price
has been allocated based on management’s estimates and an independent appraisal
of fair values as follows:


(Dollars
      in millions)Component
            Acquiree's
      carrying amount
            Fair value
      adjustments
            Purchase priceallocatedProperty,
      plant and equipment
            $1
            –
            $1Net current
      assets
            2
            –
            2Intangible
      assets-Customer contracts and relationships
            –
            10
            10Intangible
      assets-Computer software platform
            –
            3
            3$3
            $13
            $16Goodwill
            
            
            30Total
      purchase price
            
            
            $46





The entire goodwill
is deductible for tax purposes.










The identified
intangible customer contracts and relationships are being amortized over a
period of nine years whereas the identified intangible computer software
platform has been amortized over a period of four months, based on management's
estimate of the useful life of the assets.





The acquisition
date fair value of each major class of consideration as of the acquisition date
is as follows:


(Dollars
      in millions)Particulars
            Consideration
      settledFair
      value of total considerationCash
      paid
            $34Liabilities
      settled in cash
            3Contingent
      consideration
            9Total
            $46





The payment of the
contingent consideration is dependent upon the achievement of certain revenue
targets and net margin targets by McCamish over a period of 4 years ending March
31, 2014. Further, in the event that McCamish signs a deal with a customer with
total revenues of $100 million or more, the aforesaid period will be extended by
2 years. The total contingent consideration can range between $14 million and
$20 million.





The fair value of
the contingent consideration is determined by discounting the estimated amount
payable to the previous owners of McCamish on achievement of certain financial
targets. The key inputs used for the determination of fair value of contingent
consideration are the discount rate of 13.9% and the probabilities of
achievement of the net margin and the revenue targets ranging from 50% to
100%.




2.4
Prepayments and other assets




Prepayments and
other assets consist of the following:


(Dollars
      in millions)As
      of March 31,2010
            2009CurrentRental
      deposits
            $8
            $7Security
      deposits with service providers
            14
            7Loans to
      employees
            23
            22Prepaid
      expenses
            9
            7Interest
      accrued and not due
            2
            1Withholding
      taxes
            77
            33Advance
      payments to vendors for supply of goods
            4
            3Other
      assets
            6
            1$143
            $81Non-currentLoans to
      employees
            $1
            $2Deposit with
      corporation
            75
            50Prepaid
      gratuity and other benefits
            1
            -$77
            $52$220
            $133Financial
      assets in prepayments and other assets
            $123
            $89




Withholding taxes
primarily consist of input tax credits. Other assets primarily represent advance
payments to vendors for rendering of services, travel advances and other
recoverable from customers. Security deposits with service providers relate
principally to leased telephone lines and electricity supplies.




Deposit with
corporation represents amounts deposited to settle certain employee-related
obligations as and when they arise during the normal course of
business.




2.5 Property, plant and
equipment




Property, plant and
equipment consist of the following as of March 31, 2010:


(Dollars
      in millions)Gross
      carrying value
            Accumulated
      depreciation
            Carrying
      valueLand
            $73
            –
            $73Buildings
            735
            (166)
            569Plant and
      machinery
            281
            (144)
            137Computer
      equipment
            279
            (233)
            46Furniture and
      fixtures
            170
            (98)
            72Vehicles
            1
            –
            1Capital
      work-in-progress
            91
            –
            91$1,630
            $(641)
            $989




Property, plant and
equipment consist of the following as of March 31, 2009:


(Dollars
      in millions)Gross
      carrying value
            Accumulated
      depreciation
            Carrying
      valueLand
            $56
            –
            $56Buildings
            574
            (106)
            468Plant and
      machinery
            233
            (103)
            130Computer
      equipment
            243
            (189)
            54Furniture and
      fixtures
            153
            (76)
            77Vehicles
            1
            –
            1Capital
      work-in-progress
            134
            –
            134$1,394
            $(474)
            $920




During the year
ended March 31, 2010 and 2009, certain assets which were old and not in use
having gross book value of $82 million and $74 million, respectively, (carrying
value Nil) were retired.




Following are the
changes in the carrying value of property, plant and equipment for the year
ended March 31, 2010:


(Dollars in
      millions)Land
            Buildings
            Plant
      and machinery
            Computer
      equipment
            Furniture
      and fixtures
            Vehicles
            Capital
      work-in-progress
            TotalCarrying
      value as of April 1, 2009
            $56
            $468
            $130
            $54
            $77
            $1
            $134
            $920Translation
      differences
            6
            63
            17
            4
            9
            –
            17
            116Acquisition
      through business combination
            –
            –
            –
            1
            –
            –
            –
            1Additions/
      (deletions)
            11
            82
            45
            44
            21
            –
            (60)
            143Depreciation
            –
            (44)
            (55)
            (57)
            (35)
            –
            –
            (191)Carrying
      value as of March 31, 2010
            $73
            $569
            $137
            $46
            $72
            $1
            $91
            $989




Following are the
changes in the carrying value of property, plant and equipment for the year
ended March 31, 2009:


(Dollars
      in millions)Land
            Buildings
            Plant
      and machinery
            Computer
      equipment
            Furniture
      and fixtures
            Vehicles
            Capital
      work-in-progress
            TotalCarrying
      value as of April 1, 2008
            $57
            $395
            $113
            $58
            $68
            –
            $331
            $1,022Translation
      differences
            (13)
            (98)
            (27)
            (17)
            (17)
            –
            (54)
            (226)Additions/
      (deletions)
            12
            205
            87
            68
            55
            1
            (143)
            285Depreciation
            –
            (34)
            (43)
            (55)
            (29)
            –
            –
            (161)Carrying
      value as of March 31, 2009
            $56
            $468
            $130
            $54
            $77
            $1
            $134
            $920




Following are the
changes in the carrying value of property, plant and equipment for the year
ended March 31, 2008:


(Dollars
      in millions)Land
            Buildings
            Plant
      and machinery
            Computer
      equipment
            Furniture
      and fixtures
            Vehicles
            Capital
      work-in-progress
            TotalCarrying
      value as of April 1, 2007
            $40
            $279
            $85
            $59
            $51
            –
            $224
            $738Translation
      differences
            2
            22
            6
            5
            5
            –
            17
            57Acquisition
      through business combination
            –
            –
            –
            3
            –
            –
            –
            3Additions
            15
            122
            57
            52
            37
            –
            90
            373Depreciation
            –
            (28)
            (35)
            (61)
            (25)
            –
            –
            (149)Carrying
      value as of March 31, 2008
            $57
            $395
            $113
            $58
            $68
            –
            $331
            $1,022




The depreciation
expense for year ended March 31, 2010, 2009 and 2008 is included in cost of
sales in the statement of comprehensive income.




Carrying value of
land includes $33 million and $22 million as of March 31, 2010 and 2009,
respectively, towards deposits paid under certain lease-cum-sale agreements to
acquire land including agreements where the company has an option to purchase
the properties on expiry of the lease period. The company has already paid 99%
of the market value of the properties prevailing at the time of entering into
the lease-cum-sale agreements with the balance payable at the time of purchase.
The contractual commitments for capital expenditure were $67 million and $73
million as of March 31, 2010 and 2009, respectively.




2.6 Goodwill and intangible
assets




Following is a
summary of changes in the carrying amount of goodwill:


(Dollars in
      millions)As
      of March 31,2010
            2009Carrying
      value at the beginning
            $135
            $174Goodwill
      recognized on acquisition (Refer Note 2.3)
            30
            -Translation
      differences
            18
            (39)Carrying
      value at the end
            $183
            $135




Goodwill has been
allocated to the cash generating units (CGU), identified to be the operating
segments as follows:


(Dollars in
      millions)Segment
            As
      of March 31,2010
            2009Financial
      services
            $89
            $53Manufacturing
            21
            18Telecom
            3
            2Retail
            50
            44Others
            20
            18Total
            $183
            $135




The entire goodwill
relating to Infosys BPO’s acquisition of McCamish has been allocated to the
‘Financial Services’ segment.




For the purpose of
impairment testing, goodwill acquired in a business combination is allocated to
the CGU which are operating segments regularly reviewed by the chief operating
decision maker to make decisions about resources to be allocated to the segment
and to assess its performance.




The recoverable
amount of a CGU is the higher of its fair value less cost to sell and its
value-in-use. The fair value of a CGU is determined based on the market
capitalization. The value-in-use is determined based on specific calculations.
These calculations use pre-tax cash flow projections over a period of five
years, based on financial budgets approved by management and an average of the
range of each assumption mentioned below. As of March 31, 2010, the estimated
recoverable amount of the CGU exceeded its carrying amount. The recoverable
amount was computed based on the fair value being higher than value-in-use and
the carrying amount of the CGU was computed by allocating the net assets to
operating segments for the purpose of impairment testing. The key assumptions
used for the calculations are as follows:


In %Long term
      growth rate
            8-10Operating
      margins
            17-20Discount
      rate
            12.2




The above discount
rate is based on the Weighted Average Cost of Capital (WACC) of the company.
These estimates are likely to differ from future actual results of operations
and cash flows.




Following is a
summary of changes in the carrying amount of acquired intangible
assets:


(Dollars in
      millions)As
      of March 31,2010
            2009Gross
      carrying value at the beginning
            $11
            $11Intellectual
      property rights (Refer Note 2.3)
            –
            3Customer
      contracts and relationships (Refer Note 2.3)
            10
            –Computer
      software platform (Refer Note 2.3)
            3
            –Translation
      differences
            –
            (3)Gross
      carrying value at the end
            $24
            $11Accumulated
      amortization at the beginning
            $4
            –Amortization
      expense
            8
            4Accumulated
      amortization at the end
            $12
            $4Net
      carrying value
            $12
            $7




The intangible
customer contracts recognized at the time of Philips acquisition are being
amortized over a period of seven years, being management's estimate of the
useful life of the respective assets, based on the life over which economic
benefits are expected to be realized. However, during the year ended March 31,
2010 the amortization of this intangible asset has been accelerated based on the
usage pattern of the asset. As of March 31, 2010, the customer contracts have a
remaining amortization period of five years.




The intangible
customer contracts and relationships recognized at the time of McCamish
acquisition are being amortized over a period of nine years, being management’s
estimate of the useful life of the respective assets, based on the life over
which economic benefits are expected to be realized. As of March 31, 2010, the
customer contracts and relationships have a remaining amortization period of
nine years.




The intangible
computer software platform recognized at the time of McCamish acquisition having
a useful life of four months, being management’s estimate of the useful life of
the respective asset, based on the life over which economic benefits were
expected to be realized, has been fully amortized.




The aggregate
amortization expense included in cost of sales, for the year ended March 31,
2010 and 2009 was $8 million and $4 million, respectively. For the year ended
March 31, 2008, the aggregate amortization expense was less than $1
million.





Research and
development expense recognized in net profit in the statement of comprehensive
income, for the year ended March 31, 2010, 2009 and 2008 was $92 million, $51
million and $50 million, respectively.




2.7 Financial
instruments




Financial instruments by
category




The carrying value
and fair value of financial instruments by categories as of March 31, 2010 were
as follows:


(Dollars in
      millions)Loans and
      receivables
            Financial
      assets/liabilities at fair value throughprofit and
      loss
            Available for
      sale
            Trade and other
      payables
            Total carrying value/fair
      valueAssets:Cash and cash
      equivalents (Refer Note 2.1)
            $2,698
            –
            –
            –
            $2,698Available-for-sale
      financial assets (Refer Note 2.2)
            –
            –
            569
            –
            569Investment in
      certificates of deposit
            265
            –
            –
            –
            265Trade
      receivables
            778
            –
            –
            –
            778Unbilled
      revenue
            187
            –
            –
            –
            187Derivative
      financial instruments
            –
            21
            –
            –
            21Prepayments
      and other assets (Refer Note 2.4)
            123
            –
            –
            –
            123Total
            $4,051
            $21
            $569
            –
            $4,641Liabilities:Trade
      payables
            –
            –
            –
            $2
            $2Client
      deposits
            –
            –
            –
            2
            2Employee
      benefit obligations (Refer Note 2.8)
            –
            –
            –
            67
            67Other
      liabilities (Refer Note 2.10)
            –
            –
            –
            331
            331Total
            –
            –
            –
            $402
            $402




The carrying value
and fair value of financial instruments by categories as of March 31, 2009 were
as follows:


(Dollars
      in millions)Loans and
      receivables
            Financial
      assets/liabilities at fair value throughprofit and
      loss
            Available for
      sale
            Trade and other
      payables
            Total  carrying value/fair
      valueAssets:Cash and cash
      equivalents (Refer Note 2.1)
            $2,167
            –
            –
            –
            $2,167Trade
      receivables
            724
            –
            –
            –
            724Unbilled
      revenue
            148
            –
            –
            –
            148Prepayments
      and other assets (Refer Note 2.4)
            89
            –
            –
            –
            89Total
            $3,128
            –
            –
            –
            $3,128Liabilities:Trade
      payables
            –
            –
            –
            $5
            $5Derivative
      financial instruments
            –
            22
            –
            –
            22Client
      deposits
            –
            –
            –
            1
            1Employee
      benefit obligations (Refer Note 2.8)
            –
            –
            –
            58
            58Other
      liabilities (Refer Note 2.10)
            –
            –
            –
            252
            252Total
            –
            $22
            –
            $316
            $338




Fair
value hierarchy




Level 1– Quoted prices (unadjusted) in active
markets for identical assets or liabilities.




Level 2 – Inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).




Level 3– Inputs for the assets or liabilities
that are not based on observable market data (unobservable inputs).




The
following table presents fair value hierarchy of assets and liabilities measured
at fair value on a recurring basis as of March 31, 2010:


(Dollars
      in millions)As
      of March 31, 2010
            Fair
      value measurement at end of the reporting year usingLevel
      1
            Level
      2
            Level
      3AssetsAvailable-
      for- sale financial asset- Investments in liquid mutual fund
      units
            $561
            $561
            –
            –Available-
      for- sale financial asset- Investments in unlisted equity
      instruments
            $8
            –
            $8
            –Derivative
      financial instruments- gains on
      outstanding foreign exchange forward and option
      contracts
            $21
            –
            $21
            –




Income
from financial assets or liabilities that are not at fair value through profit
or loss is as follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Interest
      income on deposits
            $164
            $186
            $169Income from
      available-for-sale financial assets
            34
            1
            2$198
            $187
            $171




Derivative financial
instruments




The company uses
derivative financial instruments such as foreign exchange forward and option
contracts to mitigate the risk of changes in foreign exchange rates on trade
receivables and forecasted cash flows denominated in certain foreign currencies.
The counterparty for these contracts is generally a bank or a financial
institution. These derivative financial instruments are valued based on quoted
prices for similar assets and liabilities in active markets or inputs that are
directly or indirectly observable in the marketplace. The following table gives
details in respect of outstanding foreign exchange forward and option
contracts:


(In
      millions)As
      of  March 31,2010
            2009Forward
      contractsIn U.S.
      dollars
            267
            278In
      Euro
            22
            27In United
      Kingdom Pound Sterling
            11
            21In Australian
      dollars
            3
            –Option
      contractsIn U.S.
      dollars
            200
            173




The company
recognized a net gain on derivative financial instruments of $63 million and $26
million during the year ended March 31, 2010 and 2008, respectively, and a net
loss on derivative financial instruments of $165 million for the year ended
March 31, 2009, which are included in other income.




The foreign
exchange forward and option contracts mature between 1 to 12 months. The table
below analyzes the derivative financial instruments into relevant maturity
groupings based on the remaining period as of the balance sheet
date:


(Dollars in
      millions)As
      of March 31,2010
            2009Not later
      than one month
            $62
            $68Later than
      one month and not later than three months
            184
            197Later than
      three months and not later than one year
            268
            250$514
            $515




Financial risk
management




Financial risk
factors




The company's
activities expose it to a variety of financial risks: market risk, credit risk
and liquidity risk. The company's primary focus is to foresee the
unpredictability of financial markets and seek to minimize potential adverse
effects on its financial performance. The primary market risk to the company is
foreign exchange risk. The company uses derivative financial instruments to
mitigate foreign exchange related risk exposures. The company's exposure to
credit risk is influenced mainly by the individual characteristic of each
customer and the concentration of risk from the top few customers. The
demographics of the customer including the default risk of the industry and
country in which the customer operates also has an influence on credit risk
assessment.




Market risk




The company
operates internationally and a major portion of the business is transacted in
several currencies and consequently the company is exposed to foreign exchange
risk through its sales and services in the United States and elsewhere, and
purchases from overseas suppliers in various foreign currencies. The company
uses derivative financial instruments such as foreign exchange forward and
option contracts to mitigate the risk of changes in foreign exchange rates on
trade receivables and forecasted cash flows denominated in certain foreign
currencies. The exchange rate between the rupee and foreign currencies has
changed substantially in recent years and may fluctuate substantially in the
future. Consequently, the results of the company’s operations are adversely
affected as the rupee appreciates/ depreciates against these
currencies.




The following table
gives details in respect of the outstanding foreign exchange forward and option
contracts:


(Dollars in
      millions)As
      of March 31,2010
            2009Aggregate
      amount of outstanding forward and option contracts
            $514
            $515Gains /
      (losses) on outstanding forward and option contracts
            $21
            $(22)




The outstanding
foreign exchange forward and option contracts as of March 31, 2010 and 2009,
mature between one to twelve months.




The following table
analyzes foreign currency risk from financial instruments as of March 31,
2010:


(Dollars
      in millions)U.S.
      dollars
            Euro
            United
      Kingdom Pound Sterling
            Australian
      dollars
            Other
      currencies
            TotalCash and cash
      equivalents
            $170
            $10
            $7
            $70
            $27
            $284Trade
      receivables
            545
            57
            82
            45
            39
            768Unbilled
      revenue
            126
            16
            25
            7
            9
            183Other
      assets
            107
            3
            2
            –
            10
            122Trade
      payables
            –
            –
            –
            –
            (2)
            (2)Client
      deposits
            (2)
            –
            –
            –
            –
            (2)Accrued
      expenses
            (57)
            (3)
            –
            –
            (6)
            (66)Accrued
      compensation to employees
            (33)
            –
            –
            –
            (11)
            (44)Other
      liabilities
            (251)
            (31)
            (12)
            –
            (8)
            (302)Net
      assets / (liabilities)
            $605
            $52
            $104
            $122
            $58
            $941




The following table
analyzes foreign currency risk from financial instruments as of March 31,
2009:


(Dollars in
      millions)U.S.
      dollars
            Euro
            United
      Kingdom Pound Sterling
            Australian
      dollars
            Other
      currencies
            TotalCash and cash
      equivalents
            $125
            $8
            $14
            $59
            $11
            $217Trade
      receivables
            481
            58
            116
            3
            61
            719Unbilled
      revenue
            77
            14
            19
            3
            20
            133Other
      assets
            3
            –
            1
            –
            1
            5Trade
      payables
            (3)
            –
            –
            –
            (1)
            (4)Client
      deposits
            (1)
            –
            –
            –
            –
            (1)Accrued
      expenses
            (41)
            (1)
            (3)
            (1)
            (34)
            (80)Accrued
      compensation to employees
            (31)
            –
            –
            (2)
            (4)
            (37)Other
      liabilities
            (72)
            (32)
            (8)
            (7)
            (8)
            (127)Net
      assets / (liabilities)
            $538
            $47
            $139
            $55
            $46
            $825




For the year ended
March 31, 2010, 2009 and 2008, every percentage point depreciation /
appreciation in the exchange rate between the Indian rupee and the U.S. dollar,
has affected the company's operating margins by approximately 0.6%, 0.4% and
0.5%, respectively.




Sensitivity
analysis is computed based on the changes in the income and expenses in foreign
currency upon conversion into functional currency, due to exchange rate
fluctuations between the previous reporting period and the current reporting
period.




Credit risk




Credit risk refers
to the risk of default on its obligation by the counterparty resulting in a
financial loss. The maximum exposure to the credit risk at the reporting date is
primarily from trade receivables amounting to $778 million and $724 million as
of March 31, 2010 and 2009, respectively. Trade receivables are typically
unsecured and are derived from revenue earned from customers primarily located
in the United States. Credit risk is managed through credit approvals,
establishing credit limits and continuously monitoring the creditworthiness of
customers to which the company grants credit terms in the normal course of
business.




The following table
gives details in respect of percentage of revenues generated from top customer
and top five customers:


(In
  %)Year
      ended March 31,2010
            2009
            2008Revenue from
      top customer
            4.6
            6.9
            9.1Revenue from
      top five customers
            16.4
            18.0
            20.9




Financial assets that are neither
past due nor impaired




Cash and cash
equivalents, available-for-sale financial assets and investment in certificates
of deposits are neither past due nor impaired. Cash and cash equivalents include
deposits with banks and corporations with high credit-ratings assigned by
international and domestic credit-rating agencies. Available-for-sale financial
assets include investment in liquid mutual fund units and unlisted equity
instruments. Certificates of deposit represent funds deposited at a bank or
other eligible financial institution for a specified time period. Of the total
trade receivables, $487 million and $427 million as of March 31, 2010 and 2009,
respectively, were neither past due nor impaired.




Financial assets that are past due
but not impaired




There is no other
class of financial assets that is past due but not impaired except for trade
receivables of $1 million and $3 million as of March 31, 2010 and 2009,
respectively. The company’s credit period generally ranges from 30-45 days. The
age analysis of the trade receivables have been considered from the date of the
invoice. The age wise break up of trade receivables, net of allowances that are
past due, is given below:


(Dollars
      in millions)As
      of March 31,Period (in
      days)
            2010
            200931 –
      60
            $258
            $24861 –
      90
            $26
            $36More than
      90
            $6
            $10




The allowance for
impairment of trade receivables for the year ended March 31, 2009 and 2008 was
$16 million and $11 million, respectively. The allowance for impairment of trade
receivables for the year ended March 31, 2010 was less than $1 million. The
movement in the allowance for impairment of trade receivables is as
follows:


(Dollars
      in millions)Year
      ended March 31,2010
            2009
            2008Balance at
      the beginning
            $21
            $10
            $5Translation
      differences
            3
            (2)
            –Impairment
      loss recognized
            –
            16
            11Trade
      receivables written off
            (1)
            (3)
            (6)Balance
      at the end
            $23
            $21
            $10




Liquidity risk




As of March 31,
2010, the company had a working capital of $3,951 million including cash and
cash equivalents of $2,698 million, available-for-sale financial assets of $569
million and investments in certificates of deposit of $265 million. As of March
31, 2009, the company had a working capital of $2,583 million including cash and
cash equivalents of $2,167 million.




As of March 31,
2010 and 2009, the outstanding employee benefit obligations were $67 million and
$58 million, respectively, which have been fully funded. Further, as of March
31, 2010 and 2009, the company had no outstanding bank borrowings. Accordingly,
no liquidity risk is perceived.




The table below
provides details regarding the contractual maturities of significant financial
liabilities as of March 31, 2010:


(Dollars
      in millions)Particulars
            Less
      than 1 year
            1-2
      years
            2-4
      years
            4-7
      years
            TotalTrade
      payables
            $2
            –
            –
            –
            $2Client
      deposits
            $2
            –
            –
            –
            $2Other
      liabilities (Refer Note 2.10)
            $318
            –
            $4
            –
            $322Liability
      towards acquisition of business on an undiscounted basis (Refer Note
      2.10)
            –
            $2
            $6
            $7
            $15




The table below
provides details regarding the contractual maturities of significant financial
liabilities as of March 31, 2009:


(Dollars
      in millions)Particulars
            Less
      than 1 year
            1-2
      years
            2-4
      years
            4-7
      years
            TotalTrade
      payables
            $5
            –
            –
            –
            $5Client
      deposits
            $1
            –
            –
            –
            $1Other
      liabilities (Refer Note 2.10)
            $241
            $5
            $6
            –
            $252




As of March 31,
2010 and 2009, the company had outstanding financial guarantees of $4 million
and $3 million, respectively, towards leased premises. These financial
guarantees can be invoked upon breach of any term of the lease agreement. To the
the company's knowledge there has been no breach of any term of the lease
agreement as of March 31, 2010 and 2009.




2.8
Employee benefit obligations




Employee benefit
obligations comprise the following:


(Dollars
      in millions)As
      of March 31,2010
            2009CurrentCompensated
      absence
            $29
            $21$29
            $21Non-currentCompensated
      absence
            $38
            $37$38
            $37$67
            $58




2.9 Provisions




Provisions comprise
the following:


(Dollars in
      millions)As
      of March 31,2010
            2009Provision for
      post sales client support
            $18
            $18




Provision for post
sales client support represent cost associated with providing sales support
services which are accrued at the time of recognition of revenues and are
expected to be utilized over a period of 6 months to 1 year. The movement in the
provision for post sales client support is as follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Balance at
      the beginning
            $18
            $13
            $5Translation
      differences
            –
            (3)
            –Provision
      recognized
            –
            8
            12Provision
      utilized
            –
            –
            (4)Balance
      at the end
            $18
            $18
            $13




Provision for post
sales client support for the year ended March 31, 2010, 2009 and 2008 is
included in cost of sales in the statement of comprehensive income.




2.10 Other
liabilities




Other liabilities
comprise the following:


(Dollars in
      millions)As
      of March 31,2010
            2009CurrentAccrued
      compensation to employees
            $148
            $107Accrued
      expenses
            135
            120Withholding
      taxes payable
            56
            43Retainage
            16
            11Unamortized
      negative past service cost (Refer Note 2.12.1)
            6
            6Liabilities
      arising on consolidation of trusts
            16
            –Others
            3
            3$380
            $290Non-currentLiability
      towards acquisition of business (Refer Note 2.3)
            $9
            –Incentive
      accruals
            4
            1113
            11$393
            $301Financial
      liabilities included in other liabilities
            $322
            $252Financial
      liability towards acquisition of business on an undiscounted basis (Refer
      Note 2.3)
            $15
            –




Accrued expenses
primarily relates to cost of technical sub-contractors, telecommunication
charges, legal and professional charges, brand building expenses, overseas
travel expenses and office maintenance. Others consist of unclaimed dividends
and amount payable towards acquisition of business.




2.11 Expenses by
nature


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Employee
      benefit costs (Refer Note 2.12.4)
            $2,553
            $2,456
            $2,218Depreciation
      and amortization charges (Refer Note 2.5 and 2.6)
            199
            165
            149Travelling
      costs
            147
            184
            177Consultancy
      and professional charges
            59
            56
            73Cost of
      software packages
            74
            77
            56Communication
      costs
            48
            54
            52Cost of
      technical sub-contractors
            79
            85
            46Power and
      fuel
            30
            32
            30Repairs and
      maintenance
            55
            54
            45Commission
            3
            3
            16Branding and
      marketing expenses
            16
            19
            19Provision for
      post-sales client support (Refer Note 2.9)
            –
            8
            12Allowance for
      impairment of trade receivables (Refer Note 2.7)
            –
            16
            11Operating
      lease payments (Refer Note 2.15)
            26
            25
            22Others
            55
            55
            91Total
      cost of sales, selling and marketing expenses and administrative
      expenses
            $3,344
            $3,289
            $3,017




2.12 Employee
benefits




2.12.1 Gratuity




The following
tables set out the funded status of the gratuity plans and the amounts
recognized in the company's financial statements as of March 31, 2010, 2009 and
2008:


(Dollars in
      millions)As
      of March 31,2010
            2009
            2008Change
      in benefit obligationsBenefit
      obligations at the beginning
            $52
            $56
            $51Actuarial
      gains
            (1)
            –
            (2)Service
      cost
            17
            11
            14Interest
      cost
            4
            3
            4Benefits
      paid
            (8)
            (5)
            (6)Plan
      amendments
            –
            –
            (9)Translation
      differences
            8
            (13)
            4Benefit
      obligations at the end
            $72
            $52
            $56Change
      in plan assetsFair value of
      plan assets at the beginning
            $52
            $59
            $51Expected
      return on plan assets
            5
            4
            4Actuarial
      gains
            –
            –
            1Employer
      contributions
            14
            7
            4Benefits
      paid
            (8)
            (5)
            (6)Translation
      differences
            10
            (13)
            5Fair
      value of plan assets at the end
            $73
            $52
            $59Funded
      status
            $1
            –
            $3Prepaid
      benefit
            $1
            –
            $3




Net gratuity cost
for the year ended March 31, 2010, 2009 and 2008 comprises the following
components:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Service
      cost
            $17
            $11
            $14Interest
      cost
            4
            3
            4Expected
      return on plan assets
            (5)
            (4)
            (4)Actuarial
      gains
            (1)
            –
            (3)Plan
      amendments
            (1)
            (1)
            (1)Net
      gratuity cost
            $14
            $9
            $10




The net gratuity
cost has been apportioned between cost of sales, selling and marketing expenses
and administrative expenses on the basis of direct employee cost as
follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Cost of
      sales
            $12
            $8
            $9Selling and
      marketing expenses
            1
            1
            1Administrative
      expenses
            1
            –
            –$14
            $9
            $10




Effective July 1,
2007, the company amended its Gratuity Plan, to suspend the voluntary defined
death benefit component of the Gratuity Plan. This amendment resulted in a
negative past service cost amounting to $9 million, which is being amortized on
a straight-line basis over the average remaining service period of employees
which is 10 years. The unamortized negative past service cost of $6 million as
of March 31, 2010, has been included under other current
liabilities.




The
weighted-average assumptions used to determine benefit obligations as of March
31, 2010, 2009 and 2008 are set out below:


As
      of  March 31,2010
            2009
            2008Discount
      rate
            7.8%
            7.0%
            7.9%Weighted
      average rate of increase in compensation levels
            7.3%
            5.1%
            5.1%




The
weighted-average assumptions used to determine net periodic benefit cost for the
year ended March 31, 2010, 2009 and 2008 are set out below:


Year
      ended March 31,2010
            2009
            2008Discount
      rate
            7.0%
            7.9%
            8.0%Weighted
      average rate of increase in compensation levels
            7.3%
            5.1%
            5.1%Rate of
      return on plan assets
            9.0%
            7.0%
            7.9%




The company
contributes all ascertained liabilities towards gratuity to the Infosys
Technologies Limited Employees' Gratuity Fund Trust. In case of Infosys BPO,
contributions are made to the Infosys BPO Employees' Gratuity Fund Trust.
Trustees administer contributions made to the trust and contributions are
invested in specific designated instruments as permitted by Indian law and
investments are also made in mutual funds that invest in the specific designated
instruments. As of March 31, 2010 and 2009, the plan assets have been primarily
invested in government securities.




Actual return on
assets for the year ended March 31, 2010, 2009 and 2008 $5 million, $4 million
and $5 million, respectively.




The company
assesses these assumptions with its projected long-term plans of growth and
prevalent industry standards. The company's overall expected long-term
rate-of-return on assets has been determined based on consideration of available
market information, current provisions of Indian law specifying the instruments
in which investments can be made, and historical returns. Historical returns
during the year ended March 31, 2010, 2009 and 2008 have not been lower than the
expected rate of return on plan assets estimated for those years. The discount
rate is based on the government securities yield.




Assumptions
regarding future mortality experience are set in accordance with the published
statistics by the Life Insurance Corporation of India.




The company expects
to contribute approximately $14 million to the gratuity trusts during fiscal
2011.




2.12.2
Superannuation




The company
contributed $19 million, $17 million and $11 million to the superannuation plan
during the year ended March 31, 2010, 2009 and 2008, respectively. Since fiscal
2008, a substantial portion of the monthly contribution amount is being paid
directly to the employees as an allowance and a nominal amount has been
contributed to the plan.




Superannuation
contributions have been apportioned between cost of sales, selling and marketing
expenses and administrative expenses on the basis of direct employee cost as
follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Cost of
      sales
            $17
            $15
            $10Selling and
      marketing expenses
            1
            1
            1Administrative
      expenses
            1
            1
            –$19
            $17
            $11




2.12.3 Provident
fund




The company has an
obligation to fund any shortfall on the yield of the trust’s investments over
the administered interest rates on an annual basis. These administered rates are
determined annually predominantly considering the social rather than economic
factors and in most cases the actual return earned by the company has been
higher in the past years. In the absence of reliable measures for future
administered rates and due to the lack of measurement guidance, the company’s
actuary has expressed its inability to determine the actuarial valuation for
such provident fund liabilities. Accordingly, the company is unable to exhibit
the related information.




The company
contributed $36 million, $33 million and $30 million to the provident fund
during the year ended March 31, 2010, 2009 and 2008, respectively.




Provident fund
contributions have been apportioned between cost of sales, selling and marketing
expenses and administrative expenses on the basis of direct employee cost as
follows:


(Dollars
      in millions)Year
      ended March 31,2010
            2009
            2008Cost of
      sales
            $32
            $29
            $27Selling and
      marketing expenses
            2
            2
            2Administrative
      expenses
            2
            2
            1$36
            $33
            $30




2.12.4 Employee benefit costs
include:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Salaries and
      bonus
            $2,484
            $2,396
            $2,164Defined
      contribution plans
            23
            20
            13Defined
      benefit plans
            46
            39
            38Share-based
      compensation
            -
            1
            3$2,553
            $2,456
            $2,218




The employee
benefit cost is recognized in the following line items in the statement of
comprehensive income:


(Dollars
      in millions)Year
      ended March 31,2010
            2009
            2008Cost of
      sales
            $2,241
            $2,177
            $1,976Selling and
      marketing expenses
            198
            179
            153Administrative
      expenses
            114
            100
            89$2,553
            $2,456
            $2,218




2.13 Equity




Share capital and share
premium




The company has
only one class of shares referred to as equity shares having a par value of
$0.16. The amount received in excess of the par value has been classified as
share premium. Additionally, share-based compensation recognized in net
profit in the statement of comprehensive income is credited to share premium.
2,833,600 shares were held by controlled trusts, each as of March 31, 2010 and
2009.




Retained earnings




Retained earnings
represent the amount of accumulated earnings of the company.




Other
components of equity




Other components of
equity consist of currency translation and fair value
changes on available-for-sale financial assets.




The company’s
objective when managing capital is to safeguard its ability to continue as a
going concern and to maintain an optimal capital structure so as to maximize
shareholder value. In order to maintain or achieve an optimal capital structure,
the company may adjust the amount of dividend payment, return capital to
shareholders, issue new shares or buy back issued shares. As of March 31, 2010,
the company has only one class of equity shares and has no debt. Consequent to
the above capital structure there are no externally imposed capital
requirements.




The rights of
equity shareholders are set out below.




2.13.1 Voting




Each holder of
equity shares is entitled to one vote per share. The equity shares represented
by American Depositary Shares (ADS) carry similar rights to voting and dividends
as the other equity shares. Each ADS represents one underlying equity
share.




2.13.2 Dividends




The company
declares and pays dividends in Indian rupees. Indian law mandates that any
dividend be declared out of accumulated distributable profits only after the
transfer to a general reserve of a specified percentage of net profit computed
in accordance with current regulations. The remittance of dividends outside
India is governed by Indian law on foreign exchange and is subject to applicable
taxes.




The amount of per
share dividend recognized as distributions to equity shareholders for the year
ended March 31, 2010, 2009 and 2008 was $0.48, $0.89 and $0.31,
respectively.





The Board of
Directors, in their meeting on April 13, 2010, proposed a final dividend of
approximately $0.33 per equity share (Rs. 15 per equity share). The proposal is
subject to the approval of shareholders at the Annual General Meeting to be held
on June 12, 2010, and if approved, would result in a cash outflow of
approximately $224 million, inclusive of corporate dividend tax of $32 million.




2.13.3
Liquidation




In the event of
liquidation of the company, the holders of shares shall be entitled to receive
any of the remaining assets of the company, after distribution of all
preferential amounts. However, no such preferential amounts exist currently,
other than the amounts held by irrevocable controlled trusts. The amount
distributed will be in proportion to the number of equity shares held by the
shareholders. For irrevocable controlled trusts, the corpus would be settled in
favour of the beneficiaries.




2.13.4 Share
options




There are no
voting, dividend or liquidation rights to the holders of options issued under
the company's share option plans.




2.14 Other income




Other income
consists of the following:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Interest
      income on deposits
            $164
            $186
            $169Exchange
      gains/ (losses) on forward and options contracts
            63
            (165)
            26Exchange
      gains/ (losses) on translation of other assets and
    liabilities
            (57)
            71
            (24)Income from
      available-for-sale financial assets/ investments
            34
            1
            2Others*
            5
            8
            2$209
            $101
            $175


*
For the year ended March 31, 2009, others includes a net amount of $4 million,
consisting of $7 million received from Axon Group Plc as inducement fee offset
by $3 million of expenses incurred towards the transaction.




2.15 Operating
leases




The company has
various operating leases, mainly for office buildings, that are renewable on a
periodic basis. Rental expense for operating leases was $26 million, $25 million
and $22 million for the year ended March 31, 2010, 2009 and 2008,
respectively.




The schedule of
future minimum rental payments in respect of non-cancellable operating leases is
set out below:


(Dollars in
      millions)As
      of March 31,2010
            2009Within one
      year of the balance sheet date
            $19
            $16Due in a
      period between one year and five years
            $55
            $44Due after
      five years
            $14
            $14





The operating
      lease arrangements extend up to a maximum of ten years from their
      respective dates of inception, and relates to rented overseas premises.
      Some of these lease agreements have a price escalation
    clause.




2.16 Employees' Stock Option Plans
(ESOP)




1998 Employees
Stock Option Plan (the 1998 Plan): The company’s 1998 Plan provides for the
grant of non-statutory share options and incentive share options to employees of
the company. The establishment of the 1998 Plan was approved by the Board of
Directors in December 1997 and by the shareholders in January 1998.
The Government of India has approved the 1998 Plan, subject to a limit of
11,760,000 equity shares representing 11,760,000 ADS to be issued under the 1998
Plan. All options granted under the 1998 Plan are exercisable for equity shares
represented by ADSs. The options under the 1998 Plan vest over a period of one
through four years and expire five years from the date of completion of vesting.
The 1998 Plan is administered by a compensation committee comprising four
members, all of whom are independent members of the Board of Directors. The term
of the 1998 Plan ended on January 6, 2008, and consequently no further shares
will be issued to employees under this plan.




1999 Employees
Stock Option Plan (the 1999 Plan): In fiscal 2000, the company instituted the
1999 Plan. The Board of Directors and shareholders approved the 1999 Plan in
June 1999. The 1999 Plan provides for the issue of 52,800,000 equity shares
to employees. The 1999 Plan is administered by a compensation committee
comprising four members, all of whom are independent members of the Board of
Directors. Under the 1999 Plan, options will be issued to employees at an
exercise price, which shall not be less than the fair market value (FMV) of the
underlying equity shares on the date of grant. Under the 1999 Plan, options may
also be issued to employees at exercise prices that are less than FMV only if
specifically approved by the shareholders of the company in a general meeting.
All options under the 1999 Plan are exercisable for equity shares. The options
under the 1999 Plan vest over a period of one through six years, although
accelerated vesting based on performance conditions is provided in certain
instances and expire over a period of 6 months through five years from the date
of completion of vesting. The term of the 1999 plan ended on June 11, 2009, and
consequently no further shares will be issued to employees under this
plan.




The activity in the
1998 Plan and 1999 Plan during the year ended March 31, 2010, 2009 and 2008 are
set out below.


Year
      endedMarch
      31, 2010
            Year
      endedMarch
      31, 2009
            Year
      endedMarch
      31, 2008Shares
      arisingout
      of options
            Weighted
      averageexercise
      price
            Shares
      arisingout
      of options
            Weighted
      averageexercise
      price
            Shares
      arisingout
      of options
            Weighted
      averageexercise
      price1998
      Plan:Outstanding
      at the beginning
            916,759
            $18
            1,530,447
            $20
            2,084,124
            $21Forfeited and
      expired
            (60,424)
            $33
            (158,102)
            $38
            (53,212)
            $51Exercised
            (614,071)
            $18
            (455,586)
            $19
            (500,465)
            $19Outstanding
      at the end
            242,264
            $14
            916,759
            $18
            1,530,447
            $20Exercisable
      at the end
            242,264
            $14
            916,759
            $18
            1,530,447
            $201999
      Plan:Outstanding
      at the beginning
            925,806
            $25
            1,494,693
            $29
            1,897,840
            $26Forfeited and
      expired
            (340,264)
            $41
            (190,188)
            $39
            (117,716)
            $44Exercised
            (381,078)
            $17
            (378,699)
            $13
            (285,431)
            $16Outstanding
      at the end
            204,464
            $19
            925,806
            $25
            1,494,693
            $29Exercisable
      at the end
            184,759
            $16
            851,301
            $23
            1,089,041
            $20




The weighted
average share price of options exercised under the 1998 Plan during the year
ended March 31, 2010, 2009 and 2008 were $47.78, $36.17 and $40.81,
respectively. The weighted average share price of options exercised under the
1999 Plan during the year ended March 31, 2010, 2009 and 2008 were $46.83,
$33.65 and $40.66, respectively.




The cash expected
to be received upon the exercise of vested options for the 1998 Plan and 1999
Plan is $3 million each.




The following table
summarizes information about share options outstanding and exercisable as of
March 31, 2010:


Options
      outstanding
            Options
      exercisableRange
      of exercise pricesper share
      ($)
            No.
      of shares arisingout of
      options
            Weighted
      Averageremaining contractual
      life
            Weighted
      averageexercise
      price
            No.
      of shares arisingout of
      options
            Weighted
      Averageremaining contractual
      life
            Weighted
      averageexercise
      price1998
      Plan:4-15
            173,404
            0.94
            $12
            173,404
            0.94
            $1216-30
            68,860
            1.26
            $17
            68,860
            1.26
            $17242,264
            1.03
            $14
            242,264
            1.03
            $141999
      Plan:5-15
            152,171
            0.91
            $10
            152,171
            0.91
            $1031-53
            52,293
            1.44
            $47
            32,588
            1.20
            $47204,464
            1.05
            $19
            184,759
            0.97
            $16




The following table
summarizes information about share options outstanding and exercisable as of
March 31, 2009:


Options
      outstanding
            Options
      exercisableRange
      of exercise prices
              per share
      ($)
            No.
      of shares arisingout of
      options
            Weighted
      Averageremaining contractual
      life
            Weighted
      averageexercise
      price
            No.
      of shares arisingout of
      options
            Weighted
      Averageremaining contractual
      life
            Weighted
      averageexercise
      price1998
      Plan:4-15
            431,762
            1.58
            $12
            431,762
            1.58
            $1216-30
            428,997
            1.39
            $21
            428,997
            1.39
            $2131-45
            46,720
            0.32
            $37
            46,720
            0.32
            $3746-60
            9,280
            0.10
            $51
            9,280
            0.10
            $51916,759
            1.41
            $18
            916,759
            1.41
            $181999
      Plan:5-15
            446,185
            1.26
            $10
            446,185
            1.26
            $1016-30
            77,893
            0.52
            $19
            77,893
            0.52
            $1931-53
            401,728
            1.06
            $42
            327,223
            0.75
            $42925,806
            1.11
            $25
            851,301
            1.00
            $23




The company
recorded share-based compensation of $1 million and $3 million during the year
ended March 31, 2009 and 2008, respectively. The share-based compensation for
the year ended March 31, 2010 was less than $1 million.




2.17 Income taxes




Income tax expense
in the statement of comprehensive income comprises:


(Dollars
      in millions)Year
      ended March 31,2010
            2009
            2008Current
      taxesDomestic
      taxes
            $339
            $149
            $133Foreign
      taxes
            98
            72
            88$437
            $221
            $221Deferred
      taxesDomestic
      taxes
            $(103)
            $(31)
            $(47)Foreign
      taxes
            22
            4
            (3)$(81)
            $(27)
            $(50)Income
      tax expense
            $356
            $194
            $171




Entire deferred
income tax for the year ended March 31, 2010, 2009 and 2008 relates to
origination and reversal of temporary differences.




Income tax benefits
of $2 million, $2 million and $6 million on exercise of employee stock options
have been recognized in share premium for the year ended March 31,
2010, 2009 and 2008, respectively. Further, for the year ended March 31, 2010, a
deferred tax liability of $2 million relating to an available-for-sale financial
asset has been recognized in other comprehensive income.




A reconciliation of
the income tax provision to the amount computed by applying the statutory income
tax rate to the income before income taxes is summarized below:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Profit before
      income taxes
            $1,669
            $1,475
            $1,334Enacted tax
      rates in India
            33.99%
            33.99%
            33.99%Computed
      expected tax expense
            $567
            $501
            $453Foreign tax
      credit relief
            (45)
            -
            -Tax effect
      due to non-taxable income for Indian tax purposes
            (116)
            (325)
            (282)Tax effect
      due to set off provisions on brought forward losses
            (22)
            -
            -Tax
      reversals, net
            (103)
            (23)
            (30)Effect of
      exempt income
            (10)
            –
            –Interest and
      penalties
            5
            1
            11Effect of
      unrecognized deferred tax assets
            3
            6
            6Effect of
      differential foreign tax rates
            18
            18
            11Effect of
      non-deductible expenses
            5
            6
            –Temporary
      difference related to branch profits
            52
            7
            –Others
            2
            3
            2Income tax
      expense
            $356
            $194
            $171




The foreign tax
expense is due to income taxes payable overseas, principally in the United
States of America. The company benefits from certain significant tax incentives
provided to software firms under Indian tax laws. These incentives include those
for facilities set up under the Special Economic Zones Act, 2005 and software
development facilities designated as "Software Technology Parks" (the STP Tax
Holiday). The STP Tax Holiday is available for ten consecutive years, beginning
from the financial year when the unit started producing computer software or
April 1, 1999, whichever is earlier. The Indian Government, through the Finance
Act, 2009, has extended the tax holiday for the STP units until March 31, 2011.
Most of the company’s STP units have already completed the tax holiday period
and for the remaining STP units the tax holiday will expire by the end of fiscal
2011. Under the Special Economic Zones Act, 2005 scheme, units in designated
special economic zones which begin providing services on or after April 1, 2005
are eligible for a deduction of 100 percent of profits or gains derived from the
export of services for the first five years from commencement of provision of
services and 50 percent of such profits or gains for a further five years.
Certain tax benefits are also available for a further period of five years
subject to the unit meeting defined conditions.




Infosys is subject
to a 15% Branch Profit Tax (BPT) in the U.S. to the extent its U.S. branch's net
profit during the year is greater than the increase in the net assets of the
U.S. branch during the fiscal year, computed in accordance with the Internal
Revenue Code. As of March 31, 2010, Infosys' U.S. branch net assets amounted to
approximately $505 million. As of March 31, 2010, the company has provided for
branch profit tax of $52 million for its U.S branch, as the company estimates
that these branch profits are expected to be distributed in the foreseeable
future.




Deferred income tax
liabilities have not been recognized on temporary differences amounting to $208
million and $166 million as of March 31, 2010 and 2009, respectively, associated
with investments in subsidiaries and branches as it is probable that the
temporary differences will not reverse in the foreseeable future.




The gross movement
in the current income tax asset/ (liability) for the year ended March 31, 2010,
2009 and 2008 is as follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Net current
      income tax asset/ (liability) at the beginning
            $(61)
            $(46)
            $29Translation
      differences
            (3)
            10
            3Income tax
      benefit arising on exercise of stock options
            2
            2
            6Minimum
      alternate tax credit utilized*
            116
            –
            –Income tax
      paid
            370
            194
            137Income tax
      expense
            (437)
            (221)
            (221)Net
      current income tax asset/ (liability) at the end
            $(13)
            $(61)
            $(46)


*Minimum
alternate tax of $61 million was recognized and utilized during the year ended
March 31, 2010.




The tax effects of
significant temporary differences that resulted in deferred income tax assets
and liabilities are as follows:


(Dollars
      in millions)As
      of March 31,2010
            2009Deferred
      income tax assetsProperty,
      plant and equipment
            $48
            $26Minimum
      alternate tax credit carry-forwards
            9
            56Deductible
      temporary difference on computer software
            6
            -Trade
      receivables
            6
            2Compensated
      absences
            11
            2Accumulated
      subsidiary losses
            19
            -Others
            7
            2Total
      deferred income tax assets
            106
            88Deferred
      income tax liabilitiesIntangible
      asset
            –
            –Temporary
      difference related to branch profits
            (52)
            (7)Available-for-sale
      financial asset
            (2)
            –Total
      deferred income tax liabilities
            (54)
            (7)Total
      deferred income tax assets
            $52
            $81Deferred
      income tax assets to be recovered after 12 months
            $82
            $81Deferred
      income tax liability to be settled after 12 months
            (39)
            –Deferred
      income tax assets to be recovered within 12 months
            24
            7Deferred
      income tax liability to be settled within 12 months
            (15)
            (7)$52
            $81




In assessing the
realizability of deferred income tax assets, management considers whether some
portion or all of the deferred income tax assets will not be realized. The
ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which the temporary
differences become deductible. Management considers the scheduled reversals of
deferred income tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based on the level of historical
taxable income and projections for future taxable income over the periods in
which the deferred income tax assets are deductible, management believes that
the company will realize the benefits of those deductible differences. The
amount of the deferred income tax assets considered realizable, however, could
be reduced in the near term if estimates of future taxable income during the
carry forward period are reduced.




The gross movement
in the deferred income tax account for the year ended March 31, 2010, 2009 and
2008 is as follows:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Net deferred
      income tax asset at the beginning
            $81
            $73
            $21Translation
      differences
            8
            (19)
            3Acquisition
      of subsidiary
            –
            –
            (1)Credits
      relating to temporary differences
            81
            27
            50Minimum
      alternate tax credit utilized
            (116)
            –
            –Temporary
      difference on available-for-sale financial asset
            (2)
            –
            –Net
      deferred income tax asset at the end
            $52
            $81
            $73


*Minimum
alternate tax of $61 million was recognized and utilized during the year ended
March 31, 2010.




The credits
relating to temporary differences during the year ended March 31, 2010, 2009 and
2008 are primarily on account of compensated absences, accumulated subsidiary
losses and property, plant and equipment.




Pursuant to the
enacted changes in the Indian Income Tax Laws effective April 1, 2007, a Minimum
Alternate Tax (MAT) has been extended to income in respect of which a deduction
may be claimed under sections 10A and 10AA of the Income Tax Act; consequently
the company has calculated its tax liability for current domestic taxes after
considering MAT. The excess tax paid under MAT provisions being over and above
regular tax liability can be carried forward and set off against future tax
liabilities computed under regular tax provisions. The company was required to
pay MAT, and, accordingly, a deferred income tax asset of $9 million and $56
million has been recognized on the balance sheet as of March 31, 2010 and 2009,
respectively, which can be carried forward for a period of ten years from the
year of recognition.




2.18 Earnings per equity
share




The following is a
reconciliation of the equity shares used in the computation of basic and diluted
earnings per equity share:


Year
      ended March 31,2010
            2009
            2008Basic
      earnings per equity share - weighted average number of equity shares
      outstanding*
            570,475,923
            569,656,611
            568,564,740Effect of
      dilutive common equivalent shares - share options
    outstanding
            640,108
            972,970
            1,908,547Diluted
      earnings per equity share - weighted average number of equity shares and
      common equivalent shares outstanding
            571,116,031
            570,629,581
            570,473,287


*
Excludes treasury shares





Options to purchase
48,000 equity shares and 59,780 equity shares for the year ended March 31, 2009
and 2008, respectively, under the 1998 Plan and 401,728 equity shares and
550,592 equity shares for the year ended March 31, 2009 and 2008, respectively
under the 1999 Plan were not considered for calculating diluted earnings per
equity share as their effect was anti-dilutive. For the year ended March 31,
2010 there were no outstanding options to purchase equity shares which had an
anti-dilutive effect.




2.19 Related party
transactions




List of
subsidiaries:


Holding
      as of March 31,Particulars
            Country
            2010
            2009Infosys
      BPO
            India
            99.98%
            99.98%Infosys
      Australia
            Australia
            100%
            100%Infosys
      China
            China
            100%
            100%Infosys
      Consulting
            U.S.A
            100%
            100%Infosys
      Mexico
            Mexico
            100%
            100%Infosys BPO
      s. r. o *
            Czech
      Republic
            99.98%
            99.98%Infosys BPO
      (Poland) Sp.Z.o.o *
            Poland
            99.98%
            99.98%Infosys BPO
      (Thailand) Limited *
            Thailand
            99.98%
            99.98%Mainstream
      Software Pty. Ltd **
            Australia
            100%
            100%Infosys
      Sweden ***
            Sweden
            100%
            -Infosys
      Brasil ****
            Brazil
            100%
            -Infosys
      Consulting India Limited*****
            India
            100%
            -Infosys
      Public Services, Inc. #
            U.S.A
            100%
            -McCamish
      Systems LLC* (Refer Note 2.3)
            U.S.A
            99.98%
            -




*
              Infosys
      BPO s.r.o, Infosys BPO (Poland) Sp Z.o.o, Infosys BPO (Thailand) Limited
      and McCamish Systems LLC are wholly-owned subsidiaries of Infosys
      BPO.**
              Mainstream
      Software Pty. Ltd, is a wholly owned subsidiary of Infosys
      Australia.***
              During
      fiscal 2009, the Company incorporated wholly-owned subsidiary, Infosys
      Technologies (Sweden) AB, which was capitalised on July 8,
  2009.****
              On
      August 7, 2009 the Company incorporated wholly-owned subsidiary, Infosys
      Tecnologia DO Brasil LTDA.*****
              On
      August 19, 2009 Infosys Consulting incorporated wholly-owned subsidiary,
      Infosys Consulting India Limited.#
              On
      October 9, 2009 the Company incorporated wholly-owned subsidiary, Infosys
      Public Services, Inc.


Infosys has
provided guarantee for performance of certain contracts entered into by its
subsidiaries.




List of other related
parties:


Particulars
            Country
            Nature of
      relationshipInfosys
      Technologies Limited Employees' Gratuity Fund Trust
            India
            Post-employment
      benefit plans of InfosysInfosys
      Technologies Limited Employees' Provident Fund Trust
            India
            Post-employment
      benefit plans of InfosysInfosys
      Technologies Limited Employees' Superannuation Fund Trust
            India
            Post-employment
      benefit plans of InfosysInfosys BPO
      Limited Employees’ Superannuation Fund Trust
            India
            Post-employment
      benefit plan of Infosys BPOInfosys BPO
      Limited Employees’ Gratuity Fund Trust
            India
            Post-employment
      benefit plan of Infosys BPOInfosys
      Technologies Limited Employees’ Welfare Trust
            India
            Employee
      Welfare Trust of InfosysInfosys
      Science Foundation
            India
            Controlled
      trust





Refer Note 2.12 for
information on transactions with post-employment benefit plans mentioned
above.




Transactions with key management
personnel




The table below
describes the compensation to key management personnel which comprise directors
and members of the executive council:


(Dollars in
      millions)Year
      ended March 31,2010
            2009
            2008Salaries and
      other short-term employee benefits
            $6
            $6
            $4Other
      long-term benefits
            1
            –
            –Total
            $7
            $6
            $4




2.20 Segment
reporting




IFRS 8 establishes
standards for the way that public business enterprises report information about
operating segments and related disclosures about products and services,
geographic areas, and major customers. The company's operations predominantly
relate to providing IT solutions, delivered to customers located globally,
across various industry segments. The Chief Operating Decision Maker evaluates
the company's performance and allocates resources based on an analysis of
various performance indicators by industry classes and geographic segmentation
of customers. Accordingly, segment information has been presented both along
industry classes and geographic segmentation of customers. The accounting
principles used in the preparation of the financial statements are consistently
applied to record revenue and expenditure in individual segments, and are as set
out in the significant accounting policies.




Industry segments
for the company are primarily financial services comprising enterprises
providing banking, finance and insurance services, manufacturing enterprises,
enterprises in the telecommunications (telecom) and retail industries, and
others such as utilities, transportation and logistics companies. Geographic
segmentation is based on business sourced from that geographic region and
delivered from both on-site and off-shore. North America comprises the United
States of America, Canada and Mexico, Europe includes continental Europe (both
the east and the west), Ireland and the United Kingdom, and the Rest of the
World comprising all other places except those mentioned above and
India.




Revenue and
identifiable operating expenses in relation to segments are categorized based on
items that are individually identifiable to that segment. Allocated expenses of
segments include expenses incurred for rendering services from the company's
offshore software development centers and on-site expenses, which are
categorized in relation to the associated turnover of the segment. Certain
expenses such as depreciation, which form a significant component of total
expenses, are not specifically allocable to specific segments as the underlying
assets are used interchangeably. Management believes that it is not practical to
provide segment disclosures relating to those costs and expenses, and
accordingly these expenses are separately disclosed as "unallocated" and
adjusted against the total income of the company.




Fixed assets used
in the company's business are not identified to any of the reportable segments,
as these are used interchangeably between segments. Management believes that it
is currently not practicable to provide segment disclosures relating to total
assets and liabilities since a meaningful segregation of the available data is
onerous.




Geographical
information on revenue and industry revenue information is collated based on
individual customers invoiced or in relation to which the revenue is otherwise
recognized.




2.20.1 Industry
segments


(Dollars in
      millions)Year
      ended March 31, 2010
            Financialservices
            Manufacturing
            Telecom
            Retail
            Others
            TotalRevenues
            $1,633
            $951
            $773
            $640
            $807
            $4,804Identifiable
      operating expenses
            648
            420
            271
            262
            328
            1,929Allocated
      expenses
            412
            241
            196
            162
            204
            1,215Segment
      profit
            573
            290
            306
            216
            275
            1,660Unallocable
      expenses
            
            
            
            
            
            200Operating
      profit
            
            
            
            
            
            1,460Other income,
      net
            
            
            
            
            
            209Profit
      before income taxes
            
            
            
            
            
            1,669Income tax
      expense
            
            
            
            
            
            356Net
      profit
            
            
            
            
            
            $1,313Depreciation
      and amortization
            
            
            
            
            
            $199Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            
            $1








Year ended March 31,
      2009
            Financialservices
            Manufacturing
            Telecom
            Retail
            Others
            TotalRevenues
            $1,582
            $920
            $844
            $585
            $732
            $4,663Identifiable
      operating expenses
            657
            393
            310
            241
            289
            1,890Allocated
      expenses
            418
            243
            221
            154
            197
            1,233Segment
      profit
            507
            284
            313
            190
            246
            1,540Unallocable
      expenses
            
            
            
            
            
            166Operating
      profit
            
            
            
            
            
            1,374Other income,
      net
            
            
            
            
            
            101Profit before income
      taxes
            
            
            
            
            
            1,475Income tax
      expense
            
            
            
            
            
            194Net
    profit
            
            
            
            
            
            $1,281Depreciation
      and amortization
            
            
            
            
            
            $165Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            
            $1








Year ended March 31,
      2008
            Financialservices
            Manufacturing
            Telecom
            Retail
            Others
            TotalRevenues
            $1,494
            $615
            $900
            $492
            $675
            $4,176Identifiable
      operating expenses
            611
            270
            327
            205
            277
            1,690Allocated
      expenses
            420
            172
            253
            139
            189
            1,173Segment
      profit
            463
            173
            320
            148
            209
            1,313Unallocable
      expenses
            
            
            
            
            
            154Operating
      profit
            
            
            
            
            
            1,159Other income,
      net
            
            
            
            
            
            175Profit before income
      taxes
            
            
            
            
            
            1,334Income tax
      expense
            
            
            
            
            
            171Net
    profit
            
            
            
            
            
            $1,163Depreciation
      and amortization
            
            
            
            
            
            $149Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            
            $3




2.20.2
Geographic segments


(Dollars in
      millions)Year
      ended March 31, 2010
            North
      America
            Europe
            India
            Rest
      of theWorld
            TotalRevenues
            $3,162
            $1,105
            $58
            $479
            $4,804Identifiable
      operating expenses
            1,282
            441
            17
            189
            1,929Allocated
      expenses
            799
            279
            15
            122
            1,215Segment
      profit
            1,081
            385
            26
            168
            1,660Unallocable
      expenses
            
            
            
            
            200Operating
      profit
            
            
            
            
            1,460Other income,
      net
            
            
            
            
            209Profit
      before income taxes
            
            
            
            
            1,669Income tax
      expense
            
            
            
            
            356Net
      profit
            
            
            
            
            $1,313Depreciation
      and amortization
            
            
            
            
            $199Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            $1






Year ended March 31,
      2009
            North
      America
            Europe
            India
            Rest of the
      World
            TotalRevenues
            $2,949
            $1,230
            $60
            $424
            $4,663Identifiable
      operating expenses
            1,232
            492
            14
            152
            1,890Allocated
      expenses
            780
            325
            15
            113
            1,233Segment
      profit
            937
            413
            31
            159
            1,540Unallocable
      expenses
            
            
            
            
            166Operating
      profit
            
            
            
            
            1,374Other income,
      net
            
            
            
            
            101Profit before income
      taxes
            
            
            
            
            1,475Income tax
      expense
            
            
            
            
            194Net
    profit
            
            
            
            
            $1,281Depreciation
      and amortization
            
            
            
            
            $165Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            $1








Year ended March 31,
      2008
            North
      America
            Europe
            India
            Rest of the
      World
            TotalRevenues
            $2,589
            $1,172
            $55
            $360
            $4,176Identifiable
      operating expenses
            1,094
            452
            11
            133
            1,690Allocated
      expenses
            727
            329
            16
            101
            1,173Segment
      profit
            768
            391
            28
            126
            1,313Unallocable
      expenses
            
            
            
            
            154Operating
      profit
            
            
            
            
            1,159Other income,
      net
            
            
            
            
            175Profit before income
      taxes
            
            
            
            
            1,334Income tax
      expense
            
            
            
            
            171Net
    profit
            
            
            
            
            $1,163Depreciation
      and amortization
            
            
            
            
            $149Non-cash
      expenses other than depreciation and amortization
            
            
            
            
            $3




2.20.3
Significant clients




No client
individually accounted for more than 10% of the revenues in fiscal 2010, 2009
and 2008.




2.21
Litigation




The company is
subject to legal proceedings and claims which have arisen in the ordinary course
of its business. The company’s management does not reasonably expect that legal
actions, when ultimately concluded and determined, will have a material and
adverse effect on the results of operations or the financial position of the
company.




2.22 Tax
contingencies




The company has
received demands from the Indian taxation authorities for payment of additional
tax of $46 million, including interest of $8 million, upon completion of their
tax review for fiscal 2005 and fiscal 2006. The demands for fiscal 2005 and
fiscal 2006 were received during fiscal 2009 and fiscal 2010, respectively. The
tax demands are mainly on account of disallowance of a portion of the deduction
claimed by the company under Section 10A of the Income tax Act. The deductible
amount is determined by the ratio of export turnover to total turnover. The
disallowance arose from certain expenses incurred in foreign currency being
reduced from export turnover but not reduced from total turnover.




The company is
contesting the demands and management and its tax advisors believe that its
position will likely be upheld in the appellate process. No additional provision
has been accrued in the financial statements for the tax demands raised.
Management believes that the ultimate outcome of this proceeding will not have a
material adverse effect on the company's financial position and results of
operations. The tax demand with regard to fiscal 2005 and fiscal 2006 is pending
before the Commissioner of Income tax (Appeals), Bangalore.




Financial
Statement Schedule - II




(Schedule II of
Reg. §210.5-04(c) of Regulation S-X-17 of the Securities Act of 1933 and
Securities Exchange Act of 1934)




Valuation and
qualifying accounts




Allowance for
impairment of trade receivables


(Dollars in
      millions)Description
            Balance
      at beginning of the year
            Translation
      differences
            Charged
      to cost and expenses
            Write
      offs
            Balance
      at end of the yearFiscal
      2010
            $21
            $3
            –
            $(1)
            $23Fiscal
      2009
            $10
            $(2)
            $16
            $(3)
            $21Fiscal
      2008
            $5
            –
            $11
            $(6)
            $10


Item 19.
Exhibits Exhibit
      number
              
              Description of
      document*1.1
              
              Articles of
      Association of the Registrant, as amended*1.2
              
              Memorandum of
      Association of the Registrant, as amended**1.3
              
              Certificate
      of Incorporation of the Registrant, as currently in
  effect***4.1
              
              Form of
      Deposit Agreement among the Registrant, Deutsche Bank Trust Company
      Americas and holders from time to time of American Depository Receipts
      issued thereunder (including as an exhibit, the form of American
      Depositary Receipt)**4.2
              
              Registrant's
      1998 Stock Option Plan**4.3
              
              Registrant's
      Employee Stock Offer Plan**4.4
              
              Employees
      Welfare Trust Deed of Registrant Pursuant to Employee Stock Offer
      Plan**4.5
              
              Form of
      Indemnification Agreement****4.6
              
              Registrant's
      1999 Stock Option Plan*****4.7
              
              Form of
      Employment Agreement with Employee Directors******11.1
              
              Code of
      Ethics for Principal Executive and Senior Financial
    Officers12.1
              
              Certification
      of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of
      200212.2
              
              Certification
      of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of
      200213.1
              
              Certification
      of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of
      200213.2
              
              Certification
      of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of
      2002**15.1
              
              Registrant's
      Specimen Certificate for Equity Shares15.2
              
              Consent of
      Independent Registered Public Accounting Firm******15.3
              
              Audit
      Committee Charter******15.4
              
              Compensation
      Committee Charter*******15.5
              
              Nomination
      Committee Charter******15.6
              
              Whistleblower
      Policy*******15.7
              
              Risk
      Management Committee Charter
 
 *
              Incorporated
      by reference to exhibits filed with the Registrant's Registration
      Statement on Form F-3 ASR (File No. 333-121444) filed on November 7,
      2006.**
              Incorporated
      by reference to exhibits filed with the Registrant's Registration
      Statement on Form F-1 (File No. 333-72195) in the form declared effective
      on March 10, 1999.***
              Incorporated
      by reference to the exhibits filed with Post-Effective Amendment No. 1 to
      the Registrant's Registration Statement on Form F-6 (File No. 333-72199)
      filed on March 28, 2003, as amended by Amendment No. 1 included in the
      exhibits filed with Post-Effective Amendment No. 2 to such Registration
      Statement filed on June 30, 2004.****
              Incorporated
      by reference to exhibits filed with the Registrant's Quarterly Report on
      Form 6-K filed on August 4, 1999.*****
              Incorporated
      by reference to Exhibits filed with Registrant's Annual Report on Form
      20-F filed on April 25, 2005.******
              Incorporated
      by reference to Exhibits filed with Registrant's Annual Report on Form
      20-F filed on May 13, 2003.*******
              Incorporated
      by reference to Exhibits filed with Registrant's Annual Report on Form
      20-F filed on May 2, 2007.
 
  SIGNATURES
 The registrant
hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.
  Infosys
      Technologies Limited/s/ S.
      Gopalakrishnan
                
                S.
      GopalakrishnanDate: April
      30, 2010
              Chief Executive
      Officer