Final Report on Dividend Policy

DIVIDEND POLICY

SUBMITTED TO: Dr. SUDHANSHU PANDIYA SUBMITTED BY: MILAN SONKAR MOHD FAHEEM NITI YADAV ASHWANI KUMAR nd MBA (FT) 2 Yr IBM C.S.J.M. UNIVERSITY, KANPUR

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Table of contents

1. EXECUTIVE SUMMARRY 2. INTRODUCTION 3. CONCEPT OF DIVIDEND POLICY 4. COMPANY PROFILE 5. DIVIDEND POLICY 2009 TO2010 6. DIVIDEND POLICY 2010 TO 2011 7. DIRECTORS REPORT 8. BIBLIOGRAPHY















EXECUTIVE SUMMRAY

This report has been made for analyzing the dividend policy of Infosys from annual year 2009 to 2011. Infosys pays dividend twice a year. An interim dividend is generally declared by the board in October along with the adoption of second quarter results. Additionally, a final dividend is recommended by the Board in April along with the adoption of annual results. The final dividend is subject to the approval of shareholders at the AGM (Annual General Meeting).

The decision of dividend policy describes as to what proportion of profits is to be distributed to the shareholders and what proportion is to be retained by the firm. Each firm has its own dividend policy which may be either payment of low or high dividends. But in the long run, it is evident that the dividends of a company paying low dividends will exceed that of high dividend paying company. However, there are different theories regarding the impact of dividend payment on the value of the firm.















DIVIDEND POLICY IN INFOSYS

Dividend policy is concerned with taking a decision regarding paying cash dividened in the present or

paying an increased dividend at a later stage. The firm could also pay in the form of stock dividened which unlike cash dividends do not provide liquidity to the investors, however, it ensures capital gains to the stockholders. The expectations of dividends by shareholders helps them determine the share value, therefore, dividend policy is a significant decision taken by the financial managers of any company.

Concept Coming up with a dividend policy is challenging for the directors and financial managers of a company, because different investors have different views on present cash dividends and future capital gains. Another confusion that pops up is regarding the extent of effect of dividends on the share price. Due to this controversial nature of a dividend policy it is often called the dividend puzzle. Various models have been developed to help firms a nalyse and evaluate the perfect dividend policy. There is no agreement between these schools of thought over the relationship between dividends and the value of the share or the wealth of the shareholders in other words. One school comprises of people like James E. Walter and Myron J. Gordon (see Gordon model), model), who believe that current cash dividends are less risky than future capital gains. Thus, they say that investors prefer those firms which pay regular dividends and such dividends affect the market price of the share. Another school linked to Modigliani and Miller holds that investors don't really choose between future gains and cash dividends.















Company Background

With an initial capital of just $250, INFY was established in 1981 by Mr. N R Narayana Murthy and six engineers. The company, initially headquartered in Pune, also signed its first client – Data Basic Corporation, during the same year. INFY relocated its headquarters to Bangalore in 1983. Since S ince then, the company grew leaps and bounds clocking $500 Mn revenue mark in 2002 and $1 Bn milestone in 2004. From the initial capital of $250 INFY has rose to become a $6.35 Bn, TTM revenues as at Q1 FY2012, organization with a Market Capitalization of over $25 Bn. The company with a base of more than 133,000 employees at the end of Q1 FY2012 is also among the largest employers of the country. Under its strategy to follow Global Delivery Model, INFY became the first IT company from India to be listed on NASDAQ. A brief of the company’s progress over last thirty years is reflected in the following exhibit: INFY has emerged as the second largest software exporter in the Indian IT industry. The company’s top

line touched $6.04 Bn in FY2011 while it reported Net profits of approximately $1.6 Bn during the year. INFY is present across the globe with 64 sales offices and 63 global development centers in 75 cities across 32 countries. Moreover, the company had over 620 clients and 6,500 projects at the end of the year. In ` terms the company’s top line stood at `27,501 Crores whereas its bottom line remained at

`6,835 Crores. INFY earned more than 90% of total revenues from the global markets during the year. Furthermore, the company has an impressive record of completing 99% of its projects on time and 96% of the same within the stipulated budgets.

INFY has emerged as the second largest software exporter in the Indian IT industry. The company’s top

line touched $6.04 Bn in FY2011 while it reported Net profits of approximately $1.6 Bn during the year. INFY is present across the globe with 64 sales offices and 63 global development centers in 75 cities across 32 countries. Moreover, the company had over 620 clients and 6,500 projects at the end of the year. In ` terms the company’s top line stood at `27,501 Crores whereas whereas its bottom line remained at `6,835 Crores. INFY earned more than 90% of total revenues from the global markets during the year. Furthermore, the company has an impressive record of completing 99% of its projects on time and















DIVIDENED POLICY (2009-2010)

Fiscal 2010 was a tough year year for the industry The economic environment environment became challenging in all the major markets where we operated. We guided guided a decline in revenues and profits profits in US Dollar terms for the year as most of our customers customers decelerated their businesses. Our Our greater lient focus and a flexible operational and financial model, however, enabled us to surmount the challenges and emerge stronger from the downturn. We concluded fiscal 2010 with an excellent quarter that confirmed the r eturn of growth for our clients and us. Our consolidated revenues for fiscal 2010 stood at Rs. 22,742 crore, a yearon-year growth of 4.8%. The profit after tax and exceptional item for the year was Rs. 6,266 crore, a yearon-year growth of 4.6%. As per the International Financial Reporting Standards (IFRS), our annual revenues for fiscal 2010 were US $4,804 million, a year-on-year growth of 3.0%. The net income as per IFRS was US $1,313 million, a year-on-year growth of 2.5%. We are happy to announce a final dividend of Rs. 15.00 per equity share (equivalent to US $0.33 per American Depositary Share (ADS) at the prevailing exchange rate of Rs. 44.90 per US$). The dividends are payable on the equity shares / ADSs outstanding as on record date, at the prevailing exchange rate on the payment date, and are subject to approval by the shareholders. Our strategy of investing in capability building, Research & Development, IP-based solutions and the new markets collectively brought about the robust performance of fiscal 2010. Infosys and its subsidiaries added 141 clients and 27,639 employees (gross) in fiscal 2010. The contribution of North America and the Rest of the World to our revenues grew to 65.8% and 10.0%, respectively. The number of our million-dollar clients grew to 338 in fiscal 2010. Even while being cautious about the economic environment, our clients are beginning to invest in business. During the tough economic environment, we focused our efforts on gaining the knowledge and capabilities to build tomorrow's enterprises. So, when the financial tide turned, our clients identified with this roadmap and partnered with us to be empowered in the future. A global auto leader engaged us to formulate its Enterprise Mobility strategy to help optimize internal operations and present on-demand information to its

















Dividend Our policy is to pay dividend dividend up to 30% of the net net profit after tax of the Company. In October 2009, 2009, we paid an interim dividend of Rs. 10/- per share. We recommended a final dividend of Rs. 15/- per share (par value of of Rs. 5/- each) The total dividend amount amount paid out is Rs. 1,434 crore, as against against Rs. 1,345 crore in the previous year. Dividend (including dividend tax) as a percentage of profit after tax before exceptional items is 29.1% as compared to 27.0% in the previous year. The register of members and share transfer books will remain closed from May Ma y 29, 2010 to June 12, 2010 (both days inclusive). Our Annual General Meeting has been scheduled for June 12, 2010

DIVIDENED POLICY OF INFOSYS (2010 – 2011)

Shareholder information Corporate Infosys was incorporated in Pune, in 1981, as Infosys Consultants Private Limited, a private limited company under the Indian Companies Act, 1956. We changed our name to Infosys Technologies Private Limited in April 1992 and to Infosys Technologies Limited in June 1992, when we became a public limited company. We made an initial public offering in February 1993 and were listed on stock exchanges in India India in June 1993. 1993. Trading opened at

145 per share, share, compared compared to the IPO price of

95 per per share. In

















Bonus issues and stock split Fiscal

1986

1989

1991

1992

1994

1997

1999

2005

2007

Bonus

1:1

1:1

1:1

1:1

1:1

1:1

1:1

3:1

1:1

Note : In addition of shares, shares, the Company split split the stock in the ratio ratio of 2 for 1 in fiscal fiscal 2000.

Dividend policy The dividend policy is to distribute up to 30% of the consolidated Profit After Tax (PAT) of the Infosys group as dividend. Unclaimed dividend Section 205 of the Companies Act, 1956, mandates that companies transfer dividend that has been unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF). In accordance with the following schedule, the dividend for the years mentioned as follows, if unclaimed within a period of seven years, will be transferred to IEPF. Year

Type of

Dividend

Date of

Due date Amount (

dividend per share ( declaration for transfer

) (1)

) 2004

Final (2)

2005

Interim Final

2006

Interim Final (3)

2007

Interim Final

2008

Interim

115.00

Jul 11, 11

27,53,100

5.00 Oct 12, 04 Nov 11, 11

5,95,535

6.50

Jul 10, 12

5,82,452

6.50 Oct 11, 05 Nov 10, 12

4,88,384

38.50

Jun 12, 04

Jun 11, 05

Jun 10, 06

Jul 9, 13

17,28,727

5.00 Oct 11, 06 Nov 10, 13

6,46,835

6.50

Jul 21, 14

9,16,420

6.00 Oct 11, 07 Nov 10, 14

10,91,136

Jun 22, 07

















(5)

Includes 30th year special dividend of

30/- per share.

The Company is sending periodic communication to the concerned shareholders, advising them to lodge their claims with respect to unclaimed dividend. Shareholders are cautioned that once unclaimed dividend is transferred to IEPF, no claim shall lie in respect thereof with the Company. Dividend remitted to IEPF during the last three years Fiscal

Amount ( )

2011

4,48,296

2010

6,60,204

2009

6,49,767

Investor services Tentative calendar Quarter ending

Jun 30, 2011

Earnings

Quiet

release

period

Jul 12, 2011

Jun 16 to Jul 14, 2011

Sep 30, 2011

Oct 12,

Sep 16 to

2011

Oct 14, 2011

Dec 31, 2011

Jan 12,

Dec 16,

2012 2011 to Jan 14, 2012 Mar 31, 2012

Apr 13,

Mar 16 to

















Venue

The Christ University Auditorium, Hosur Road, Bangalore 560 029

Book closure dates

May 28, 2011 to June 11, 2011

Dividend payment date

June 13, 2011

Investor awareness Maintaining the highest standards of corporate governance is not a matter of mere form, but of substance. In continuation of our efforts in that direction, we have provided a synopsis of some of your rights and responsibilities as a shareholder on our website, www.infosys.com. We encourage you to visit our website and read the document. We hope that the document will give you appropriate guidance, though in brief, on any questions regarding your rights as a shareholder. Dematerialization of shares and liquidity Infosys shares are tradable compulsorily in electronic form and, through Karvy Computershare Private Limited, Registrars and Share Transfer Agents, we have established connectivity with both the depositories, that is, National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The International Securities Identification Number (ISIN) allotted to our shares under the Depository System is INE009A01021. INE009A01021. As at March 31, 2011, 99.72% of our shares were held in dematerialized form and the rest in physical form. We were the the first company in India to pay a one-time custodial custodial fee of

44.43 lakh to NSDL.

Consequently, our shareholders do not have to pay depository participants, the custodial fee charged by NSDL on their holding.

















To enable us to serve our investors better, we request shareholders whose shares are in physical mode to dematerialize shares and to update their bank a ccounts with the respective depository participants. Secretarial audit As a measure of good corporate governance practice, the Board of Directors of the Company appointed Parameshwar G. Hegde, Practicing Company Secretary, to conduct Secretarial Audit of records and documents of the Company. The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, and all the Regulations and Guidelines of the Securities and Exchange of India (SEBI) as applicable to the Company. The audit also covers the reconciliation on a quarterly basis, the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit has confirmed that the total issued / paid up capital is in agreement with the aggregate total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. Further, the company voluntarily adheres to the various Secretarial Standards issued by the Institute of Company Secretaries of India. Investor complaints Received Nature of complaints Dividend / Bonus related

Attended

2011

2010

2011

2010

706

629

706

629

We attended to most of the investors’ grievances / correspondences within a period of ten days from the date of receipt of such grievances. The exceptions have been for cases constrained by disputes or legal impediments. Designated e-mail address for investor services In terms of Clause 47 (f) of the Listing Agreement, the designated e-mail address for investor complaints



















Name of the shareholder

No. of

%

Shares (1)

Life Insurance Corporation of India

Oppenheimer Developing Markets Fund Abu Dhabi Investment Authority

(2)

(2)

Franklin Templeton Investment Funds

(2)

ICICI Prudential Life Insurance Company Limited Vanguard Emerging Markets Stock Index Fund Government of Singapore

(3)

(2)

(2)

Aberdeen Asset Managers Limited

(2)

Bajaj Allianz Life Insurance Company Limited HDFC Trustee Company Limited (1)

Financial institution

(2)

Foreign institutional investor

(3)

Body corporate

(3)

(3)

2,45,97,487

4.28

1,25,56,971

2.19

1,10,65,282

1.93

99,87,588

1.74

84,09,519

1.46

70,88,500

1.23

63,01,219

1.10

62,68,000

1.09

61,41,329

1.07

59,05,736

1.03

Distribution of shareholding as at March 31, 2011 Range of equity shares held

No. of

%

No. of

%

































Income from software services and products

25,385

Software development expenses

14,267

11,559

Gross profit

11,118

9,581

Selling and marketing expenses

1,219

974

General and administration expenses 1,485

21,140

1,247

Operating profit before interest and depreciation (PBIDTA)

Interest

8,414

–

7,360

–

















item

6,443

5,803

Profit and Loss account balance brought forward

13,806

Amount available for appropriation

10,305

20,249

16,108

Dividend

Interim

574

573

30th year special dividend – interim

1,722

Final

Total dividend

1,149

3,445

861

1,434

–

















Basic

112.26

101.22

Diluted

112.22

101.10

Notes : Rs. 1 crore equals Rs. 10 million.

(1) Income from sale of investments in On Mobile Systems Inc., U.S., net of taxes and transaction costs.

(2) Equity shares are at par value of Rs. 5/- each.

2. Building Tomorrows Enterprise

During the year, we formally launched our new corporate strategy, Building Tomorrows Enterprise to showcase our plan for leading the services industry into the new era as the next generation global consulting and services company. In our journey to increase our client



















This transition will enable us to increase our client relevance, strengthen our strategic partnerships with our clients and evolve our business model.

It will help us to sharpen our industry vertical focus, allow us to invest in capabilities to deliver higher business value and align our innovation agenda with that of our clients. The new structure will also significantly expand our global market and a nd provide opportunities for the next generation of leaders.

















and 5.9% of our revenues during the current year and previous year respectively. The net profit after tax was Rs. 6,443 crore (25.4% of revenue) as against Rs. 5,803 crore (27.5% of revenue) in the previous year. The net profit for the previous year includes income from sale of investments in OnMobile Systems Systems Inc., U.S., of Rs. 48 crore, net of taxes and transaction costs.

We seek long-term partnerships with our clients that enhance their value while addressing their IT requirements. Our customer- centric approach has resulted in high high levels of client satisfaction. satisfaction. We

















As per Section 212 of the Companies Act, 1956, we are required to attach the Directors report, Balance Sheet, and Profit and Loss account of our subsidiaries. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8, 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the Annual Report. Accordingly, the Annual Report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries,

















solutions portfolio and include consulting, package implementation, independent validation, migration, application development and maintenance, system integration, software performance engineering and support. These offerings make Finacle™ a strong innovation facilitator,

enabling banks to accelerate growth, while maximizing value from their large-scale business transformation. transformation. FinacleTM is chosen by 140 140 banks across 73 countries to power operations across 47,000 branches. Today, FinacleTM enables its customer banks to serve 390 million accounts and 289 million consumers worldwide. Finacle™ is also leading the financial

inclusion agenda in India. Of the 82 regional rural banks in the

















Outstanding Performance (iSOP) program.

During the year, the Quality department, in collaboration with multiple stakeholders across the organization, had developed a framework called Business Value Articulation which ensures alignment of our approaches to deliver value to our customers. Some of our key initiatives are :

ENCORE : An initiative to promote reuse and reduce cycle time by creating and deploying reusable technical and business components.



















from May 28, 2011 to June 11, 2011 (both days inclusive). Our Annual General Meeting has been scheduled to be held on June 11, 2011.

Transfer to reserves

















Whistleblower Policy and Code of Conduct, have been incorporated in our Company policy. Our Code of Conduct was updated to make it relevant and responsive to the changing needs of our business.

















material departures from prescribed accounting standards in the adoption of the accounting standards.

The Board of Directors accepts responsibility for the integrity and

















K. Dinesh has expressed his his intention not to seek re-appointment. The Members of the Board place on record their deep sense of appreciation for the services rendered by K. Dinesh during his tenure as Member of

















We have also set up a scalable recruitment and human resources management process, which enables us to attract and retain high-caliber employees. We added 15,321 (net) and 32,247 (gross) employees this year, taking our total strength to 1,08,009 from 92,688 at the end of























































































































































Final Report on Dividend Policy

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