Infosys increases guidance for revenue and EPS for fiscal 2004

Our Corporate Bureau
10 January 2004

Bangalore: Infosys' income from software development services and products was Rs. 1,235.26 crore for the third quarter ended December 31, 2003, an increase of 28.86 percent over comparable income for the corresponding quarter in the previous year Net profit after tax for the third quarter ended December 31, 2003 was Rs. 328.14 crore, an increase of 28.02 percent over comparable net profit after tax for the corresponding quarter in the previous year. Earnings per share from ordinary activities increased to Rs. 49.43 from Rs. 38.70 for the corresponding quarter in the previous year, an increase of 27.73 percent.

The company added 30 new clients during the quarter and there was a gross addition of 3,666 employees for the quarter for Infosys and its subsidiary, Progeon Ltd. Total employees stood at 23,209 as on December 31, 2003 for Infosys and its subsidiary, Progeon Ltd.

Business outlook

Nandan M. Nilekani, CEO, president and managing director, Infosys Ltd said, "We have reorganized Infosys to face new challenges, increased expectations from clients, a fast-changing economy and a new competitive scenario." He added that "We have enhanced our focus on vertical markets and on providing business solutions leveraging technology, using our Global Delivery Model."

The company's outlook for the quarter and the fiscal year ending March 31, 2004, under Indian GAAP and US GAAP, is as follows:

Under Indian GAAP

Infosys non-consolidated income from software development services and products is projected to be between Rs. 1,260 crore and Rs. 1,269 crore. Earnings per share is expected to be at Rs. 49.50.

Infosys consolidated income is projected to be between Rs. 1,319 crore and Rs. 1,331 crore and earnings per share is expected to be Rs. 49.70.

Outlook for the fiscal year ending March 31, 2004*

Infosys non-consolidated income from software development services and products is projected to be between Rs. 4,712 crore and Rs. 4,721 crore. Earnings per share is expected to be at Rs. 186.20. Infosys consolidated income is projected to be between Rs. 4,823 crore and Rs. 4,835
crore. Earnings per share is expected to be at Rs. 186.70

* conversion 1 US$ = Rs. 45.50

Under US GAAP

Outlook for the quarter ending March 31, 2004

Consolidated net revenues are projected to be in the range of $ 290 million to $ 293 million.
Consolidated earnings per American Depositary Share are expected to be $ 0.55

Outlook for the fiscal year ending March 31, 2004

Consolidated net revenues are projected to be in the range of $ 1,050 million to $ 1,053 million.
Consolidated earnings per American Depositary Share are expected to be $ 2.02.

S. Gopalakrishnan, member of the board of Infosys said, "The acquisition of Expert Information Systems Pty. Limited, Australia is complete and we are working towards a seamless integration." He added that, "This will accelerate our market penetration in Australia and provide enhanced value to our clients."

Expansion of services and significant projects

During the quarter, Infosys continued its association with global corporations helping them realize significant business benefits through effective leveraging of technology. The company added 30 new clients and strengthened its relationship with over 350 clients worldwide, through the implementation of new initiatives. In the telecom sector, Infosys saw the addition of leading corporations to its client list. A premier wireless carrier in the US chose Infosys to design, develop and deploy a financial and marketing data mart that will help it analyze its financial performance. One of Canada's top communications companies, providing wireline and wireless telecommunications products, applications and services, also started working with the company during the quarter. Infosys was selected by a growing telecom business process outsourcing provider in the US to partner in the development of its order and inventory management systems.

Another key client added is a leading provider of highly integrated silicon solutions that enable broadband communications and networking of voice, video and data services. In the Asia Pacific region, a premier telecommunications carrier chose Infosys to help them increase the effectiveness of their integrated telecommunications services.

High-tech companies are finding new ways of improving knowledge and expertise in cutting edge technology. An industry leader providing global data and IP network and integration services for multinational businesses has engaged Infosys in the design, development and support of its global CRM applications. The world's leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries also established a partnership with Infosys during the last quarter. Other significant client additions in this sector include a world leader in integrated IT and eProcessing solutions for the financial services industry and a corporation providing global automated international trade management solutions.

Infosys also made significant progress in the media and entertainment industry during the quarter with the addition of three global leaders. One of the world's premier media and entertainment companies chose Infosys to help them with some of their technology initiatives. Infosys has been signed up to assist a global provider of news, data and analysis in providing accurate and real-time information. Corporations in the automobile and aerospace industry are increasingly leveraging technology to improve their efficiency. Infosys has partnered with a leader in lumbar and seating comfort technology to create an IT strategy that will help streamline its manufacturing processes. The company manufactures seating components for some of the world's best known automotive and airline companies. During the quarter, Infosys also established a relationship with a leading supplier of injection molding equipment in Canada.

The retail industry continues to use technology to provide faster and more efficient services to its growing customer base. Infosys reinforced its position in this segment in the US by adding to its client base a renowned supplier of specialty outdoor gear and a nationwide chain of superstores in the US, selling domestic merchandise and home furnishings.

Infosys enhanced its presence in the financial services sector by establishing a relationship with a global investment bank based in the UK. The bank chose Infosys to strengthen critical elements of its infrastructure across several locations in the world. Infosys will leverage its expertise in Microsoft technologies to meet the client's need for a quick, scalable, and cost-efficient deployment. In the healthcare sector, Infosys started working with a non-profit, independent, regional healthcare provider in the US.

"We have added several high-quality clients in the high-tech and financial services sectors, in addition to leading communication service providers," said Basab Pradhan, head - world-wide sales and senior vice president at Infosys. "We see this as a result of the market's continuing interest in offshore services, and also, some of our successful business solutions and alliances.

S. D. Shibulal, board member and head of world-wide customer delivery at Infosys said, "Offshore effort increased to 67.8 percent during the quarter as compared to 63.9 percent for the same quarter in the previous year. Our billing for two clients, on an LTM (Last Twelve Months) basis, has crossed $ 50 million each."

Banking Products

Infosys' Banking Business Unit (BBU) made significant headway in several countries this quarter. One of the premier public sector banks headquartered in Bangalore, India, with over 800 branches, has chosen to deploy Finacle®. A leading bank headquartered in Mauritius has signed up for Finacle®, making it the fifth among nine banks in the island nation to use the product.

With the addition of a bank in Zimbabwe to its client list, Infosys extended its footprint to seven countries in Africa. BBU also established its presence in China this quarter, with one of the leading banks choosing Finacle® for its branches.

Progeon Limited

Progeon Limited ("Progeon") added one client during the quarter and generated revenues of Rs. 21.78 crore. The net addition to employees during the quarter was 362 and the employee strength as on December 31, 2003 was 1,400.

The consolidated financial results including the financial results of Progeon Limited, according to Indian GAAP, for the quarter ended December 31, 2003 are attached to this release.

Update on China operations

Infosys has incorporated its wholly owned subsidiary in the People's Republic of China, 'Infosys Technologies (Shanghai) Co. Limited'. The subsidiary will be capitalized at US$ 5 million and Infosys has transferred US$ 1 million as initial capital. The setting up of the software development center for 200 professionals in Shanghai is progressing well. The China subsidiary will be offering end-to-end software services to domestic as well as multinational companies operating in China. It will also serve as a hub for software services in the Asia Pacific region.

Update on acquisition of Expert

The acquisition of Expert Information Services Pty. Limited,
Australia (Expert) was completed on January 2, 2004. The acquired company has been renamed as 'Infosys Technologies (Australia) Pty. Ltd and is a wholly owned subsidiary of Infosys.

Liquidity and capital expenditure

Cash and cash equivalents including investments in liquid mutual funds increased by Rs. 344.25 crore during the quarter, from Rs. 2,139.67 crore to Rs. 2,483.92 crore, after incurring capital expenditure of Rs. 85.19 crore. Operating cash flows for the quarter ended December 31, 2003 were at Rs. 496.58 crore (Rs. 248.38 crore for the quarter ended December 31, 2002).

"Pricing has been stable and despite the largest hiring for a quarter, margins have been maintained," said T. V. Mohandas Pai, member of the board and chief financial officer of Infosys.