================================================================================


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ----------------


                                    Form 10-Q


(Mark One)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                  For the quarterly period ended June 30, 1997

                                       or

( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                         Commission File Number: 0-27806


                                ----------------

                              THE INDUS GROUP, INC.
          (Exact name of Registrant issuer as specified in its charter)


         California                                             94-3108025
(State or other jurisdiction of                               (I.R.S Employer
 incorporation or organization)                              Identification No.)

60 Spear Street, San Francisco, California                        94105
 (Address of principal executive offices)                       (Zip code)

                                 (415) 904-5000
              (Registrant's telephone number, including area code)
                                ----------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

As of July 31, 1997,  Registrant  had  outstanding  19,157,714  shares of Common
Stock, $.001 par value.


================================================================================



<PAGE>


<TABLE>
                                TABLE OF CONTENTS
<CAPTION>

                          Part I: Financial Information                                                       Page
                                                                                                              ----
<S>                                                                                                            <C>
Item     1.  Financial Statements (unaudited)
             Condensed Consolidated Statements of Operations - three and six months ended June 30, 1997
                 and 1996...............................................................................        1
             Condensed Consolidated Balance Sheets - June 30, 1997 and December 31, 1996................        2
             Condensed Consolidated Statement of Shareholders' Equity - year ended
                 December 31, 1996 and six months ended June 30, 1997...................................        3
             Condensed Consolidated Statements of Cash Flows - six months ended
                 June 30, 1997 and 1996..................................................................       4
             Notes to Condensed Consolidated Financial Statements........................................       5
Item     2.  Management's Discussion and Analysis of Financial Condition and Results of Operations......        8

                           Part II: Other Information

Item     1.  Legal Proceedings...........................................................................      13
Item     2.  Changes in Securities.......................................................................      13
Item     3.  Defaults Upon Senior Securities.............................................................      13
Item     4.  Submission of Matters to a Vote of Security Holders.........................................      13
Item     5.  Other Information...........................................................................      13
Item     6.  Exhibits and Reports on Form 8-K............................................................      14


             Signatures..................................................................................      15

</TABLE>



<PAGE>


<TABLE>
PART I: FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


<CAPTION>
                                                        THE INDUS GROUP, INC.

                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                              (In thousands, except per share amounts)

                                                             (Unaudited)


                                                                                     Three Months Ended          Six Months Ended
                                                                                          June 30,                   June 30,
                                                                                    ---------------------     ---------------------
                                                                                      1997         1996         1997          1996
                                                                                    --------     --------     --------     --------
<S>                                                                                 <C>          <C>          <C>          <C>     
Revenues:
     Software licensing fees ..................................................     $  4,221     $  3,793     $  7,943     $  7,751
     Services and maintenance .................................................       19,272       13,806       37,972       26,707
                                                                                    --------     --------     --------     --------
          Total  revenues .....................................................       23,493       17,599       45,915       34,458

Cost  of revenues .............................................................       10,032        7,388       19,550       14,037
                                                                                    --------     --------     --------     --------
Gross margin ..................................................................       13,461       10,211       26,365       20,421

Operating expenses:
     Research and development .................................................        3,593        3,293        6,524        6,708
     Sales and marketing ......................................................        3,203        1,995        6,441        3,931
     General  and administrative ..............................................        2,177        1,846        4,473        3,689
                                                                                    --------     --------     --------     --------
          Total operating expenses ............................................        8,973        7,134       17,438       14,328
                                                                                    --------     --------     --------     --------

Income  from operations .......................................................        4,488        3,077        8,927        6,093
Other income, net .............................................................          397          381          808          428
                                                                                    --------     --------     --------     --------
Income before income taxes ....................................................        4,885        3,458        9,735        6,521

Provision for income taxes ....................................................        1,954        1,407        3,991        2,667
Cumulative effect of deferred income taxes provided upon January 1, 1996
   conversion to C-Corporation status .........................................         --           --           --          6,700
                                                                                    --------     --------     --------     --------
Net income (loss) .............................................................     $  2,931     $  2,051     $  5,744     $ (2,846)
                                                                                    ========     ========     ========     ========
Pro forma statement of operations:
     Income before income taxes, as above .....................................     $  4,885     $  3,458     $  9,735     $  6,521
     Provision for income taxes (federal, state and foreign) ..................        1,954        1,407        3,991        2,667
                                                                                    --------     --------     --------     --------
     Pro forma net income .....................................................     $  2,931     $  2,051     $  5,744     $  3,854
                                                                                    ========     ========     ========     ========
     Pro forma net income per  share ..........................................     $   0.15     $   0.11     $   0.29     $   0.21
                                                                                    ========     ========     ========     ========

     Shares used in computing pro forma net income per share ..................       19,816       19,375       19,713       18,534
                                                                                    ========     ========     ========     ========

<FN>
                                                       See accompanying notes.
</FN>
</TABLE>

                                                                 1

<PAGE>


<TABLE>
                                                        THE INDUS GROUP, INC.

                                                CONDENSED CONSOLIDATED BALANCE SHEETS

                                                (In thousands, except share amounts)

                                                             (Unaudited)
<CAPTION>
                                                                                                        June 30,        December 31,
                                                                                                          1997               1996
                                                                                                         --------          --------
                                                                                                                              (1)
<S>                                                                                                      <C>               <C>     
                                                               ASSETS

Current assets:
     Cash and cash equivalents .................................................................         $    313          $ 13,266
     Marketable securities .....................................................................           25,032            26,524
     Billed accounts receivable, less allowance for doubtful accounts of $549
         at June 30, 1997 and $449 at December 31, 1996 ........................................           16,275            16,889
     Unbilled accounts receivable ..............................................................            8,084             5,633
     Other current assets ......................................................................            8,196             4,523
                                                                                                         --------          --------
         Total current assets ..................................................................           57,900            66,835

Marketable securities - noncurrent .............................................................            5,225             2,129
Investments ....................................................................................           12,723              --
Property and equipment, net ....................................................................            8,015             6,337
Employee notes receivable and other noncurrent assets ..........................................              612               213
                                                                                                         --------          --------
                                                                                                         $ 84,475          $ 75,514
                                                                                                         ========          ========

                                                LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable ..........................................................................         $  2,593          $  2,165
     Deferred income taxes .....................................................................            4,293             3,837
     Other accrued liabilities .................................................................            4,009             3,541
     Deferred revenue ..........................................................................            5,795            10,599
                                                                                                         --------          --------
         Total current liabilities .............................................................           16,690            20,142
                                                                                                         --------          --------
Shareholder's equity:
     Preferred Stock, $.001 par value at June 30, 1997 and December 31, 1996:
          Authorized shares - 5,000,000
          Issued and outstanding shares - none .................................................             --                --
     Common Stock, $.001 par value at June 30, 1997 and December 31, 1996:
          Authorized shares - 50,000,000
          Issued and outstanding shares -19,147,314 and
            18,590,376, respectively ...........................................................               19                19
     Additional capital ........................................................................           53,059            46,425
     Other .....................................................................................             (265)             (300)
     Retained earnings .........................................................................           14,972             9,228
                                                                                                         --------          --------
         Total shareholders' equity ............................................................           67,785            55,372
                                                                                                         --------          --------
                                                                                                         $ 84,475          $ 75,514
                                                                                                         ========          ========

<FN>
(1)  The Balance Sheet at December 31, 1996 was derived from the audited  financial  statements as of that date but does not include
     all of the information and footnotes required by Generally Accepted Accounting Principles for complete financial statements.

                                                       See accompanying notes.
</FN>
</TABLE>

                                                                 2

<PAGE>


<TABLE>
                                                        THE INDUS GROUP, INC.

                                      CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                                (In thousands, except share amounts)

                                                             (Unaudited)
<CAPTION>
                                                                                                           Retained
                                                                                                           Earnings        Total
                                                              Common        Additional                  (Accumulated   Shareholders'
                                                               Stock         Capital         Other         Deficit)       Equity
                                                              --------       --------       --------       --------       --------
<S>                                                            <C>            <C>            <C>            <C>            <C>     
Balance at December 31, 1994 ............................      $    129       $   --         $   --         $  8,113       $  8,242

     Issuance of common stock
       as deferred compensation .........................           480           --             (480)          --             --
     Cash distributions to shareholders .................          --             --             --           (9,516)        (9,516)
     Translation  adjustment ............................          --             --               (6)          --               (6)
     Stock options (1) ..................................          --           18,900           --             --           18,900
     Amortization of deferred compensation ..............          --             --               48           --               48
     Net loss ...........................................          --             --             --           (6,820)        (6,820)
                                                               --------       --------       --------       --------       --------
Balance at December 31, 1995 ............................           609         18,900           (438)        (8,223)        10,848
     Conversion to C Corporation effective
       January  1, 1996 .................................          --           (8,223)          --            8,223           --
     Reincorporation and adoption of $.001
        par value .......................................          (494)           494           --             --             --
     Issuance of common stock (2) .......................             4         35,288           --             --           35,292
     Tax benefit from exercise of stock options .........          --            6,669           --             --            6,669
     Purchase of Indus International, Inc. net
        assets ..........................................          (100)            (3)          --             --             (103)
     Unrealized loss on marketable securities ...........          --             --              (42)          --              (42)
     Translation adjustment .............................          --             --               84           --               84
     Amortization of deferred compensation ..............          --             --               96           --               96
     Net loss ...........................................          --           (6,700)          --            9,228          2,528
                                                               --------       --------       --------       --------       --------
Balance at December 31, 1996 ............................            19         46,425           (300)         9,228         55,372
     Tax benefit from exercise of stock options .........          --            1,309           --             --            1,309
     Issuance of common stock (3) .......................          --              575           --             --              575
     Investment in Prism ................................          --            4,750           --             --            4,750
     Unrealized loss on marketable securities ...........          --             --              (76)          --              (76)
     Translation adjustment .............................          --             --               74           --               74
     Amortization of deferred compensation ..............          --             --               37           --               37
     Net income .........................................          --             --             --            5,744          5,744
                                                               --------       --------       --------       --------       --------

Balance at June 30, 1997 ................................      $     19       $ 53,059       $   (265)      $ 14,972       $ 67,785
                                                               ========       ========       ========       ========       ========

<FN>
(1)  Value of  unexercised  stock options of The Indus Group,  Inc. upon  elimination of  contingency  feature,  which had precluded
     exercise of these options.

(2)  Consists of $33,864 received from February 29, 1996 initial public offering  (2,500,000  common shares offered at $15 per share
     less underwriting commission and expenses),  $1,052 received from June 30, 1996 and December 31, 1996 issuance of 71,309 common
     shares under the Employee  Stock  Purchase Plan and $376  received from the issuance of 916,845  common shares upon exercise of
     options.

(3)  Consists of $501 received from June 30, 1997  issuance of 29,088 common shares under the Employee  Stock  Purchase Plan and $74
     received from the issuance of 188,565 common shares upon exercise of options.

                                                       See accompanying notes.
</FN>
</TABLE>

                                                                 3

<PAGE>


<TABLE>
                                                        THE INDUS GROUP, INC.

                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                           (In thousands)

                                                             (Unaudited)
<CAPTION>
                                                                                                           Six Months Ended June 30,
                                                                                                           ------------------------
                                                                                                             1997            1996
                                                                                                           --------        --------
<S>                                                                                                        <C>             <C>      
Cash flows from operating activities

Net income (loss) ..................................................................................       $  5,744        $ (2,846)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
     Depreciation and amortization .................................................................          1,045             616
     Amortization of deferred compensation .........................................................             37              96
     Loss on sale of fixed assets ..................................................................            315               2
     Deferred income taxes .........................................................................            455          (1,669)
     Cumulative effect of deferred income taxes provided January 1, 1996 ...........................           --             6,700
     Tax benefit from exercised stock options ......................................................          1,309             801
     Changes in operating assets and liabilities:
          Billed accounts receivable ...............................................................            614           1,499
          Unbilled accounts receivable .............................................................         (2,451)          1,400
          Other current assets .....................................................................         (3,673)           (323)
          Employee notes receivable ................................................................            (50)              6
          Accounts payable .........................................................................            427             246
          Income taxes payable .....................................................................           --               320
          Other accrued liabilities ................................................................            469             714
          Deferred revenue .........................................................................         (4,804)            935
          Other ....................................................................................             53              14
                                                                                                           --------        --------
Net cash provided by (used in) operating activities ................................................           (510)          8,511
                                                                                                           --------        --------

Cash flows from investing activities

Purchase of marketable securities ..................................................................         (1,700)        (34,176)
Sale of marketable securities ......................................................................           --             2,300
Investments ........................................................................................         (8,300)           --
Acquisition of property and equipment ..............................................................         (3,018)         (1,688)
                                                                                                           --------        --------
Net cash used in investing activities ..............................................................        (13,018)        (33,564)
                                                                                                           --------        --------

Cash flows from financing activities

Net repayment of line of credit ....................................................................           --            (8,900)
Net proceeds from issuance of common stock .........................................................            575          34,431
Purchase of Indus International, Inc. net assets ...................................................           --              (103)
                                                                                                           --------        --------
Net cash provided by financing activities ..........................................................            575          25,428
                                                                                                           --------        --------

Net increase (decrease) in cash and cash equivalents ...............................................        (12,953)            375
Cash and cash equivalents at beginning of period ...................................................         13,266              45
                                                                                                           --------        --------
Cash and cash equivalents at end of period .........................................................       $    313        $    420
                                                                                                           ========        ========

Supplemental disclosures of cash flow information

Interest paid ......................................................................................       $   --          $    105
                                                                                                           ========        ========
Income taxes paid ..................................................................................       $  4,570        $  3,176
                                                                                                           ========        ========

Supplemental schedule of noncash financing activities

Issuance of common stock as part consideration for purchase of Prism ...............................       $  4,750        $   --   
                                                                                                           ========        ========

<FN>
                                                       See accompanying notes.
</FN>
</TABLE>

                                                                 4

<PAGE>

                              THE INDUS GROUP, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

1.       Significant Accounting Policies

         Interim Financial Statements

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information  and with the  instructions to Form 10-Q and
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  Operating results for the three and six month periods ended June
30, 1997 are not necessarily  indicative of the results that may be expected for
the fiscal year ending December 31, 1997. For further information,  refer to the
audited  financial  statements  and footnotes  thereto for the fiscal year ended
December 31, 1996  included in the  Company's  Annual  Report on Form 10-K filed
March 26,1997.

         Cash Equivalents and Marketable Securities

         The Company considers all highly liquid, low risk debt instruments with
a  maturity  of  three  months  or less  from the  date of  purchase  to be cash
equivalents.  The Company  generally  invests its cash and cash  equivalents  in
money market  accounts  and agency  repurchase  agreements  which are secured by
government agency securities.

         The  Company   presently   classifies  all  marketable   securities  as
available-for-sale investments and carries them at fair market value. Marketable
securities  represent U.S.  government  obligations and indirect  investments in
municipal  obligations.  Marketable securities classified as long-term represent
U.S. government  obligations maturing no later than May 1999. Unrealized holding
gains  and  losses,  net of  taxes,  are  carried  as a  separate  component  of
shareholders' equity.


2.       Issuance of Common Stock

         Initial Public Offering

         On February 29, 1996, the Company  completed an initial public offering
(the "Offering") in which it sold 2,500,000 shares of Common Stock at $15.00 per
share.   The  Offering   raised  net  proceeds  of  $33,863,764   (exclusive  of
underwriting discount and $1,011,236 in related expenses).

         Employee Stock Purchase Plan

         The Company  received  $500,663  from the issuance of 29,088  shares of
Common Stock on June 30, 1997 under the 1995 Employee Stock Purchase Plan.

         Exercise of Stock Options

         During the six months ended June 30, 1997, the Company received $74,269
from the  issuance of 188,565  shares of common  stock upon  exercise of options
under the 1992 Stock Option Plan.

         Acquisition of Prism Consulting

         On April 1, 1997,  the  Company  acquired  Prism  Consulting,  Inc.,  a
private management  consulting firm for 339,285 shares of common stock at $14.00
per share and $250,000 in cash.

                                       5

<PAGE>

                              THE INDUS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                                   (Unaudited)


2.       Issuance of Common Stock (continued)

         Subsequent Event

         The  Company   entered  into  an  agreement  and  plan  of  merger  and
reorganization  on  June  5,  1997  with  TSW  International,  Inc.,  a  Georgia
corporation.  The Merger is intended to be treated as a tax-free  reorganization
pursuant to the  provisions of Section 368 of the Internal  Revenue Code of 1986
and a  pooling  of  interests  for  accounting  purposes.  The  Company  and TSW
International,  Inc. will each become a subsidiary of a new Delaware corporation
named Indus International,  Inc. which has been formed by the Company solely for
the  purpose  of  the   transactions   contemplated   under  the  Merger.   Upon
effectiveness  of the Merger,  all the outstanding  capital stock of the Company
and all  the  outstanding  capital  stock  of TSW  International,  Inc.  will be
converted into common stock, par value $.001 per share, of Indus  International,
Inc..  Immediately following consummation of the Merger, the former shareholders
and  optionholders  of the  Company  and  the  former  security  holders  of TSW
International,  Inc. will  collectively  hold  approximately  53.75% and 46.25%,
respectively,  of Indus  International,  Inc.  Common  Stock on a fully  diluted
basis.

3.       Investment

         The Company acquired a 10% interest in TenFold  Corporation,  a private
software  company,  for approximately $8 million in cash. The Company received a
perpetual,  unrestricted  license  for  applications  and tools  developed  with
TenFold's technology.


4.       Pro Forma Data

         The  pro  forma  data  reflects   adjustments  which  would  have  been
applicable had the Company been a C Corporation in all periods.

         Statements of Operations

         Effective upon its  incorporation  in 1990, the Company elected to have
its United  States  income  taxed  under  Subchapter  S of the Code.  Income tax
provisions through December 31, 1995 have been principally attributable to state
taxes  and  taxes  imposed  by  foreign  governments  on the  Company's  foreign
operations.  The Company's S Corporation status terminated  effective January 1,
1996,  and the  Company  will be  subject  to  federal  income  taxation  at the
corporate level thereafter.  In connection with the termination of S Corporation
status on January 1, 1996,  a one-time  charge  representing  a  cumulative  net
federal and state deferred income tax liability of $6.7 million was recorded.

         For  purposes  of  presenting   comparative  earnings  and  calculating
earnings  per share  data,  pro forma net income for the second  quarter of 1996
reflects the  elimination  of the $6.7 million  cumulative  deferred  income tax
charge upon converting from an S Corporation to a C Corporation.

                                       6

<PAGE>


                              THE INDUS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                                   (Unaudited)

         Per Share Data

<TABLE>
         Pro forma net income per share is  computed  using pro forma net income
and the weighted average number of common and dilutive common  equivalent shares
outstanding  during each period.  Dilutive common  equivalent  shares consist of
incremental  common shares  issuable upon the assumed  exercise of stock options
(using the  treasury  stock  method).  Fully  diluted per share  amounts are not
presented,  as the  effect is not  material.  The  computation  of the  weighted
average number of shares  outstanding  for the three and six month periods ended
June 30, 1997 and 1996 is as follows (in thousands):
<CAPTION>

                                                                      Three Months Ended  Six Months Ended
                                                                            June 30,          June 30,
                                                                        ---------------    ---------------
                                                                         1997     1996      1997     1996
                                                                        ------   ------    ------   ------
<S>                                                                     <C>      <C>       <C>      <C>   
Weighted average outstanding ........................................   19,038   17,752    18,834   16,868
Equivalent shares assumed to be outstanding had options granted                           
  prior to 1995 been exercised and used to repurchase shares at their                     
  then fair value ...................................................      778    1,623       879    1,666
                                                                        ------   ------    ------   ------
                                                                        19,816   19,375    19,713   18,534
                                                                        ======   ======    ======   ======
</TABLE>                                                                        

5.       Earnings Per Share

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement  No.  128,  Earnings  Per Share,  which is  required  to be adopted on
December  31,  1997.  At that time,  the company  will be required to change the
method  currently  used to compute  earning  per share and to restate  all prior
periods.  Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share for the second quarter ended
June 30, 1997 and June 30, 1996 of $.006 and $.01 per share,  respectively.  The
impact of Statement 128 on the  calculation of fully diluted  earnings per share
for these quarters is not expected to be material.

                                       7

<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  Actual  results could differ  materially  from those  projected in the
forward-looking  statements  located in the Research and Development,  Sales and
Marketing  and  Liquidity  and  Capital  Resources  sections  as a result of the
factors set forth below, among others.  For a more complete  discussion of these
factors,  refer to the Risk Factors  included in the Company's  Definitive Proxy
Statement for a Special Meeting of Shareholders to be held on August 25, 1997.

The  Company  has  experienced,  and may in the future  experience,  significant
fluctuations in quarterly revenues and operating results. The Company's revenues
and  operating  results in general,  and in  particular  its  revenues  from new
licenses,  are  relatively  difficult  to  forecast  for a  number  of  reasons,
including (i) the relatively long sales cycles for the Company's products,  (ii)
the variable size and timing of individual license  transactions,  (iii) changes
in demand for the Company's products and services,  (iv) competitive  conditions
in the  industry,  (v)  changes  in  customer  budgets,  (vi) the  timing of the
introduction  of new  products  or product  enhancements  by the  Company or its
competitors, (vii) the Company's success in and costs associated with developing
and  introducing  new products,  (viii) product life cycles,  (ix) the timing of
revenue  recognition under the  percentage-of-completion  method, (x) changes in
the proportion of revenues  attributable to license fees versus  services,  (xi)
changes in the level of operating expenses,  (xii) delay or deferral of customer
implementations  of the Company's  software,  (xiii) software  defects and other
product quality problems,  and (xiv) other economic  conditions  generally or in
specific  process  industry  segments.  Further,  the purchase of the  Company's
products  generally  involves a  significant  commitment  of  capital,  with the
attendant  delays  frequently  associated  with large capital  expenditures  and
authorization  procedures  within  large  organizations.  For  these  and  other
reasons,  the sales cycles for the Company's  products are typically lengthy and
subject to a number of significant risks over which the Company has little or no
control,  including  customers'  budget  constraints and internal  authorization
reviews. In addition,  delays in the completion of a product  implementation may
require that the revenues associated with such implementation be recognized over
a longer period than originally  anticipated.  Such delays in the implementation
or  execution  of orders  has  caused,  and may in the  future  cause,  material
fluctuations in the Company's operating results. Similarly, customers may cancel
implementation projects at any time without penalty, and such cancellation could
have a  material  adverse  effect  on  the  Company's  business  or  results  of
operations.  Because  the  Company's  expenses  are  relatively  fixed,  a small
variation  in  the  timing  of  recognition  of  specific   revenues  can  cause
significant  variations in operating  results from quarter to quarter and may in
some future  quarter  result in losses or have a material  adverse effect on the
Company's business or results of operations.  For a more complete  discussion of
these factors,  refer to the Risk Factors  included in the Company's  Definitive
Proxy  Statement for a Special  Meeting of Shareholders to be held on August 25,
1997 filed with the Securities and Exchange Commission on August 12, 1997.

Risks relating to the proposed merger of the Company and TSW International, Inc.
include:  (i) risks relating to the integration of the operations of the Company
and TSW  International,  Inc.;  (ii) the  incurrence of the Combined  Company of
certain   non-recurring  charges  in  connection  with  the  Merger;  (iii)  the
additional shares of Indus International,  Inc. Common Stock to be issued in the
Merger as well as the number of shares of Indus International, Inc. Common Stock
to be eligible  for public  resale;  (iv) certain  differences  in the rights of
holders of the Company's Common Stock and TSW International,  Inc. Capital Stock
resulting  from the  Merger;  (vi)  certain  affiliates  of the  Company and TSW
International,  Inc.  have  certain  interests  that  are  different  from or in
addition to shareholders of the Company and  shareholders of TSW  International,
Inc. Risks relating to the business of the proposed  Combined  Company  include:
(i) the Combined Company's ability to manage growth; (ii) the utilization by the
Combined Company of new distribution  channels;  and (iii) risks relating to the
successful integration of current and future products and technologies.

The Company has in the past and may in the future acquire complementary products
or businesses.  Risks associated with such  transactions  include  difficulty in
retaining ad assimilating the personnel of the combined companies, difficulty in
integrating  the  operations  of  the  combined  companies,  disruption  of  the
Company's ongoing business,  expenses associated with completing the transaction
and  amortizing  acquired  intangible  assets,  and dilution of existing  equity
holders.  There can be no assurance that such  transactions  will not materially
adversely  affect the  Company's  business,  financial  condition  or  operating
results.

                                       8

<PAGE>


Results of Operations

Overview.  The Indus Group, Inc. develops,  markets,  and supports a proprietary
line of enterprise  management software and implementation  services for process
industry  customers  worldwide.  Taking advantage of the client/server  model of
networked   computing,   PASSPORT  Software  Solutions  contain  "best  business
practices" which serve as the catalyst for improving core business functions for
electric utilities,  oil and gas, chemical refining,  forest products, and steel
producing  industries.   ABACUS,  The  Indus  Group's  proprietary  methodology,
accelerates  the  realization  of benefits  by  delivering  a reliable  cost and
time-efficient approach to implementation across the enterprise.

The  Company   derives  its   revenues   primarily   from   software   licenses,
implementation and training services and maintenance fees. While the Company has
derived the majority of its revenues  from electric  utilities,  it also derives
revenues from  customers in other process  industries,  such as the oil and gas,
petrochemical, steel and forest product industries.

The Company provides its software to customers under contracts which provide for
software  license  fees,  system  implementation  services and the first year of
software maintenance.  Revenues from software license fees, which typically have
ranged from approximately $1 million to $5 million per enterprise  license,  are
recognized  as earned  revenue  over the  estimated  time period to complete the
implementation  of the software,  which generally is twelve to fourteen  months.
Revenues  from system  implementation  services,  which  typically are time- and
material-based,  are  recognized  as  direct  contract  costs are  incurred  and
typically range from one to three times the license fees.

Accordingly,  revenues  for each  quarter  depend in part on  revenues  from the
closing of new  contracts  during the quarter as well as revenue from  contracts
under  implementation that were executed in prior quarters. A portion of license
fees is deferred initially and subsequently  recognized over the one-year period
during  which  continuing  maintenance  and  support  services  are  provided to
customers  under the contracts.  After an initial  contract  period,  additional
maintenance and support services, for which the Company typically charges 15-18%
of the original license fee per year, are subject to separate  contracts whereby
revenue is recognized ratably over the contract period.

In March 1997,  the Company  acquired a 10% interest in TenFold  Corporation,  a
private software company for  approximately $8 million in cash. The Company will
receive a  perpetual,  unrestricted  license for future  applications  and tools
developed with TenFold's  technology.  In April 1997, the Company acquired Prism
Consulting,  a private  management  consulting  firm,  for $4.75  million in the
Company's  stock at the then  current  market  value and  $250,000 in cash.  The
Company has not and does not anticipate any material consequences on its results
of operations for the calendar year 1997 as a result of these acquisitions.

In June 1997,  the  Company  entered  into an  agreement  and plan of merger and
reorganization with TSW International,  Inc., a Georgia corporation.  The Merger
is  intended  to  be  treated  as a  tax-free  reorganization  pursuant  to  the
provisions of Section 368 of the Internal  Revenue Code of 1986 and a pooling of
interests for accounting purposes. The Company and TSW International,  Inc. will
each  become  a   subsidiary   of  a  new  Delaware   corporation   named  Indus
International,  Inc. which has been formed by the Company solely for the purpose
of the transactions  contemplated  under the Merger.  Upon  effectiveness of the
Merger, all the outstanding capital stock of the Company and all the outstanding
capital stock of TSW  International,  Inc. will be converted  into common stock,
par value $.001 per share, of Indus International,  Inc.  Immediately  following
consummation of the Merger,  the former  shareholders  and  optionholders of the
Company  and  the  former  security  holders  of TSW  International,  Inc.  will
collectively  hold  approximately  53.75%  and  46.25%,  respectively,  of Indus
International,  Inc. Common Stock on a fully diluted basis. 

                                       9

<PAGE>


Results of Operations (continued)

<TABLE>
The following table sets forth for the periods indicated the percentage of total
revenues  represented  by certain  line  items in the  Company's  statements  of
operations:

<CAPTION>
                            Percent of Total Revenues

                                                                           Three Months Ended  Six Months Ended
                                                                                 June 30,          June 30,
                                                                             --------------    --------------
                                                                              1997     1996     1997     1996
                                                                              -----    -----    -----    -----
<S>                                                                           <C>      <C>      <C>      <C>  
Revenues:
     Software licensing fees ...........................................      18.0%    21.6%    17.3%    22.5%
     Services maintenance ..............................................      82.0     78.4     82.7     77.5
                                                                             -----    -----    -----    -----
          Total revenues ...............................................     100.0    100.0    100.0    100.0

Cost of revenues .......................................................      42.7     42.0     42.6     40.7
                                                                             -----    -----    -----    -----
Gross margin ...........................................................      57.3     58.0     57.4     59.3

Operating expenses:
     Research and development ..........................................      15.3     18.7     14.2     19.5
     Sales and marketing ...............................................      13.6     11.3     14.0     11.4
     General and administrative ........................................       9.3     10.5      9.8     10.7
                                                                             -----    -----    -----    -----
          Total operating expenses .....................................      38.2     40.5     38.0     41.6
                                                                             -----    -----    -----    -----

Income from operations .................................................      19.1     17.5     19.4     17.7
Other income, net ......................................................       1.7      2.2      1.8      1.2
                                                                             -----    -----    -----    -----

Income before income taxes .............................................      20.8     19.7     21.2     18.9

Provision for income taxes (state and foreign only in 1995) ............       8.3      8.0      8.7      7.7

Cumulative effect of deferred income taxes provided upon January 1, 1996
   conversion to C-Corporation status ..................................       --       --       --      19.4
                                                                             -----    -----    -----    -----
Net income (loss) ......................................................      12.5%    11.7%    12.5%    (8.2)%
                                                                             =====    =====    =====    =====
Pro forma statement of operations:
     Income before income taxes, as above ..............................      20.8%    19.7%    21.2%    18.9%
     Provision for income taxes (federal, state and foreign) ...........       8.3      8.0      8.7      7.7
                                                                             -----    -----    -----    -----
     Pro forma net income per share ....................................      12.5%    11.7%    12.5%    11.2%
                                                                             =====    =====    =====    =====
</TABLE>

Revenues.  Total  revenues  increased  34% to $23.5 million in the quarter ended
June 30, 1997 from $17.6 million in 1996. In the first six months of 1997, total
revenues  increased by 33% to $45.9 million from $34.5 million in 1996.  Revenue
from  international  customers  (excluding Canada and Mexico) accounted for 6.5%
and 8.6% of  revenues  for the  quarter  and six  months  ended  June 30,  1997,
respectively,  and 20% for both the quarter and six months  ended June 30, 1996.
As most of the Company's  contracts are  denominated  in U.S.  dollars,  foreign
currency fluctuations have not impacted the results of operations.  The top five
customers  of the  Company  have  accounted  for  approximately  34%  and 35% of
revenues for the quarter and six months ended June 30, 1997,  respectively,  and
50% of revenues  for both the quarter and six months  ended June 30,  1996.  The
composition  of the top five  customers has changed from year to year,  with the
exception of one customer which generated  revenues ranging from 9.5% of revenue
for the quarter  ended June 30,  1997 to 10.5% of revenue for the quarter  ended
June 30, 1996.

Revenues  from  licensing  fees  increased by 11% to $4.2 million in the quarter
ended June 30, 1997 from $3.8 million in 1996.  In the first six months of 1997,
licensing  fees  increased  2.5% to $7.9 million from $7.8 million in 1996.  The
license fee growth from 1996 to 1997 resulted primarily from closing of a number
of license fee agreements with both new and existing customers.  License fees as
a percentage of revenue were 18.0% and 21.6% for the three months ended June 30,
1997 and 1996,  and 17.3% and 22.5% for the six months  ended June 30,  1997 and
1996.

                                       10

<PAGE>

Results of Operations (continued)

Revenues from services and maintenance  increased by 40% to $19.3 million in the
quarter  ended June 30, 1997 from $13.8 million in 1996. In the first six months
of 1997,  services and maintenance  revenue  increased 42% to $38.0 million from
$26.7  million in 1996.  The  service and  maintenance  growth from 1996 to 1997
resulted  primarily  from  implementation  services  generated  by  several  new
domestic  contracts  and  additional   implementation   projects  with  existing
customers.

The Company does not believe that the revenue  growth  experienced  in the first
six months of 1997 is  necessarily  indicative  of any  revenue  growth that may
occur in future periods.

Cost of Revenues.  Cost of revenues  consists  primarily  of: (i)  personnel and
related costs for implementation  (including account executive  personnel),  and
(ii) training and customer support  services.  Substantially  all of the cost of
revenues  is  attributable  to  providing  services  and  maintenance;  costs of
software  license  fees,  which consist  primarily of packaging  and  production
costs,  are not significant  and are not segregated in the Company's  accounting
records. All software development costs are expensed to research and development
as incurred.

Cost of revenues  increased  36% to $10.0  million in the quarter ended June 30,
1997 from  $7.4  million  in 1996.  In the  first  six  months of 1997,  cost of
revenues  increased by 39% to $19.6 million from $14.0 million in 1996. The 1997
increase in absolute dollars in cost of revenues was due principally to the need
for  additional  personnel to service the Company's  customers.  As a percent of
total revenue,  cost of revenues was 43% and 42% for the quarters ended June 30,
1997 and 1996, respectively. For the first six months of 1997 and 1996, the cost
of revenues as a percent of total revenue was at 42.6% and 40.7%,  respectively.
The  slight  increase  in  the  percentage  was  due  to  growth  in  low-margin
reimbursable  expenses.  The  Company's  accounting  policy is to record  direct
reimbursable costs as revenue when billed to the customer,  which is then offset
by the related cost of revenues. Since the direct reimbursable costs have little
or no margin, they reduce the overall gross margin as a percent of revenues.

Research and  Development  (R&D).  Research  and  development  expenses  consist
primarily of: (i) personnel and related costs and (ii) computer  timeshare costs
directly  attributable to the development of new software application  products,
enhancements  to  existing  products  and the  costs of  porting  the  Company's
products to different platforms.

Research and  development  expenses  increased 9% to $3.6 million in the quarter
ended June 30, 1997 from $3.3 million in 1996.  In the first six months of 1997,
research  and  development  expenses  decreased  by 3% to $6.5 million from $6.7
million  in 1996.  As a  percent  of total  revenue,  research  and  development
expenses  were 15.3% and 18.7% for the  quarters  ended June 30,  1997 and 1996,
respectively.  For  the  first  six  months  of  1997  and  1996,  research  and
development  expenses  as a percent  of total  revenue  were  14.2%  and  19.5%,
respectively.

R&D  investment  increased in the second quarter in 1997 compared to 1996 due to
the timing of PASSPORT  Release 6.0 which was  completed by July 1997.  PASSPORT
Release 5.0 was  completed in the first  quarter of 1996  resulting in a minimal
R&D cost  impact in the second  quarter of 1996.  The  Company  believes  that a
significant level of investment in R&D is essential to remain  competitive.  The
amount of R&D in absolute dollars for a particular  period may vary depending on
the projects in progress.

In accordance with Statement of Financial  Accounting Standards No. 86, software
development  costs are expensed as incurred until  technological  feasibility of
the software is established,  after which any additional  costs are capitalized.
To date,  the  Company has  expensed  all  software  development  costs  because
development  costs incurred  subsequent to the  establishment  of  technological
feasibility have not been material.

Sales and Marketing.  Sales and marketing expenses increased 61% to $3.2 million
in the quarter  ended June 30, 1997 from $2.0 million in 1996.  In the first six
months of 1997,  sales and marketing  expenses  increased by 64% to $6.4 million
from $3.9  million  1996.  As a percent of total  revenue,  sales and  marketing
expenses were at 13.6%,  11.3%,  14.0% and 11.4% for the quarters ended June 30,
1997 and 1996 and for the first six months of 1997 and 1996,  respectively.  The
growth in sales and marketing  expenses in absolute dollars is primarily due to:
(i) the addition of personnel,  (ii) expansion into new vertical markets,  (iii)
expansion of strategic alliance program,  (iv) changes in the mix of the revenue
base on which commission  expense is generated.  The Company believes that sales
and  marketing  expenses  as a  percentage  of total  revenues  may  continue to
increase for the same reasons.

                                       11

<PAGE>


Results of Operations (continued)

General and Administrative. General and administrative expenses increased 18% to
$2.2 million in the quarter  ended June 30, 1997 from $1.8  million in 1996.  In
the first six months of 1997, general and  administrative  expenses increased by
21% to $4.5 million from $3.7  million in 1996.  As a percent of total  revenue,
general and  administrative  expenses were 9.3% and 10.5% for the quarters ended
June 30, 1997 and 1996, respectively. For the first six months of 1997 and 1996,
the general and  administrative  expenses as a percent of total revenue was 9.8%
and 10.7%,  respectively.  The growth in general and administrative  expenses in
absolute dollars is primarily a result of: an expansion in staffing and increase
in other costs necessary to support the Company's growth.

Provision  for Income  Taxes.  Effective  upon its  incorporation  in 1990,  the
Company elected to have its United States income taxed under Subchapter S of the
Code.  Accordingly,  income  tax  provisions  prior  to  1996  were  principally
attributable  to state  taxes and taxes  imposed by foreign  governments  on the
Company's  foreign  operations.  The Company's S Corporation  status  terminated
effective  January 1, 1996,  and the Company  will be subject to federal  income
taxation at the corporate level thereafter.  In relation to the termination of S
Corporation  status as of January 1, 1996,  a  one-time  charge  representing  a
cumulative net federal and state  deferred  income tax liability of $6.7 million
was recorded.

Net Income  (Loss).  The net loss for the six months ended June 30, 1996 was the
result of the $6.7 million cumulative  deferred income tax liability charge upon
elimination of the S Corporation status.

Pro Forma Net  Income.  For  purposes of  presenting  comparative  earnings  and
calculating  earnings  per share  data,  pro forma net income for the six months
ended June 30, 1996 reflects the  elimination  of the $6.7 million  nonrecurring
cumulative deferred income tax charge upon converting from an S Corporation to a
C Corporation.

Liquidity and Capital Resources

The Company had total assets of $84.5 million and $75.5 million at June 30, 1997
and December 31, 1996, respectively.  Historically, the Company has financed its
operations  primarily through cash provided by operations,  borrowings under its
line of  credit  and,  to a lesser  extent,  through  borrowings  from its Chief
Executive Officer and principal shareholder. In March 1996, the Company received
$33.9 million,  representing  the proceeds (net of underwriting  commissions and
offering  costs)  from an initial  public  offering of  2,500,000  shares of its
Common  Stock.  These  proceeds  were  used to  purchase  marketable  securities
(comprised  of  municipal  and U.S.  government  obligations)  and certain  cash
equivalent instruments.

As of June 30, 1997, the Company's  principal sources of liquidity  consisted of
approximately  $313,000  in cash and  cash  equivalents  and  $25.0  million  in
marketable securities.  In addition, the Company has an unsecured revolving bank
line of credit agreement which permits borrowings, including stand-by letters of
credit,  of up to $15 million.  The facility  expires in May 1999. No borrowings
were outstanding under this line at June 30, 1997.

In the six months ended June 30, 1997,  cash,  cash  equivalents  and marketable
securities  decreased  substantially  as a result  of cash  investment  in a 10%
interest in TenFold  Corporation  ($8  million),  the  purchase of property  and
equipment ($3.0 million),  the purchase of marketable securities ($1.7 million),
and cash used by operations  ($510,000).  Cash paid for income taxes for the six
months  ended  June  30,  1997  and 1996  was  $4.6  million  and $3.2  million,
respectively.

Cash  requirements  are  expected to continue to increase in order to fund:  (i)
personnel  and  salary  costs,  (ii)  research  and  development   costs,  (iii)
investment  in  additional  technical   equipment,   and  (iv)  working  capital
requirements.  The Company presently anticipates additional capital expenditures
for the remainder of 1997 of approximately  $2 million,  primarily for equipment
and furniture.

The Company's principal  commitments at June 30, 1997,  consisted of obligations
under operating leases for facilities and computer equipment.

The Company believes that its existing cash and marketable securities,  together
with anticipated  cash flow from operations and available bank borrowings,  will
be  sufficient  to meet its cash  requirements  during the next 12  months.  The
foregoing statement regarding the Company's expectations for continued liquidity
is a  forward-looking  statement,  and  actual  results  may  differ  materially
depending  on a variety of  factors,  including  variable  operating  results or
presently  unexpected usages of cash, such as the merger with TSW International,
Inc. and acquisitions.

                                       12

<PAGE>

PART II: OTHER INFORMATION


ITEM 1.       LEGAL PROCEEDINGS

              There are no pending legal  proceedings  to which the Company is a
              party or of which any of its property is subject.


ITEM 2.       CHANGES IN SECURITIES

              None.


ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              None.


ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              (a) The Company held its annual meeting of  stockholders on May 6,
                  1997.

              (b) Pursuant to the  election of the five  directors  listed under
                  Item 1,  Robert W.  Felton,  Richard W.  MacAlmon,  Michael E.
                  Percy,  Alan G.  Merten,  and  Donald F.  Robertson  were each
                  elected  for a one year  term.  Robert W.  Felton,  Richard W.
                  MacAlmon,  Michael  E.  Percy and  Donald F.  Robertson  still
                  continue as directors and were elected at prior annual meeting
                  for a term of one year.  Alan G.  Merten  still  continues  as
                  director and was elected by the Board in December 1995.

              (C) The Company's stockholders voted the following matters:

                   (i)    Election of five directors.  All directors proposed by
                          management were selected.

                          Name of                   Number of       Number of
                          Nominee                   Votes For     Votes Withheld
                          -------                   ---------     --------------
                          Robert W. Felton          16,600,010        3,971
                          Richard W. MacAlmon       16,600,018        3,963
                          Alan G. Merten            16,600,018        3,963
                          Michael E. Percy          16,600,018        3,963
                          Donald F. Robertson       16,599,968        4,013

                   (ii)   Approval  of an  amendment  to the 1995  Stock Plan to
                          increase  the number of shares  reserved  for issuance
                          thereunder by 2,500,000. 13,921,430 votes were cast in
                          favor of the  amendment,  2,659,733 were cast against,
                          zero votes were withheld, there were 2,360 abstentions
                          and 20,458 broker non-votes.

                   (iii)  Ratification  and approval of the appointment of Ernst
                          &  Young  as  independent  public  accountants  of the
                          Company  for  the  year  ending   December  31,  1997.
                          16,602,111   votes   were   cast  in   favor   of  the
                          appointment,  950 votes were cast  against,  zero were
                          withheld,  there were 920  abstentions and zero broker
                          non-votes.

ITEM 5.       OTHER INFORMATION

              None.

                                       13

<PAGE>


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits.

       2.1        Agreement  and Plan of Merger and  Reorganization  dated as of
                  June 5, 1997  ("Agreement of Merger"),  by and among The Indus
                  Group, Inc., Indus International,  Inc. and TSW International,
                  Inc.   (Incorporated  by  reference  to  Exhibit  2.1  to  the
                  Registration   Statement   on  Form   S-4   filed   by   Indus
                  International,   Inc.   with  the   Securities   and  Exchange
                  Commission on August 7, 1997; Registration No. 333-33113)
       2.2        First  Amendment  to  Agreement of Merger dated as of July 21,
                  1997 by and among The Indus Group, Inc., Indus  International,
                  Inc. and TSW International, Inc. (Incorporated by reference to
                  Exhibit 2.2 to the Registration Statement on Form S-4 filed by
                  Indus  International,  Inc. with the  Securities  and Exchange
                  Commission on August 7, 1997; Registration No. 333-33113)
       11.01      Statement of Computation of Pro Forma Net Income Per Share.
       27.01      Financial Data Schedule.


(b)    Reports on Forms 8-K.

       No  reports on Form 8-K were filed  during  the  Quarter  covered by this
       report.

                                       14

<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                             THE INDUS GROUP, INC.
                                                 (Registrant)



Date:  August 14, 1997

                                             /s/ Robert W. Felton
                                             -----------------------------------
                                             Robert W. Felton
                                             President and Chief Executive 
                                             Officer



Date:  August 14, 1997
                                             /s/ Frank W. Siskowski
                                             -----------------------------------
                                             Frank Siskowski
                                             Senior Vice President of Finance 
                                             and Chief Financial Officer
                                             (Principal Financial and Accounting
                                              Officer)

                                       15

<PAGE>


                                INDEX TO EXHIBITS


                                                                    Sequentially
                                                                      Numbered
     Exhibit                Description                                 Page
     -------                -----------                                 ----
       2.1* Agreement and Plan of Merger and Reorganization  dated as of June 5,
            1997 by and among The Indus Group Inc., Indus  International,  Inc.,
            and TSW International, Inc.,
       2.2* First  amendment to Agreement of Merger dated as of July 21, 1997 by
            and among The Indus Group, Inc., Indus  International,  Inc. and TSW
            International, Inc.
      11.01 Statement of Computation of Pro Forma Net Income Per Share
      27.01 Financial Data Schedule