MANAGEMENT DISCUSSION & ANALYSIS

Company Overview

L&T Infotech is one of India’s global IT services and solutions companies. In 2015, NASSCOM ranked our company as the sixth largest Indian IT services company in terms of export revenues. We were amongst the top 20 IT service providers globally in 2015 according to the Everest Group’s PEAK Matrix for IT service providers. Our clients comprise some of the world’s largest and well-known organisations, including 49 of the Fortune Global 500 companies.

We offer an extensive range of IT services to our clients in diverse industries such as banking and financial services, insurance, energy and process, consumer packaged goods, retail and pharmaceuticals, media and entertainment, hi-tech and consumer electronics and automotive and aerospace. Our range of services includes application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions. We serve our clients across these industries, leveraging our domain expertise, diverse technological capabilities, wide geographical reach, an efficient global delivery model, thought partnership and “new age” digital offerings.

We were incorporated in 1996 and are headquartered in Mumbai, India. We leverage the strengths and heritage of our Promoter, Larsen & Toubro Limited, a leading Indian conglomerate in engineering, construction, manufacturing, finance and technology. The L&T group provides us with access to professionals with deep industry knowledge in the sectors in which we do business. We have also inherited from L&T group, it’s corporate and business culture and corporate governance practices, which in our view places us in good stead in relation to our business. In addition, we benefit from the commonality of business verticals with our Promoter.

Our growth has been marked by significant expansion of business verticals and geographies in which we do business. Besides India, we Management Discussion & Analysis provide services globally from North America, Europe, Asia Pacific and the rest of the world. As of March 31, 2016, we had 22 Delivery Centres and 44 sales offices globally.

I. Economic Overview

Global Economic Scenario:

Post the economic crisis of 2008, the global economy has continued to be on the recovery path, however the pace of this recovery has been extremely sluggish and fragile.

The key economic events that have defined and driven the world economy in the past one year and a few months are slowdown of the Chinese economic juggernaut due to rebalancing and a prolonged slump in energy and commodity prices, especially oil. These two developments have severely impacted the developing economies, especially the energy and commodity exporters such as Brazil, Russia, etc.

However, this has been balanced, albeit partially, by modest revival in growth of many developed countries, especially the United States of America. This kind of a mixed bag scenario has been further complicated by the volatility in the global financial markets, which have reacted with wild swings especially during the last months of 2015 and initial part of 2016 in the background of mixed economic news and major decisions by the US Federal Reserve to increase the interest rates from 0% to 0.25% - 0.5% and Chinese Central Bank’s move to devalue the Yuan. As per the IMF report, global growth during the second half of 2015, at 2.8 percent, was weaker due to slowdown during Q4. In their assessment, this weakness reflected, to a significant degree, softening of economic activity in major advanced economies of United States and Japan. However, economic sentiments have recovered and prospects for the world economy in 2016 are expected to be better than 2015, although marginally so and with significant downside risks ndian Economic Overview:

With the economy growing by 7.2% in 2014-15 and expected to grow by 7.6% in 2015-16 (based on revised base to 2011- 12), India overtook China as the fastest growing large economy. The revival in growth momentum has however underwhelmed on account of the sluggish global economic scenario, no major uptick in domestic demand and subdued investments from the private sector due to balance sheets overburdened with debt. However, the new Government has managed to improve the overall macroeconomic health of the economy by reducing the fiscal deficit and current account deficit being curtailed due to reduced oil price decline. Going forward some of the factors that will drive the Indian growth story especially in 2016 will be as follows:

• Jump in public investments by Government in the major infrastructure sectors

• Potential increase in consumption on account of 7th pay commission and One Rank One Pension implementation

• Expected normal monsoon after two continuous rainfall deficient years and Government’s focus on rural sector will drive rural demand

• Continued reform measures and Government’s initiatives to attract foreign investments

• Decline in interest rates on account of drop in inflation In addition to this, further reforms and policy initiatives of the Government are likely to ensure uptick in growth for the Indian economy. Some of the important initiatives such as ‘Make in India’, ‘Digital India’, ‘Skill India’ and ‘Start-Up India’ mission are being aggressively promoted by the Indian government.

On the negative side, overhang of debt related stress in the major sectors of the economy, including banking, and further tapering of exports due to fragile economic scenario globally will continue impact negatively for some more time.

II. Industry Overview

Global IT-BPM Industry in 2015:

Key trends in the Global IT-BPM Market noted by NASSCOM were as follows:

• Increasing number of firms are using custom application development as a means to enhance customer service with tailored solutions. The need to be differentiate their company and competitors and the need to comply with regulations and industry mandates are driving growth in the segment.

• CADM services using cloud computing, mobility considered as a strategic tool to enhance business processes and improve customer satisfaction and acquisition.

• Social, Mobile, Analytics & Cloud (SMAC) adoption across industries became all pervasive driving growth in IT services.

• Enterprise applications becoming increasingly consumer oriented, mobile and on-the-go; applications’ delivery mechanism shifting to cloud-based environment.

• Demand for migration, porting and re-platforming of traditional on brmise application to SaaS from both clients and ISVs provide significant opportunity.

• Agile testing is growing in acceptance even though it is yet to fully mature.

• Crowd-sourced testing is gaining popularity and testing automation as well as data management are adapting to the new technology demands.

• Key drivers for third party and GICs are cloud based testing, IP-led testing, testing-as-a-service, automated testing and testing in domain-specific niche services along with transformational programs using SMAC and Internet of Things (IoT).

• The year was marked by spinoffs, buyouts, divestitures and focused acquisitions among service providers which helped bolster the bottom line for the vendors and their customers. Technology M&A deals in volume registered a record high of USD 713 billion in 2015 on a global basis.

Driven by increased competition, some other firms took the restructuring of businesses route to improve profits and reduce costs. (Source: NASSCOM Report)

III. Significant Factors Affecting Our Results of Operations

This section sets out certain key factors that our management believes have historically affected our results of operations during the year under review, or which could affect our results of operations in the future.

Client relationships

Client relationships are at the core of our business. We have a history of high client retention and derive a significant proportion of our revenues from repeat business built on our successful execution of prior engagements. In the year ended March 31, 2016 we generated 96.9% of our revenue from existing clients.

As a client relationship matures and deepens, we seek to maximise our revenues and profitability by expanding the scope of IT services offered to that client with the objective of winning more business from our clients, particularly in relation to our more substantive and value-added IT service offerings.

Composition of revenue portfolio

Our ability to achieve growth in our revenues is dependent on composition of the proportion of work performed onsite and offshore through our global delivery model.

Our offshore export service revenues consist of revenues from IT services performed in our facilities in India. Our onsite export service revenues consist of revenues from software services performed at clients’ brmises or from our Delivery Centres outside India. Onsite services typically generate higher revenues than the same services performed offshore, and our profit margins are typically higher if work is performed offshore as compared to onsite. Accordingly, the mix of IT services performed onsite and offshore has an impact on our ability to achieve higher profit margins.

employees and employee costs

A principal component of our ability to compete effectively is our ability to attract and retain qualified employees. Our number of employees increased to 20,072 as of March 31, 2016 from 19,479 as of March 31, 2015.

Employee benefit expenses constituted 57.5% and 57.7% of our total income in the year ended March 31, 2016 and March 31, 2015. Wage costs in India, including in the IT services industry, have historically been more competitive than wage costs in the United States, Europe and other developed economies.

In addition, we continue to invest in the recruitment and retention of sales and administration staff in line with our growth and expand our markets.

Foreign currency fluctuations

Since our key clients are foreign corporate and the majority of our revenues are generated outside of India we are exposed to translation and transaction foreign exchange risks. Although we partly benefit from a natural hedge for our foreign currency revenues against our foreign currency expenses, we also have an exposure to foreign exchange rate risk in respect of revenues or expenses entered into in a currency where corresponding expenses or revenues are denominated in different currencies. Such transactions are denominated in currencies such as USD, Euro, Canadian Dollars, British Pound Sterling and South Afric an Rand. In addition, the overall competitiveness of the Indian IT industry in the global market is also significantly dependent on favourable exchange rates.

Tax benefits for Indian IT companies

We have historically benefited from the direct and indirect tax benefits given by the Government for the export of IT services from SEZs, including for our business. As a result, a substantial portion of our profits is exempt from income tax leading to a lower overall effective tax rate than that which we would otherwise enjoy if we were doing business outside SEZs, and we will continue to enjoy these benefits in the near future. Our effective tax rate was 19.6% and 18.0%, respectively in the year ended March 31, 2016 and March 31, 2015.

Until March 31, 2011, direct and indirect tax benefits were also available for the export of IT services from software development centres registered under the STPI Scheme, including for our business. From April 1, 2011 onwards, we have enjoyed only indirect tax benefits for our business through software development centers registered under the

STPI Scheme

IV. Financial Conditions Consolidated

Sources of Funds

1. Share Capital

a) The board of directors at their meeting held on June 16, 2015 approved sub-division of the equity shares of face value of Rs. 5 each to face value of Rs. 1 each. The shareholders approved the sub-division on June 22, 2015 at the extraordinary general meeting

b) The authorised share capital of the Company was increased by Rs. 36.25 Million comprising of 36,250,000 equity shares of Rs. 1 each at the board meeting held on June 16, 2015 and approved by the shareholders at the extraordinary general meeting held on June 22, 2015.

c) In accordance with the order of the Hon’ble High Court of Judicature at Bombay for amalgamating Information Systems Research Centre Private Limited, the authorised share capital of the Company was increased by Rs. 40.00 Million comprising of 40,000,000 equity shares of Rs. 1 each on amalgamation.

d) The Issued, paid up and subscribed share capital increased by Rs. 8.57 Million on account of shares issued on exercise of employee stock options during the year ended March 31, 2016.

The Company’s long-term borrowings decreased to Rs. 147.23 Million as at March 31, 2016 from Rs. 277.78 Million as at March 31, 2015 on account of repayment of external commercial borrowing to the extent of Rs. 130.55 Million during the year as per repayment schedule.

The Company’s short-term borrowings stood at Rs. 397.53 Million at March 31, 2016 from Rs. 1,897.48 Million as at March 31, 2015 on account of net repayment of loans.

Deferred tax liability or asset is recognised on timing differences between the income accounted in financial statements and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Other deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

During the year, the increase in Deferred Tax liability is mainly on account of:

• Premia earned on forward contracts: - Pursuant to Income Computation and Disclosure Standards, brmia earned on forward contracts is taxable on settlement and not at the time of entering the forward contract and this creates a timing difference for which Deferred Tax liability has been created

Current liabilities consisting of trade payables, other current liabilities and short term provisions stood at Rs. 11,212.23 Million as of March 31, 2016 from Rs. 7,258.39 Million as of March 31, 2015.

Other current liabilities as of March 31, 2016 include proposed dividend along with dividend distribution tax which has been rebrsented as the final dividend. The Board of Directors, in its meeting held on April 26, 2016, have proposed a final dividend of Rs. 2.60 per equity share. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on May 31, 2016.

Short term provisions comprise of provisions for employee benefits on account of gratuity and compensated absences and income tax provision.

Additions:

Additions to the gross block in the year ended March 31, 2016 amounted to Rs. 1,346.97 Million. The Company has been continuously investing in infrastructure facilities on account of computers, office equipment, expansion of development centres and overseas offices, in order to meet growing business needs.

Deductions:

During the year, the company disposed various assets with a gross block of Rs. 728.50 Million, particularly on vacancy of an office space in Chennai location in India.

7. Trade Receivables

Trade receivables amounted to Rs. 11,659.87 Million (net of provision for doubtful debts amounting to Rs. 160.69 Million) as at March 31, 2016, compared to Rs. 10,901.16 Million (net of provision for doubtful debts amounting to Rs. 175.30 Million) as at March 31, 2015. Debtors are at 19.9% of revenue from operations for the year ended March 31, 2016, compared to 21.9% as at March 31, 2015.

8. Unbilled Revenue

Unbilled revenue primarily comprise of costs and earnings in excess of billings to the clients on fixedprice, fixed-time frame, and time-and-material contracts. Unbilled revenue stood at Rs. 3,787.89 Million as at March 31, 2016 as against Rs. 1,544.50 Million at March 31, 2015 since the composition of fixed price and system integration contracts increased during the year.

9. Cash & Bank

The bank balances in India include both rupee accounts and foreign currency accounts. The bank balances in overseas accounts are maintained to meet the expenditure of the overseas operations.

Deposits with financial institutions rebrsent surplus money deployed in form of deposits and collaterals kept against open ended bank guarantees issued to customers. The cash & bank balance stood at Rs. 2,033.66 Million as at March 31, 2016 from Rs. 2,009.21 Million as at March 31, 2015

Loans and advances as at March 31, 2016 increased by Rs. 2,092.29 Million arising out of increase in long-term loans and advances by Rs. 1,809.34 Million and increase in short-term loans and advances of Rs. 282.95 Million.

The increase in loans and advances was primarily attributable to brmia on forward contract and MAT recoverable. Under ICDS, tax treatment for brmia earned on forward contracts has changed and brmia earned on forward contracts is taxable on settlement and not at the time of earning. Prior to the application of ICDS, such brmia were taxable when earned. Due to this change, MAT credit recoverable has increased, and tax charge has decreased with corresponding increase in deferred tax provision. Financial Year 2016 Compared to Financial Year 2015

1. Income

Our total income comprises of revenue from operations and other income.

Our total income increased by 21.2% to Rs. 61,430.21 Million for the year ended March 31, 2016 from Rs. 50,695.36 Million for the year ended March 31, 2015, primarily due to an increase in our revenue from operations and other income primarily on account of foreign exchange gain.

Revenue from operations

We generate revenue from our continuing operations through time-and-materials contracts and fixed-price contracts by providing IT services and solutions to our clients in our industrials and services clusters.

Our revenue from continuing operations increased by 17.7% to Rs. 58,470.60 Million for the year ended March 31, 2016 from Rs. 49,680.94 Million for the year ended March 31, 2015, primarily as a result of growth in our revenues in our banking and financial services, insurance, automotive and aerospace, media and entertainment and plant equipment business verticals, as well as our digital solutions, testing and IMS service lines, which was partially offset by lower revenues from continuing operations in our energy and process business vertical.

Revenue from continuing operations in North America increased by 18.4% to Rs. 40,370.47 Million for the year ended March 31, 2016 from Rs. 34,097.77 Million for the year ended March 31, 2015, primarily as a result of growth in our banking and financial services, insurance, media and entertainment and automotive and aerospace business verticals. Revenue from continuing operations in Europe increased by 14.2% to Rs. 10,124.59 Million for the year ended March 31, 2016 from Rs. 8,862.74 Million for the year ended March 31, 2015, primarily as a result of increase in revenues from existing clients and revenues from new clients in Nordics, Germany and France.

Revenue from continuing operations in Asia-Pacific decreased by 0.7% to Rs. 1,190.47 Million for the year ended March 31, 2016 from Rs. 1,199.12 Million for the year ended March 31, 2015, primarily as a result of completion of projects for a large client. Revenue from continuing operations in India increased by 63.8% to Rs. 3,400.19 Million for the year ended March 31, 2016 from Rs. 2,075.90 Million for the year ended March 31, 2015, primarily as a result of increase in revenue attributable to system integration projects from new clients in the banking and financial services, plant equipment and the defence business verticals.

Revenue from continuing operations in the rest of the world decreased by 1.8% to Rs. 3,384.88 Million for the year ended March 31, 2016 from Rs. 3,445.41 Million for the year ended March 31, 2015, primarily as a result of currency devaluation of the South African Rand against the Indian Rupee which negatively impacted our revenue from continuing operations in South Africa and due to the completion of implementation of projects for few large clients in the Middle East.

Our USD revenue from continuing operations comprise revenues denominated in USD, in addition to amounts in foreign currencies across our operations, that are converted into USD using the month-end/day-end exchange rates for the relevant period. Such revenues increased by 9.5% to USD887.2 Million for the year ended March 31, 2016 from USD809.9 Million for the year ended March 31, 2015.

Other Income

Our other income primarily consists of income from foreign exchange gains (or losses), investments in mutual funds, profit on sale of fixed assets, interest received and miscellaneous income. Our other income increased to Rs. 2,959.61 Million for the year ended March 31, 2016 from Rs. 915.00 Million for the year ended March 31, 2015. This was primarily due to foreign exchange gain of Rs. 2,795.57 Million in the year ended March 31, 2016 compared with a foreign exchange gain of Rs. 667.81 Million in the year ended March 31, 2015.

In order to mitigate our foreign exchange risk, we have a longterm hedging policy. We hedge the major currencies in which we transact business (for example, the US dollar and the Euro) by entering into forward contracts. Our forward contracts are run on a net exposure basis, typically for a period of up to three years. These forward contracts provide for payments by banks to us in the situations where the spot exchange rate on maturity is lower than the rate at which forward contracts were entered and payment by us to the banks in situations where the spot exchange rate on maturity is higher than the rate at which forward contracts were entered. Such forward contracts are treated as foreign currency transactions and accounted for accordingly. Exchange differences arising on such contracts are recognised in the period in which they arise and the brmium paid/received is accounted as expense/income over the period of the contract and the impact is reversed upon maturity of the contract.

In the year ended March 31, 2016, the debrciation of major currencies in which we transact business against the US dollar, was offset by the forward rates contracted with banks in the past. This, coupled with higher volume of forward contracts entered into and maturing in this period, led to a higher gain on settlement under our forward contracts and higher brmia income, which we recognised as part of our other income. As a result of this, our foreign exchange gain was Rs. 2,795.57 Million in the year ended March 31, 2016.

2. Expenses

Our expenses include employee benefit expenses, operating expenses, sales, administration and other expenses, finance costs, debrciation and amortisation and tax expenses. Our total expenses increased by 21.1% to Rs. 48,114.45 Million for the year ended March 31, 2016 from Rs. 39,735.79 Million for the year ended March 31, 2015, primarily as a result of an increase in employee benefit expenses, which was attributable to the growth of our operations.

Employee benefit expenses

Employee benefit expenses comprise salaries (including overseas staff expenses); staff welfare; contributions to provident and other funds; contributions to superannuation funds and contributions to gratuity funds.

Our employee benefit expenses increased by 20.9% to Rs. 35,346.58 Million for the year ended March 31, 2016 (which rebrsented 57.5% of our total income for such year) from Rs. 29,242.73 Million for the year ended March 31, 2015 (which rebrsented 57.7% of our total income for such year), primarily as a result of increase in salaries, including overseas staff expenses, to Rs. 33,997.84 Million from Rs. 28,056.30 Million. Due to the growth of our operations, our usage of local hires and increase in company level annual increments has impacted costs.

Operating expenses

Operating expenses comprise communication expenses; operating lease charges; consultancy charges; cost of software packages for own use; insurance; and the cost of bought-out items for resale. Our operating expenses increased by 37.4% to Rs. 6,710.80 Million for the year ended March 31, 2016 (which rebrsented 10.9% of our total income for such year) from Rs. 4,885.63 Million for the year ended March 31, 2015 (which rebrsented 9.6% of our total income for such year). This was primarily as a result of an increase in the costs of bought-out items for resale (which relates to the purchase of hardware and software license) to Rs. 1,982.12 Million for the year ended March 31, 2016 from Rs. 742.76 Million for the year ended March 31, 2015 and a 16.6% increase in our consultancy charges to Rs. 4,032.97 Million for the year ended March 31, 2016 from Rs. 3,458.95 Million for the year ended March 31, 2015, in both cases, primarily as a result of increase in services performed for clients requiring us to work with external sub-contractors.

Sales, administration and other expenses

Sales, administration and other expenses primarily comprise rent and establishment expenses; travelling and conveyance; legal and professional charges; telephone charges and postage; rates and taxes; power and fuel and other miscellaneous expenses. Our sales, administration and other expenses increased by 8.0% to Rs. 6,057.07 Million for the year ended March 31, 2016 (which rebrsented 9.9% of our total income for such year) from Rs. 5,607.43 Million for the year ended March 31, 2015 (which rebrsented 11.1% of our total income for such year), primarily as a result of increase in repairs to building in Vashi and transit houses in Airoli and other locations, increase in general repairs and maintenance expenses for new units which became fully operational in the year ended March 31, 2016, higher tax rates and taxes payable in relation to the growth of our operations offset by reversal of provision made in the year ended March 31, 2015 for California state taxes pursuant to a final judicial order received in our favour. The increase in miscellaneous expenses is due to certain one-time expenses and increase in expenditure made on account of CSR activities.

Finance costs

Finance costs comprise interest paid on fixed loans, external commercial borrowings and lease finance charges. Exchange losses on borrowings are also accounted for as part of finance costs.

Our finance costs decreased by 0.6% to Rs. 103.57 Million for the year ended March 31, 2016 from Rs. 104.19 Million for the year ended March 31, 2015, primarily due to repayment of loans during the year.

Debrciation and amortization

Tangible and intangible assets are amortised over periods corresponding to their estimated useful lives. Our debrciation on tangible assets decreased by 0.7% to Rs. 736.67 Million for the year ended March 31, 2016 from Rs. 741.55 Million for the year ended March 31, 2015, and our amortisation of intangible assets increased by 19.7% to Rs. 1,002.85 Million for the year ended March 31, 2016 from Rs. 837.85 Million for the year ended March 31, 2015 primarily as a result of amortization of certain software purchased at the beginning of the year ended March 31, 2016 which were leased from third parties during the year ended March 31, 2015 and consequently, we did not record any amortization relating to such software in our financial accounts for such period.

Profit before extraordinary items and tax

As a result of the above mentioned factors, our profit before extraordinary items and tax was Rs. 11,472.67 Million for the year ended March 31, 2016 (which rebrsented 18.7% of our total income for such year) and Rs. 9,275.98 Million for the year ended March 31, 2015 (which rebrsented 18.3% of our total income for such year).

Profit from continuing operations before tax

As a result of the foregoing factors, our profit from continuing operations before tax increased by 23.8% to Rs. 11,472.67 Million for the year ended March 31, 2016 (which rebrsented 18.7% of our total income for such year) from Rs. 9,266.26 Million for the year ended March 31, 2015 (which rebrsented 18.3% of our total income for such year).

Tax expenses

Tax expenses comprise of current tax and deferred tax. Current income tax is the amount expected to be paid to the tax authorities in accordance with the applicable tax laws in relevant jurisdictions. Deferred income tax reflects the impact of timing differences between taxable income and accounting income.

Our current tax increased by 0.2% to Rs. 1,649.17 Million for the year ended March 31, 2016 from Rs. 1,645.32 Million for the year ended March 31, 2015. This decrease was primarily due to an increase in the overseas taxes corresponding to increase in operations and increase in overseas withholding taxes which was offset by reduction in current tax provision in India due to application of ICDS with effect from April 1, 2015. Under ICDS, tax treatment for brmia earned on forward contracts has changed and brmia earned on forward contracts is taxable on settlement and not at the time of earning. Prior to the application of ICDS, such brmia were taxable when earned.

Due to this change, current tax provision is reduced (and MAT credit entitlement has increased), with corresponding increase in deferred tax provision. Thus, there is no impact on total tax provision (current plus deferred) due to application of ICDS. Our deferred tax charge for the year ended March 31, 2016 was Rs. 600.44 Million as against our deferred tax charge for the year ended March 31, 2015 of Rs. 35.76 Million owing to the application of ICDS as explained above.

Our total tax expense has increased by 33.8% to Rs. 2,249.61 Million for the year ended March 31, 2016 from Rs. 1,681.08 Million for the year ended March 31, 2015 primarily due to increase in profit before tax by 23.8% to Rs. 11,472.67 Million for the year ended March 31, 2016 from Rs. 9,266.26 Million for the year ended March 31, 2015.

Net profit after tax

As a result of the foregoing factors, our net profit was Rs. 9,221.77 Million for the year ended March 31, 2016 and Rs. 7,685.26 Million for the year ended March 31, 2015.

Earnings per share (EPS)

Our Basic EPS before extraordinary items has increased by 19.3% to Rs. 56.26 per share in the year ended March 31, 2016 from Rs. 47.17 per share in the year ended March 31, 2015. Correspondingly, the Diluted EPS has increased by 24.3% to Rs. 56.13 per share in the year ended March 31, 2016 from Rs. 45.14 per share in the year ended March 31, 2015. The weighted average number of potential equity shares on account of employee options has reduced from 7,270,100 shares in the year ended March 31, 2016 to 392,052 shares in the year ended March 31, 2016 due to exercise of stock options.

Our Basic EPS after extraordinary items has increased by 18.0% from Rs. 47.66 per share to Rs. 56.26 per share in the year ended March 31, 2016. Correspondingly, the Diluted EPS has increased by 23.1% from Rs. 45.60 per share to Rs. 56.13 per share in the year ended March 31, 2016.

Segmental Reporting

Business segmentation

We report our continuing business operations in two business segments, which we term “clusters”: an industrials cluster (comprising the business verticals of energy and process, consumer packaged goods, retail and pharmaceuticals, hi-tech and consumer electronics, automotive and aerospace, plant equipment, and utilities, engineering and construction) and a services cluster (comprising the business verticals of banking and financial services, insurance, media and entertainment, travel and logistics and other miscellaneous business verticals).

The business units within each cluster include certain horizontals from an organisational structure perspective, which are responsible for serving clients across both clusters. In addition, our results of operations brsented for the year ended March 31, 2015 also included our telecom cluster, which constituted our discontinued operations from Product Engineering Services transferred to L&T Technology Services Limited on January 1, 2014.

Geographic segmentation

Our revenues are generated from four main geographic markets: North America, Europe, Asia Pacific and India. We brsent our revenues by client location based on the location of the specific client site that we serve, irrespective of the location of the headquarters of the client or the location of the Delivery Centre where the work is performed. The following tables show a breakdown of our revenue from continuing operations and discontinued operations separately, on the basis of the geographic location of our clients, with each item rebrsented as a percentage of revenue from continuing operations and revenue from discontinued operations, as applicable, for the periods indicated:

Cash flow from operating activities

Net cash generated from our operating activities before extraordinary item was Rs. 8,633.03 Million for the year ended March 31, 2016. Our net profit before tax (excluding extraordinary items), was Rs. 11,472.67 Million for the year ended March 31, 2016, which was adjusted mainly for debrciation and amortization of Rs. 1,739.52 Million and unrealised foreign exchange gain of Rs. 901.57 Million. As a result, our operating profit before working capital changes was Rs. 12,225.69 Million for the year ended March 31, 2016. This was further adjusted primarily for a decrease in our working capital of Rs. 935.67 Million. The decrease in our working capital was primarily attributable to an increase in trade and other payables of Rs. 2,123.04 Million partially set-off by increase in trade receivables and unbilled revenue by Rs. 3,069.79 Million. Cash generated from our operations was Rs. 11,290.02 Million in the year ended March 31, 2016, adjusted for direct taxes paid of Rs. 2,656.99 Million. As a result, our net cash generated from operating activities before extraordinary item was Rs. 8,633.03 Million for the year ended March 31, 2016.

Cash flow used for/from investing activities Net cash used for investing activities (after extraordinary items) was Rs. 441.35 Million for the year ended March 31, 2016, which was primarily attributable to our purchase of fixed assets amounting to Rs. 1,290.54 Million. This was partially offset by proceeds from the sale of current investments of Rs. 674.75 Million in the year ended March 31, 2016.

Cash flow used in financing activities Net cash used in financing activities was Rs. 8,167.23 Million for the year ended March 31, 2016, mainly consisting of the payment of dividends of Rs. 5,467.30 Million, the repayment of borrowings of Rs. 1,662.61 Million and the payment of dividend tax of Rs. 1,048.71 Million.

VII. Outlook, risks and concerns

This section lists forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these statements as a result of certain factors. This section list our outlook, risks and concerns as follows:

Internal Risks:

1. Our business will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and the industries on which we focus.

2. Intense competition in the market for technology services could affect our pricing, which could reduce our share of business from clients and decrease our revenues and profitability.

3. Our revenues, expenses and profitability may be subject to significant fluctuation and hence may be difficult to brdict. This increases the likelihood that our results of operations could fall below the expectations of investors and market analysts, which could cause the market price of the Equity Shares to decline.

4. Exchange rate fluctuations in various currencies in which we do business could negatively impact our business, financial condition and results of operations.

5. Our revenues are highly dependent on clients primarily located in North America and Europe, as well as on clients concentrated in certain industries, notably banking and financial services, insurance, energy and process, and consumer packaged goods, retail and pharmaceuticals. Our revenues are also dependent on two service lines; therefore, an economic slowdown or factors that affect the economic health of North America or Europe, these industries or these service lines could adversely affect our business, financial condition and results of operations.

6. Challenges in relation to immigration may affect our ability to compete for, and provide services to, clients in the United States and/or other countries, partly because we may be required to hire locals instead of using our existing work force, which could result in lower profit margins, delays in, or losses of, client engagements and otherwise adversely affect our ability to meet our growth, revenue and profit projections. We cannot assure you that we will not be subject to penalties in relation to employment visa violations in the future.

7. Our pricing structures do not accurately anticipate the cost and complexity of performing our work and if we are unable to manage costs successfully, then certain of our contracts could be or become unprofitable.

8. Some of our client contracts contain benchmarking and most favoured customer provisions which, if triggered, could result in lower contractual revenues and profitability in the future.

9. Our Company has amended the ESOP Scheme 2000 and changed the vesting schedule and exercise period of options and has exercised discretion with respect to the vesting and exercise of certain options; any of these actions have resulted in and may continue to result in claims under the Existing Employee Stock Option Plans that may adversely impact our reputation, business, financial condition and results of operations

10. Our revenue depends to a large extent on a limited number of clients, and our revenue could decline if we lose a major client.

11. Wage increases in India may diminish our competitive advantage against companies located in the United States and Europe and may reduce our profit margins.

12. Our profitability could suffer if we are not able to maintain favorable employee utilization.

13. Our success depends in large part upon the strength of our management team and other highly skilled professionals. If we fail to attract, retain and manage transition of these personnel, our business may be unable to grow and our revenue could decline.

14. Any inability to manage our growth could disrupt our business and reduce our profitability.

15. We may face difficulties in providing end-to-end business solutions for our clients that could cause clients to discontinue their work with us, which, in turn, could adversely impact our business, financial condition and results of operations. We may also be required to pay damages for deficient services or for violating intellectual property rights.

16. If we are unable to collect our dues and receivables from, or invoice our unbilled services to, our clients, our results of operations and cash flows could be adversely affected.

17. If there is a change in tax regulations, our tax liabilities may increase and thus adversely affect our financial position and results of operations. We would indeed realize lower tax benefits if the special tax holiday scheme for units set up in special economic zones is substantially modified.

18. Any increase in or realization of our contingent liabilities could adversely affect our financial condition.

19. Our business is based on the trust and confidence of our customers and any damage to that trust and confidence whether in relation to our personnel or our brand may materially and adversely affect our business, future financial performance and results of operations.

20. Adverse changes to our relationships with key alliance partners could adversely affect our revenues and results of operations.

21. We may be liable to our clients for damages caused by system failures, disclosure of confidential information or data security breaches, which could harm our reputation and cause us to lose clients.

22. Disruptions in telecommunications could harm our service model, which could result in a reduction of our revenue.

23. We may engage in acquisitions that may not be successful or meet our expectations.

24. Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violation of these regulations could harm our business.

25. Our work with government clients exposes us to additional risks inherent in the government contracting environment.

26. Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, and this may have a material adverse effect on our business, financial condition and results of operations.

27. Compliance with, and changes in labour laws and regulations could materially and adversely affect our business, future financial performance and results of operations, while we face further labour risks, such as the risk of our employees joining a labour union and engaging in collective bargaining.

28. Our debt financing agreements contain restrictive covenants that may adversely affect our business, credit ratings, prospects, results of operations and financial condition.

External Risks:

29. The markets in which we operate are subject to the risk of earthquakes, floods, tsunamis, storms and other natural and manmade disasters.

30. Changing laws, rules and regulations and legal uncertainties, including adverse application of tax laws and regulations, may adversely affect our business and financial performance.

31. Our business is substantially affected by brvailing economic, political and other brvailing conditions in India.

32. We may be affected by competition law in India and any adverse application or interbrtation of the Competition Act could adversely affect our business.

33. Indian law limits our ability to raise capital outside of India and may limit the ability of others to acquire us, which could brvent us from operating our business or entering into a transaction that is in the best interests of our shareholders.

34. Significant differences exist between Indian GAAP, used throughout our financial information and other accounting principles with which investors may be more familiar.

35. Public companies in India, including us, are required to brpare financial statements under Ind AS and compute Income Tax under the Income Computation and Disclosure Standards (the “ICDS”). The transition to Ind AS and ICDS in India is very recent and we may be negatively affected by such transition.

36. We may be unsuccessful in protecting our intellectual property rights in India. Unauthorised use of our intellectual property may result in the development of technology, products or services which compete with our products. We may also be subject to third-party claims of intellectual property infringement.

VIII. Material developments in Human Resources

This has been elaborated in the Human Resources section of the Annual Report.