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 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]


Continuous Growth
Revenues and Operating Profit

450.0
413.8
400.0

350.0

300.0
(in $ million)

250.0
203.4
200.0

150.0 137.5
121.0
100.0 68.3 60.5
IPO 39.6 35.8
50.0 18.1 26.6
9.5 2.6 4.1 6.3 9.2 13.4
-
1994 1995 1996 1997 1998 1999 2000 2001
Revenues Operating profits

Excluding one-time charge for compensation arising from stock split



Growing Earnings Per Share

2.5

2.01
2

1.5
(in US$)

1 0.93

0.49
0.5
0.22
0.12 0.15
0.05 0.07
0
1994 1995 1996 1997 1998 1999 2000 2001
Earnings per share

Excluding one-time charge for compensation arising from stock split



Per-capita revenue growth

450.0
413.8
400.0

350.0

300.0

250.0
203.4
200.0

150.0
121.0

100.0 87.0
68.3 68.0
57.0 57.1
42.0 48.0
50.0 39.6 35.6
25.4
11.4 17.2
-
1997 1998 1999 2000 2001

Per capita revenues (US$ 000) Billed manmonths ('000) Revenues (US$ Mn)


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


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 Transparency

People

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
Upsell to existing customers
Exposure limits for client concentration
Exposure limit for dotcom businesses
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

88.0
(in %)

86.0

84.0

82.0

80.0

78.0
1996 1997 1998 1999 2000 2001
Repeat business (% to total revenues) 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 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 (%)


Quarterly per-capita revenue growth

160,000

140,000

120,000

100,000
(in US$)

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 End-to-end

base of IT professionals service provider

Increase employee
productivity by Offer new services
promoting reuse to existing clients

Use tools and Develop

methodologies new clients

Our 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%

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%
41.0%

0.0% 40.0%
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 Utilization % -ET Gross margin %

ET excluding trainees
IT including trainees
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 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


We have today the infrastructure, processes and

people to manage future growth


Creating physical infrastructure

140.0

120.0

100.0

80.0
(in $ Mn)

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.


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) Software professionals Added in the quarter

Additions are on a net basis


World-class Quality Processes

Focus on defect prevention, technology insertion

CMM Level 5 and process changes to improve quality and productivity

Reduction in cycle time and defects for six cross

Six Sigma functional processes
Orders Through Remittance (OTR)
Visa processing
US Payroll

Cross functional teams to address improvement areas in

Baldrige 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 CSI-
Wipro 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