Nandan Nilekani - CEO and MD Kris Gopalakrishnan - President, COO and Joint MD V. Balakrishnan - CFO Sandeep Mahindroo - General Manager, Investor Relations

Bryan Keane - Prudential Moshe Katri - Cowen & Company James Friedman - Susquehanna Joseph Foresi - Janney Montgomery Scott Rod Bourgeois - Sanford C. Bernstein Julio Quinteros - Goldman Sachs David Grossman - Thomas Weisel Partners George Price - Stifel Nicolaus

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Infosys Technologies’ Q3 '07 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you, Mr. Mahindroo, you may begin your conference.

Thanks, Angela. Good morning, and welcome to this conference call to discuss Infosys' financial results for the quarter ended December 31, 2006. I'm Sandeep from the Investor Relations team in New York. Let me start by wishing you all a very happy and prosperous 2007. Joining us today on this conference call is CEO and MD, Mr. Nandan Nilekani; President, COO, and Joint MD, Mr. Kris Gopalakrishnan; and CFO, Mr. V Balakrishnan, along with other members of the senior management. We'll start with a brief statement on the performance of the company for the recently concluded quarter, followed by the outlook for the quarter and year ended March 31, 2007. After that, we'll open up the discussion for the Q&A. Before I pass it on to Mr. Nilekani, I would like to remind you that anything that we say which refers to our outlook for the future is a forward-looking statement, and must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available with our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Mr. Nilekani.

Thank you, and I'd like to welcome all of you to this call, this evening Indian time, and morning in the U.S., and happy New Year to all of you, and let me give you a brief overview of the business, and then Kris will continue and then Bala will talk from the finance side. I think, we have had another good quarter. We have had sequential growth as you have seen of 10.1%. This happens to be the third consecutive quarter where we have delivered double digit revenue growth in dollar terms. So we believe that this is an endorsement and validation of our strategy of building the brand, building our transformation capability, and our investments is enriching and synergizing our portfolio of services, so that we can create compelling value propositions for our client. While we have grown 10.1% this quarter, we have also given our guidance for the next quarter, where we expect revenues to grow between 4.6% to 4.9%. And for the year, we expect revenues in dollar terms to grow at 43.6% in this fiscal year. The revenue for this quarter was at $821 million, and our earnings per ADS has gone up to $0.39 from $0.26 in the previous quarter, with an addition of 43 new clients. While we have grown at double digits in dollar terms, in rupee terms our growth has been more modest. It has been at 5.9%, essentially because the rupee appreciated at around 3.8% for the year, and therefore we lost about 145 crores of revenue due to rupee appreciation. But even here, I think given the fact that typically 1% appreciation of the rupee cost us 0.5% of operating margin. If nothing else had changed, this rupee appreciation would have cost us about 2 percentage points of operating margin reduction, but thanks to an improvement in revenue productivity, thanks to an improvement in license revenue in Finacle, thanks to scale benefits on SG&A. We have been able to offset the negative impact of operating margin on currency by a positive impact through essentially, productivity, efficiency and value realization. And therefore the net impact in fact of all this was positive, and the operating margin overall has gone up by 20 basis points, in spite of the rupee appreciation. So, we think that's a strong signal for the robustness of the business model. We also believe that the story continues, we think that the outlook is strong. We think offshoring continues to be a strong secular trend. While we believe that IT spending will go up by a few percentage points in this year, we believe the trend of our clients to increase. The proportion of their spend on offshore and global sourcing is going to go up, which will play in our favor. We also believe that the risk perception of our clients about offshoring has reduced even further, and now they are quite comfortable with having several thousand employees of theirs working in India, through various partnerships or through their own units. So, I think, the risk perception in the mind of the global CEO has come down, and we think that's a positive sign for the future of this industry. With this, I'll pass it on to my colleague Kris Gopalakrishnan, President, to delve into some more aspects of our business performance.

Thank you, Nandan, and let me also wish you all a Happy New Year. In nine months of this fiscal, we've had revenue of $2.23 billion, which crossed the revenue for the full fiscal last year. In the last year full fiscal, the revenue was $2.15 billion, and nine months revenue this time is $2.23 billion. Also in the BFSI space we have crossed billion dollars in revenue. BFSI is today 38.6% of our revenues, up from 37.4% revenues from last quarter, and we've crossed $1 billion in BFSI space. In BPO also in the first nine months of this fiscal, we've crossed $100 million. So there are several parts of the business, several segments of the business, which have contributed to this growth. Just to highlight this, Nandan talked about products doing well, products have gone to 4.3%. Europe has gone to 26.8% of revenues from 25.8%. Package implementation has gone to 17.9% from 17.0%. In the BFSI space itself, insurance has gone from 6.7% to 7.6%. Retail has gone to 10.5% from 9%. Services companies have gone from 7.7% to 8.3%. The top 25 clients have grown 12.6% compared to a company growth of 10.1%, and if we include the holidays for this quarter, actually the growth would have been closer to about 13%. So good all round performance and good growth, and in spite of the rupee appreciation, as Nandan said, we have been able to maintain the margins. Infosys today has 488 active clients, we added 43 clients this quarter compared to 45 last quarter. So the client additions continue to be robust. We have 256, $1 million relationships; 67, $10 million relationships; 11, $50 million relationship; and 2, $100 million relationships. We added 6,092 employees this quarter at a gross level, of which 1,676 employees were with prior experience and came in the lateral -- came laterally. So, we continue to add experienced employees to the workforce. Attrition is slightly up at 13.5% compared to 12.9% last quarter. Attrition, if I exclude involuntary separation, especially at the entry-level, it comes down to 12.2%. The corresponding number last quarter is 12%. Top client contributed 6.9% to the revenues. Repeat business continues to be very strong at 94.7%. Accounts receivable 63 days. So again the story is that all round performance, good performance. And now let me pass it onto Bala, the CFO, to continue the discussion. V. Balakrishnan: Thank you, Kris. Good morning, everybody. We have seen strong growth in revenues this quarter. Sequentially, the revenues grew by 10.1% to $821 million for the quarter. We had seen the margins improving. The gross margin this quarter was 43% as compared to 43.3% last quarter. We got some benefit on the SG&A side. The SG&A is 14.5% of our revenues as compared to 15% last quarter, the profit before tax 30.1% to 30.2% last quarter, the effective tax rate continued to remain at 11.7%, and we had a net margin of 26.5%. This quarter the currency behaved more erratically. The rupee appreciated by 3.8%. The average rupee-dollar rate last quarter was 46.29. This quarter it was 44.53, resulting in appreciation of 3.8%. It impacted the operating margin by 2 percentage points. We had some offsetting factors. The product revenues grew sequentially by 27.5% from 28 million in Q2 to 35 million in Q3. It impacted positively the margins by 80 basis points. We had the blended per capita revenue going up by 1.4%, 1.9% on-site and 1.7% offshore. That gave a positive impact of 80 basis points to the margin and we had the scale benefit on the SG&A of 50 basis points. Net-net, we had 2 percentage point impact on the margins because of the currency, which was offset by 80 basis points due to billing rate increase, 80 basis points due to product revenues going up, and 50 basis points due to the SG&A scale benefit. So, we are able to maintain the margins in spite of substantial appreciation in rupee for the quarter. For the next quarter, we had given a guidance of increasing revenues of somewhere between 4.6% to 4.9% with the EPS growth of 2.6% to 2.6%. We are assuming the rupee-dollar rate to be at 44.11 for next quarter. We take the Federal Reserve Bank rate -- loan buying rate for our currency purposes. It was 44.11 as of December end. We are considering the same thing for our next quarter guidance. For the next quarter guidance, the EPS growth has been slower than revenue growth mainly because of currency otherwise the margins are almost similar to what you had seen in the third quarter. Coming to subsidiaries, there are four subsidiaries. Progeon had revenue of $40 million with a net profit of 22.4%. Last quarter, they had a net profit margin of 21.3%. Infosys Australia, $24 million revenue with a 14% net income margin. Last quarter, they had revenue of $25 million. Infosys Consulting, $12 million of revenue with $6.5 million of losses. Last quarter they had a loss of $3.2 million. They are still in the investment phase. They are growing. They may breakeven in the next few quarters, but right now they are in the investment phase. Infosys China, $5 million revenue with a loss of $1 million. Last quarter the loss was, well, similar, $1 million. So net-net, we had observed the impact of currency. We are able to maintain the margins, able to grow faster. For the third consecutive quarter, we had double-digit growth in revenues. I think it's very significant. With this I conclude my opening remarks. Now we can open the floor for questions.

(Operator Instructions). Your first question comes from Bryan Keane of Prudential. Bryan Keane - Prudential: Hi guys. Very solid quarter. Can you just talk a little bit about pricing, the pricing environment? We hear a lot of different things. I guess -- and you can break it up between new deals, and then what you are seeing on renewals? V. Balakrishnan: Pricing continues to remain favorable with an upward bias. For the new customers, we are getting about 3% to 4% above our average. For the existing customers, when we renegotiate, we are getting probably close to that, totaling may be 2% to 4% above our average. And our revenue productivity blended has gone up by 1.4% this quarter. The onsite revenue productivity has gone up by 1.9%. The offshore revenue productivity has gone up by 1.7%. That is on a quarter-to-quarter basis. On the year-to-year basis, that is if you look at last year versus this year, the onsite has gone up by 3.7%. Offshore has gone up by 2.1%, and the blended has gone up by 4.3%. So, the rate increase is actually showing up in our revenue productivity over a period of time and it is also showing in our margins. Bryan Keane - Prudential: Right, and also the margins were quite good. They were benefited by the amount of effort that moved -- continue to move towards the mix towards offshore. What -- can that mix continue to go, I don’t know if 75% to 80% and that seem to have a lot of leverage on the margin. Even though utilization fell, it looked like the effort moving more towards offshore was the key? V. Balakrishnan: Our target for onsite versus offshore is to keep onsite between 30% to 35%, so right now it's around 32%, actually 32.7% to be precise, and last quarter, it was 33%. So, that is the range at which we will keep this. As we add new services, we look at services, which have significant offshore content like infrastructure management, testing, et cetera. On the other side, consulting, package implementation, they are more onsite-centric. But when we combine all these things the ratio is still maintained, again, kind of retaining our operating margins. Bryan Keane - Prudential: Okay. And then just finally on the guidance, as you guys stated you have grown double digit sequentially for three consecutive quarters, but for the fourth quarter, it looks like it's more the mid-point of the range sequentially is like 4.7% or 4.6 somewhere in there. What's the reason for the drop off and is it some seasonality or what can explain that to go to mid single digits from the double digits you guys have been putting up sequentially? V. Balakrishnan: For our clients, this quarter is the quarter in which their budgets are finalized and frozen et cetera. So, though we have grown sequentially and we have said that for the year we would grow at about 43.5%, last quarter of course 10.1% we'd said, given the visibility we have right now and the budgets have been frozen, we have given a guidance of about 4.9% growth this quarter. And if you look back, I don’t know for past 3, 4 years, our guidance in Q4 typically has been lower, and given that, our utilization today is about 77.7%, we have the ability if really the opportunity comes our way to grow faster. Bryan Keane - Prudential: Okay, great. Thanks a lot.

Your next question comes from the line of Moshe Katri of Cowen & Company. Moshe Katri - Cowen & Company: Okay. Thanks and congratulations on a solid quarter. Can you talk a bit about the deceleration in sequential revenue growth rate from your top 5 and top 10 clients? And then, in the same context, also by vertical we have seen a deceleration in manufacturing and telecom verticals, thanks? V. Balakrishnan: The top 25 clients grew by 12.6% sequentially. The growth in -- I am just getting there rightly, top five clients grew by 18.9% -- sorry 10.4%, top 25 clients grew by 12.6%. That’s on the client side. From a industry vertical perspective, of course, we have seen growth in BFS side, Banking Financial Services, insurance, retail services, et cetera, and there is a slow down in, especially the transportation sector for us, but see what happens is some clients stagnate for sometime before they again continue to grow or sometimes they drop off. So, I think, the only sector I can see where that has impacted is really in the transportation and logistics sector.

Your next question comes from James Friedman of Susquehanna. James Friedman - Susquehanna: Thanks. It’s Jamie Friedman with Susquehanna. I know some of this was covered on the prior call, but a couple of housekeeping details for Bala. Bala, did you say what the -- I know you said the net margin, but did you say what the operating margin was at Progeon Infosys BPO? V. Balakrishnan: Yeah. See, Progeon, the net margin is 22.4%, operating margin is 21.1%. Last quarter, the net margin was 21.3, and operating was 19.5. James Friedman - Susquehanna: Thank you. And then, when you were describing earlier about the 80 basis points from billing to 80 basis points from products, and the 50 basis point decline in G&A. I just wanted to ask about the products. When you say products, what was the -- if you can give us some color on Finacle, and how that may have impacted the product-related improvement, because it seems like Finacle had quite a strong quarter?

See, Finacle is a total bank automation product. We sell it in India and some of the Asian countries. Now we’re getting into the western markets also. This quarter the Finacle revenue was $35 million as compared to $28 million last quarter. Product revenues is always -- it’s a lumpy business, some quarter it will higher, some quarter it will be lower, and it's more of a license revenue. So, we have seen the Finacle revenues growing up sequentially by 27.5%, an increase of $7 million, and that had impacted positively the margin by 80 basis points, because license revenue most of the revenues flow into the margins. James Friedman - Susquehanna: Got it. And then the last thing, with regard to the billable headcount, if my calculation is right that increased as a percentage of the total professionals, the billable headcount increased pretty significantly, sequentially. And here I am just doing the numbers, but it was up -- it looks like it was up about 7% or 8% sequentially. How should we think about the seasonality related to that, and what should we anticipate is billable as a percentage of total professionals going forward? Thank you.

I think, the revenue grew by 10.1%, the volume growth was 7.4% this quarter. There was a pricing growth of 1.4%. What we believe is, the pricing environment is stable, so most of the growth could come because of volume going forward. But due to change in business mix and as some of the new customers who joined us at a higher price points, they grow faster. Both could positively impact the bill rate increase. So I think, the volume growth continues to be strong. It was 7.4% this quarter. Last quarter it was 11.2% that continues to be strong. But the revenue growth will depend on both the volume and price growth. James Friedman - Susquehanna: Thank you very much.

Your next question comes from Joseph Foresi of Janney Montgomery Scott. Joseph Foresi - Janney Montgomery Scott: Hi, guys, and nice job this quarter. I was wondering if you could talk a little bit about the demand environment, sort of areas of growth, looking into fiscal '08. Is there any particular areas that you see accelerating, and are you seeing any trends in the size and the number of the deals? V. Balakrishnan: The demand continues to be robust. And we have been talking to our customers and doing some dispute settling with our customers. The feedback we get is that the budgets are going to remain stable or slightly up maybe 2% to 3%. But at the same time, there is definite indication that their spend on outsourcing, as well as offshoring is definitely on the rise. So, we expect -- we are not seeing any slowdown at this point from our customer base. Now on the deal size, what has happened to us is that the size of the deals have constantly gone up. Just to give you a flavor of the deals which we had last quarter. We have signed a deal with one of the largest hi-tech manufacturers and started work on $100 million, multi-year. We have signed a deal of about $75 million with a software provider in U.S. With a food manufacturer, we have signed a deal, $73 million, all three of them multi-year. So today we are winning deals, multiple deals of $50 million and above in a quarter. We are also being called to almost all the large deals in the market, so we have been called to deal at any size, even close to billion dollars today in the market. Joseph Foresi - Janney Montgomery Scott: Great. And sort of a second question here, I was wondering, if you would talk about hiring this quarter. It usually tracks well with revenue, but it appeared to be a little bit lighter on a net basis sequentially, how should we look at the hiring this quarter especially in reference to sort of future revenue growth? Is this an affect of having ramped up in the September quarter?

We hired 6,036 people at the gross level, and net hires is about -- 6,092, and net hires is 3,282. Our attrition, as I said, is 13.5% on a last 12-month basis for this quarter. We expect to hire another 5,000 people in the next quarter. That is quarter four for us, gross, which will make the total number of people recruited this year to about 30,000. Currently our headcount across the complete group is 69,432 people. So, that’s where we are right now. And we’re growing headcount at, so for example this quarter the headcount grew by about 5%, 6%. Now last quarter, we saw a significant jump in hiring because there is a seasonality to hiring. We had hired about 10,795 people last quarter, and this is because the people joining us from college, straight out of college join typically in July, August, September timeframe. That's the time when the campus hires join the company. Joseph Foresi - Janney Montgomery Scott: Okay. Thank you. And just two more quick ones. On the attrition side, can you guys give us any color on where you see that rate going, and any, maybe overall views on the labor market and supply right now?

The attrition is happening mainly in the one to five year band -- highest in the one to three year and second highest in the three to five year band. 46% of people who leave us go to join other companies; 20% for higher studies, 10% drop out of the workforce, and this 46% has been constant for the last many quarters. What is happening is that people leave for various reasons, not necessarily because of other companies coming to India and setting up shop. If you look at the attrition data, we've 1.3% involuntary attrition over the 13.5% primarily driven by people who did not pass our training course at the end of 14 or 16 weeks of training, because we've toughened the entry norms to get into the delivery organization. And if you normalize that, the attrition is 12.2%, as against 12% the previous quarter. In terms of overall people who left us, the number of people is the same this quarter, and also the last quarter, despite having a higher number of people this quarter. Overall I would say, that attrition is a function of the market having more opportunities. We do not see any definite trend. There is a marginal increase in attrition, net of involuntary attrition, and we are fairly comfortable at this point. Joseph Foresi - Janney Montgomery Scott: Sure. And just one last question here on the BPO side. Maybe you can give us an overview of the market. Is your focus continuing -- is it primarily on non-voice work, and if so, should we see margins improve and maybe attrition decrease? And thanks, guys.

On the BPO side, as far as the market is concerned, we continue to see extremely good traction, our pipeline looks strong. We have grown. Our quarter-on-quarter growth has been in double digits through the last three quarters, and this quarter we grew by 20 plus percent. As we have seen a margin expansion this quarter, as Bala pointed out, and if you take off some of the one-off items we have, we are tracking 24 plus percent margin, which we expect to continue to maintain as we move forward. Our attrition numbers quarter-on-quarter has moved positively. We were 38.2% attrition last quarter, this quarter we have 26% attrition. So we have made significant progress on the attrition side at least on a quarter-to-quarter basis, but this is only one quarter decrease, and we need to sustain it. We believe it is very important for our business to sustain attrition at these kind of numbers or even lower, and we are working very hard towards moving in that direction. Joseph Foresi - Janney Montgomery Scott: Great. Thank you.

Your next question comes from Rod Bourgeois of Bernstein. Rod Bourgeois - Sanford C. Bernstein: Yes, it's Rod Bourgeois here. I wanted to ask about the CapEx budget for the year. Has there been any change from your previous estimate of $360 million to $400 million that you spoke about in the September quarter, seeing your full year CapEx plan. Just would like some color on whether that CapEx plan has been lowered? V. Balakrishnan: I think, the CapEx plan for the whole year continues to be the same. We said $360 million to $400 million, and there is no change in that. Rod Bourgeois - Sanford C. Bernstein: Okay. Are you on plan or is the CapEx spending going to be more back-end loaded than you originally planned?

The CapEx plan includes some provision for purchasing land for the next campuses, particularly in Bangalore and Hyderabad. So, the purchase of land may get delayed, it won't impact our overall construction schedule. But if you remove that, rest of that construction, whatever of any size is on schedule. Rod Bourgeois - Sanford C. Bernstein: Okay. Got it. And you noted the increase in your involuntary attrition, and I am wondering if that could possibly be an indication that the quality of the incoming pool of labor might not be what it was in previous years.

I think, it's not the quality. It's just that our standards have been toughen on very -- in a dramatic manner. The quality remains the same, because we pick among the top 20% of the college batch. It’s just that the entry criteria have been stiffened up. For instance, we have a minimum requirement of 4 CGPA out of 5, which we did not have. And two, we give them only one opportunity after they finish the initial assessment to complete. If they don’t complete, then they don't go through. Earlier, we had more relaxed criteria, if they do not complete, we put them through a training program for another 30, 45 days, and that could take more time. Now we give them one more opportunity to complete in 15 days, and that is it. So, we have toughened up the criteria to ensure that people take this much more seriously than earlier, and if they don't, they do not continue and that's the only thing. We have not seen any fall in stand of the people coming in. Rod Bourgeois - Sanford C. Bernstein: Got it. But, can you specify what’s driving your increased criteria? I mean is there a reason why you’ve taken your criteria up?

We’ve taken the criteria up to make sure that as we spread our intake across many more colleges, people do not take our training program in an easy manner. What we’ve found in the previous year was that beware of people who are not stretching themselves to learn as much as they could. They were just coasting through in the secure knowledge that is okay to coast through, and there were no strict penalties that don’t do very well because of lack of effort. So, we put in a strict penalty to say that, you need to have minimum criteria to get through, if you don’t, you may not continue. And that’s the only reason to ensure that the training becomes really effective and people take it very, very seriously. Rod Bourgeois - Sanford C. Bernstein: Okay, great. That makes perfect sense. And if I assume the license revenue spike that you received in the quarter, which also helped margins 80 basis points, if I assume that was a “lumpy event” and is not going to be a recurring event, then you need other levers moving into next quarter, particularly if you have a surprise like the rupee moving against you again. So, can you give us some specificity on what positive margin leverage you have remaining for the March quarter, if you need to pull those levers more aggressively for an unexpected event? V. Balakrishnan: I think we spoke about several levers in the past. One is onsite/offshore mix, second is the utilization rate, third is a G&A scale benefit, and fourth is the increase in blended per capita revenues. So, we had to use one of these levers or some of these levers at some point of time to make sure the margins are maintained. Our guidance factors in the stable margin except for the rupee for next quarter because we assume the currency rate of 44.11 for next quarter, whereas in December quarter the average rate was 44.53. So, we have to use some of these levers to make sure that impact is minimal. Rod Bourgeois - Sanford C. Bernstein: Okay. But I guess the question I would have on that is offsite mix and per capita revenues are levers if you have an unexpected surprise, can you really affect offsite mix? Is that a controllable lever that you can decide to pull in a given quarter? Or is that something that’s really just a function of the demand that happens to be available and it’s harder to control that? And I would assume offsite mix and per capita revenues are levers that are hard to control at your discretion, is that accurate or not?

I think it depends on the service mix. For example, if testing grows faster, most of it is offshore, BPO grows faster, most of it is offshore. But to some extent it’s decided even by the business mix. So, if we are able to grow some of the high offshore revenue segments like testing our BPO, offshore could increase. Rod Bourgeois - Sanford C. Bernstein: Right. But I guess as an example, if the rupee surprisingly appreciated in a material way tomorrow, do you have the ability to decide to increase your revenue content in segments that better leverage offsite? Can you make that decision into a quarter and act on it?

I think the rupee behaved irrational in the last week of the quarter, we can’t do it. If it happens in the beginning of the quarter probably we could focus more on segments where we want to grow. So, I am trying to change some of the mix, but it’s not totally in our hands, it also depends on the market demand environment. But I think we also have other levers, as I told you, we have the SG&A benefit, we have the utilization rates, so we can use some of the lever stocks that impact. Rod Bourgeois - Sanford C. Bernstein: Okay. And one final question, this has been very helpful. Within G&A, I mean what are the specific things you could do into a quarter on G&A? I mean I guess, cutting variable comp is a lever, are there others besides that that are pretty big buckets of room for cutting if needed?

I think on the G&A side, one of the variable salaries, and some of that costs are discretionary that we can cut down. And also we keep fixed vigil on kind of G&A expense we want to spend. So, even though the absolute numbers may increase slightly, it may not increase in proportion to revenues. That’s why we get the scale benefits. So, some of the discretionary cost, may be around 30, 40 basis points, you can squeeze in the G&A side. Rod Bourgeois - Sanford C. Bernstein: Got it, very clear. All right, thanks guys very much.

Our next question comes from Julio Quinteros of Goldman Sachs. Julio Quinteros - Goldman Sachs: Good morning guys. I just wanted to check on a couple of quick things. First of all, the kind of visibility that you guys have on the product side, can you talk a little bit about it, if something this is going to be a much more lumpy business if it stays at this percentage of your business given the software nature of the sales, is that correct?

Product, yes is lumpy, Bala had indicated that it will be lumpy. But it’s a small part of our business, about 4% of our business comes from product revenue. And lead times for closure are longer and -- we have a smaller base to work on. So, this quarter, we’ve had a positive benefit from that, but it is lumpy. Julio Quinteros - Goldman Sachs: Got it. And then certain comments overnight regarding appetite for acquisitions in Europe, can you talk a little bit about what that was intended to reference?

We have always said that we are open for acquisitions. We will look at acquisitions to fill a gap in our services mix to grow faster in a market where organic growth will be challenging, for example, in a non-English speaking market like Germany, France, Japan et cetera and so in that context, Europe -- in Europe, where we can look at an acquisition. We'll also look at acquisitions to look at the faster growth in a particular industry vertical or an entirely new vertical. Given that, integration is the biggest challenge, making it work is the biggest challenge, and the industry data shows that only maybe 15% to 20% of acquisitions give the value or the benefit which was intended to be given and/or you derive benefit from that. We are careful in selecting the companies. We are careful in what we are willing to pay and we are careful about the ability to integrate. We need to have clear plans for integration, roles, and responsibilities. Especially, the overlap is significant. We need to figure out who stays, who does what, and where the work gets done because our model requires a lot of people to be stationed in locations like India and offshore locations et cetera. So there are some challenges and that’s the reason why we have been very careful about acquisitions. We have done one in Australia. We have done smaller one for our product group where they needed certain modules for filling the portfolio for the product, and we did some acquisitions there, but we are open at any point of time. We are in discussions with some companies, some investment banks et cetera, only if it fructifies we can, of course, talk about it, or show that we have done one more. Julio Quinteros - Goldman Sachs: Okay, great. And then finally for me on the wage increases, as we begin to look through fiscal year 2008, what are sort of the preliminary plans or view points for affecting another wage increase as we head in fiscal -- the next fiscal year?

In the last several years, if you look at what has happened in India, wage increases have been in the range of 13% to 15%. At this point, we believe that is the range we are looking at for next year also. And that’s something, which we have factored into our model. About 70% of the recruitment happens at the entry level at the bottom of the pyramid, for -- where we look at the distribution of people. And as the year goes, this 13% to 15% actually reduces to maybe about 5%, 6% because the pyramid starts broadening at the bottom as the year progresses. And, so the total impact is actually much lower than the 13% to 15%. Julio Quinteros - Goldman Sachs: Okay, great. And is this modest change? I thought last quarter you guys were talking about possibly even going as high as 20% on the offshore wage increases. Are you looking at a slightly reduced number now, or maybe -- maybe I am mistaking you guys to somebody else?

See, the 13% to 15% is the average across the company. Julio Quinteros - Goldman Sachs: Yeah.

Now, what we do is, we do targeted increase where the attrition is high. Mohan talked about attrition being higher at the two to five year experience level. So, we can do targeted increase at certain levels, and as I've said that the entry level is much lower and that’s how the pyramid effect comes in. Julio Quinteros - Goldman Sachs: Okay. Great. Thank you guys.

Your next question comes from David Grossman of Thomas Weisel Partners. David Grossman - Thomas Weisel Partners: Thanks. I am looking at perhaps, Bala, you can or Kris breakout the improvement and realization between pricing and mix? V. Balakrishnan: I think, the volume growth had been 7.4%, 6.1% onsite, 8% offshore. So, on a blended basis volumes grew by 7.4%. The per capita revenue went up by 1.4%, 1.9% onsite, 1.7% offshore. Overall, revenue growth was 10.1%. David Grossman - Thomas Weisel Partners: Right. I guess, I was thinking more in terms of the per capita revenue, if you could, it looks like you grew, like you said, about 0.5 sequentially and 4% or 5% year-over-year. And I am wondering is there anyway to isolate how much of that is pricing versus mix? V. Balakrishnan: Well, it's difficult, it's a mix of everything. You have some new customers coming at higher price point because mix is changing some of the high bill rate services like package implementation consulting. They are growing faster, it's a blend of everything, it's difficult to break it up. David Grossman - Thomas Weisel Partners: Is there anyway to say both --

I think, it's quite complex actually because you have to look at the year in which the customer was added, and then you have to look at the different services. You have to look at onsite, offshore. It's fairly complicated because of that. David Grossman - Thomas Weisel Partners: Okay. And I guess getting back to the unit growth number, I think, Bala, there were couple of fewer work days, was that two in the quarter versus the prior quarter? And I guess, I have two questions in that context, is that essentially the change in sequential unit growth from the past couple of quarters to the December quarter? And then secondly, can you give us an idea, do we face that same dynamic in the March quarter, or are you going to be -- are you flattish in terms of number of work days March versus December? V. Balakrishnan: I think, the number of working days in December quarter was two days less. That is one of the reasons why the growth has been slower. In March quarter, the working days is slightly higher, but March quarter is always a soft quarter for us, because the customers finalize the budgets, and it takes time for them to spend. So that is a reason, we have given a guidance of 4.9% growth in March. Other than that, I don’t see any other reason. David Grossman - Thomas Weisel Partners: Okay. And then talking a little bit just about the pipeline, and I don’t know if that was Shibu earlier on the call that he was making some comments. But if you look at the pipeline, the larger deals are these characterized more by stand-alone deals or are these typically components of larger outsourcing deals, which are segregating out components which can be then offshore? V. Balakrishnan: The deals which I talked about, the ones which I mentioned in my remarks, they were all stand-alone deals. They were not segregations. We also pursue deals of size ranging from $100 million to $1 billion, and some of them we do end up getting part of the deal, and we probably have about 5 to 6 of those deals in progress. But they are long incubation deals. It takes anywhere from nine months to a year for closure. But at the same time, the deals I mentioned and the deals I mentioned as happening every quarter, many of them are stand-alone deals. David Grossman - Thomas Weisel Partners: Okay. And just one last question on the… V. Balakrishnan: And for the guidance, we’re not factoring what we consider as the mega-deals, which are $100 million and above. David Grossman - Thomas Weisel Partners: And how many fit that category? V. Balakrishnan: At this point probably we have five to six in that category, but the point is these are long incubation deals, it takes anywhere from nine months to 12 months. David Grossman - Thomas Weisel Partners: Okay. And then just getting back to the BPO business for a while, that business, it’s been growing in kind of mid single to low double digit growth rates sequentially for several quarters, and it spiked up this year. Is that -- is there something fundamentally going on in the BPO business on a secular basis or just recognition in the marketplace that this could be done or more focused by Infosys, any color you can give us to the -- I guess, to the acceleration of sequential growth over the last two quarters?

Sorry. No, I don’t think there is, the BPO market has been, in terms of overall demand has been quite good. So, it is not that suddenly there is a big change in the BPO market, which has led to this continued growth. We have been growing quite rapidly since we were set up five years back. But what you are definitely seeing is that our number of clients, there must be increased number of clients, and as you see growth in each of those clients, you can track a much higher growth than before. So, we are continuing to sign more clients, and each of those clients as they continue to add to the growth rate, you’ll see that the double digit kind of growth rate is coming back. I mean, our clients are seeing value in working with us. We are able to demonstrate to them how we’re adding value on a year-to-year basis and that’s why we have seen continued growth in each of our BPO clients we are working with. And as we sign more clients, and normally if we sign a client this year, you’ll see the real impact of the growth from that client coming only after 12 months to 18 months. David Grossman - Thomas Weisel Partners: Okay. Very good. Thank you.

Your next question comes from the line of George Price of Stifel Nicolaus. George Price - Stifel Nicolaus: Hi. Can you hear me? Hello. Can you hear me, okay?

Yes, sir. Your line is open. George Price - Stifel Nicolaus: Okay. I apologize, a little phone issue there. A lot of my questions have been answered, but I still do have a couple more, just going back to the prior question on talking about the large deals. Has there been any change to your view of what you will and wont be willing to pursue, I know Infosys historically has seemed to be a little bit more hesitant in pursuing larger deals that may involve higher risk, particularly to the margin side, taking over a large amount of people, certainly taking over any meaningful assets. Can you just tell us where your view stands right now? What are the characteristics of the larger deals that you’re looking at now?

So, not much change in our philosophy here. We want to take these deals at reasonable prices and reasonable margins. We want to make sure that we are able to execute well, which means that under the global delivery model typically [telling them] the expertise is delivered offshore. So, if you takeover a significant number of employees, then we will be challenged to figure out what to do with them. So, that’s why we are reluctant to take over significant number of employees, 20%, 30% of employees we can take over or beyond that, and we need to figure out what to do. It would be better, if the client can do the restructuring, given that they want to get the benefit of the global delivery model, and then we can work with them to takeover the work, etcetera. So that's the philosophy of the company, and it continues to be the philosophy. George Price - Stifel Nicolaus: To what extent are you willing to enter in the longer-term deals that are going to be margin dilutive, and kind of over what timeframe? I mean, if you get hit for a couple of quarters, and to the extent, you can elaborate on what magnitude might be tolerable versus -- I mean, how far will you go in that regard and what would you not take on?

So, what we do is when a large deal comes in, our finance department does a modeling exercise to figure out what will be the impact on our margins, short-term, long-term, etcetera. And if we are able to absorb that, and sometimes we are able to absorb that because there is some other business, which is coming at a higher margin, etcetera. Then we proceed. So that's something we do on a deal by deal basis and take decisions based on what is the current situation at that point. George Price - Stifel Nicolaus: Okay. Wage inflation, and just on the -- one more thing on the larger deals, you mentioned five to six deals that you are looking at right now that are fairly sizeable. Can you talk about a timeframe that they maybe [decisioned], I am assuming those would be likely fiscal '08 deals, but what if it's not, and maybe where within the year, earlier or later?

We have not included these in our guidance precisely because it's a one or a zero in a timeframe that long. And we don't want to give you a calendar of -- these are the deals, these are when it is going to be potentially signed etcetera, because we don't know. We have no control over this, and we have -- that’s why we have not included it in our guidance also. George Price - Stifel Nicolaus: Okay. Going back also to some of the questions on wage inflation, noting that you leveraged the pyramid to dilute the wage inflation that you experienced on a blended basis, we did see -- or have started to see, I guess, some wage inflation at the entry level, I guess, actually those starting in fiscal '08. Do you think that you might need to do this again? Can you just talk about maybe the entry level environment from that perspective, are there other -- beyond even this industry, are there other industries or other players within the industry that might be influencing demand for people at the entry level, that might cause you to have to up the entry level wages materially?

Well, I think, the entry level wages in the country are being influenced by only two industries: the IT industry, and the financial services industry. The financial service industry this year will hire maybe about 75,000 to 100,000 people and the IT industry about 380,000 people. These two are driving up the demand for entry level people, and the IT industry is hiring the largest number of people. You get the best of the crop. But obviously, the competition is for the best of the best. And here the financial services could offer a slightly higher wage to grab them. And certainly the glamour quotient of financial service industry is getting higher, because of investment banking and [absurd] incomes that they earn. As far as entry wages go, we raised them from 240,000 rupees a year to 270,000 rupees a year for the next year, and it could go up by maybe 10% a year after that, and this 10% is factored into that 13% to 15% compensation that we talk about for the entire band. So, if you pay a 10% increase at entry level, the mid level you could possibly afford to pay slightly more at critical areas to make sure that it will become more attractive. But definitely going forward for the rest of industry in this country, it is going to become very-very challenging to get more and more people in. Right now the retail industry is hiring, they are not able to get people. The construction industry is not able to get people because all the engineers want to join IT and the manufacturing industries couldn’t find it more difficult. What will happen in India in the next three or four years, is what we call right-skilling. Indian industry has traditionally been a place, where we have taken over-qualified people to do more mundane work. I think, in the next two or three years most companies will start identifying people for the right time and not getting over-qualified people to do work. And that I think will help to stem this balance in a particular way. For instance, we have about 1,700 graduates within Infosys, and the services business would do a part of the work in one or two verticals, and that number is becoming slightly larger over the years. So in this way right-skilling will be the solution for the whole industry, and as far as we are concerned we are sure we'll be at the top of the heap. George Price - Stifel Nicolaus: Okay. And so the 10% that you discussed remind me last year you made, what was -- was it a 20% bump for those entering in fiscal '08? V. Balakrishnan: No. I am not saying that. What I am saying is -- George Price - Stifel Nicolaus: No. I am sorry. You gave that the 240 or 270, I apologize. So, the 10% bump that you just referenced that could come after that, that would be for those coming in, in fiscal '09? V. Balakrishnan: Yeah. George Price - Stifel Nicolaus: Okay. And last question on just going back to Finacle. I have seen some articles and some comments that you have made and you discussed it a little bit here that you are looking to expand your client base for the Finacle product outside of India with larger financial -- global financial institutions. Can you talk a little bit more about where that stands in terms of opportunity pipeline, and your plans in fiscal 08? I mean, just maybe some more around the goals of what you might like this segment, small as it is, obviously it does have a -- can have a meaningful impact. What are your goals for this segment might be looking into fiscal '08? I mean mid -- upper single digit as a percent of revenue or how many clients maybe would you think would be a reasonable assumption by the end of fiscal '08 and anything along those lines? V. Balakrishnan: Well, we would like Finacle to grow faster than the rest of the business on a related basis. That would be a very nice goal. And as far as the price line is concerned, we have said earlier today that the pipeline is stronger in the last quarter, the December quarter than the previous quarter. We’ve seen opening in Europe. We have seen openings in Eastern Europe and in Southeast Asia. Southeast Asia has opened up large banks that are now seeing a need for change the core banking. We already got a very large bank headquartered in Singapore and we are seeing an increase in Russia and Eastern Europe and some fraction in Western Europe. So, we are seeing the first studyings of the need for the Western banks in Europe to open up and look at change. As far as the US is concerned, our viewers is concerned, the functionality that we have needs to be improved upon to meet the requirements of the US that were not right there at this point of time.

Okay. I think with this, we have come to the end of our call and I would like to thank each and everyone of you for coming on this call and asking us questions. We are always there to answer any questions and if you have any further questions, we would be happy to have email from you to Shekhar Narayanan, Sandeep Mahindroo, and V. Bala, our CFO. So we will be happy to answer any questions. And thank you everyone and see you same time next quarter. Thank you. Good night. Good morning. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.