Infosys – a unique business model

1. Infosys – A Unique Business Model

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Infosys – A Unique
Business Model

2. Safe Harbor

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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 company’s 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.

3. Infosys - An Overview

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Infosys - An Overview
End-to-end IT solutions provider
One of the most profitable software
services providers in the world
Publicly traded in India since 1993
Fifth 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]

4. Continuous Growth Revenues and Operating Profit

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Continuous Growth
Revenues and Operating Profit
450.0
413.8
400.0
(in $ million)
350.0
300.0
250.0
203.4
200.0
150.0
100.0
50.0
137.5
121.0
68.3
9.5 2.6
18.1
4.1
26.6
6.3
39.6
9.2
1994
1995
1996
1997
IPO
60.5
35.8
13.4
1998
-
Revenues
1999
Operating profits
Excluding one-time charge for compensation arising from stock split
2000
2001

5. Growing Earnings Per Share

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Growing Earnings Per Share
2.5
2.01
(in US$)
2
1.5
0.93
1
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

6. Per-capita revenue growth

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Per-capita revenue growth
450.0
413.8
400.0
350.0
300.0
250.0
203.4
200.0
150.0
121.0
87.0
100.0
50.0
68.3
42.0
39.6
48.0
11.4
17.2
1997
1998
68.0
57.0
25.4
57.1
35.6
1999
Per capita revenues (US$ 000)
2000
Billed manmonths ('000)
2001
Revenues (US$ Mn)

7. Business outlook

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Business outlook
Quarter ending June 30, 2001
› Net revenue is expected to be in the range of $ 123 million to
$ 125 million
› Earnings per ADS is expected to be in the range of $ 0.28 to
$ 0.29
Fiscal year ending March 31, 2002
› Net revenue is expected to be in the range of $ 530 million to
$ 545 million
› Earnings per ADS is expected to be in the range of $ 1.24 to
$ 1.27

8. Challenging external IT environment

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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

9. Investors’ Concerns

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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

10. PSPD Model

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PSPD Model
Quality
People
Transparency
Predictability
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

11.

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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

12.

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Million dollar customers
300
90%
80%
250
70%
200
60%
50%
150
40%
100
30%
20%
50
10%
0
0%
FY 95
FY 96
FY 97
FY 98
FY 99
FY 00
FY 01
Million $ clients
4
7
9
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 (%)

13. Quarterly per-capita revenue growth

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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

14. Key parameters

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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

15. Moving-up the Value Chain – A Multi-pronged Approach

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Moving-up the Value Chain – A
Multi-pronged Approach
Expand and diversify
base of IT professionals
Increase employee
productivity by
promoting reuse
Use tools and
methodologies
End-to-end
service provider
Offer new services
to existing clients
Develop
new clients
Our intention is to increase per capita revenues by a
minimum of 3-5% per annum to maintain margins

16.

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Hiring and utilization

17. Infosys: the Employer-of-choice

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Infosys: the Employer-of-choice
Adjudged “India’s 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

18. Our views on labor cost pressures

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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

19. The impact of stock options

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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%

20. We continue to focus on margins

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We continue to focus on margins

21. Utilization rates and margins (%)

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Utilization rates and margins (%)
90.0%
51.0%
50.0%
80.0%
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

22. Strategic investments

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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 are also envisaged in technology specific venture capital funds
We 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

23. We have today the infrastructure, processes and people to manage future growth

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We have today the infrastructure, processes and
people to manage future growth

24. Creating physical infrastructure

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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
-
Cash balances (end of quarter)
102.6
104.1
106.8
116.6
105.8
116.5
110.9
124.1
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.

25. People statistics

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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
Added in the quarter
177
835
218
393
1,056
1,480
985
921
Employees (total)
Additions are on a net basis
Software professionals
Added in the quarter

26. World-class Quality Processes

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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

27. We have built a strong brand

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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 India’s 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

28. We have won several awards

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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

29. In summary

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In summary
We have a unique business model which is fully
poised to exploit the growth opportunities in
the market and minimize risk

30. Thank You

®
Thank You
Visit us at www.infy.com