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                                  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 March 31, 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)

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

Indicateby  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 April 30, 1997,  Registrant had  outstanding  19,024,115  shares of Common
Stock, $.001 par value.

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<PAGE>

                                TABLE OF CONTENTS

                          Part I: Financial Information
                                                                            Page
                                                                            ----
Item     1.       Financial Statements (unaudited)
                  Condensed Consolidated Statements of 
                      Operations - three months ended March 31, 1997
                      and 1996...............................................  1
                  Condensed Consolidated Balance Sheets - 
                      March 31, 1997 and March 31, 1996......................  2
                  Condensed Consolidated Statement of Shareholders' 
                      Equity - year ended December 31, 1996 and 
                      three months ended March 31, 1997......................  3
                  Condensed Consolidated Statements of 
                      Cash Flows - three months ended
                      March 31, 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....................  7

                           Part II: Other Information

Item     1.       Legal Proceedings.......................................... 11
Item     2.       Changes in Securities...................................... 11
Item     3.       Defaults Upon Senior Securities............................ 11
Item     4.       Submission of Matters to a Vote of Security Holders........ 11
Item     5.       Other Information.......................................... 11
Item     6.       Exhibits and Reports on Form 8-K........................... 11


                  Signatures................................................. 12

<PAGE>

PART I: FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


                              THE INDUS GROUP, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                    (In thousands, except per share amounts)

                                   (Unaudited)



                                                            Three Months Ended
                                                                March 31,
                                                            ------------------
                                                             1997         1996
                                                             ----         ----
Revenues:
     Software licensing fees ........................      $ 3,722      $ 3,958
     Services and maintenance .......................       18,700       12,901
                                                           -------      -------
          Total revenues ............................       22,422       16,859

Cost of revenues ....................................        9,518        6,649
                                                           -------      -------
Gross margin ........................................       12,904       10,210

Operating expenses:
     Research and development .......................        2,931        3,415
     Sales and marketing ............................        3,238        1,936
     General and administrative .....................        2,296        1,843
                                                           -------      -------
          Total operating expenses ..................        8,465        7,194
                                                           -------      -------

Income from operations ..............................        4,439        3,016
Other income, net ...................................          411           47
                                                           -------      -------
Income before income  taxes .........................        4,850        3,063
Provision for income taxes ..........................        2,037        1,260
Cumulative effect of deferred income taxes
   provided upon January 1, 1996
   conversion to C-Corporation status ...............         --          6,700
                                                           -------      -------
Net income (loss) ...................................      $ 2,813      $(4,897)
                                                           =======      =======
Pro forma statement of operations:
     Income before income taxes, as above ...........      $ 4,850      $ 3,063
     Provision for income taxes
     (federal, state and foreign) ...................        2,037        1,260
                                                           -------      -------
     Pro forma net income ...........................      $ 2,813      $ 1,803
                                                           =======      =======
Pro forma net income per share ......................      $  0.14      $  0.10
                                                           =======      =======

Shares used in computing pro forma net
   income per share .................................       19,609       17,686
                                                           =======      =======

                             See accompanying notes.

                                       1
<PAGE>

                              THE INDUS GROUP, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except share amounts)

                                   (Unaudited)

                                                          March 31, December 31,
                                                            1997         1996
                                                            ----         ----
                                                                          (1)
                                     ASSETS

Current assets:
     Cash and cash equivalents ...........................   $ 5,666    $13,266
     Marketable securities ...............................    27,422     26,524
     Billed accounts receivable, less allowance for
         doubtful accounts of $549 at March 31, 1997
         and $449 at December 31, 1996 ...................    16,065     16,889
     Unbilled accounts receivable ........................     6,292      5,633
     Other current assets ................................     3,766      4,523
                                                             -------    -------
         Total current assets ............................    59,211     66,835
Marketable securities - noncurrent .......................     2,111      2,129
Property and equipment, net ..............................     7,174      6,337
Investment ...............................................     7,997       --
Employee notes receivable ................................       210        213
                                                             -------    -------
                                                             $76,703    $75,514
                                                             =======    =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable ....................................   $ 2,823    $ 2,165
     Deferred income taxes ...............................     4,233      3,837
     Other accrued liabilities ...........................     3,495      3,541
     Deferred revenue ....................................     8,056     10,599
                                                             -------    -------
         Total current liabilities .......................    18,607     20,142
Shareholders' equity:
     Preferred Stock, $.001 par value at March 31, 1997
        and December 31, 1996:
          Authorized shares - 5,000,000
          Issued and outstanding shares - none ...........      --         --
     Common Stock, $.001 par value at March 31, 1997
        and December 31, 1996:
          Authorized shares - 50,000,000
          Issued and outstanding shares -18,639,011
            (18,590,376 at December 31, 1996) ............        19         19
     Additional capital ..................................    46,448     46,425
     Other ...............................................      (412)      (300)
     Retained earnings ...................................    12,041      9,228
                                                             -------    -------
         Total shareholders' equity ......................    58,096     55,372
                                                             -------    -------
                                                             $76,703    $75,514
                                                             =======    =======

(1)  Derived from audited financial statements.

                             See accompanying notes.

                                       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 (2) ........................       --        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 on
        January  1, 1996 ......................       --        (8,223)       --         8,223        --
     Reincorporation and adoption of $.001
        par value .............................       (494)        494        --          --          --
     Issuance of common stock (1) .............          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 ....       --            23                                  23
     Translation adjustment ...................                                (44)                    (44)
     Unrealized loss on marketable securities .                                (86)                    (86)
     Amortization of deferred compensation ....                                 18                      18
     Net income ...............................                                          2,813       2,813
                                                  --------    --------    --------    --------    --------
Balance at March 31, 1997 .....................   $     19    $ 46,448    $   (412)   $ 12,041    $ 58,096
                                                  ========    ========    ========    ========    ========

<FN>
(1)    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),  $500 received from June 30, 1996
       issuance of 39,189 common shares under the Employee  Stock  Purchase Plan
       and $230  received  from the  issuance  of  545,595  common  shares  upon
       exercise of options.

(2)    Value  of  unexercised  stock  options  of The  Indus  Group,  Inc.  upon
       elimination of contingency feature.

                             See accompanying notes.
</FN>
</TABLE>
                                       3
<PAGE>

                              THE INDUS GROUP, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

                                   (Unaudited)


                                                           Three Months Ended
                                                               March 31,
                                                            1997         1996
                                                            ----         ----
Cash flows from operating activities
Net income (loss) ....................................    $  2,813     $ (4,897)
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization ...................         496          288
     Provision for doubtful accounts .................         100         --
     Amortization of deferred compensation ...........          19           48
     Loss (gain) on sale of fixed assets .............         300         --
     Deferred income taxes ...........................         395         (860)
     Cumulative effect of deferred income taxes
       provided January 1, 1996 ......................        --          6,700
     Tax benefit from exercise of stock options ......        --            801
     Changes in operating assets and liabilities:
          Billed accounts receivable .................         724        4,048
          Unbilled accounts receivable ...............        (659)       1,276
          Other current assets .......................         757         (200)
          Employee notes receivable ..................         (69)         (10)
          Accounts payable ...........................         307           69
          Accrued payroll and related expense ........         216         --
          Income taxes payable .......................        --          1,274
          Other accrued liabilities ..................          90          582
          Deferred revenue ...........................      (2,543)       1,069
          Other ......................................         (61)           4
                                                          --------     --------
Net cash provided by operating activities ............       2,885       10,192
                                                          --------     --------
Cash flows from investing activities
Purchase of marketable securities ....................        (893)     (31,914)
Investment ...........................................      (7,997)        --
Acquisition of property and equipment ................      (1,617)        (521)
                                                          --------     --------
Net cash used in investing activities ................     (10,507)     (32,435)
                                                          --------     --------
Cash flows from financing activities
Net repayment of credit ..............................        --         (8,900)
Net proceeds from issuance of common stock ...........          22       33,927
Purchase of Indus International, Inc. net assets .....        --           (103)
                                                          --------     --------
Net cash provided by financing activities ............          22       24,924
                                                          --------     --------

Net increase in cash and cash equivalents ............      (7,600)       2,681
Cash and cash equivalents at beginning of period .....      13,266           45
                                                          ========     ========
Cash and cash equivalents at end of period ...........    $  5,666     $  2,726
                                                          ========     ========
Supplemental disclosures of cash flow information
Interest paid ........................................    $   --       $     76
                                                          ========     ========
Income taxes paid ....................................    $     80     $      6
                                                          ========     ========

                             See accompanying notes.

                                       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 month period ended March 31, 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 fund accounts.

         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 mature no
later than July 1998.  Unrealized  holding gains and losses,  net of taxes,  are
carried as a separate component of shareholders' equity.


2.       Basis of Presentation

         On March 1, 1996, pursuant to an Asset Purchase Agreement,  the Company
purchased  all of the  assets  and  assumed  all of  the  liabilities  of  Indus
International,  Inc.,  an entity  which was  related  to The Indus  Group,  Inc.
through common shareholders. The purchase price of the net assets, which equaled
the net book value,  was $103,252.  Concurrent  with this purchase,  the Company
established  a  new  wholly-owned  subsidiary  to  which  the  net  assets  were
transferred.  The financial  statements  include the accounts of the Company and
Indus International, Inc., which was included on a combined basis prior to March
1, 1996.  All  significant  intercompany  accounts  and  transactions  have been
eliminated.


3.       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).

         Exercise of Stock Options

         During the three  months  ended March 31,  1997,  the Company  received
$22,026  from the  issuance of 52,660  shares of common  stock upon  exercise of
options.

         Subsequent Event

         The Company  entered into an agreement  after March 31, 1997 to acquire
Prism Consulting, a private management consulting firm, for $4.75 million in the
Company's stock at the current market value and $250,000 in cash.

                                       5
<PAGE>
                              THE INDUS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                                   (Unaudited)

4.       Investment

         The Company acquired a 10% interest in TenFold  Corporation,  a private
software company, for approximately $8 million in cash. The Company will receive
a pertpetual, unlimited license for future applications and tools developed with
TenFold's technology.

5.       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 first  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.

         Per Share Data

         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 month periods ended March 31,
1997 and March 31, 1996 is as follows (in thousands):

                                                             Three Months Ended
                                                                 March 31,
                                                            -------------------
                                                             1997          1996
                                                             ----          ----
     Weighted average outstanding ......................     18,629      15,984
     Equivalent shares assumed to be
       outstanding had options granted
       prior to 1995 been exercised and used to
       repurchase shares at their then fair value ......        980       1,702
                                                             ------      ------
                                                             19,609      17,686
                                                             ======      ======

6             Earning 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 first quarter ended
March 31, 1997 and March 31, 1996 of $.01 per share. The impact of Statement 128
on the calculation of fully diluted earnings per share for these quarters is not
expected to be material.

                                       6
<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.

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 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,
(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  have  caused,  and may in the future  cause,  material
fluctuations in the Company's operating results. Similarly, customers may cancel
implementation projects at any time, 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.

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 and 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.

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  operational  business
functions  for  electric  utilities,  oil and  gas,  chemical  refining,  forest
products,  nuclear 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,  including oil and gas,
chemical refining, nuclear, 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  application  software  licenses,  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 client  workstation  software are recognized as
billed. Revenues from system implementation  services, which generally are time-
and  material-based,  are  recognized as direct  contract costs are incurred and
typically range from one to three times the license fees.

                                       7
<PAGE>

Results of Operations (continued)

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 agreements whereby
revenue is recognized ratably over the agreement 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,  unlimited  license  for  future  applications  and tools
developed with TenFold's  technology.  Subsequent to March 31, 1997, the Company
acquired  Prism  Consulting,  a private  management  consulting  firm, for $4.75
million in the Company's stock at the 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.

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:

                            Percent of Total Revenues

                                                            Three Months Ended
                                                                March 31,
                                                            -------------------
                                                             1997        1996
                                                            -------------------
Revenues:
     Software licensing fees ..........................       16.6%       23.5%
     Services and maintenance .........................       83.4        76.5
                                                             -----       ----- 
          Total revenues ..............................      100.0       100.0

Cost of revenues ......................................       42.4        39.4
                                                             -----       ----- 
Gross  margin .........................................       57.6        60.6

Operating expenses:
     Research and development .........................       13.1        20.2
     Sales and marketing ..............................       14.4        11.5
     General and administrative .......................       10.2        10.9
                                                             -----       ----- 
          Total operating expenses ....................       37.8        42.6
                                                             -----       ----- 
Income (loss) from operations .........................       19.8        18.0
Other income,  net ....................................        1.8         0.3
                                                             -----       ----- 
Income (loss) before income taxes .....................       21.6        18.3
Provision for income taxes (state and foreign
    only in 1995) .....................................        9.1         7.5
Cumulative effect of deferred income taxes
   provided upon January 1, 1996
   conversion to C-Corporation status .................        --         40.0
                                                             -----       -----
Net income (loss) .....................................       12.5%      (29.2%)
                                                             =====       =====  
Pro forma statement of operations:
     Income (loss) before income taxes, as above ......       21.6%       18.3%
     Provision for income taxes (federal, state and
          foreign only in 1995) .......................        9.1         7.5
                                                             -----       ----- 
     Pro forma net income .............................       12.5%       10.8%
                                                             -----       ----- 

                                       8
<PAGE>

Results of Operations (continued)

Revenues.  Total revenues increased 33% to $22.4 million in the first quarter in
1997 from $16.9 million in the first quarter of 1996.  The increase was due to a
significant  growth in service revenues.  Revenue from  international  customers
(excluding  Canada and Mexico)  accounted  for 11% and 20% of  revenues  for the
first quarter of 1997 and 1996, respectively.  The decrease in the percentage of
international  revenue was due to the lack of new  international  customers.  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 40-45% of revenues for
the periods  presented.  The  composition  of the top five customers has changed
from year to year,  with the  exception of two of the customers  whose  combined
revenues  accounted  for 12% of total  revenue for the first quarter of 1997 and
19% of total revenue for the first quarter of 1996.

Revenues  from  licensing  fees  decreased  by 6% to $3.7  million  in the first
quarter in 1997 from $4  million  in the first  quarter of 1996 due to delays in
the closing of new  contracts.  A number of factors  have  contributed  to these
delays including  reorganizations  within potential  customers and delays in the
decision process by potential customers.  Revenues from services and maintenance
increased  by 45% to $18.7  million  in the first  quarter  in 1997  from  $12.9
million in 1996.  The service and  maintenance  revenue growth from 1996 to 1997
resulted  primarily  from  implementation  services  generated  by  several  new
significant  domestic  contracts,  and additional  implementation  projects with
existing  customers.  The  Company  does not  believe  that the  revenue  growth
experienced  in the  first  quarter  of 1997 is  necessarily  indicative  of any
revenue growth that may occur in future periods.

The Company's  domestic and foreign  markets have not been affected by inflation
or fluctuations in interest rates and costs. The Company has not experienced any
material seasonality in its operating results.

Cost of Revenues.  Cost of revenues  consists  primarily  of: (i)  personnel and
related costs for implementation  (including account executive  personnel),  and
(ii)  personnel  and related costs for 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 43% to $9.5 million in the first quarter in 1997 from
$6.6  million  in 1996  and was  due  principally  to the  need  for  additional
personnel to service the  Company's  customers.  As a percent of total  revenue,
cost of revenues  increased to 42.4% for the first quarter in 1997 from 39.4% in
1996.  The  increase in the cost of sales  percentage  is  partially  due to the
increase  in the  level  of  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 have the effect of
decreasing the Company's gross margin

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  decreased  14% to $2.9 million in the first
quarter  in 1997 from $3.4  million in 1996.  The  Company  continues  to invest
research and development efforts for modifications of existing  applications and
development of new technologies,  including the capability to support additional
platforms,   databases,   graphical  user  interfaces,   toolsets  and  emerging
technologies.  The Company believes that a significant level of R&D is essential
to remain competitive and will continue to invest development  resources towards
incorporating new technologies into PassPort and designing  additional  PassPort
functionality.  The amount for a  particular  period may vary  depending  on the
projects in progress.

INDUS has historically developed its own applications.  During 1996, the Company
devoted R&D resources to the development of General Ledger, Asset Management and
Financial  Planning  applications.  In response to time-to-market  demands,  the
Company recently  formalized  strategic product  relationships  with third party
vendors, including PeopleSoft,  Oracle and SPL World Group, who will blend their
financial and customer  information/order entry applications with PassPort. As a
result,  the Company has halted the  development  of the General  Ledger,  Asset
Management  and  Financial   Planning   applications.   A  portion  of  the  R&D
expenditures  intended for the financial application project were reallocated to
(i)  the  software  integration   development   necessary  to  provide  seamless
integration with the Company's  strategic partners' offerings and (ii) sales and
marketing  efforts.  In 1997, the Company  expects to shift,  as a percentage of
total  revenues,  at least  3% from R&D  expenditures  to  sales  and  marketing
expenditures.

                                       9
<PAGE>

Results of Operations (continued)

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 67% to $3.2 million
in the first  quarter in 1997 from $1.9  million in 1996.  As a percent of total
revenue, sales and marketing expenses increased to 14.4% the first quarter ended
in 1997  from  11.5% in 1996.  The  growth in sales and  marketing  expenses  is
primarily  due to:  (i) the  addition  of  personnel,  (ii)  expansion  into new
international  sectors,  (iii)  changes in the mix of the revenue  base on which
commission expense is generated and (iv) the new vertical business programs. The
Company  believes  that sales and  marketing  expenses as a percentage  of total
revenues may increase as it (i) expands its  presence in the  marketplace,  (ii)
initiates operations in additional international markets, (iii) develops new and
existing  marketing and product strategic  alliances and (iv) increases focus on
specific vertical markets, such as Transmission and Distribution.

General and Administrative. General and administrative expenses increased 25% to
$2.3 million in the first quarter in 1997 from $1.8 million in 1996.  The growth
in general and administrative expenses is primarily a result of: (i) incremental
expenditures related to being a public company and (ii) an expansion in staffing
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 three  months ended March 31, 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 three months
ended March 31, 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 $76.7  million and $75.5  million at March 31,
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 lesser  extent,  through  borrowings  from its Chief
Executive Officer and principal shareholder. In March 1996, the Company received
$33.9  million (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 March 31, 1997, the Company's  principal sources of liquidity consisted of
approximately  $5.7 million in cash and cash  equivalents  and $27.4  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 1997,  however,  the
Company  believes it will be able to renew this agreement or replace it on terms
acceptable to the Company.  No borrowings  were  outstanding  under this line at
March 31, 1997.

In the three months ended March 31, 1997,  cash, cash equivalents and marketable
securities  decreased  as a result of the cash  investment  in a 10% interest in
TenFold  Corporation ($8 million),  the purchase of property and equipment ($1.6
million) and the purchase of marketable securities ($0.9 million) offset by cash
generated from operations ($2.9 million).

Cash  requirements  are  expected to continue to increase in order to fund:  (i)
personnel and salary costs, (ii) investment in additional  technical  equipment,
and (iii)  working  capital  requirements.  The  Company  presently  anticipates
additional capital  expenditures for the remainder of 1997 of approximately $3.0
million.  The Company's  principal  commitments at March 31, 1997,  consisted of
obligations under operating leases for facilities and computer equipment.

                                       10
<PAGE>

Liquidity and Capital Resources (continued)

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 usage's of cash, such as acquisitions.




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

              None.


ITEM 5.       OTHER INFORMATION

              None.


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

              (a) Exhibits.

              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.

                                       11
<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:  May 14, 1997
                                         /s/ Robert W. Felton
                                         ---------------------------------------
                                         Robert W. Felton
                                         President and Chief Executive Officer





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


                                       12
<PAGE>
                                INDEX TO EXHIBITS


                                                                    Sequentially
                                                                    ------------
                                                                      Numbered
                                                                      --------
     Exhibit                 Description                                Page
     -------                 -----------                                ----


      11.01   Statement of Computation of Pro Forma Net Income Per Share
      27.01   Financial Data Schedule