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Infosys – A Unique Business Model

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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.

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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]

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Continuous GrowthRevenues and Operating Profit

Excluding one-time charge for compensation arising from stock split

CAGR = 71.5%

CAGR = 76.3%

IPO9.5 18.1 26.6

39.668.3

121.0

203.4

413.8

2.6 4.1 6.3 9.2 13.435.8

60.5

137.5

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

1994 1995 1996 1997 1998 1999 2000 2001

(in

$ m

illio

n)

Revenues Operating profits

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Growing Earnings Per Share

Excluding one-time charge for compensation arising from stock split

0.05 0.07 0.12 0.15 0.22

0.49

0.93

2.01

0

0.5

1

1.5

2

2.5

1994 1995 1996 1997 1998 1999 2000 2001

(in

US

$)

Earnings per share

CAGR = 69.5%

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Per-capita revenue growth

42.0 48.0 57.068.0

87.0

11.4 17.2 25.4 35.657.1

39.6

68.3

121.0

203.4

413.8

-

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

1997 1998 1999 2000 2001

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

CAGR = 50%

CAGR = 80%

CAGR = 20%

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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

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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

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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

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Predictability Sustainability

Profitability De-risking

Maintenance

Higher value services

Increase revenue productivity

Offshore model - Global Delivery

Upsell to existing customers

Iterative Model of Development

Translating clients to partners

Offshore Software Development Centers

QualityPeople

Transparency

Exposure limits for client concentration

Exposure limit for dotcom businesses

Exposure limit for opportunity businesses (like Y2K)

Geographical diversification

Long-term relationship

Growth

PSPD Model

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Repeat business through the years

78.0

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0(i

n %

)

Repeat business (% to total revenues) 91.8 84.1 83.1 90.0 87.6 84.5

1996 1997 1998 1999 2000 2001

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Million dollar customers

0

50

100

150

200

250

300

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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 /

total revenues (%)

65.1% 69.9% 57.4% 68.8% 80.2% 81.8% 85.6%

FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01

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Quarterly per-capita revenue growth

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

(in

US

$)

Per capita revenues - Onsite Per capita revenues - Offshore Per capita revenues - Blended

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

Q1 FY00 Q2 FY00 Q3 FY00 Q4 FY00 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01

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Key parameters

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

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Gross margin % Selling and general expenses % Operating margins %

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%

Q1 FY00 Q2 FY00 Q3 FY00 Q4 FY00 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01

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End-to-end service

provider

Offer new services to

existing clients

Developnew clients

Use tools and

methodologies

Expand and diversifybase of IT

professionals

Increase employee

productivity by promoting reuse

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

Our intention is to increase per capita revenues by a minimum of 3-5% per annum to maintain margins

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Hiring and utilization

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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

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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

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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%

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We continue to focus on margins

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Utilization rates and margins (%)

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

ET – excluding traineesIT – including trainees

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

40.0%

41.0%

42.0%

43.0%

44.0%

45.0%

46.0%

47.0%

48.0%

49.0%

50.0%

51.0%

Utilization % -IT Utilization % -ET Gross margin %

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%

Q1 FY00 Q2 FY00 Q3 FY00 Q4 FY00 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01

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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

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

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Creating physical infrastructure

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.

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

(in

$ M

n)

Capital expenditure Capital commitments (end of quarter) Operating cash flows earned in the next quarter Cash balances (end of quarter)

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

Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01

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People statistics

Additions are on a net basis

-

2,000

4,000

6,000

8,000

10,000

12,000

Employees (total) Software professionals Added in the quarter

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

Q1 FY00 Q2 FY00 Q3 FY00 Q4 FY00 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01

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World-class Quality Processes

We have strong internal quality processes to manage growth

Focus on defect prevention, technology insertion and process changes to improve quality and productivityCMM Level 5CMM Level 5

Reduction in cycle time and defects for six cross functional processes

Orders Through Remittance (OTR) Visa processing US Payroll

Six SigmaSix Sigma

Cross functional teams to address improvement areas in

strategic management functions

Leadership Development, Customer Relationship Management, Human Resource Management, Information Systems and Process Management

BaldrigeBaldrige

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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

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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 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

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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

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Thank You

Visit us at www.infy.com