Infosys A

Unique Business
Model

Safe Harbor
Certain statements in this presentation concerning our future growth prospects are
forward looking statements which involve a number of risks and uncertainties that could
cause actual results to differ materially from those in such forward looking statements.
The risks and uncertainties relating to these statements include, but are not limited to,
risks and uncertainties regarding fluctuations in earnings, our ability to manage growth,
intense competition in IT services including those factors which may affect our cost
advantage, wage increases in India, our ability to attract and retain highly skilled
professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client
concentration, restrictions on immigration, our ability to manage our international
operations, reduced demand for technology in our key focus areas, disruptions in
telecommunication networks, our ability to successfully complete and integrate potential
acquisitions, liability for damages on our service contracts, the success of the
companies in which Infosys has made strategic investments, withdrawal of
governmental fiscal incentives, political instability, legal restrictions on raising capital or
acquiring companies outside India, and unauthorized use of our intellectual property
and general economic conditions affecting our industry. Additional risks that could affect
our future operating results are more fully described in our United States Securities and
Exchange Commission filings including our Annual Report on Form 20-F for the fiscal
year ended March 31, 2000, and our Quarterly Reports filed on Form 6-K for the
quarters ended June 30, 2000, September 30, 2000 and December 31, 2000. These
filings are available at www.sec.gov. Infosys may, from time to time, make additional
written and oral forward looking statements, including statements contained in the
companys filings with the Securities and Exchange Commission and our reports to
shareholders. The company does not undertake to update any forward looking
statement that may be made from time to time by or on behalf of the company.

Infosys - An Overview
End-to-end

IT solutions provider

One

of the most profitable software

services providers in the world

Publicly
Fifth

traded in India since 1993

most valuable company in

India
Listed

on NASDAQ since
March 1999

Present

market cap at US$ 5.5

billion (as of May 11, 2001) [based
on BSE prices]

Continuous Growth

Revenues and Operating Profit

450.0

413.8

400.0

(in $ million)

350.0
300.0

CA

250.0
200.0

=
R
G

G
A
C

150.0

5%
.
1
7

3
.
6
=7

203.4

68.3
9.5 2.6

18.1
4.1

26.6
6.3

39.6
9.2

1994

1995

1996

1997

IPO

137.5

121.0

100.0
50.0

Revenues

13.4

1998

35.8

1999

Operating profits

Excluding one-time charge for compensation arising from stock split

60.5

2000

2001

Growing Earnings Per Share

2.5

2.01

(in US$)

1.5

R
G
A
C

.5%
9
6
=
0.93
0.49

0.5

0.05

0.07

0.12

1994

1995

1996

0.15
1997

0.22

0
1998

1999

Earnings per share

Excluding one-time charge for compensation arising from stock split

2000

2001

Per-capita revenue growth

450.0

413.8

400.0

20%
=
R
CAG

350.0

50%
=
R
CAG

300.0
250.0

%
= 80
R
CAG

200.0
150.0

121.0

100.0
50.0

203.4

42.0

39.6

68.3

48.0

11.4

17.2

1997

1998

87.0

68.0

57.0
25.4

57.1
35.6

1999

Per capita revenues (US$ 000)

2000
Billed manmonths ('000)

2001
Revenues (US$ Mn)

Business outlook
Quarter

ending June30,2001

Net revenue is expected to be in the range of

$123million to $125million
Earnings per ADS is expected to be in the range of
$0.28 to $0.29
Fiscal

year ending March31,2002

Net revenue is expected to be in the range of

$530million to $545million
Earnings per ADS is expected to be in the range of
$1.24 to $1.27

Challenging external IT environment

Reports on slow-down in IT spending by US companies

Earnings warnings from some of our major customers

Concerns on dot-com and venture-funded businesses

Earnings warnings from some of the software companies in US

Possible softness in labor markets in the US

Internet consulting companies facing pressure on visibility and

billing rates

There may be supply-demand gap in India resulting in escalation

of labor cost

Falling markets and stock options becoming unattractive

resulting in escalation of compensation costs

Investors Concerns

Business
Effect of slow-down in IT spending in US on Infosys
Visibility in business
Future revenue growth

Per capita revenues

Ability to increase the per-capita revenues on a go-forward basis
Impact on the per-capita revenue growth rate due to reduced dot-com / venture-funded
businesses

Hiring and Utilization

Ability to attract the best and the brightest
Lower utilization rates coupled with increased hiring
Labor cost escalation due to falling market price of the stock

Margins
Ability to maintain or grow the margins on a go-forward basis

Exposure to dot-com/venture funded companies

Strategic investments and accounts receivable

PSPD Model

Quality

People

Predictability

Transparency

Sustainability

Maintenance

Translating clients to partners

Long-term relationship
Offshore Software
Development Centers

Growth
Higher value services
Increase revenue productivity
Offshore model - Global Delivery

Exposure limits for client concentration

Exposure limit for dotcom businesses

Upsell to existing customers

Exposure limit for opportunity

businesses (like Y2K)

Iterative Model of Development

Geographical diversification

Profitability

De-risking

Repeat business through the years

94.0

92.0

90.0

(in %)

88.0

86.0

84.0

82.0

80.0

78.0
Repeat business (% to total revenues)

1996

1997

1998

1999

2000

2001

91.8

84.1

83.1

90.0

87.6

84.5

Million dollar customers

300

90%
80%

250

70%

200

60%
50%

150

40%

100

30%
20%

50

10%

0%

FY 95

FY 96

FY 97

FY 98

FY 99

FY 00

FY 01

Million $ clients

19

35

42

80

Total clients

19

31

69

93

115

194

273

Million $ clients/ total (%)

21.1%

22.6%

13.0%

20.4%

30.4%

21.6%

29.3%

Million $ client revenues /

65.1%

69.9%

57.4%

68.8%

80.2%

81.8%

85.6%

total revenues (%)

Quarterly per-capita revenue growth

160,000
140,000

(in US$)

120,000
100,000
80,000
60,000
40,000
20,000
-

Q1 FY00

Q2 FY00

Q3 FY00

Q4 FY00

Q1 FY01

Q2 FY01

Q3 FY01

Q4 FY01

Per capita revenues - Onsite

95,511

103,888

103,036

104,028

115,434

135,600

138,400

134,900

Per capita revenues - Offshore

49,536

51,098

53,115

54,756

60,862

64,500

65,200

64,500

Per capita revenues - Blended

62,809

67,975

70,160

71,571

80,959

90,400

89,600

86,200

Per capita revenues - Onsite

Per capita revenues - Offshore

Per capita revenues - Blended

Key parameters
60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

Q1 FY00

Q2 FY00

Q3 FY00

Q4 FY00

Q1 FY01

Q2 FY01

Q3 FY01

Q4 FY01

Gross margin %

48.1%

45.6%

45.3%

43.7%

47.7%

48.7%

47.3%

49.6%

Selling and general expenses %

14.0%

12.4%

12.7%

13.5%

13.2%

14.6%

12.9%

14.8%

Operating margins %

31.0%

30.5%

30.1%

28.1%

32.9%

32.9%

33.2%

33.7%

Gross margin %

Selling and general expenses %

Operating margins %

Excluding one time charge arising on accelerated amortization of stock compensation expense

Moving-up the Value Chain

A Multi-pronged Approach
Expand and
diversify
base of IT
professionals
Increase
employee
productivity by
promoting reuse

End-to-end
service
provider

Offer new
services to
existing clients

Use tools
Develop
and
new clients
methodologi
Oures
intention is to increase per capita revenues by a

minimum of 3-5% per annum to maintain margins

Hiring and utilization

Infosys: the Employer-of-choice

Adjudged

Indias Best Employer by the

first Business Today-Hewitt Survey
conducted in December 2000
Ability to attract the best and the brightest

High

investment in technology and training

14 weeks of intensive training for new hires

55 member faculty, including 8 Ph.Ds
All

employees in Infosys are covered by the

stock option plan

Incubation

mechanism for employees to

launch their own ventures. Piloted
OnMobile - a end to end wireless solutions
provider

Attrition

rate of 11% for fiscal 2001 and 9%

for fiscal 2000

Our views on labor cost pressures

Wage pressures for freshers may not arise because of

increased market penetration. This is due to:
Softening of wages in the US markets due to lay-offs
Slowdown in hiring by second / third tier companies in India
due to a decline in business opportunities

Wage pressures already exist in the market for project

managers since demand outweighs supply
This situation may not change

We require a growth rate of ~3-5% in per capita revenues

to neutralize wage pressures

The impact of stock options

Stock options are not a substitute for salaries.

Stock options are granted as additional incentive

Stock options are widely distributed amongst employees

Most of the senior employees of the company (around 1550) are covered
under the 1994 stock option plan that created substantial wealth in their
hands

62% of options outstanding under the 1994 plan (covering 1,472

employees) will vest after 2 years

Part of the grants under the 1998 and 1999 option plan, have already
vested

Stock options have created 80 dollar millionaires and over 1,150 rupee
millionaires, at Infosys

The employee ownership in Infosys including the outstanding option

grants is 11.7%

We continue to focus on margins

Utilization rates and margins (%)

90.0%

51.0%

80.0%

50.0%
49.0%

70.0%

48.0%
60.0%

47.0%

50.0%

46.0%

40.0%

45.0%
44.0%

30.0%

43.0%
20.0%

42.0%

10.0%
0.0%

41.0%
Q1 FY00

Q2 FY00

Q3 FY00

Q4 FY00

Q1 FY01

Q2 FY01

Q3 FY01

Q4 FY01

Utilization % -IT

75.8%

71.2%

68.1%

76.6%

74.9%

65.4%

66.7%

64.9%

Utilization % -ET

80.5%

81.1%

74.8%

81.5%

85.6%

80.5%

77.6%

73.0%

Gross margin %

48.1%

45.6%

45.3%

43.7%

47.7%

48.7%

47.3%

49.6%

Utilization % -IT

ET excluding trainees
IT including trainees

Utilization % -ET

40.0%

Gross margin %

Margins are the key. Bench is for strategic reasons. The cost of
bench is hardly $800 per month per person

Strategic investments
Investments

are key to Infosys strategic objectives of gaining access to

niche technologies and markets

We

leveraged the expertise derived from our relationships with our investee
companies to deliver value to large clients across the globe

We

become the IT strategic partner for our investee companies

Benefits

arise in the form of revenue and net income enhancements

Investments
We

are also envisaged in technology specific venture capital funds

have invested:

$3 million in Cidra, a developer of photonic devices for high-precision wavelength

management and control for next-generation optical networks (FY01 revenues $1.7 million and cumulative revenues of $ 2.1 million)
$ 0.4 million in M-Commerce Ventures Pte Ltd., Singapore, an early stage VC fund
$ 1.5 million in Asia Net Media BVI Ltd. (FY01 revenues - $0.9 million and
cumulative revenues of $ 1.1 million)
$ 0.5 million in PurpleYogi Inc

We have today the infrastructure,

processes and people to manage future
growth

Creating physical infrastructure

140.0

120.0

(in $ Mn)

100.0

80.0

60.0

40.0

20.0

Q1 00

Q2 00

Q3 00

Q4 00

Q1 01

Q2 01

Q3 01

Q4 01

Capital expenditure

5.0

8.9

10.8

12.2

19.4

25.0

26.8

29.7

Capital commitments (end of quarter)

7.9

14.2

16.0

18.5

26.6

26.4

26.3

34.0

Operating cash flows earned in the next quarter

14.7

14.2

29.0

20.6

43.4

29.0

44.5

102.6

104.1

106.8

116.6

105.8

116.5

110.9

124.1

Cash balances (end of quarter)

Capital expenditure

Capital commitments (end of quarter)

Operating cash flows earned in the next quarter

Cash balances (end of quarter)

As of March 31, 2001, we had software development space of 1.66 million sq. ft. capable of accommodating 10,100
personnel and 1.91 million sq. ft. capable of accommodating 8,500 personnel under construction.

People statistics
12,000

10,000

8,000

6,000

4,000

2,000

Q1 FY00

Q2 FY00

Q3 FY00

Q4 FY00

Q1 FY01

Q2 FY01

Q3 FY01

Q4 FY01

Employees (total)

3,943

4,778

4,996

5,389

6,445

7,925

8,910

9,831

Software professionals

3,321

4,122

4,261

4,623

5,594

6,941

7,824

8,656

177

835

218

393

1,056

1,480

985

921

Added in the quarter

Additions are on a net basis

Employees (total)

Software professionals

Added in the quarter

World-class Quality Processes

CMM Level 5
Six Sigma

Baldrige

Focus on defect prevention, technology insertion

and process changes to improve quality and productivity
Reduction in cycle time and defects for six cross
functional processes
Orders Through Remittance (OTR)
Visa processing
US Payroll
Cross functional teams to address improvement areas in
strategic management functions
Leadership Development, Customer Relationship
Management, Human Resource Management,
Information Systems and Process Management
We have strong internal quality processes to manage growth

We have built a strong brand

Prominently

covered in Business
Week, New York Times and Wall
Street Journal

Most

admired company in India poll by Indias largest business

daily, The Economic Times

Infosys

figures in Forbes
20 for 2000

First

recipient of the UTI award for

corporate governance - chosen
from over 7500 listed companies in
India

We have won several awards

The Far Eastern Economic Review rated Infosys as

the No. 1 company in India in the Review 2000, an
annual survey of Asia's leading companies

Infosys became the first IT company to win the IMC

Ramkrishna Bajaj National Quality Award in the
services category

We were judged by the Financial Technology Asia

Magazine as the Best Regional Software House

The BankAway product from Infosys won the CSIWipro award for the Best Packaged Application for
the year 2000

Silver Shield Award for the Best Presented

Accounts awarded by the ICAI for Non-financial
Private Sector Companies for six consecutive years
ended March 31, 1995 through 2000

In summary

We have a unique business model which is fully

poised to exploit the growth opportunities in
the market and minimize risk

Thank You
Visit us at www.infy.com