<PAGE>

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

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2005
                         Commission File Number 0-22903

                                  SYNTEL, INC.
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
            Michigan                                              38-2312018
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)
</TABLE>

<TABLE>
<S>                                                               <C>
525 E, Big Beaver Road, Suite 300, Troy, Michigan                   48083
     (Address of principal executive offices)                     (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (248) 619-2800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: ___________

                           Common Stock, no par value
                                (Title of Class)

     Indicate by check mark if the Registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

Yes       No   X
    -----    -----

     Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act.

Yes       No   X
    -----    -----

     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 such shorter period that the Registrant
has been required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X   No
    -----    -----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large Accelerated Filer Accelerated Filer   X   Non-Accelerated Filer
                                                -----                       ----


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     Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

Yes       No   X
    -----    -----

     The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of the last business day of the Registrant's most recently
completed second fiscal quarter, June 30, 2005, based on the last sale price of
$16.03 per share for the Common Stock on The NASDAQ National Market on such
date, was approximately $126,721,000.

     As of February 27, 2006, the Registrant had 40,936,394 shares of Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Registrant's Proxy Statement for the 2006 Annual Meeting of
Shareholders to be held on or about June 1, 2006 are incorporated by reference
into Part III hereof.


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                                   SYNTEL INC.

                                    FORM 10-K

                                      INDEX

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<S>           <C>
PART I
   ITEM 1.    BUSINESS
   ITEM 1A.   RISK FACTORS
   ITEM 1B.   UNRESOLVED STAFF COMMENTS
   ITEM 2.    PROPERTIES
   ITEM 3.    LEGAL PROCEEDINGS
   ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II
   ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
              SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
              SECURITIES
   ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA
   ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS
   ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
              MARKET RISK
   ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE
   ITEM 9A.   CONTROLS AND PROCEDURES
   ITEM 9B.   OTHER INFORMATION

PART III
   ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   ITEM 11.   EXECUTIVE COMPENSATION
   ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT AND RELATED SHAREHOLDER MATTERS
   ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
   ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV
   ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
              SIGNATURES
</TABLE>


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                                     PART I

ITEM 1. BUSINESS.

References herein to the "Company" or "Syntel" refer to Syntel, Inc. and its
wholly owned subsidiaries worldwide on a consolidated basis.

FORWARD-LOOKING STATEMENTS

     This report on Form 10-K, including without limitation the Business section
and Management's Discussion and Analysis of Financial Condition and Results of
Operations, and other sections of this report, including the allowance for
doubtful accounts, contingencies and litigation, potential tax liabilities,
interest rate or foreign currency risks, and projections regarding our liquidity
and capital resources, could be construed as forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements containing words such as "could", "expects",
"may", "anticipates", "believes", "estimates", "plans", and similar expressions.
In addition, the Company or persons acting on its behalf may, from time to time,
publish other forward-looking statements. Such forward looking statements are
based on management's estimates, assumptions and projections and are subject to
risks and uncertainties that could cause actual results to differ materially
from those discussed in the forward looking statements. Some of the factors that
could cause future results to materially differ from the recent results or those
projected in the forward-looking statements include the following:

          -    Recruitment and Retention of IT Professionals

          -    Government Regulation of Immigration

          -    Variability of Quarterly operating Results

          -    Customer Concentration; Risk of Termination

          -    Exposure to Regulatory and General Economic Conditions in India

          -    Intense Competition

          -    Ability to Manage Growth

          -    Fixed-Price Engagements

          -    Potential Liability to Customers

          -    Dependence on Key Personnel

          -    Risks Related to Possible Acquisitions

          -    Limited Intellectual Property Protection

          -    Potential Anti-outsourcing Legislation

          -    Adverse Economic Conditions

          -    Failure to Successfully Develop and Market New Products and
               Services

          -    Benchmarking Provisions

          -    Corporate Governance Issues

          -    Telecom/Infrastructure Issues

          -    Confidentiality Issues

          -    New Facilities

          -    Stock option Accounting

          -    Terrorist Activity, War or Natural Disasters

          -    Instability and Currency Fluctuations


                                       4
<PAGE>

     For a more detailed discussion of certain of the risks associated with the
Company's business, see "Item 1A. Risk Factors" in this Form 10-K. The Company
undertakes no obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this Form 10-K.

OVERVIEW

     Syntel, incorporated under Michigan law on April 15, 1980, is a worldwide
provider of information technology services to Global 2000 companies. The
Company's service offerings are grouped into four segments, Applications
Outsourcing, e-Business, Business Process Outsourcing (BPO) and TeamSourcing(R).
Applications Outsourcing consists of outsourcing services for ongoing
management, development and maintenance of business applications. e-Business
consists of practice areas in Web Solutions, Customer Relationship Management
(CRM), Data Warehousing/Business Intelligence, and Enterprise Applications
Integration (EAI) services. BPO consists of a variety of back-office outsourced
services such as transaction processing, loan servicing, retirement processing,
and collections and payment processing. Syntel's primary BPO focus is in the
financial services, healthcare and insurance sectors. TeamSourcing consists of
professional Information Technology (IT) consulting services. Syntel believes
that its service offerings are distinguished by its Global Delivery Model, a
corporate culture focused on customer-service, responsiveness and its own
internally-developed "intellectual capital", which is based on a proven set of
methodologies, practices and tools for managing the IT functions of its
customers.

     Through Applications Outsourcing, Syntel provides high-value applications
management services for ongoing management, development and maintenance of
customers' business applications. Syntel assumes responsibility for and manages
selected application support functions for the customer. Utilizing its developed
methodologies, processes and tools, the Company is able to assimilate the
customer's business process knowledge in order to develop and deliver services
specifically tailored for that customer. In 2005, 2004 and 2003, Applications
Outsourcing services accounted for approximately 76%, 76% and 76% of total
consolidated revenues, respectively.

     Through its e-Business practices, Syntel helps its customers harness
advanced technologies to improve their businesses. Web Solutions involve
services in the areas of web architecture, web-enabling legacy applications, as
well as the creation of web portals. Customer Relationship Management (CRM)
involves customizing and implementing CRM software packages to enhance a
customer's interaction with its customers. Data Warehousing/Business
Intelligence involves gathering and analyzing key business data to make better
real-time decisions through "data mining." Enterprise Applications Integration
involves consulting and Applications Outsourcing services designed to better
integrate front- office and back-office applications. Additionally, Syntel has
entered into several partnerships to provide its implementation, customization,
migration and maintenance services with leading software and IT application
software infrastructure providers including Ab Initio, Actuate, BEA Systems,
Business Objects, Cognos, IBM, Informatica, Mercury, Microstrategy, Oracle, SAP,
Serden Technologies, TIBCO, among others. These partnerships will provide the
Company with increased opportunities for market penetration. In 2005, 2004 and
2003, e-Business accounted for approximately 14%, 16% and 19% of total
consolidated revenues, respectively.


                                       5

<PAGE>
      Through BPO, Syntel provides outsourced solutions for a client's business
processes, providing them with the advantage of a low cost position and process
enhancement through optimal use of technology. Syntel uses a proprietary tool
called IdenteonTM to assist with strategic assessments of business processes and
identifying the right ones for outsourcing. In the area of financial services,
Syntel focuses on the middle and back-office business processes of the
transaction cycle. Syntel's insurance BPO services include claims processing,
policy administration, among others. BPO accounted for approximately 3% and 1%
of the total revenues for the years ended December 31, 2005 and 2004,
respectively.

     Through TeamSourcing, Syntel provides professional IT consulting services
directly to customers. TeamSourcing services include systems specification,
design, development, implementation and maintenance of complex IT applications
involving diverse computer hardware, software, data and networking technologies
and practices. TeamSourcing services are provided by individual professionals
and teams of professionals dedicated to assisting customer IT departments with
systems projects and ongoing functions. TeamSourcing accounted for approximately
7%, 7% and 5% of the total revenues, for the years ended December 31, 2005, 2004
and 2003, respectively.

     The information set forth under Note 17 "Segment Reporting" to the
Consolidated Financial Statements attached as an exhibit to this Annual Report
on Form 10-K is incorporated herein by reference.

     The Company's Global Delivery Service provides Syntel with flexibility to
deliver to each customer a unique mix of services on-site at the customer's
location, off-site at Syntel's U.S. locations and offshore at Global Development
Centers in Mumbai, Chennai and Pune, India. The benefits to the customer from
this customized service approach include responsive delivery based on an
in-depth understanding of the specific processes and needs of the customer,
quick turnaround, access to the most knowledgeable personnel and best practices,
resource depth, 24-hour support seven days a week and cost-effectiveness. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers
around the world largely unconstrained by geography, time zones or cultures.

     Syntel provides its services to a broad range of Global 2000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. Its
five largest customers during 2005, based on revenues were American Express,
Humana, Daimler Chrysler, Wells Fargo and Allstate. The Company has been chosen
as a preferred vendor by several of its customers and has been recognized for
its quality and responsiveness. The Company has a focused sales effort that
includes a strategy of migrating existing TeamSourcing customers to higher-value
e-Business and Applications Outsourcing services. During recent years, the
Company has focused on increasing its resources in the development, marketing
and sales of its e-Business, Applications Outsourcing and BPO services.

     The Company believes its human resources are its most valuable asset and
invests significantly in programs to recruit, train and retain IT professionals.
The Company recruits globally through its worldwide recruiting network and
maintains a broad package of employee support programs. Syntel believes that its
management structure and human resources organization is designed to maximize
the Company's ability to efficiently expand its IT professional staff in
response to customer needs.

                                       6

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As of December 31, 2005, Syntel's worldwide billable headcount consisted of
4,456 consultants providing professional services to Syntel's customers.

     The information set forth under Note 18 "Geographic Information" to the
Consolidated Financial Statements attached as an exhibit to this Annual Report
on Form 10-K is incorporated herein by reference.

INDUSTRY BACKGROUND

     Increasing globalization, rapid adoption of the Internet as a business tool
and technological innovation are creating an increasingly competitive business
environment that is requiring companies to fundamentally change their business
processes. This change is driven by increasing demand from customers for
increased quality, lower costs, faster turnaround, and highly responsive and
personalized service. To effect these changes and adequately address these
needs, companies are focusing on their core competencies and on cost-effectively
utilizing IT solutions to improve productivity, lower costs and manage
operations more effectively.

     Designing, developing, and implementing advanced technology solutions are
key priorities for the majority of corporations. In addition, the development
and maintenance of new IT applications continues to be a high priority. This
type of work requires highly skilled individuals trained in diverse
technologies. However, there is a growing shortage of these individuals and many
companies are reluctant to expand their IT departments through additional
staffing, particularly at a time when they are attempting to minimize their
fixed costs and reduce workforces. The Company believes that many organizations
are concluding that using outside specialists to address their advanced
technology and ongoing IT requirements enables them to develop better solutions
in shorter time frames and to reduce implementation risks and ongoing
maintenance costs. Those outside specialists best positioned to benefit from
these trends have access to a pool of skilled technical professionals, have
demonstrated the ability to manage IT resources effectively, have low-cost
offshore software development facilities, and can efficiently expand operations
to meet customer demands.

     Demand for IT services has grown significantly as companies seek ways to
outsource not only specific projects for the design, development and integration
of new technologies, but also ongoing management, development and maintenance of
existing IT systems.

     The Company believes that outsourcing the ongoing management, development
and maintenance of IT applications is becoming increasingly critical to business
enterprises. The difficulties of IT planning, budgeting and execution in the
face of technological innovations and uncertainties, the focus on cost cutting,
and a growing shortage of skilled personnel are driving senior corporate
management to strategically pursue outsourcing of critical internal IT
functions. Organizations are seeking an experienced IT services outsourcing
provider that not only has the expertise and knowledge to address the
complexities of rapidly changing technologies, but also possesses the capability
to understand and automate the business processes and knowledge base of the
organization. In addition, the IT provider must be able to develop customized
solutions to problems unique to the organization.


                                       7

<PAGE>

This involves maintaining on-site professionals who know the customer's IT
processes, providing access to a wide range of expertise and best practices,
providing responsiveness and accountability to allow internal IT departments to
meet organization goals, and providing low cost, value-added services to stay
within the organization's IT budget constraints.

     In this environment, large organizations are increasingly finding that full
facilities management outsourcing providers who own and manage an organization's
entire IT function do not permit the organization to retain control over, or
permit flexible reallocation of, its IT resources.

SYNTEL SOLUTION

     Syntel provides e-Business solutions in the areas of Web Solutions,
Customer Relationship Management (CRM), Data Warehousing/Business Intelligence,
and Enterprise Applications Integration (EAI). The Company's approach involves
taking an enterprise-wide view of the customer's technology and business
environment to ensure comprehensive solution integration. This view is termed
the Digital Ecosystem. Syntel's methodology for implementing its e-Business
services involves Digital Blueprinting/Build/Optimize(R). In the Digital
Blueprinting phase, Syntel's teams analyze a customer's current technology
environment and its business objectives, and then begin architecting the
e-Business solution to meet these objectives. In the Build phase, Syntel
actually constructs the technology applications and integrates the necessary
package applications for the customer. In the Optimize phase, Syntel provides
ongoing, cost effective maintenance and enhancement services for the newly
created applications. Additionally, Syntel has entered into several partnerships
to provide its implementation, customization, migration and maintenance services
with leading software and IT application software infrastructure providers
including Ab Initio, Actuate, BEA Systems, Business Objects, Cognos, IBM,
Informatica, Mercury, Microstrategy, Oracle, SAP, Serden Technologies, TIBCO,
among others. These partnerships will provide the Company with increased
opportunities for market penetration.

     Syntel provides comprehensive Applications Outsourcing services consisting
of applications management services for ongoing management, development and
maintenance of business applications, as well as TeamSourcing services
consisting of professional IT consulting services. The Company believes that its
Applications Outsourcing approach to IT services outsourcing, which involves
assuming responsibility for management of selected applications rather than
taking over an entire IT department or providing facilities management, provides
significant differentiation from its competitors in the IT services market.
Syntel believes that its e-Business and Applications Outsourcing service
offerings are distinguished by its Global Delivery Service, a corporate culture
focused on customer service and responsiveness and its internally developed
"intellectual capital," comprised of a proven set of methodologies, practices
and tools for managing the IT functions of its customers.

     Syntel seeks to provide high-value BPO solutions to its customers, as
opposed to low-value, capital-intensive voice-based BPO services. Through BPO,
Syntel provides outsourced solutions for a client's business processes,
providing them with the advantage of a low-cost position and process enhancement
through optimal use of technology. Syntel uses a proprietary tool called
IdenteonTM to assist with strategic assessments of business processes,
identifying the right ones for outsourcing. In the area of financial services,
Syntel focuses on the middle and back-office business processes of the
transaction cycle.


                                       8

<PAGE>
Syntel's insurance BPO services include claims processing and policy
administration, among others.

GLOBAL DELIVERY SERVICE. Syntel performs its services on-site at the customer's
location, off-site at Syntel's U.S. locations and offshore at its Indian
locations. By linking each of its service locations together through a dedicated
data and voice network, Syntel provides a seamless service capability to its
customers around the world, largely unconstrained by geographies, time zones and
cultures. This Global Delivery Service gives the Company the flexibility to
deliver to each customer a unique mix of on-site, off-site and offshore services
to meet varying customer needs for direct interaction with Syntel personnel,
access to technical expertise, resource availability and cost-effective
delivery. The benefits to the customer from this customized service include
responsive delivery based on an in-depth understanding of the specific processes
and needs of the customer, quick turnaround, access to the most knowledgeable
personnel and best practices, resource depth, 24-hour support seven days a week,
and cost-effectiveness. To support its Global Delivery Service, the Company
currently has three Global Development Centers located in Mumbai, India; Pune,
India; and Chennai, India. The Company also has a Support Center located in
Cary, North Carolina.

     In January 2001, the Company acquired 40 acres of land at the cost of
approximately $1.0 million for construction of a state-of-the-art development
and training campus in Pune, India. When fully completed, the facility will
cover over 1 million square feet and will accommodate 9,000 employees. It will
be both a customer and employee focused facility, including such amenities as
training facilities, cafeteria and fitness center. The Company has appointed a
leading project management company, finalized architectural drawings for Phase I
and has appointed contractors for all key elements of the project. The
superstructure and finalization of Phase 1 is near completion and work on
external development and services is near completion. An office building with
space for 950 seats, a food court and hotel are expected to be ready by the
second quarter of 2006, pending regulatory approvals.

FOCUS ON CUSTOMER SERVICE. The Syntel corporate culture reflects a "customer for
life" philosophy, which emphasizes flexibility, responsiveness,
cost-consciousness and a tradition of excellence. The Company recognizes that
its best source for new business opportunities comes from existing customers and
believes its customer service is a significant factor in Syntel's high rate of
repeat business. At engagement initiation, Syntel's services are typically based
on expertise in the software life cycle and underlying technologies. Over time,
however, as Syntel develops an in-depth knowledge of a customer's business
processes, IT applications and industry, Syntel gains a competitive advantage to
perform additional higher-value IT services for that customer.

PROVEN INTELLECTUAL CAPITAL. Over its 25-year history, Syntel has developed a
proven set of methodologies, practices, tools and technical expertise for the
development and management of its customers' information systems. This
"intellectual capital" of Syntel includes methodologies for the selection of
appropriate customer IT functions for management by Syntel, tools for the
transfer to Syntel of the systems knowledge of the customer, and techniques for
providing systems support improvements to the customer. Syntel also offers to
its customers well-trained personnel backed by a proven, extensive employee
training and continuing development program. The Company believes its
intellectual capital enhances its ability to understand customer needs, design
customized solutions and provide quality services on a timely and cost-effective
basis.


                                       9

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SYNTEL STRATEGY

     The Company's objective is to become a strategic partner with its customers
in managing the full IT services lifecycle by utilizing its Global Delivery
Model, intellectual capital and customer service orientation. The Company plans
to continue to pursue the following strategies to achieve this objective:

LEVERAGE GLOBAL DELIVERY MODEL. The ability to deliver a seamless service
capability virtually anywhere in the world from its domestic and offshore
facilities gives the Company an effective ability to meet customer needs for
technical expertise, best practice IT solutions, resource availability,
responsive turnaround and cost-effective delivery. The Company strives to
leverage this capability to provide reliable and cost-effective services to its
existing customers, expand services to existing customers and to attract new
customers. Moreover, the flexibility and capacity of the Global Delivery Service
and the Company's worldwide recruitment and training programs enhance the
ability of the Company to expand its business as the number of customers grows
and their IT demands increase. The Company intends to expand the capacity of its
Global Development Centers worldwide.

AGGRESSIVELY BUILD E-BUSINESS COMPETENCIES. Through its comprehensive suite of
e-Business services, the Company provides a key strategic role in helping
customers rapidly and cost-effectively build advanced technology solutions.
Through large-scale retraining programs, strategic acquisitions and
partnerships, the Company has quickly built a strong competency in the area of
e-Business services.

CONTINUE TO GROW APPLICATIONS OUTSOURCING SERVICES. Through Applications
Outsourcing, the Company markets its higher value applications management
services for ongoing applications management, development and maintenance. In
recent years, the Company has significantly increased its investment in
Applications Outsourcing services and realigned its resources to focus on the
development, marketing and sales of its Applications Outsourcing and e-Business
services, including the hiring of additional salespeople and senior managers,
redirecting personnel experienced in the sale of higher value contracts,
developing proprietary methodologies, increasing marketing efforts, and
redirecting organizational support in the areas of finance and administration,
human resources and legal.

BUILD A HIGH VALUE BPO SOLUTION SET. The Company will grow its expertise in the
area of value-added BPO solutions, primarily in the areas of financial services
and insurance. By leveraging a mature Global Delivery Model and domain
expertise, the Company is able to provide competitively priced BPO solutions
that deliver process improvements as well.

EXPAND CUSTOMER BASE AND ROLE WITH CURRENT CUSTOMERS. The Company's sales
efforts include migrating existing TeamSourcing customers to higher value
e-Business and Applications Outsourcing services. The Company's emphasis on
customer service and long-term relationships has enabled the Company to generate
recurring revenues from existing customers. The Company also seeks to expand its
customer base by leveraging its expertise in providing services to the
financial, manufacturing, retail, transportation, and information/communications
industries, as well as to government entities. With the expansion of the
Company's Indian operations, the Company is increasing its marketing efforts in
other parts of the world, particularly in Europe.


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PROVIDE GREAT DEPTH & BREADTH OF SERVICE OFFERINGS. The Company will continue to
create market-based service offerings to meet the emerging needs of its
customers. In 2004, the Company introduced a global testing service called
SynAppTest as well as SSN Secure, for privacy solutions related to social
security numbers. The Company plans to develop new service offerings on a
continual basis.

ENHANCE PROPRIETARY KNOWLEDGE BASE AND EXPERTISE. The Company believes that its
"intellectual capital" of methodologies, practices, tools and technical
expertise is an important part of its competitive advantage. The Company strives
to continually enhance this knowledge base by creating competencies in emerging
technical fields such as internet/intranet applications, client/server
applications, object-oriented software, e-commerce, and data warehousing
technology. The Company continually develops new methodologies and toolsets,
building skills in e-Business, and acquiring a broad knowledge and expertise in
the IT functions of specific industries. Through these efforts, the Company
becomes more valuable to the customer, is often able to expand the scope of its
work to existing customers, and is able to offer industry-specific expertise.

ATTRACT AND RETAIN HIGHLY SKILLED IT PROFESSIONALS. The Company believes that
its human resources are its most valuable asset. Accordingly, its success
depends in large part upon its ability to attract, develop, motivate, retain and
effectively utilize highly skilled IT professionals. Over the years, the Company
has developed a worldwide recruiting network, logistical expertise to relocate
its personnel, and programs for human resource retention and development. The
Company (1) employs professional recruiters who recruit qualified professionals
throughout the U.S. and India, (2) trains employees and new recruits through
both computer based training and its four training centers, one of which is
located in the U.S. and three of which are located in India, and (3) maintains a
broad range of employee support programs, including relocation assistance, a
comprehensive benefits package, career planning, a qualified stock purchase
program, and incentive plans. The Company believes that its management structure
and human resources organization is designed to maximize the Company's ability
to efficiently expand its professional IT staff in response to customer needs.

PURSUE SELECTIVE PARTNERSHIP OPPORTUNITIES. The Company has entered into
partnership alliances with several software firms and IT application
infrastructure firms, including Ab Initio, Actuate, BEA Systems, Business
Objects, Cognos, IBM, Informatica, Mercury, Microstrategy, Oracle, SAP, Serden
Technologies, TIBCO, among others. The alliances provide a strong software
implementation strategy for the customer, combining the partner's software with
Syntel's extensive implementation and delivery capabilities. Before entering
into a partnership alliance, the Company considers a number of criteria,
including: (1) technology employed; (2) projected product lifecycles; (3) size
of the potential market; (4) software integration requirements of the product;
and (5) the reputation of the potential partner.

SERVICES

     Syntel provides a broad range of IT services through its Applications
Outsourcing, e-Business, BPO, and TeamSourcing service offerings. Through
Applications Outsourcing offering, the Company provides complete software
applications development, maintenance and platform migration services. Through
its e-Business practices, the Company provides advanced technology services in
the areas of Web Solutions, Customer Relationship Management (CRM), Data
Warehousing/Business Intelligence, and Enterprise Applications Integration (EAI)
and Enterprise Resource Planning (ERP) software package implementation.

                                       11

<PAGE>

Through its BPO offerings, the Company provides a host of outsourced solutions
for business processes. Through TeamSourcing, the Company provides professional
IT consulting services. During the past year, the Company has increased the
personnel and resources dedicated to the development, marketing and sales of its
Applications Outsourcing, e-Business, and BPO services. For the years ended
December 31, 2005, 2004 and 2003, e-Business and Applications Outsourcing
combined accounted for approximately 90%, 92% and 95%, respectively, of the
Company's revenues and TeamSourcing represented approximately 7%, 7% and 5%,
respectively, of the Company's total revenues. The BPO segment started
contributing revenues during the year 2004. Revenue from this segment was 3% and
1% of the Company's total revenues for the years ended December 31, 2005 and
2004, respectively.

     Syntel's focus on customer service is evidenced by the high level of repeat
business from existing customers and the quality awards its customers have
bestowed on Syntel. In the fourth quarter of 2005, more than 96% of Syntel's
revenue came from clients the Company has worked with for at least one year.
Syntel has earned a host of quality awards, including the "CIO Award" from
General Motors, as well as "Preferred Supplier" status with DaimlerChrysler
Corporation, in which Syntel received the highest rating in each customer
service category. The Company has also been recognized by Target Corporation
with a "Best Business Partner Award". Syntel's development centers in India
earned the highest possible quality rating of the Software Engineering Institute
(SEI) Capability Maturity Model (CMM) Level 5. Syntel is also an ISO 9001: 2000
certified company, and in late 2004, Syntel earned the BS 7799 2:2002 security
certification for its centers in India, as well as neoQA Certified to Level 4.
During 2004, Syntel also earned a host of media awards, including Fortune Small
Business "America's Fastest-Growing Small Companies"; Healthcare Informatics
100; Diversity Business "Top 100 Diversity Owned Businesses in the U.S.";
VARBusiness 500; and was on the Forbes "200 Best Small Companies in America"
list for the fifth time.


                                       12

<PAGE>

APPLICATIONS OUTSOURCING

     Syntel provides high-value application management services for ongoing
management, development and maintenance of business applications. Through
Applications Outsourcing, the Company assumes responsibility for, and manages
selected applications support functions of the customers. The Global Delivery
Service is central to Syntel's delivery of Applications Outsourcing services. It
enables the Company to respond to customers' needs for ongoing service and
flexibility and has provided the capability to become productive quickly on a
cost-effective basis to meet timing and resource demands for mission critical
applications.

     Syntel has developed methodologies, processes and tools to effectively
integrate and execute Applications Outsourcing engagements. Referred to as
"IntelliTransfer(R)," this methodology is implemented in three stages of
planning, transition and launch. Syntel first focuses on the customer's
personnel, processes, technology and culture to develop a plan to effectively
assimilate the business process knowledge of the customer. Syntel then begins to
learn the business processes of the customer, and, finally, seeks to assume
responsibility for performance of a particular customer applications system or
systems. As the Company develops an in-depth knowledge of the customer's
personnel, processes, technology and culture, Syntel acquires a competitive
advantage to pursue more value-added services. The Company believes its approach
to providing these services results in a long-term customer relationship
involving a key Syntel role in the business processes and applications of the
customer.

     Because providing both e-Business and Applications Outsourcing services
typically involves close participation in the IT strategy of a customer's
organization, Syntel adjusts the manner in which it delivers these services to
meet the specific needs of each customer. For example, if the customer's
business requires fast delivery of a mission-critical applications update,
Syntel will combine its on-site professionals, who have knowledge of the
customer's business processes and applications, together with its global
infrastructure to deliver around-the-clock resources. If the customer's need is
for cost reduction, Syntel may increase the portion of work performed at its
offshore Global Development Center, which has significantly lower costs. The
Company believes that its ability to provide flexible service, delivery and
access to resources permits responsiveness to customer needs and are important
factors that distinguish its e-Business and Applications Outsourcing services
from other IT service firms.

E-BUSINESS SERVICES

     Syntel provides strategic advanced technology services for the design,
development, implementation and maintenance of solutions to enable customers to
be more competitive. Many of today's advanced technology solutions are built
around utilization of the Internet, which has transformed many businesses. The
Company provides customized technology services in the areas of web solutions,
including web architecture, web-enablement of legacy applications, and portal
development. The Company also provides Customer Relationship Management (CRM)
services, which involve software solutions that put Syntel's customers in closer
touch with their own customers. Syntel helps its customers select the
appropriate package software options, then customize and implement the
solutions. In the area of Data Warehousing/Business Intelligence, Syntel helps
customers make more strategic use of information within their businesses through
the development and implementation of data warehouses and data mining tools.

                                       13

<PAGE>

In the area of Enterprise Applications Integration, Syntel takes an
enterprise-wide view of its customers' environment and implements package
software solutions that create better integration, and therefore better
information utilization, between front-office and back-office applications.
Additionally, the Company has effectively engaged several partnerships to
provide its implementation, customization, migration and maintenance services
with leading software and IT application software infrastructure providers
including Ab Initio, Actuate, BEA Systems, Business Objects, Cognos, IBM,
Informatica, Mercury, Microstrategy, Oracle, SAP, Serden Technologies, TIBCO,
among others. These partnerships will provide the Company with increased
opportunities for market penetration.

BUSINESS PROCESS OUTSOURCING (BPO)

     Syntel seeks to provide high-value BPO solutions to its customers, as
opposed to low-value, capital-intensive voice-based BPO services. Through BPO,
Syntel provides outsourced solutions for a client's business processes,
providing them with the advantage of a low-cost position and process enhancement
through optimal use of technology. Syntel uses a proprietary tool called
IdenteonTM to assist with strategic assessments of business processes,
identifying the right ones for outsourcing. In the area of financial services,
Syntel focuses on the middle and back-office business processes of the
transaction cycle. Syntel's insurance BPO services include
claims processing and policy administration, among others. BPO accounted for
approximately 3% of revenues, for the year ended December 31, 2005.

TEAMSOURCING(R)

     Syntel offers professional IT consulting services directly to its customers
and, to a lesser degree, in partnership with other service providers. The
professional IT consulting services include individual professionals and teams
of professionals dedicated to assisting customer systems projects and ongoing IT
functions. This service responds to the demand from internal IT departments for
additional expertise, technical skills and personnel. The Company's wide range
of TeamSourcing services include IT applications systems specification, design,
development, implementation and maintenance, which involve diverse computer
hardware, software, data and networking technologies and practices.

STRATEGIC OFFERINGS GROUP

     The Company seeks to gain a competitive advantage through its
methodologies, tools and technical expertise. The Company employs a team of
professionals in its Strategic Offerings Group whose mission is to develop and
formalize Syntel's "intellectual capital" for use by the entire Syntel
organization. The Strategic Offerings Group focuses on monitoring industry
trends, creating competencies in emerging technical fields, developing new
methodologies, techniques and tools such as IntelliTransfer(R) and
IntelliCaptureSM, creating reusable software components through its Innovate
methodology to enhance quality and value on customer assignments, and educating
Syntel's personnel to improve marketing, sales and delivery effectiveness. The
Strategic Offerings Group consists of senior technical personnel located in both
the U.S. and India.


                                       14

<PAGE>

CUSTOMERS

     Syntel provides its services to a broad range of Global 2000 corporations
principally in the financial services, insurance, manufacturing, retail and
healthcare industries. During 2005, the Company provided services to over 91
customers, principally in the U.S. The Company also provides services to
customers in Europe and Southeast Asia, many of whom are subsidiaries or
affiliates of its U.S. customers. Representative customers of the Company, each
of which provided revenue of at least $100,000 during 2005, include:

FINANCIAL SERVICES        MANUFACTURING                INSURANCE
------------------        -------------                ---------
American Express          American Greetings           ACE Ina Holdings
Bank One                  Mead Westvaco                All State Insurance
Boston Financial Data     Tektronix, Inc.              American International
Services                                               Group
Conseco Finance Corp      RETAIL                       CNA Commercial Lines
Credit Swiss First        ------                       Kemper Insurance/Unitrin
Boston                    Target Corporation           Maxum Specialty Insurance
Deutsche Bank             PepsiCo Inc. Valhalla        Stewart - Landata
First Data Merchant       Borders Group Inc.           Systems Inc.
Services                                               Westfield Insurance
General Motors            TRANSPORTATION/AVIATION      ZC Sterling
Acceptance Corp           -----------------------
GFI Trade Capture         Airlines Reporting Corp      INFORMATION/COMMUNICATION
Group 1                   Federal Express Corp.        -------------------------
International Finance     The News Market              Hewlett Packard
Data Services             Thomas Cook                  Symantec
J P Morgan Chase                                       TIBCO Software Inc.
Moody's Investor          EMERGING/OTHERS              DSMI
Services                  ---------------              GLAXO WELLCOME
Portfolio Europe          Deloitte Consulting          Metasolv
State Street Bank
Washington Mutual Bank                                 AUTOMOTIVE
Wells Fargo Bank                                       ----------
                                                       Daimler-Chrysler Corp
HEALTHCARE                                             Ford Motor Co.
----------                                             Freightliner LLC
Availity LLC                                           T-System
Blue Cross Blue Shield
of North Carolina
Blue Cross Blue Shield
of Georgia
First Health Services
Corp
Health Care Associates
Humana Inc
McKesson
Well point

     For the years ended December 31, 2005, 2004, and 2003, the Company's top
ten customers accounted for approximately 65%, 61% and 64% of the Company's
revenues, respectively. For the year ended December 31, 2005 one customer
contributed revenues in excess of 10% of total consolidated


                                       15

<PAGE>

revenues. The Company's three largest customers in 2005 were American Express,
Humana Inc and Daimler-Chrysler Corporation contributing approximately 16%, 8%
and 8% respectively, of the total revenues. The Company's largest customer for
2005, 2004 and 2003 was American Express, accounting for approximately 16% of
the total revenues for each of the years ended December 31, 2005, 2004 and 2003,
respectively.

GLOBAL DELIVERY SERVICE

     Syntel's Global Delivery Service gives the Company the flexibility and
resources to perform services on-site at the customer's location, off-site at
the Company's U.S. locations and offshore at the Company's Indian locations. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers.
The Global Delivery Service gives the Company the flexibility to deliver to each
customer a customized mix of integrated on-site, off-site and offshore services
to meet varying customer needs for direct interaction with Syntel personnel,
access to technical expertise and best practices, resource availability and
cost-effective delivery.

     Through on-site service delivery at the customer's location, the Company is
able to gain comprehensive knowledge concerning the customer's personnel,
processes, technology and culture, and maintain direct customer contact to
facilitate project management, problem solving and integration of Syntel
services. Off-site service delivery at the Company's U.S. locations provides the
customer with access to the diverse skill base and technical expertise resident
at different regional centers, availability of resources, and cost-effective
delivery due to the savings in transportation, facilities and relocation costs
associated with on-site work. Offshore service delivery at the Company's Indian
locations provides the customer with the capacity to receive around the clock
attention to applications maintenance and project development for faster
turnaround, greater availability of resources, expertise resident in India and
more cost-effective delivery than the Company's off-site services.

     The Company has developed global recruiting and training programs which
have efficiently provided skilled IT professionals to meet customer needs. In
addition, the Company's sales, solutions and delivery functions are closely
integrated in the Global Delivery Service so that appropriate resources can be
provided to the customer at the right time and at the most advantageous
location. Each customer is tracked and serviced through a multi-stage customer
care process. Regular meetings are held with key project management, sales,
technical, legal and finance personnel to monitor progress, identify issues and
discuss solutions. As engagements evolve and customer needs change, the Company
can reallocate resources responsively among these locations as necessary.

     The Company's three Global Development Centers located in: Mumbai, India;
Pune, India; Chennai, India; and a Support Center at Cary, North Carolina
support the Company's Global Delivery Service. During 2005, the Company also
created a BPO facility in Mumbai, India with a capacity of 484 people.
Additionally during 2005, the company created another BPO facility in Mumbai
with a capacity of 94 resources.

     The Mumbai, India Global Development Center, which employed, including
onsite deputations outside Mumbai, 2,713 persons as of December 31, 2005, serves
as the hub of the Company's Indian operations. This Global Development Center
provides substantial resource depth to meet customer needs around the world,
low-cost service delivery, a 24-hour customer assistance center and development
of technical solutions and expertise. Mumbai also serves as the principal
recruiting and training


                                       16

<PAGE>

center for the Company. The Mumbai Center has been in operation for over a
decade and has a capacity of approximately 2,033 people including BPO
operations.

     The Chennai Training and Global Development Center employed, including
onsite deputations outside Chennai, 1,168 persons as of December 31, 2005. The
Chennai facility has a capacity of approximately 1,046 persons and has been in
operation for approximately five years.

     The Cary, North Carolina Support Center, which employed six persons at
December 31, 2005, serves as a hub for the Company's telecommunications. Its
support functions include administration of a dedicated data and voice network,
and a 24-hour customer assistance center which coordinates problem resolution
worldwide.

     In January 2001, the Company acquired 40 acres of land at the cost of
approximately $1.0 million for construction of a state-of-the-art development
and training campus in Pune, India. When fully completed, the facility will
cover over 1 million square feet and will accommodate 9000 employees. It will be
both a customer and employee focused facility, including such amenities as
training facilities, cafeteria and fitness center. The Company has appointed a
leading project management company, finalized architectural drawings for Phase I
and has appointed contractors for all key elements of the project. The
superstructure and finalization of Phase 1 is near completion and work on
external development and services is near completion. An office building with
space for 950 seats, a food court and hotel are expected to be ready by the
second quarter of 2006, pending regulatory approvals.

     The Company believes that space availability in Mumbai and Chennai will
accommodate short-term facility requirements and the new campus in Pune will
enable the Company to meet offshore growth requirements for the next several
years. As a step in this direction, in 2002 the Company leased certain
facilities to open an interim Development Center in Pune, which employed 1,461
persons including onsite deputations outside Pune, as of December 31, 2005, and
having a capacity of 1,512 persons.

SALES AND MARKETING

     The Company markets and sells its services directly through its
professional salespeople and senior management operating principally from the
Company's offices in Santa Clara, California; Phoenix, Arizona; Schaumburg,
Illinois; Dallas, Texas; Minneapolis, Minnesota; New York, New York; Troy,
Michigan; Cary, North Carolina; Nashville, Tennessee; Natick, Massachusetts;
London, England; Hong Kong; Stuttgart, Germany and Singapore. The sales staff is
aligned by industry vertical, with each salesperson provided the authority to
pursue Applications Outsourcing, e-Business, BPO and, to a much lesser degree,
TeamSourcing opportunities. The sales team is supported, as required, by
technical expertise and subject matter experts from the Company's delivery
teams.

     The sales cycle for Applications Outsourcing engagements ranges from six to
twelve months, depending on the complexity of the engagement. Due to this longer
sales cycle, Applications Outsourcing sales executives follow an integrated
sales process for the development of engagement proposals and solutions, and
receive ongoing input from the Company's technical services, delivery, finance
and legal departments throughout the sales process. The Applications Outsourcing
sales process also typically involves a greater number of customer personnel at
more senior levels of management than the TeamSourcing sales process.


                                       17

<PAGE>

     The sales cycle for e-Business engagements, from initial contact to
execution of an agreement, varies by type of service and account size, but
typically ranges from one to six months, depending on the complexity of the
engagement. The sales cycle for large, fixed price e-Business engagements is
similar to that of Applications Outsourcing engagements. The sales cycle for
partnership software installations is generally one to two months. The
associated software installation engagements are also generally short, lasting
one to three months.

     The sales cycle for TeamSourcing engagements, from initial contact to
execution of an agreement, varies by type of service and account size, but is
typically completed within 30 days. TeamSourcing engagements are essentially
developed from existing customers as the Company focuses its attention on
growing the Applications Outsourcing, BPO and e-Business segments.

     Syntel's marketing organization strives to build and support the Syntel
brand as well as generate awareness and leads for the Company's service
offerings. The Company's current marketing initiatives include online
advertising, webcasts, conference sponsorship and attendance, direct mail
campaigns, case studies, and public relations aimed at CEOs, CIOs and CFOs of
Global 2000 companies. In addition, Syntel's marketing team maintains ongoing
relationships with leading industry analysts such as Gartner Group, IDC,and
Forrester Research, to ensure analysts have a good understanding of Syntel's
offerings and positioning. Syntel's marketing group also manages the Company's
investor relations program, market research, proposals function and sales
support efforts.

HUMAN RESOURCES

     The Company believes that its human resources are its most valuable asset.
Accordingly, the Company's success depends in large part upon its ability to
attract, develop, motivate, retain and effectively utilize highly skilled IT
professionals. The Company has developed a number of processes, methodologies,
technologies and tools for the recruitment, training, development and retention
of its employees. As of December 31, 2005, the Company had 6,093 full time
employees. Of this total, the U.S. operations employed, including onsite
deputations, 1,422 persons, including 1,357 IT professionals; the Indian
operation employed 4,315 persons, including 3,934 IT professionals; and the
Company employed an additional 356 persons in various remote locations,
principally the U.K., Singapore and Germany.

     A majority of the Company's professional employees have a Bachelor of
Science degree or its equivalent, or higher degrees in computer science,
engineering disciplines, management, finance and other areas. Their experience
level ranges from entry-level programmers to engagement managers and senior
consultants with over 20 years of IT experience. The Company has personnel who
are experienced in mainframe, client/server and open systems technologies, and
proficient in a variety of computer programming languages, software tools,
database management systems, networks, processes, methodologies, techniques and
standards.

     The Company has implemented a management structure and human resources
organization intended to maximize the Company's ability to efficiently expand
its professional staff. Although the Company believes that it has the capability
to meet its anticipated future needs for IT professionals through its
established recruiting and training programs, there can be no assurance that the
Company will be able to hire, train or retain qualified IT professionals in
sufficient numbers to meet anticipated staffing needs.


                                       18

<PAGE>

RECRUITING. The Company has developed a recruiting methodology and organization,
which is a core competency. The Company has significantly expanded its
international-based recruiting team, with recruiters in Mumbai, Chennai,
Hyderabad, Bangalore, and Pune, India, to recruit for the Company's global
requirements. The Company also has a recruiting team based in the U.S., which
recruits primarily across the U.S. The Company uses a standardized global
selection process that includes written tests, interviews, and reference checks.

     Among the Company's other recruiting techniques are the placement of
advertisements on its own web site and popular job boards, in newspapers and
trade magazines, providing bonuses to its employees who refer qualified
applicants, participating in job fairs and recruiting on university campuses. In
addition, the Company has developed a proprietary database of talent hosted on
the Internet, which is an automated tool for managing all phases of recruiting.
This system enhances the ability of the Company's recruiters to select
appropriate candidates and can distribute resumes directly to the recruiters.

TRAINING. The Company uses a number of established training delivery mechanisms
in its efforts to provide a consistent and reliable source for qualified IT
professionals.

     Syntel also maintains an Internet-based global Computer-Based Training
(CBT) program with over 200 training courses from which Syntel employees can
select to enhance and develop their skills. The CBT topics cover the latest
Client/Server topics including Object Oriented Programming, local-area and
wide-area networking, E-Commerce, various Microsoft products, and Web-based
solutions in addition to management and related developmental areas.

     The Company continued to re-skill a significant percentage of the
consulting base during the last year in the latest advanced software platforms,
including J2EE, Object Oriented, C++, C-Sharp, .NET, RMI CORBA, SAP, PeopleSoft,
ETL, Datastage, Ab-initio, Informatica and Microstrategy.

     Since 1998, the Company has operated a Project Manager Training program.
The objective of the program is to develop certified project managers to ensure
consistent and quality delivery of the Company's engagements on a worldwide
basis. The 12 to 18 month program consists of lecture style classroom work,
computer based training, and on the job apprenticeships. The program trains
students on industry "best practices" as well as Syntel specific methods and
processes. Program participants must receive certification from the Project
Management Institute ("PMI") before receiving Syntel branded certification.

     The Company has been accepted as a Microsoft Certified Solution Partner and
sponsors the Microsoft Certification Program and provides opportunities for
cross training of its professionals in emerging technologies at its various
development centers.

SUPPORT AND RETENTION. The Company seeks to provide meaningful support to its
employees which the Company believes leads to improved employee retention and
better quality services to its customers. A significant percentage of the
Company's employees have been recruited from outside the U.S. and relocated to
the U.S. This has resulted in the need to provide a higher level of initial
support to its employees than is common for U.S.-based employees. As a result of
these activities, Syntel has developed a significant knowledge base in making
foreign professionals comfortable and quickly productive in the U.S. and Europe.
The Company also conducts regular career planning sessions with its employees,
and seeks to meet their career goals over a long-term planning horizon.

                                       19

<PAGE>

As part of its retention strategy, the Company strives to provide a competitive
compensation and benefits package, including relocation reimbursement and
support, health insurance, 24-hour on-call nurse consulting, a 401(k) plan, life
insurance, dental options, a vision eye-care program, long-term disability
coverage, short-term disability options, tuition subsidy plan, and a health club
reimbursement program. Since its initial public offering in 1997, the Company
has offered a stock option program, and since 1998 a qualified stock purchase
program, providing all eligible employees the opportunity to purchase the
Company's Common Stock at a 15% discount to fair market value. During 2004 and
2005, the Company issued incentive restricted stock to its non-employee
directors and some employees as well as to some employees of its subsidiaries.

COMPETITION

     The IT services industry is intensely competitive, highly fragmented and
subject to rapid change and evolving industry standards. The Company competes
with a variety of other companies, depending on the IT services it offers. The
Company's primary competitors for professional IT staffing engagements include
participants from a variety of market segments, including "Big Four" accounting
firms, systems consulting and implementation firms, applications software
development and maintenance firms, service groups of computer equipment
companies and temporary staffing firms. In Applications Outsourcing and
e-Business services, the Company competes primarily with IBM Global Solutions,
Keane, EDS, Cognizant and Accenture, as well as India-based companies including
TCS, Infosys, and Wipro.

AVAILABLE INFORMATION

     Syntel makes available, free of charge, through its investor relations
website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15 (d) of the Exchange Act, as soon as reasonably
practicable after they are electronically filed with or furnished to the SEC.
The URL for Syntel's investor relations web site is www.syntelinc.com.


                                       20

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Registrant, their ages, and the position or
office held by each, are as follows:

<TABLE>
<CAPTION>
         NAME            AGE                     POSITION
         ----            ---                     --------
<S>                      <C>   <C>
Revathy Ashok             46   Chief Financial Officer and Treasurer
Lakshmanan Chidambaram    41   Vice President, Sales
Bharat Desai              53   Chairman, President and Chief Executive
                                  Officer
Anil Jain                 47   Business Unit Head & Senior Vice President,
                                  Insurance Vertical
Srikanth Karra            42   Vice President, Global Human Resources
Rakesh Khanna             43   Banking & Finance Business Unit President
Anand Kalidass            47   Vice President, Strategic Offerings
Vijay Mehra               38   Telecom, Retail, Logistics and Travel
                                  Industries Business Unit President
Daniel M. Moore           51   Chief Administrative Officer, Secretary,
                                  and General Counsel
Keshav Murugesh           42   Chief Operating Officer
Naresh Nagarajan          42   Healthcare Business Unit President
Nitin Rakesh              34   Vice President and Head of B&FS BPO
                                  Operations
R. S. Ramdas              51   Vice President, Finance and Corporate
                                  Services
Sunil Sarna               46   Business Unit Head & Senior Vice
                                  President, Automotive Vertical
Neerja Sethi              50   Vice President, Corporate Affairs and
                                  Director
Vinod Swami               44   Vice President, Global Sales
</TABLE>


                                       21

<PAGE>


     Revathy Ashok was appointed Chief Financial Officer of the Company in May
2005. Prior to joining Syntel, Ms. Ashok served as Executive Vice President and
Group Chief Financial Officer at Microland Group, an IT services company
focusing on remote infrastructure management, Internet and e-Business
technologies, from 2001.

     Lakshmanan Chidambaram was appointed as Head of Sales, Banking and
Financial Services and Insurance Business units in February, 2006. Mr.
Chidambaram joined Syntel in 2001 and has served in a variety of sales
positions.

     Bharat Desai is a co-founder of the Company and has served as its President
and Chief Executive Officer and as a Director since its formation in 1980. Mr.
Desai was appointed Chairman of the Board in February 1999. Mr. Desai is the
spouse of Ms. Sethi.

     Anil Jain was appointed as Business Unit Head & Senior Vice President,
Insurance Vertical in February 2006. Mr. Jain has been with Syntel since 1993
serving in a number of client relationship and service delivery capacities.


     Srikanth Karra was appointed as Syntel's Vice President - Global Human
Reosurces in March 2005. Prior to joining Syntel, Mr. Karra served as HR Head
for India and Global Leader for Staffing and Relationship Development at GE
Capital International Services, a global diversified financial services company,
from 2001 to 2005.

     Rakesh Khanna was appointed as Banking & Finance Business Unit President
with the Company in July 2005. Prior to joining Syntel, Mr. Khanna served in
senior management at IFLEX Solutions Ltd., a company specializing in software
products and services for banks and financial service institutions, from
September 1996 to July 2005.

     Anand Kalidass was appointed as Vice President, Strategic Offerings in
2005. Prior to joining Syntel, Mr. Kalidass served as Senior Vice President at
Caritor, a global technology solutions provider from June 1997 to December
2004.

     Vijay Mehra was appointed as Telecom, Retail, Logistics and Travel
Industries Business Unit President in April 2005. Prior to joining Syntel, from
September 2000 to March 2005, Mr. Mehra was working with McKinsey & Company, a
management consulting firm, as one of the senior-most managers in the IT
Practice.

     Daniel M. Moore has served the Company as Chief Administrative Officer,
Secretary, and General Counsel since August 1998.

     Keshav Murugesh was appointed as Chief Operating Officer of the Company in
October 2004. Mr. Murugesh joined the Company as Chief Financial Officer in May
2002 and continued as Acting Chief Financial Officer until his successor,
Revathy Ashok was appointed. Prior to joining Syntel, Mr. Murugesh served as
Vice President Finance at ITC Infotech Ltd from October 2000 to May 2002. Prior
to this assignment, Mr. Murugesh served as Finance Head, Information Systems
Business from August 1999 to September 2000 at ITC Ltd, India.

     Naresh Nagarajan was appointed as Syntel's Healthcare Business Unit
President in April 2005. Prior to joining Syntel, Mr. Nagarajan was a Limited
Partner with iLABS Group LLP, a venture capital firm, from 2001.


                                       22
<PAGE>

     Nitin Rakesh was appointed as Vice President and Head of B&FS BPO
Operations in February 2006 and has been with Syntel since 2002 in various
capacities with the business process outsourcing unit. Prior to joining Syntel,
Mr. Rakesh served n various capacities in TCG Group, a company specializing in
investments, real estate & software from Dec 1999 to Sep 2002, with his last
assignment in the group as Head of Sales, Banking & Financial Services, for TCG
Software Services.

     R. S. Ramdas was appointed as Vice President, Finance and Corporate
Services in March 2004 and became a member of the leadership team in February
2006. Mr. Ramdas has served with Syntel since 1990 in various positions
including heading corporate tax, treasury, internal audit, and global
procurement.

     Sunil Sarna was appointed as Business Unit Head & Senior Vice President,
Automotive Vertical in February 2006. Mr. Sarna has served with Syntel since
1998 in various client relationship and delivery roles.

     Neerja Sethi is a co-founder of the Company and has served as a Vice
President, Corporate Affairs and as a Director since its formation in 1980. Ms.
Sethi is the spouse of Mr. Desai.

     Vinod Swami joined the Company in June 1993 and is appointed as Senior Vice
President and Head of Sales, Automotive, Healthcare and Diversified Businesses
since February 2006. Mr. Swami previously served as Vice President, Global
Sales, from February 2005 to February 2006, Vice President, Strategic Sales from
December 2002 to February 2005 and in various sales positions prior to December
2002.

ITEM 1A. RISK FACTORS

The following factors should be considered carefully when evaluating our
business.

RECRUITMENT AND RETENTION OF IT PROFESSIONALS. The Company's business of
delivering professional IT services is labor intensive, and, accordingly, its
success depends upon its ability to attract, develop, motivate, retain and
effectively utilize highly-skilled IT professionals. The Company believes that
both in the United States and in India there is a growing shortage of, and
significant competition for, IT professionals who possess the technical skills
and experience necessary to deliver the Company's services, and that such IT
professionals are likely to remain a limited resource for the foreseeable
future. The Company believes that, as a result of these factors, it operates
within an industry that experiences a significant rate of annual turnover of IT
personnel. The Company's business plans are based on hiring and training a
significant number of additional IT professionals each year to meet anticipated
turnover and increased staffing needs. The Company's ability to maintain and
renew existing engagements and to obtain new business depends, in large part, on
its ability to hire and retain qualified IT professionals. The Company performs
a significant portion of its employee recruiting in foreign countries,
particularly in India. Any perception among the Company's recruits or foreign IT
professionals, whether or not well-founded, that the Company's ability to assist
them in obtaining permanent residency status in the United States has been
diminished could result in increased recruiting and personnel costs or lead to
significant employee attrition or both.

                                       23

<PAGE>

There can be no assurance that the Company will be able to recruit and train a
sufficient number of qualified IT professionals or that the Company will be
successful in retaining current or future employees. Failure to hire and train
or retain qualified IT professionals in sufficient numbers could have a material
adverse effect on the Company's business, results of operations and financial
condition.

GOVERNMENT REGULATION OF IMMIGRATION. The Company recruits its IT professionals
on a global basis and, therefore, must comply with the immigration laws of the
countries in which it operates, particularly the United States. As of December
31, 2005, approximately 53% of Syntel's U.S. workforce (12% of Syntel's
worldwide workforce) worked under H-1B visas (permitting temporary residence
while employed in the U.S.) and another 16% of the Company's U.S. workforce (4%
of the Company's worldwide workforce) worked under L-1 visas (permitting
inter-company transfers of employees that have been employed with a foreign
subsidiary for at least 6 months). Pursuant to U.S. federal law, the U.S.
Citizenship and Immigration and Services (CIN) limits the number of new H-1B
visas to be approved in any government fiscal year. In years in which this limit
is reached, the Company may be unable to obtain enough H-1B visas to bring a
sufficient number of foreign employees to the U.S. If the Company were unable to
obtain sufficient H-1B employees, the Company's business, results of operations
and financial condition could be materially and adversely affected. Furthermore,
Congress and administrative agencies have periodically expressed concerns over
the levels of legal immigration into the U.S. These concerns have often resulted
in proposed legislation, rules and regulations aimed at reducing the number of
work visas, including L-1 and H-1B visas that may be issued.

In addition to immigration restrictions in the U.S., the Company is subject to
various immigration and work permit restrictions globally and in particular in
the European community. These restrictions restrain the Company's ability to add
skilled professionals as needed for global operations and could have an adverse
impact on the Company's global strategy. Adverse changes to these immigration
and work permit regulations could have a material adverse effect on the
company's business, results of operations and financial condition.

VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company has experienced and
expects to continue to experience fluctuations in revenues and operating results
from quarter to quarter due to a number of factors, including: the timing,
number and scope of customer engagements commenced and completed during the
quarter; progress on fixed-price engagements; timing and cost associated with
expansion of the Company's facilities; changes in IT professional wage rates;
the accuracy of estimates of resources and time frames required to complete
pending assignments; the number of working days in a quarter; employee hiring,
attrition and utilization rates; the mix of services performed on-site, off-site
and offshore; termination of engagements; start-up expenses for new engagements;
longer sales cycles for Applications Outsourcing engagements; customers' budget
cycles; and investment time for training. Because a significant percentage of
the Company's selling, general and administrative expenses are relatively fixed,
variations in revenues may cause significant variations in operating results. It
is possible that Company's operating results could be below or above the
expectations of market analysts and investors. In such event, the price of the
Company's common stock would likely be materially adversely affected. No
assurance can be given that quarterly results will not fluctuate causing an
adverse effect on the Company's financial condition at the time.


                                       24

<PAGE>

CUSTOMER CONCENTRATION; RISK OF TERMINATION. The Company has in the past
derived, and believes it will continue to derive, a significant portion of its
revenues from a limited number of large, corporate customers. The Company's ten
largest customers represented approximately 65%, 61%, and 64% of the total
revenues for the years ended December 31, 2005, 2004 and 2003, respectively. The
Company's largest customer for 2005, 2004 and 2003, was American Express
accounting for approximately 16% of the total revenues for each of the years
ended December 31, 2005, 2004 and 2003, respectively.

The volume of work performed for specific customers is likely to vary from year
to year, and a significant customer in one year may not provide the same level
of revenues in any subsequent year. Because many of its engagements involve
functions that are critical to the operations of its customer's businesses, any
failure by Syntel to meet a customer's expectations could result in cancellation
or non-renewal of the engagement and could damage Syntel's reputation and
adversely affect its ability to attract new business. Many of the Company's
contracts are terminable by the customer with limited notice and without
compensation beyond the professional services rendered through the date of
termination. An unanticipated termination of a significant engagement could
result in the loss of substantial anticipated revenues and could require the
Company to either maintain or terminate a significant number of unassigned IT
professionals. The loss of any significant customer or engagement could have a
material adverse effect on the Company's business, results of operations and
financial condition.

EXPOSURE TO REGULATORY AND GENERAL ECONOMIC CONDITIONS IN INDIA. A significant
element of the Company's business strategy is to continue to develop and expand
offshore Global Development Centers in India. As of December 31, 2005, the
Company had approximately 67% of its billable workforce in India, and
anticipates that this percentage will increase over time. While wage costs in
India are significantly lower than in the U.S. and other industrialized
countries for comparably skilled IT professionals, wages in India are increasing
at a faster rate than in the U.S., and could result in the Company incurring
increased costs for IT professionals. In the past, India has experienced
significant inflation and shortages of foreign exchange, and has been subject to
civil unrest. No assurance can be given that the Company will not be adversely
affected by changes in inflation, exchange rate fluctuations, interest rates,
tax provisions, social stability or other political, economic or diplomatic
developments in or affecting India in the future. In addition, the Indian
government is significantly involved in and exerts significant influence over
its economy. In the recent past, the Indian government has provided significant
tax incentives and relaxed certain regulatory restrictions in order to encourage
foreign investment in certain sectors of the economy, including the technology
industry. Certain of these benefits that directly benefited the Company
included, among others, tax holidays, liberalized import and export duties and
preferential rules on foreign investment. The Company treats any earnings from
its operations in India and other foreign countries as permanently invested
outside the United States. If the Company decides to repatriate any of such
earnings, it will incur a Dividend distribution tax for distribution from India,
currently 14.03% under Indian tax law and be required to pay U.S. corporate
income taxes on such earnings. As of December 31, 2005, the estimated dividend
distribution taxes and U.S. corporate taxes that would be due upon repatriation
of accumulated earnings are approximately $34.1 million. Changes in the business
or regulatory climate of India could have a material adverse effect on the
Company's business, results of operations and financial condition.


                                       25

<PAGE>

In December 2004, FASB Staff Position No. FAS 109-2, "Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American
Jobs Creation Act of 2004" ("FSP FAS 109-2") was issued, providing guidance
under SFAS No. 109, "Accounting for Income Taxes" for recording the potential
impact of the repatriation provisions of the American Jobs Creation Act of 2004,
enacted on October 22, 2004. FSP FAS 109-2 allows time beyond the financial
reporting period of enactment to evaluate the effects of the Jobs Act before
applying the requirements of FSP FAS 109-2. The American Jobs Creation Act of
2004 provided a special one-time favorable effective federal tax rate for
U.S.-based organizations. The Company repatriated cash dividends of $61.0
million out of the retained earnings of its controlled foreign subsidiary,
Syntel Limited, to the U.S. in accordance with the Act. The Company recorded a
tax charge of approximately $12.3 million, including US Federal and state taxes
and the Indian dividend distribution tax under the Indian Income Tax laws,
during the fourth quarter of 2005. Proceeds from these extra ordinary dividends
are required to be invested in the United State for specific purposes permitted
under Act pursuant to an approved written domestic reinvestment plan. As of
December 31, 2005 the Company has invested approximately $42.5 million towards
permitted investments under the Act against this extra ordinary dividend
pursuant to an approved Domestic reinvestment plan.

The Company intends to use remaining accumulated and future earnings of foreign
subsidiaries to expand operations outside the United States and accordingly
undistributed earnings of foreign subsidiaries are considered to be indefinitely
reinvested outside the United States and no provision for U. S. federal and
state income tax or applicable dividend distribution tax has been provided
thereon.

If the company determines to repatriate all undistributed repatriable earnings
of foreign subsidiaries as of December 31, 2005, the company would have accrued
taxes of approximately $34.1million.

INTENSE COMPETITION. The IT services industry is intensely competitive, highly
fragmented and subject to rapid change and evolving industry standards. The
Company competes with a variety of other companies, depending on the IT services
it offers. The Company's primary competitors for professional IT staffing
engagements include participants from a variety of market segments, systems
consulting and implementation firms, applications software development and
maintenance firms, service groups of computer equipment companies and temporary
staffing firms. In Applications Outsourcing and e-Business services, the Company
competes primarily with companies in the domestic and global arena. In the
domestic IT arena, Syntel competes against firms such as IBM Global Solutions,
Keane, EDS, Cognizant, and Accenture. In the global IT services arena, Syntel is
increasingly competing against a number of India-based companies including TCS,
Infosys, and Wipro. Many of the Company's competitors have substantially greater
financial, technical and marketing resources and greater name recognition than
the Company. As a result, they may be able to compete more aggressively on
pricing, respond more quickly to new or emerging technologies and changes in
customer requirements, or devote greater resources to the development and
promotion of IT services than the Company. India-based companies also present
significant price competition due to their competitive cost structures and tax
advantages. In addition, there are relatively few barriers to entry into the
Company's markets and the Company has faced, and expects to continue to face,
additional competition from new IT service providers. Further, there is a risk
that the Company's customers may elect to increase their internal resources to
satisfy their IT services needs as opposed to relying on a third-party vendor
such as the Company. The IT services industry is also undergoing


                                       26

<PAGE>

consolidation which may result in increased competition in the Company's target
markets. Increased competition could result in price reductions, reduced
operating margins and loss of market share, any of which could have a material
adverse effect on the Company. The Company also faces significant competition in
recruiting and retaining IT professionals which could result in higher labor
costs or labor shortages. There can be no assurance that the Company will
compete successfully with existing or new competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, results of operations or financial condition.

ABILITY TO MANAGE GROWTH. While the Company has experienced modest increase in
revenues over the past few years, it has historically experienced rapid growth
that has placed significant demands on the Company's managerial, administrative
and operational resources. Additionally, ongoing changes in the delivery mix
from onsite to offshore staffing have also placed additional operational and
structural demands on the Company. Revenues have increased from $45.3 million in
1993 to $226.2 million in 2005, and the number of worldwide billable employees
has increased from 689 as of December 31, 1993 to 4,456 as of December 31, 2005.
The Company established sales offices in London, England in 1996 and in Hong
Kong in 2001, opened sales and service offices in Singapore in May 1997 and in
Munich, Germany in 2001 and has expanded its Global Development Centers in
Mumbai, Chennai and Pune, India. The Company's future growth depends on
recruiting, hiring and training IT professionals, increasing its international
operations, expanding its U.S. and offshore capabilities, adding effective sales
and management staff and adding service offerings. Effective management of these
and other growth initiatives will require the Company to continue to improve its
operational, financial and other management processes and systems. Failure to
manage growth effectively could have a material adverse effect on the quality of
the Company's services and engagements, its ability to attract and retain IT
professionals, its business prospects, and its results of operations and
financial condition. In recent years, the Company has realigned existing
personnel and resources, and has invested incrementally in the development of
its Applications Outsourcing business, with increased focus on outsourcing
services for ongoing applications management, development, and maintenance. The
Company has also invested in the development of its e-Business practice business
process outsourcing (BPO) practice. A key factor in the Company's growth
strategy is to increase Applications Outsourcing, e-Business and BPO practices
with new and existing customers. This strategy was evidenced by a shift in the
revenue mix from TeamSourcing to Applications Outsourcing and e-Business in
recent years, as well as the improvement in the Company's direct margins.
However, Applications Outsourcing services generally require a longer sales
cycle (up to 12 months) and generally require approval by more senior levels of
management within the customer's organization, as compared with traditional IT
staffing services. Additionally, while the sales cycle for many e-Business
engagements tend to be shorter (one to six months), many engagements are short
in duration (three to six months), requiring increased sales and marketing.
While the Company has strengthened its experience and strength in marketing,
developing, and performing such services, there can be no assurance that the
Company's increased focus on Applications Outsourcing, e-Business and BPO will
continue to be successful, and any failure of such strategy could have a
material adverse effect on the Company's business, results of operations, and
financial condition.

FIXED-PRICE ENGAGEMENTS. The Company undertakes engagements, in the nature of
development and maintenance, billed on a fixed-price basis, in addition to the
engagements billed on time-and-materials basis and has a strategy


                                       27

<PAGE>

to increase its percentage of revenue from fixed-price engagement. The Company's
failure to estimate accurately the resources and time required for an engagement
or its failure to complete fixed-price engagements within budget, on time and to
the required quality levels would expose the Company to risks associated with
cost overruns and, in certain cases, penalties, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. Fixed-price revenues from development and maintenance
activity represented approximately 50%, 54% and 52% of total revenues for the
years ended December 31, 2005, 2004, and 2003, respectively.

POTENTIAL LIABILITY TO CUSTOMERS. Many of the Company's engagements involve IT
services that are critical to the operations of its customers' businesses. The
Company's failure or inability to meet a customer's expectations in the
performance of its services could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. Although the Company attempts to limit contractually its liability for
damages arising from negligent acts, errors, mistakes or omissions in rendering
its IT services, there can be no assurance that the limitations of liability set
forth in its service contracts will be enforceable in all instances or would
otherwise protect the Company from liability for damages. Although the Company
maintains general liability insurance coverage, including coverage for errors
and omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms, will be available in sufficient amounts to cover
one or more large claims, or that the insurer will not disclaim coverage as to
any future claim. The successful assertion of one or more large claims against
the Company that are uninsured, exceed available insurance coverage or result in
changes to the Company's insurance policies, including premium increases or the
imposition of large deductible or co-insurance requirements, could adversely
affect the Company's business, results of operations and financial condition.

DEPENDENCE ON KEY PERSONNEL. The success of the Company may be highly dependent
on the efforts and abilities of Bharat Desai, the Company's co-founder,
Chairman, President, and Chief Executive Officer and other key personnel. The
loss of the services of these key personnel for any reason could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company does not maintain key man life insurance on Mr. Desai or
any other key personnel.

RISKS RELATED TO POSSIBLE ACQUISITIONS. The Company has expanded, and may
continue to expand its operations through the acquisition of additional
businesses. Financing of any future acquisition could require the incurrence of
indebtedness, the issuance of equity (common or preferred) or a combination
thereof. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate any
acquired businesses into the Company without substantial expense, delays or
other operational or financial risks and problems. Furthermore, acquisitions may
involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
legal liabilities and amortization of acquired intangible assets. Customer
satisfaction or performance problems within an acquired firm could have a
material adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that acquired businesses, if any, will
achieve anticipated revenues and earnings. The failure of the Company to manage
its acquisition strategy successfully could have a material adverse effect on
the Company's business, results of operations and financial condition.


                                       28

<PAGE>

LIMITED INTELLECTUAL PROPERTY PROTECTION. The Company's success depends in part
upon certain methodologies, practices, tools and technical expertise it utilizes
in designing, developing, implementing and maintaining applications and other
proprietary intellectual property rights. In order to protect its proprietary
rights in these various intellectual properties, the Company relies upon a
combination of nondisclosure and other contractual arrangements as well as trade
secret, copyright and trademark laws which afford only limited protection. The
Company also generally enters into confidentiality agreements with its
employees, consultants, customers and potential customers and limits access to
and distribution of its proprietary information. India is a member of the Berne
Convention, an international treaty, and has agreed to recognize protections on
intellectual property rights conferred under the laws of foreign countries,
including the laws of the U.S. The Company believes that laws, rules,
regulations and treaties in effect in the U.S. and India are adequate to protect
it from misappropriation or unauthorized use of its intellectual property.
However, there can be no assurance that such laws will not change and, in
particular, that the laws of India will not change in ways that may prevent or
restrict the transfer of software components, libraries and toolsets from India
to the U.S. There can be no assurance that the steps taken by the Company will
be adequate to deter misappropriation of its intellectual property, or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its rights. Although the Company believes that its intellectual property
rights do not infringe on the intellectual property rights of others, there can
be no assurance that such a claim will not be asserted against the Company in
the future or what impact any such claim, would have on the Company's business,
results of operation or financial condition. The Company presently holds no
patents or registered copyrights. The Company holds the trademarks or
servicemarks: Syntel(R), registered in the U.S. and Germany; Consider IT
Done(R), registered in the U.S. and Germany; Identeon(TM); IntelliSourcing(R);
IntelliTransfer(R); Skillbay(R); TeamSourcing(R); Total ERP Applications
Methodology (TEAM)(R); Latest to Legacy(R); New2USA.com(R); and Digital
Blueprinting-Build-Optimize(R). The Company has submitted U.S. federal and
foreign trademark applications to register those names for its service offerings
not already registered. However, there can be no assurance that the Company will
be successful in obtaining trademarks for these trade names.

POTENTIAL ANTI-OUTSOURCING LEGISLATION. In the recent past, the issue of
outsourcing of services abroad by companies has become a topic of political
discussion in the United States and in other countries. Measures aimed at
limiting or restricting outsourcing by companies are under discussion in U. S.
Congress as well as in as many of the state legislatures in addition to other
countries. While no substantive anti-outsourcing legislation has been enacted to
date that significantly adversely affects the Company, given the continuing
debate over this issue, the introduction and enactment of such legislation is
possible. If introduced and enacted, such measures are likely to fall within two
categories: (1) a broadening of restrictions on outsourcing by government
agencies and on government contracts with firms that outsource services directly
or indirectly, and/or (2) measures that impact private industry, such as tax
disincentives, restriction on the transfer or maintenance of certain information
abroad and/or intellectual property transfer restrictions. In the event that any
such measures become law, our business, financial condition and results of
operations could be adversely affected and our ability to service our customer
could be impaired.

ADVERSE ECONOMIC CONDITIONS. If economic growth slows, our utilization and
billing rates for our technology professionals could be adversely affected,
which may result in lower gross and operating profits.


                                       29

<PAGE>

FAILURE TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS AND SERVICES. Over the
past several years, we have been expanding the nature and scope of our
engagements by extending the breadth of services we offer. The success of our
service offerings depends, in part, upon continued demand for such services by
our existing and new clients and our ability to meet this demand in a
cost-competitive and effective manner. In addition, our ability to effectively
offer a wider breadth of end-to-end business solutions depends on our ability to
attract existing or new clients to these service offerings. To obtain
engagements for our end-to-end solutions, we also are more likely to compete
with large, well-established international consulting firms as well as other
India-based technology services companies, resulting in increased competition
and marketing costs. Accordingly, our new service offerings may not effectively
meet client needs and we may be unable to attract existing and new clients to
these service offerings. The increased breadth of our service offerings may
result in larger and more complex client projects. This will require us to
establish closer relationships with our clients and potentially with other
technology service providers and vendors, and require a more thorough
understanding of our client's operations. Our ability to establish these
relationships will depend on a number of factors including the proficiency of
our technology professionals and our management personnel. Our business will
suffer if we fail to anticipate and develop new services and enhance existing
services in order to keep pace with rapid changes in technology and the
industries on which we focus. The technology services market is characterized by
rapid technological change, evolving industry standards, changing client
preferences and new product and service introductions. Our future success will
depend on our ability to anticipate these advances and develop new product and
service offerings to meet client needs. We may fail to anticipate or respond to
these advances in a timely basis, or, if we do respond, the services or
technologies we develop may not be successful in the marketplace. Further,
products, services or technologies that are developed by our competitors may
render our services non-competitive or obsolete.

BENCHMARKING PROVISIONS. As the size and duration of our client engagements
increases, clients may require benchmarking provisions. Benchmarking provisions
allow a customer in certain circumstances to request a benchmark study prepared
by an agreed upon third-party comparing our pricing, performance and efficiency
gains for delivered contract services to that of an agreed upon list of other
service providers for comparable services. Based on the results of the benchmark
study and depending on the reasons for any unfavorable variance, we may be
required to reduce the pricing for future services to be performed under the
balance of the contract, which could have an adverse impact on our revenues and
profitability.

CORPORATE GOVERNANCE ISSUES. Compliance with new and changing corporate
governance and public disclosure requirements adds uncertainty to our compliance
policies and increases our costs of compliance. Changing laws, regulations and
standards relating to accounting, corporate governance and public disclosure,
including the Sarbanes-Oxley Act of 2002, new SEC regulations, NASDAQ National
Market rules, and Securities and Exchange Commission regulations are creating
uncertainty for companies. These new or changed laws, regulations and standards
may lack specificity and are subject to varying interpretations. Their
application in practice may evolve over time as new guidance is provided by
regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs of compliance as a result of
ongoing revisions to such governance standards.


                                       30

<PAGE>

We are committed to maintaining high standards of corporate governance and
public disclosure, and our efforts to comply with evolving laws, regulations and
standards in this regard have resulted in, and are likely to continue to result
in, increased general and administrative expenses and a diversion of management
time and attention from revenue-generating activities to compliance activities.
In addition, the new laws, regulations and standards regarding corporate
governance may make it more difficult for us to obtain director and officer
liability insurance. Further, our board members, chief executive officer, and
chief financial officer could face an increased risk of personal liability in
connection with their performance of duties. As a result, we may face
difficulties attracting and retaining qualified board members and executive
officers, which could harm our business. If we fail to comply with new or
changed laws or regulations and standards differ, our business and reputation
may be harmed.

TELECOM/INFRASTRUCTURE ISSUES. Disruptions in telecommunications, system
failures, or virus attacks could harm our ability to execute our Global Delivery
Model, which could result in client dissatisfaction and a reduction of our
revenues. A significant element of our Global Delivery Model is to continue to
leverage and expand our global development centers. Our global development
centers are linked with a redundant telecommunications network architecture that
uses multiple service providers and various satellite and optical links with
alternate routing. We may not be able to maintain active voice and data
communications between our various global development centers and between our
global development centers and our clients' sites at all times due to
disruptions in these networks, system failures or virus attacks. Any significant
failure in our ability to communicate could result in a disruption in business,
which could hinder our performance or our ability to complete client projects on
time. This, in turn, could lead to client dissatisfaction and a material adverse
effect on our business, results of operations and financial condition.

CONFIDENTIALITY ISSUES. We may be liable to our clients for damages caused by
disclosure of confidential information or system failures. We are often required
to collect and store sensitive or confidential client and customer data. Many of
our client agreements do not limit our potential liability for breaches of
confidentiality. If any person, including any of our employees, penetrates our
network security or misappropriates sensitive data, we could be subject to
significant liability from our clients or from our clients' customers for
breaching contractual confidentiality provisions or privacy laws. Unauthorized
disclosure of sensitive or confidential client and customer data, whether
through breach of our computer systems, systems failure or otherwise, could
damage our reputation and cause us to lose clients. Many of our contracts
involve projects that are critical to the operations of our clients' businesses,
and provide benefits, which may be difficult to quantify. Any failure in a
client's system or breaches of security could result in a claim for substantial
damages against us, regardless of our responsibility for such failure. Although
we attempt to limit our contractual liability for consequential damages in
rendering our services, these limitations on liability may be unenforceable in
some cases, or may be insufficient to protect us from liability for damages. We
maintain general liability insurance coverage, including coverage for errors or
omissions, however, this coverage may not continue to be available on reasonable
terms and may be unavailable in sufficient amounts to cover one or more large
claims. Also an insurer might disclaim coverage as to any future claim. A
successful assertion of one or more large claims against us that exceeds our
available insurance coverage or changes in our insurance policies, including
premium increases or the imposition of a large deductible or co-insurance
requirement, could adversely affect our operating results.


                                       31

<PAGE>

NEW FACILITIES. We are investing substantial cash assets in new facilities and
physical infrastructure, and our profitability could be reduced if our business
does not grow proportionately.

STOCK OPTION ACCOUNTING. Our earnings will be adversely affected once we change
our accounting policies with respect to the expensing of stock options. We do
not currently deduct the expense of employee stock option grants from our income
based on the fair value method. We have adopted the pro forma disclosure
provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Recently,
the Financial Accounting Standards Board issued FASB Statement No. 123 (revised
2004) "Share-Based Payment" ("SFAS No. 123R") requiring companies to change
their accounting policies to record the fair value of stock options issued to
employees as an expense. During December 2004, the Financial Accounting
Standards Board issued SFAS No. 123R, "Share-Based Payment" (SFAS 123R),which
requires companies to measure and recognize compensation expense for all
stock-based payments at fair value. Stock-based payments include stock option
grants and other transactions under Company stock plans. The Company grants
options to purchase common stock to some of its employees and directors under
various plans at prices equal to the market value of the stock on the dates the
options were granted. The Company is required to adopt SFAS 123R by the first
quarter of fiscal 2006. The Company will use the modified prospective
application transition method and estimates that the adoption of SFAS No. 123R
for share-based awards issued to employees will not have a significant impact
on its statement of income or financial position for 2006. This estimate is
based upon various assumptions, including an estimate of the number of
share-based awards that will be granted, cancelled or expired during 2006, as
well as the Company's future stock prices. These assumptions are highly
subjective and changes in these assumptions could significantly affect the
Company's estimate.

TERRORIST ACTIVITY, WAR OR NATURAL DISASTERS. Terrorist activity, war or natural
disasters could adversely affect our business, results of operations and
financial condition. Terrorist activity, other acts of violence or war, or
natural disasters have the potential to have a direct impact on our clients.
Such events may make travel more difficult, may make it more difficult to obtain
work visas for many of our technology professionals and may effectively curtail
our ability to deliver our services to our clients. Such obstacles to business
may increase our expenses and negatively affect the results of our operations.
Many of our clients visit several technology services firms prior to reaching a
decision on vendor selection. Terrorist activity, war or natural disasters could
make travel more difficult and delay, postpone or cancel decisions to use our
services.

INSTABILITY AND CURRENCY FLUCTUATIONS. Historically, we have held a significant
amount of our cash funds in Indian rupees. Accordingly, changes in exchange
rates may have a material adverse effect on our revenues, other income, cost of
services sold, gross margin and net income, which may in turn have a negative
impact on our business, operating results and financial condition. The exchange
rate between the Indian rupee and the dollar has changed substantially in recent
years and may fluctuate substantially in the future. We expect that a majority
of our revenues will continue to be generated in U.S. dollars for the
foreseeable future and that a significant portion of our expenses, including
personnel costs, as well as capital and operating expenditures, will continue to
be denominated in Indian rupees. Consequently, the results of our operations are
adversely affected as the Indian rupee appreciates against the dollar.



                                       32

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

     The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately 14,600
square feet of leased space in Troy, Michigan. The Company occupies these
premises under a lease expiring in March 2007. The Company has a
telecommunications hub located in approximately 3,200 square feet of leased
space in Cary, North Carolina, under a lease, which expires July 31, 2010. The
Company also leases office facilities in Santa Clara, California; Phoenix,
Arizona; Schaumburg, Illinois; Dallas, Texas; Minneapolis, Minnesota; New York,
New York; Nashville, Tennessee; Natick, Massachusetts; Berkshire, England;
Stuttgart, Germany; and Singapore

     Syntel leases approximately 65,140 square feet of office space in Mumbai,
India, under ten leases expiring on various dates from October 2006 to March
2009. These facilities house IT professionals, as well as its senior management,
finance and accounts, administrative personnel, human resources, recruiting, and
sales and marketing functions.

     For facilitating its BPO operations, Syntel has leased 33,130 square feet
of office space in Mumbai, India. Additionally, during the year, Syntel has
leased approximately 7,235 square feet of office space in Mumbai, India for
facilitating its BPO operations. The lease term for both the BPO facilities
expires on May 2007 and February 2008, respectively.

     Syntel leases approximately 76,008 square feet of office space in Chennai,
India, under two leases expiring on April 2006 and September 2009 both subject
to the Company's option to renew for an additional period of three to five
years.

     Syntel leases four offices in Pune, India consisting of approximately
63,490 square feet. The lease terms expires on various dates from May 2006 to
June 2006, all subject to the Company's option to renew for an additional period
of three to five years.

     During the year, Syntel leased an additional 34,500 square feet of office
space in Pune, India. The lease expires in April 2006.

     In January 2001, the Company acquired 40 acres of land at the cost of
approximately $1.0 million for construction of a state-of-the-art development
and training campus in Pune, India. When fully completed, the facility will
cover over 1 million square feet and will accommodate 9000 employees. It will be
both a customer and employee focused facility, including such amenities as
training facilities, cafeteria and fitness center. The Company has appointed a
leading project management company, finalized architectural drawings for Phase I
and has appointed contractors for all key elements of the project. The
superstructure and finalization of Phase 1 is near completion and work on
external development and services is near completion. An office building with
space for 950 seats, a food court and hotel are expected to be ready by the
second quarter of 2006, pending regulatory approvals.

     The Company has acquired 28 acres of land in an Information Technology Park
in Chennai, India.

     The Company believes that the existing facilities and planned development
in Pune and Chennai are adequate for its currently anticipated future needs.


                                       33

<PAGE>

ITEM 3. LEGAL PROCEEDINGS:

     The Company is not currently a party to any material legal proceeding or
governmental investigation.

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

     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the year ended December 31, 2005.


                                       34

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
     ISSUER PURCHASES OF EQUITY SECURITIES.

     (a) The Registrant's Common Stock is traded on the NASDAQ National Market
under the symbol "SYNT." The following table sets forth, for the periods
indicated, the range of high and low sales prices per share of the Company's
Common Stock as reported on NASDAQ for each full quarterly period in 2004 and
2005.

<TABLE>
<CAPTION>
Period                  High      Low
------                 ------   ------
<S>                    <C>      <C>
First Quarter, 2004    30.900   24.320
Second Quarter, 2004   28.370   16.210
Third Quarter, 2004    17.880   13.770
Fourth Quarter, 2004   20.000   16.250
First Quarter, 2005    19.530   15.930
Second Quarter, 2005   18.730   15.750
Third Quarter, 2005    19.490   16.140
Fourth Quarter, 2005   22.000   18.380
</TABLE>

     (b) There were approximately 705 shareholders of record and 3,500
beneficial holders on February 27, 2006.

     (c) The Board of Directors has declared a quarterly dividend of $0.06 per
share during each quarter of the Company's last two fiscal years. In addition,
the Board of Directors at its meeting dated March 3, 2005 declared a one-time
special dividend of $1.50 per share payable to Syntel shareholders of record at
the close of business on March 14, 2005. The Company paid cash dividends of $
1.74 and $0.24 per share for the years ended December 31, 2005 and 2004,
respectively.

     (d) EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth, with respect to the Company's equity
compensation plans, (i) the number of shares of common stock to be issued upon
the exercise of outstanding options, (ii) the weighted average exercise price of
outstanding options, and (iii) the number of shares remaining available for
future issuance, as of December 31, 2005.

<TABLE>
<CAPTION>
                      NUMBER OF SECURITIES
                       TO BE ISSUED UPON         WEIGHTED-AVERAGE          NUMBER OF SECURITIES REMAINING
                           EXERCISE OF           EXERCISE PRICE OF      AVAILABLE FOR FUTURE ISSUANCE UNDER
                      OUTSTANDING OPTIONS,     OUTSTANDING OPTIONS,     EQUITY COMPENSATION PLANS (EXCLUDING
   PLAN CATEGORY      WARRANTS, AND RIGHTS   WARRANTS, AND RIGHTS ($)    SECURITIES REFLECTED IN COLUMN (1))
   -------------      --------------------   ------------------------   ------------------------------------
<S>                   <C>                    <C>                        <C>
Equity compensation          438,251                   12.28                          2,347,413
 plans approved by
    shareholders

Equity compensation               --                      --                                 --
 plans not approved
  by shareholders
                             -------                   -----                          ---------
       TOTAL                 438,251                   12.28                          2,347,413
                             =======                   =====                          =========
</TABLE>


                                       35

<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

SYNTEL, INC. & SUBSIDIARIES
(In thousands, except share data)

The following tables set forth selected consolidated financial data and other
data concerning Syntel, Inc. for each of the last five years. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related Notes thereto.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                    ----------------------------------------------------
                                                      2005       2004       2003       2002       2001
                                                    --------   --------   --------   --------   --------
                                                              (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                 <C>        <C>        <C>        <C>        <C>
STATEMENT OF INCOME DATA
   Net revenues                                     $226,189   $186,573   $179,507   $161,507   $172,283
   Cost of revenues                                  135,043    107,120    101,699     94,010    106,943
   Gross profit                                       91,146     79,453     77,808     67,497     65,340
   Selling, general and administrative expenses       44,917     36,999     28,278     31,421     34,522
   Capitalized development cost impairment                --         --         --         --      1,624
   (Reduction in) reserve requirements applicable
      to Metier transaction                               --         --       (882)    (5,698)        --
   Income from operations                             46,229     42,454     50,412     41,774     29,194
   Other income, principally interest                  4,592      3,773      3,168      3,191      3,780
   Income before income taxes                         50,821     46,227     53,580     44,965     32,974
   Income tax provision (1)                           20,500      5,253     13,242     12,338      8,636
   Income before loss from equity investments and
      investment write off                            30,321     40,974     40,338     32,627     24,338
   Loss from equity investments and investment
      write offs (net of tax)                             --         --         34        141      3,893
   Net income                                       $ 30,321   $ 40,974   $ 40,304   $ 32,486   $ 20,445
   Net income per share, diluted                    $   0.75   $   1.01   $   0.99   $   0.81   $   0.52
   Cash dividends declared per common share         $   1.74   $   0.24   $   1.37         --         --
   Weighted average shares outstanding, diluted       40,671     40,469     40,797     39,917     38,987
</TABLE>


                                       36

<PAGE>

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                           ----------------------------------------------------
                                             2005       2004       2003       2002       2001
                                           --------   --------   --------   --------   --------
                                                             ($ IN THOUSANDS)
<S>                                        <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA
   Working capital                         $120,866   $170,786   $142,207   $145,988   $103,502
   Total assets                             198,161    226,968    185,198    183,572    152,247
   Total shareholders' equity               152,278    190,642    153,406    154,844    112,258

OTHER DATA
   Billable headcount in U.S.                 1,341      1,145      1,138      1,111        987
   Billable headcount in India                3,006      1,906      1,376        943        419
   Billable headcount at other locations        109        121        150        101        138
                                           --------   --------   --------   --------   --------
   Total billable headcount                   4,456      3,172      2,664      2,155      1,544
                                           ========   ========   ========   ========   ========
</TABLE>

1)   The tax rate for the year ended December 31, 2005 is impacted by reversal
     of tax reserve of $2.6 million, provision for valuation allowance of $1.7
     million and the tax related to the repatriation of $12.3 million. Without
     the above, the effective tax rate for the year ended December 31, 2005
     would have been 17.8%. During year ended December 31, 2004, the tax rate
     was impacted by reversal of tax reserve of $1.7 million, tax credit of $0.5
     million in Syntel India and the research and development tax credit of $0.5
     million in Syntel Inc. Without the above, the effective income tax rate
     during the year ended December 31, 2004 would have been 17.3%. During year
     ended December 31, 2003, the tax rate was impacted by provision of tax
     reserve of $3.1 million. Without the above, the effective income tax rate
     during the year ended December 31, 2003 would have been 19%.


                                       37

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS.

CRITICAL ACCOUNTING POLICIES

     We believe the following critical accounting policies, among others,
involve our more significant judgments and estimates used in the preparation of
our consolidated financial statements. The Company has discussed the critical
accounting policies and estimates with the Audit Committee of the Board of
Directors.

     REVENUE RECOGNITION. Revenue recognition is the most significant accounting
policy for the Company. The Company recognizes revenue from time and material
contracts as services are performed. During the years ended December 31, 2005,
2004 and 2003, revenues from time and material contracts constituted 50%, 46%
and 48%, respectively of total revenues. Revenue from fixed-price, application
management, maintenance and support engagements is recognized as earned, which
generally results in straight-line revenue recognition as services are performed
continuously over the term of the engagement. During the years ended December
31, 2005, 2004 and 2003, revenues from fixed price application management and
support engagements constituted 29%, 33% and 27%, respectively.

     Revenue on fixed price development projects is measured using the
proportional performance method of accounting. Performance is generally measured
based upon the efforts incurred to date in relation to the total estimated
efforts to the completion of the contract. The Company monitors estimates of
total contract revenues and cost on a routine basis throughout the delivery
period. The cumulative impact of any change in estimates of the contract
revenues or costs is reflected in the period in which the changes become known.
In the event that a loss is anticipated on a particular contract, provision is
made for the estimated loss. The Company issues invoices related to fixed price
contracts based on either the achievement of milestones during a project or
other contractual terms. Differences between the timing of billings and the
recognition of revenue based upon the proportional performance method of
accounting are recorded as revenue earned in excess of billings or deferred
revenue in the accompanying financial statements. During the years ended
December 31, 2005 2004 and 2003, revenues from fixed price development contracts
constituted 21%, 21% and 25%, respectively.

SIGNIFICANT ACCOUNTING ESTIMATES

     The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses for the reporting period. By their
nature, these estimates and judgments are subject to an inherent degree of
uncertainty. The Company bases its estimates and judgments on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results could differ from those estimates.

     REVENUE RECOGNITION. The use of the proportional performance method of
accounting requires that the Company makes estimates about its future efforts
and costs relative to the fixed price contracts. While the Company has
procedures in place to monitor the estimates throughout the performance period,
such estimates are subject to change as each contract


                                       38

<PAGE>

progresses. The cumulative impact of any such changes is reflected in the period
in which the changes become known.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS. The Company records an allowance for
doubtful accounts based on a specific review of aged receivables. The provision
for the allowance for doubtful accounts is recorded in selling, general and
administrative expenses. At December 31, 2005 and 2004, the allowance for
doubtful accounts was $2.6 million and $1.2 million respectively. These
estimates are based on our assessment of the probable collection from specific
customer accounts, the aging of the accounts receivable, analysis of credit
data, bad debt write-offs, and other known factors.

     INCOME TAXES--ESTIMATES OF EFFECTIVE TAX RATES AND RESERVES FOR TAX
CONTINGENCIES. When preparing our financial statements, the Company records
provisions for income taxes based on enacted tax laws and rates in the various
taxing jurisdictions in which it operates.

In determining the tax provisions, the Company also provides for tax
contingencies based on the Company's assessment of future regulatory reviews of
filed tax returns. Such reserves, which are recorded in income taxes payable,
are based on management's estimates and accordingly are subject to revision
based on additional information. The reserve no longer required for any
particular tax year, is credited to the current year's income tax provision.

During 2005, the Company has reversed $2.6 million of the accrual for income
taxes related to the year 2001 and credited it to the current year's income tax
provision.

In addition, during 2005 the Company has also reversed $0.9 million related to
the payroll tax provision and provided for valuation allowance of $1.7 million
attributable to certain deferred tax benefits, on write-off of certain
investments in 2001, which are not expected to be materialized.

The revision in estimates noted above had an after tax impact of increasing the
diluted earnings per share for the year ended December 31, 2005 by $0.04 per
share.

     ACCRUALS FOR LEGAL EXPOSURES. The Company estimates the costs associated
with legal exposures that it has and the related legal expenses and records the
probable liability if it can be reasonably estimated or the lower end of a
range, if the amount cannot be reasonably estimated. The accrual related to
litigation and legal fees at December 31, 2005 and 2004, was $0.2 million and
$0.1 million, respectively.

OVERVIEW

     Syntel is a worldwide provider of professional IT consulting and
applications management services to Global 2000 companies, as well as to
government entities. The Company's service offerings include Applications
Outsourcing, consisting of application management services for ongoing
management, development and maintenance of business applications; e-Business,
consisting of the integration and development of advanced technology
applications including E-commerce, Web development, Data Warehousing, CRM,
Oracle, and SAP; as well as partnerships with leading software and IT
application software infrastructure providers to provide its implementation,
customization, migration and maintenance services including Ab Initio, Actuate,
BEA Systems, Business Objects, Cognos, IBM, Informatica, Mercury, Microstrategy,
Oracle, SAP, Serden Technologies, TIBCO, among others.


                                       39

<PAGE>

     Through BPO, Syntel provides outsourced solutions for a client's business
processes, providing them with the advantage of a low cost position and process
enhancement through optimal use of technology. Syntel uses a proprietary tool
called IdenteonTM to assist with strategic assessments of business processes,
identifying the right ones for outsourcing.

     The Company's revenues are generated from professional services fees
provided through four segments, Applications Outsourcing, e-Business,
TeamSourcing and BPO. The Company has invested significantly in developing its
ability to sell and deliver Applications Outsourcing and e-Business services,
and has shifted a larger portion of its business to engagements within these two
segments, which the Company believes have higher growth and gross margin
potential. The following table outlines the revenue mix for the years ended
December 31, 2005, 2004, and 2003:

<TABLE>
<CAPTION>
                           PERCENT OF TOTAL REVENUES
                           -------------------------
                               2005   2004   2003
                               ----   ----   ----
<S>                        <C>        <C>    <C>
Applications Outsourcing        76%    76%    76%
e-Business                      14     16     19
TeamSourcing                     7      7      5
BPO                              3      1      0
                               ---    ---    ---
                               100%   100%   100%
                               ===    ===    ===
</TABLE>

     On Applications Outsourcing engagements, the Company typically assumes
responsibility for engagement management and generally is able to allocate
certain portions of the engagement to on-site, off-site and offshore personnel.
Syntel may bill the customer on either a time-and-materials or fixed-price
basis. Against a significant portion of Applications Outsourcing engagements,
executed historically, on a time-and-materials basis, a significant share of the
new Applications Outsourcing engagements have started on a fixed-price basis
during 2005, 2004 and 2003. For the years ended December 31, 2005, 2004 and
2003, fixed-price revenues from development and maintenance activity comprised
approximately 55%, 58% and 56% of total Applications Outsourcing revenues,
respectively.

     The Company re-skilled a very significant percentage of the consulting base
during 2003, 2004 and 2005 in the latest advanced software platforms, including
JAVA, Object Oriented, C++, C-Sharp, .NET, RMI CORBA, SAP, PeopleSoft, ETL,
Datastage, Ab-initio, Informatica and Microstrategy. The Company has focused
training efforts on consultants assigned to TeamSourcing engagements, and as a
result, has successfully migrated such consultants to the e-Business segment.
The Company has also cross trained its employees on current outsourcing
engagements to be able to successfully migrate to and develop and maintain the
emerging technologies that our clients are investing in.

     Historically, most e-Business engagements were billed on a
time-and-materials basis under the direct supervision of the customer (similar
to TeamSourcing engagements); however, as the Company expanded its expertise in
delivering e-commerce engagements, Syntel has assumed the project management
role and entered into fixed-price arrangements for a significant number of new
e-Business engagements started during 2005, 2004 and 2003. For the years ended
December 31, 2005, 2004 and 2003, fixed-price revenues from development and
maintenance activity comprised approximately 61%, 54% and 51% of total
e-Business revenues, respectively.


                                       40

<PAGE>


     On TeamSourcing engagements, Syntel's professional services typically are
provided at the customer's site and under the direct supervision of the
customer. TeamSourcing revenues generally are recognized on a time-and-materials
basis as services are performed. As indicated in the above table, the Company's
dependence on TeamSourcing engagements has decreased significantly and is
expected to continue to decrease as a percentage of the total revenue base as
the Company consciously refocuses its sales efforts and migrates resources to
e-Business and Applications Outsourcing engagements.

     On BPO engagements, services are provided at our offshore facility, which
gives the benefit of lower cost to the customer. BPO revenues generally are
recognized on a time-and-materials basis as services are performed. For the
years ended December 31, 2005 and 2004, the revenue from BPO engagements
comprised approximately 3% and 1% of total revenues.

     The Company's most significant cost is personnel cost, which consists of
compensation, benefits, recruiting, relocation and other related costs for its
IT professionals. The Company strives to maintain its gross margin by migrating
more revenue toward Applications Outsourcing and e-Business, controlling
engagement costs, and offsetting increases in salaries and benefits with
increases in billing rates. The Company has established a human resource
allocation team whose purpose is to staff IT professionals on engagements that
efficiently utilize their technical skills and allow for optimal billing rates.
Syntel India, a wholly owned subsidiary of the Company, provides software
development services from Mumbai, Pune and Chennai, India, where salaries of IT
professionals are comparatively lower than in the U.S.

     The Company has performed a significant portion of its employee recruiting
in other countries. As of December 31, 2005, approximately 53% of Syntel's U.S.
workforce (12% of Syntel's worldwide workforce) worked under H-1B visas
(permitting temporary residence while employed in the U.S.) and another 16% of
the Company's U.S. workforce (4% of the Company's worldwide workforce) worked
under L-1 visas (permitting inter-company transfers of employees that have been
employed with a foreign subsidiary for at least 6 months).

     The Company has made substantial investments in infrastructure in recent
years, including: (1) expanding the facilities in Mumbai, India, including a BPO
facility; (2) developing a Technology Campus in Pune, India; (3) expanding the
Global Development Center in Chennai, India; (4) upgrading of the Company's
global telecommunication network; (5) increasing Applications Outsourcing sales
and delivery capabilities through significant expansion of the sales force and
the Strategic Solutions Group, which develops and formalizes proprietary
methodologies, practices and tools for the entire Syntel organization; (6)
hiring additional experienced senior management; (7) expanding global recruiting
and training capabilities; and (8) enhancing human resource and financial
information systems.

     Through its strong relationships with customers, the Company has been able
to generate recurring revenues from repeat business. These strong relationships
also have resulted in the Company generating a significant percentage of
revenues from key customers. The Company's top ten customers accounted for
approximately 65%, 61% and 64% of revenues for the years ended December 31,
2005, 2004, and 2003, respectively.


                                       41

<PAGE>

     For the years ended December 31, 2005, 2004 and 2003 only one customer
contributed revenues in excess of 10% of total consolidated revenues. The
Company's largest customer for 2005, 2004 and 2003 was American Express,
contributing approximately 16%, 16% and 16%, respectively of total consolidated
revenues. Although the Company does not currently foresee a credit risk
associated with accounts receivable from these customers, credit risk is
affected by conditions or occurrences within the economy and the specific
industries in which these customers operate.

RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated selected income
statement data as a percentage of the Company's net revenues.

<TABLE>
<CAPTION>
                                       PERCENTAGE OF REVENUES
                                      YEAR ENDED DECEMBER 31,
                                      -----------------------
                                        2005    2004    2003
                                       -----   -----   -----
<S>                                   <C>      <C>     <C>
Net Revenues                           100.0%  100.0%  100.0%
Cost of revenues                        59.7    57.4    56.7
                                       -----   -----   -----
Gross profit                            40.3    42.6    43.3
Selling, general and administrative
   expenses                             19.9    19.8    15.8
Reduction in reserve requirements
   applicable to Metier transaction       --      --    (0.5)
INCOME FROM OPERATIONS                  20.4%   22.8%   28.0%
</TABLE>


                                       42

<PAGE>

Following is selected segment financial data for the years ended December 31,
2005, 2004 and 2003. The Company does not allocate assets to operating segments:

<TABLE>
<CAPTION>
                                2005       2004       2003
                              --------   --------   --------
                                      (in Thousands)
<S>                           <C>        <C>        <C>
Net Revenues
   Applications Outsourcing   $171,331   $143,007   $136,424
   e-Business                   31,210     29,249     33,795
   TeamSourcing                 16,953     12,480      9,288
   BPO                           6,695      1,837         --
                              --------   --------   --------
                               226,189    186,573    179,507
Gross Profit
   Applications Outsourcing     72,411     62,696     62,282
   e-Business                    9,687     11,302     14,389
   TeamSourcing                  4,886      4,598      1,137
   BPO                           4,162        857         --
                              --------   --------   --------
                                91,146     79,453     77,808
Gross Profit %
   Applications Outsourcing       42.3%      43.8%      45.7%
   e-Business                     31.0%      38.6%      42.6%
   TeamSourcing                   28.8%      36.8%      12.2%
   BPO                            62.2%      46.7%        --
                              --------   --------   --------
                                  40.3%      42.6%      43.3%
Selling, general and
   administrative expenses      44,917     36,999     28,278
Reduction in reserve
   requirements for Metier
   transaction                      --         --       (882)
INCOME FROM OPERATIONS        $ 46,229   $ 42,454   $ 50,412
                              --------   --------   --------
</TABLE>


                                       43

<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 2005 AND 2004.

REVENUES. Net revenues increased to $226.2 million in 2005 from $186.6 million
in 2004, representing a 21.2% increase. Our revenues have increased primarily
consequent to our increased workforce. Information technology offshoring is
clearly becoming a mega trend with increasing numbers of global corporations
aggressively outsourcing their crucial applications development or business
processes to vendors with an offshore presence. Syntel too has benefited from
this trend. At the beginning of 2004, the Company introduced the Client Partner
Program, which enabled better relationships with key customers leading to growth
in business. Further, during the year 2005, the Company has introduced Business
Unit Heads which enables better relationship and leadership for each of its
Business Units. Worldwide billable headcount, including personnel employed by
Syntel India, Syntel Singapore, Syntel Europe, and Syntel Germany as of December
31, 2005, increased 41% to 4,465 employees as compared to 3,172 employees as of
December 31, 2004. However, the growth in revenues was not commensurate with the
growth in the billable headcount. This is primarily because a significant growth
in the billable headcount was in India, where our recoveries per offshore
billable resource is generally lower as compared to an on-site based resource.
As of December 31, 2005, the Company had approximately 67% of its billable
workforce in India as compared to 60% as of December 31, 2004.. The top five
customers accounted for 45% of the total revenues in 2005, up from 40% of the
total revenues in 2004. Moreover, the top 10 customers accounted for 65% of the
revenues in 2005 as compared to 61% in 2004.

APPLICATIONS OUTSOURCING REVENUES. Applications Outsourcing revenues increased
from $143.0 million, or 76% of total revenues in 2004, to $171.3 million, also
76% of total revenues in 2005. The $28.3 million increase is attributable
principally to revenue from new engagements, contributing $64.3 million
partially offset by a net decrease in existing projects in the amount of $6.0
million and by $30.0 million in lost revenues as a result of project
completions.

APPLICATIONS OUTSOURCING COST OF REVENUES. Cost of revenues consists of costs
directly associated with billable consultants worldwide, including salaries,
payroll taxes, benefits, relocation costs, immigration costs, finder's fees, and
trainee compensation. Applications Outsourcing cost of revenues increased to
57.7% of Applications Outsourcing revenues in 2005, from 56.2% in 2004. The 1.5%
increase in cost of revenues as a percent of revenues was attributable primarily
to increased compensation cost associated with a special dividend on restricted
stock and a performance- based incentive program for delivery teams, during the
three months ended March 31, 2005, contributing an increase of 0.1 %, the salary
revision, effective April 1, 2005, in India, contributing an increase of 0.5 %,
visa filing expenses, contributing an increase of 0.5 % and increase in offshore
headcount, contributing an increase of 1.3 %. These increases were partially
offset by a 0.4 % decrease due to write back of leave accruals, related to the
change in leave policy in India and a 0.5 % decrease due to reversal of payroll
tax provision.

E-BUSINESS REVENUES. e-Business revenues increased from $29.2 million in 2004,
or 16% of total consolidated revenues, to $31.2 million in 2005, or 14% of total
consolidated revenues. The $2.0 million increase is attributable principally to
revenue from new engagements, contributing $10.0 million partially offset by a
net decrease in existing projects in the amount of $1.3 million and by $6.7
million in lost revenues as a result of project completions.


                                       44

<PAGE>

E-BUSINESS COST OF REVENUES. Cost of revenues consists of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finder's fees, and trainee
compensation. e-Business cost of revenues increased to 69.0% of e-business
revenues in 2005, from 61.4% in 2004, an increase of 7.6%. This increase was
attributable primarily to compensation cost associated with a special dividend
on restricted stock and a performance-based incentive program for delivery teams
during the three months ended March 31, 2005 and the salary revision effective
April 1, 2005 in India, partially offset by the write back of leave accruals
related to the change in leave policy in India.

TEAMSOURCING REVENUES. TeamSourcing revenues increased from $12.5 million, or 7%
of total consolidated revenues in 2004, to $16.9 million, also 7% of total
consolidated revenues in 2005. The $4.4 million increase is attributable
principally to revenue from new engagements and increased revenue of $4.3
million from the SkillBay web portal partially further increased by $1.6 million
due to net increase in revenue from existing projects and partly offset by $1.5
million in lost revenues as a result of project completion and net reduction in
revenues from exiting projects.

TEAMSOURCING COST OF REVENUES. TeamSourcing cost of revenues consists of costs
directly associated with billable consultants, including salaries, payroll
taxes, benefits, relocation costs, immigration costs, finder's fees, and trainee
compensation. TeamSourcing cost of revenues increased to 71.2% of TeamSourcing
revenues in 2005, from 63.2% in 2004. The 8.0% increase in cost of revenues, as
a percent of total TeamSourcing revenues, was attributable primarily to the
higher cost TeamSourcing placements partially offset by net revenues from
Skillbay web portal placements.

BPO REVENUES. The BPO segment started contributing revenues during 2004.
Revenues from this segment were $6.7 million or 3% of total revenues for the
year ended 2005 compared to $1.8 million or 1% of total revenues for the year
ended 2004. Also, as of February 1, 2005, the Company signed a joint venture
agreement with a large banking institution which helped it to ramp up its
business in the BPO segment.

BPO COST OF REVENUES. The BPO segment cost of revenues consists of costs
directly associated with billable consultants, including salaries, payroll
taxes, benefits, finder's fees, trainee compensation and travel. Cost of
revenues for the year ended 2005 decreased to 37.8% of the segment's revenues
from 53.3% for the year ended December 31, 2004. The 15.5% decrease in cost of
revenues, as a percent of total BPO revenues, was attributable primarily to
better utilization of resources.

As a result of the continued uncertainty and weakness in the global economic and
political environment, companies continue to seek to outsource their IT spending
offshore. However, the Company also sees clients' needs to reduce their costs
and the increased competitive environment among IT companies. The Company
expects these conditions to continue in the next few quarters. In response to
the continued pricing pressures and increased competition for outsourcing
clients, the Company continues to focus on expanding its service offerings into
areas with higher and sustainable price margins, managing its cost structure,
and anticipating and correcting for decreased demand and skill and pay level
imbalances in its personnel. The Company's immediate measures include increased
management of compensation expenses through headcount management and variable
compensation plans, as well as increasing utilization rates or reducing
non-deployed sub-contractors or non-billable IT professionals.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses consist primarily of salaries, payroll taxes and


                                       45

<PAGE>

benefits for sales, solutions, finance, administrative, and corporate staff, as
well as travel, telecommunications, business promotions, marketing and various
facility costs for the Company's Global Development Centers and various offices.

Selling, general, and administrative costs for the year ended December 31, 2005
were $44.9 million or 19.9% of total revenues, compared to $37.0 million or
19.8% of total revenues for the year ended December 31, 2004.

Selling, general, and administrative costs for the year ended December 31, 2005
include a one-time special performance-based incentive program for sales teams
of $0.4 million, compensation expense related to a special dividend of $1.50 per
share on restricted stock held by employees of $0.1 million and expense related
to allowance for doubtful accounts of $ 1.1 million.

After considering the impact of the above-mentioned items, the decrease in
selling, general, and administrative expenses as a percentage of revenue is
primarily due to increase in revenue during the year ended December 31, 2005 as
against the year ended December 31, 2004, which resulted in an approximately 3.4
% decrease partially offset by an increase in: compensation costs of $0.1
million in the USA and India, travel expenses of 0.7 million, depreciation of
$1.6 million and rent of $0.6 million towards the BPO offices at the
Hiranandani, Mumbai and the Pune facilities in India, consulting charges of $0.3
million, legal expenses of $0.4 million, professional charges of $0.5 million,
recruiting expenses of $0.3 million, provision for doubtful debts of $0.1
million, office expenses of $1.4 million, and telecommunication expenses of $0.3
million which resulted in an approximately 2.8 % increase.

COMPARISON OF YEARS ENDED DECEMBER 31, 2004 AND 2003.

REVENUES. Net revenues increased from $179.5 million in 2003 to $186.6 million
in 2004, representing a 3.9% increase. During the first quarter of 2004 the
Company entered into its first Business Process Outsourcing (BPO) agreement,
which contributed $1.8 million revenue for the year 2004. Further, our revenues
have increased primarily consequent to our increased workforce. Information
technology offshoring is becoming a major trend with increasing numbers of
Global Corporations aggressively outsourcing their crucial applications
development or Business Processes to vendors with an offshore presence. Syntel,
too, has benefited from this trend. At the beginning of 2004, the Company
introduced the Client Partner Program, which enabled better relationships with
key customers leading to growth in business. Worldwide billable headcount,
including personnel employed by Syntel India, Syntel Singapore, Syntel Europe,
and Syntel Germany as of December 31, 2004 increased 19% to 3,172 employees as
compared to 2,664 employees as of December 31, 2003. However, the growth in
revenues was not commensurate with the growth in the billable headcount. This is
primarily because a significant growth in the billable headcount was in India,
where our recoveries per offshore billable resource is generally lower as
compared to an on-site based resource. As of December 31, 2004, the Company had
approximately 60% of its billable workforce in India as compared to 52% as of
December 31, 2003. The Company also decreased its dependence on its larger
customers. The top five customers accounted for 40% of the total revenues in
2004, down from 42% of the total revenues in 2003. Moreover, the top ten
customers accounted for 61% of the revenues in 2004 as compared to 64% in 2003.


                                       46

<PAGE>

APPLICATIONS OUTSOURCING REVENUES. Applications Outsourcing revenues increased
from $136.4 million, or 76% of total revenues in 2003, to $143.0 million, also
76% of total revenues in 2004. The $6.6 million increase is attributable
principally to revenue from new engagements, contributing $45.9 million
partially offset by a net decrease in existing projects in the amount of $15.6
million and by $23.7 million in lost revenues as a result of project
completions.

APPLICATIONS OUTSOURCING COST OF REVENUES. Cost of revenues consists of costs
directly associated with billable consultants worldwide, including salaries,
payroll taxes, benefits, relocation costs, immigration costs, finder's fees, and
trainee compensation. Applications Outsourcing cost of revenues increased to
56.2% of Applications Outsourcing revenues in 2004, from 54.3% in 2003. The 1.9%
increase in cost of revenues as a percent of revenues was attributable primarily
to the aggressive offshore hiring during 2004, which impacted costs, but did not
necessarily add to revenues as a significant number of these hires went into
training.

E-BUSINESS REVENUES. e-Business revenues decreased from $33.8 million in 2003,
or 19% of total consolidated revenues, to $29.2 million in 2004, or 16% of total
consolidated revenues. The $4.6 million decrease was attributable principally to
lost revenues as a result of project completion and net reduction in revenues
from existing projects contributing approximately $12.2 million, partially
offset by approximately $5.9 million in revenue from new engagements and a
nonrecurring $1.7 million reduction in revenue in 2003 resulting from a regular
warrant granted to a significant customer as a sales incentive.

E-BUSINESS COST OF REVENUES. Cost of revenues consists of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finder's fees, and trainee
compensation. e-Business cost of revenues increased to 61.4% of e-business
revenues in 2004, from 57.4% in 2003, an increase of 4.0%. This increase was
attributable primarily to the aggressive hiring which impacted costs, but did
not necessarily add to revenues as a significant number of these hires were
still in training.

TEAMSOURCING REVENUES. TeamSourcing revenues increased from $9.3 million, or 5%
of total consolidated revenues in 2003, to $12.5 million, or 7% of total
consolidated revenues in 2004. The $3.2 million increase is attributable
principally to revenue from new engagements and increased revenue of $4.7
million from the SkillBay web portal partially offset by $1.5 million in lost
revenues as a result of project completion and net reduction in revenues from
exiting projects.

TEAMSOURCING COST OF REVENUES. TeamSourcing cost of revenues consists of costs
directly associated with billable consultants, including salaries, payroll
taxes, benefits, relocation costs, immigration costs, finder's fees, and trainee
compensation. TeamSourcing cost of revenues decreased to 63.2% of TeamSourcing
revenues in 2004, from 87.8% in 2003. The 24.6% decrease in cost of revenues, as
a percent of total TeamSourcing revenues was attributable primarily to the
higher margin TeamSourcing placements and net revenues from SkillBay web portal
placements during 2004.

BPO REVENUES. The BPO segment started contributing revenues during 2004.
Revenues from this segment were $1.8 million or 1% of total revenues for the
year ended 2004.

BPO COST OF REVENUES. The BPO segment cost of revenues consists of costs
directly associated with billable consultants, including salaries, payroll


                                       47

<PAGE>

taxes, benefits, finder's fees, trainee compensation, travel, consumables as
well as dedicated connectivity charges. The BPO segment cost of revenues was
53.3% of the segment's revenues for the year ended December 31, 2004.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses consist primarily of salaries, payroll taxes and
benefits for sales, solutions, finance, administrative, and corporate staff, as
well as travel, telecommunications, business promotions, marketing and various
facility costs for the Company's Global Development Centers and various offices.

Selling, general, and administrative costs for the year ended December 31, 2004
were $37.0 million or 19.8% of total revenues, compared to $28.3 million or
15.8% of total revenues for the year ended December 31, 2003.

Selling, general, and administrative costs for the year ended December 31, 2003
includes net reversals of $0.5 million primarily on account of successful
recovery of receivables previously provided for as allowance for doubtful
accounts, a $2.0 million revision of the estimated reserve for litigation and
legal fees due to settlements and other changes in estimates of underlying legal
costs, a $0.7 million reduction in office related expenses due to the settlement
of vendor disputes, and a downward revision of the 2002 estimates of bonus
compensation of $0.8 million.

After considering the impact of the above-mentioned items, the selling, general,
and administrative expenses are at 19.8% and 18.0% of total revenues, for the
years ended December 31, 2004 and 2003, respectively. The 1.8 percentage point
increase in selling, general, and administrative expenses as a percentage of
revenue is primarily due to net increases in costs related to depreciation of
$1.0 million, communication expenses of $0.9 million, compensation and hiring
related expense in US and India of $0.6 million, travel expenses of $0.4
million, marketing expenses of $0.3 million and corporate expenses of $1.5
million, which resulted in an approximately 2.6 percentage point increase,
partially offset by increases in revenue during the twelve months ended December
31, 2004 as against the twelve months ended December 31, 2003, which resulted in
an approximately 0.8 percentage point decrease.

QUARTERLY RESULTS OF OPERATIONS

     Note 19 of the consolidated financial statements appearing elsewhere in
this document sets forth certain unaudited quarterly income statement data for
each of the eight quarters beginning January 1, 2004 and ended December 31,
2005. In the opinion of management, this information has been presented on the
same basis as the Company's Financial Statements appearing elsewhere in this
document and all necessary adjustments (consisting only of normal recurring
adjustments) have been included in order to present fairly the unaudited
quarterly results. The results of operations for any quarter are not necessarily
indicative of the results for any future period.

     The Company's quarterly revenues and results of operations have not
fluctuated significantly from quarter to quarter in the past but could fluctuate
in the future. Factors that could cause such fluctuations include: the timing,
number and scope of customer engagements commenced and completed during the
quarter; fluctuation in the revenue mix by segments; progress on fixed-price
engagements; acquisitions; timing and


                                       48

<PAGE>

cost associated with expansion of the Company's facilities; changes in IT
professional wage rates; the accuracy of estimates of resources and time frames
required to complete pending assignments; the number of working days in a
quarter; employee hiring and training, attrition and utilization rates; the mix
of services performed on-site, off-site and offshore; termination of
engagements; start-up expenses for new engagements; longer sales cycles for
Applications Outsourcing engagements; customers' budget cycles and investment
time for training.

LIQUIDITY AND CAPITAL RESOURCES

     The Company generally has financed its working capital needs through
operations. Both the Mumbai and Chennai expansion programs, as well as the 1999
acquisitions of Metier, Inc. and IMG, Inc. were financed from internally
generated funds. Additionally, construction of the Technology Campus in Pune,
India is being financed through internally generated funds.

     The Company's cash and cash equivalents consist primarily of certificates
of deposit, corporate bonds and treasury notes. A part of such amounts are held
by JP Morgan Chase Bank NA for which a triple A rated letter of credit has been
provided. Remaining amounts are held by various banking institutions including
India-based banks.

     Net cash provided by operating activities was $36.4 million, $48.5 million
and $44.1 million for the years ended December 31, 2005, 2004 and 2003,
respectively. The number of days sales outstanding in accounts receivable was
approximately 52 days, 61 days and 60 days as of December 31, 2005, 2004 and
2003, respectively.

     Net cash provided by investing activities was $21.6 million for the year
ended December 31, 2005. During 2005, the Company invested $27.9 million to
purchase short-term investments and $16.4 million for capital expenditures,
consisting principally of PCs, communications equipment and infrastructure and
facilities. This was partially offset by proceeds from sale of or maturities of
short-term investments of $65.9 million.

     Net cash used in investing activities was $33.1 million for the year ended
December 31, 2004. During 2004, the Company invested $94.3 million to purchase
short-term investments and $12.0 million for capital expenditures, consisting
principally of PCs, communications equipment and infrastructure and facilities.
This was partially offset by proceeds from sale or maturities of short-term
investments of $73.2 million.

     Net cash used in investing activities was $20.2 million for the year ended
December 31, 2003. During 2003, the Company invested $52.3 million to purchase
short-term investments and $4.2 million for capital expenditures, consisting
principally of PCs, communications equipment and infrastructure and facilities.
This was partially offset by proceeds from sale or maturities of short-term
investments of $36.3 million.

     Net cash used in financing activities in 2005 was $68.1 million, due
principally to the dividend distribution of $70.9 million and the repurchase of
35,000 shares of Common Stock for $0.7 million, partially offset by proceeds
from the issuance of shares under stock option and stock purchase plans of $3.4
million

     Net cash used in financing activities in 2004 was $8.0 million, due
principally to the dividend distribution of $9.7 million and the repurchase of
100,000 shares of Common Stock for $1.4 million, partially offset by proceeds
from the issuance of shares under stock option and stock purchase plans of $3.1
million.


                                       49

<PAGE>


     Net cash used in financing activities in 2003 was $45.9 million, due
principally to the dividend distribution of $52.3 million and the repurchase of
10,000 shares of Common Stock for $0.1 million, partially offset by proceeds
from the issuance of shares under stock option and stock purchase plans of $6.5
million.

     The Company has a line of credit with JP Morgan Chase Bank NA, which
provides for borrowings up to $15.0 million ($20.0 million at December 31,
2004). The line of credit has been renewed and amended and now expires on August
31, 2006. The line of credit has a sub-limit of $5.0 million for letters of
credit, which bear a fee of 1% per annum of the face value of each standby
letter of credit issued. Borrowing under the line of credit bears interest at
(i) a formula approximating the Eurodollar rate plus the applicable margin of
1.25%, (ii) the bank's prime rate minus 1.0% or (iii) negotiated rate plus
1.25%. There were no outstanding borrowings at December 31, 2005 and 2004.

     The Company believes that the combination of present cash balances and
future operating cash flows will be sufficient to meet the Company's currently
anticipated cash requirements for at least the next 12 months.

     The following table sets forth the Company's known contractual obligations
as of December 31, 2005:

                                                                        ($ '000)

<TABLE>
<CAPTION>
                                              PAYMENTS DUE BY PERIOD
                              ------------------------------------------------------
                                       LESS THAN                           MORE THAN
CONTRACTUAL OBLIGATION         TOTAL     1 YEAR    1-3 YEARS   3-5 YEARS    5 YEARS
----------------------        ------   ---------   ---------   ---------   ---------
<S>                           <C>      <C>         <C>         <C>         <C>
Long-Term Debt                    --        --          --          --         --
Capital Lease Obligations         --        --          --          --         --
Operating Leases               9,988     2,667       4,034       3,174        113
Purchase Obligations           2,886     2,886          --          --         --
Other Long-Term Liabilities
Reflected on the
Registrant's Balance Sheet
under GAAP                        --        --          --          --         --
                              ------     -----       -----       -----        ---
Total                         12,874     5,553       4,034       3,174        113
                              ======     =====       =====       =====        ===
</TABLE>

Certain agreements for lease and purchase obligations included above are
cancelable with a specified notice period or penalty, however all contracts are
reflected in the table above as if they will be performed for the full term of
the agreement.

INCOME TAX MATTERS

Syntel's software development centers/units are located in Mumbai, Chennai and
Pune. Units in Mumbai are located in a Special Economic Zone (SEZ), the unit at
Chennai is 100% Export Oriented Unit (EOU) and units at Pune are registered with
Software Technologies Park of India (STPI). Under the Indian Income Tax Act,
1961 (the "Act"), 100% EOUs at Chennai, units registered with STPI at Pune and
certain units located in SEZ are eligible for an exemption from payment of
corporate income taxes for up to 10 years of operations on the profits generated
from these undertakings or March 31, 2009, whichever is earlier. Certain units
located in SEZ are eligible


                                       50

<PAGE>

for 100% exemption from payment of corporate taxes for the first 5 years of
operation and a 50% exemption for the next 5 years.

     Effective April 1, 2003 one of the Company's Software Development Units has
ceased to enjoy the above-mentioned tax exemption. Another development unit
ceased to enjoy the tax exemption on April 1, 2005. Provision for Indian Income
Tax is made only in respect of business profits generated from these software
development units, to the extent they are not covered by the above exemptions
and on income from investments and interest income.

     The benefit of tax Holiday granted by the Indian authorities was $11
million, $7.6 million and $9.1 million for the years 2005, 2004 and 2003,
respectively.

     The American Jobs Creation Act of 2004 provided a special one-time
favorable effective federal tax rate for U.S.-based organizations. The Company
repatriated cash dividends of $61.0 million during 2005 out of the retained
earnings of its controlled foreign subsidiary, Syntel Limited, to the U.S. in
accordance with the Act. The Company recorded a tax charge of approximately
$12.3 million, including U.S. Federal and state taxes and the Indian dividend
distribution tax under the Indian Income Tax laws, during the fourth quarter of
2005. Proceeds from these extra ordinary dividends are required to be invested
in the United States for specific purposes permitted under Act pursuant to an
approved written domestic reinvestment plan. As of December 31, 2005, the
Company has invested approximately $42.5 million towards permitted investments
under the Act against this extra ordinary dividend pursuant to an approved
Domestic reinvestment plan.

     The Company intends to use remaining accumulated and future earnings of
foreign subsidiaries to expand operations outside the United States and
accordingly undistributed earnings of foreign subsidiaries are considered to be
indefinitely reinvested outside the United States and no provision for U. S.
federal and state income tax or applicable dividend distribution tax has been
provided thereon. If the company determines to repatriate all undistributed
repatriable earnings of foreign subsidiaries as of December 31, 2005, the
company would have accrued taxes of approximately $34.1 million.

     The Company records provisions for income taxes based on enacted tax laws
and rates in the various taxing jurisdictions in which it operates. In
determining the tax provisions, the Company also provides for tax contingencies
based on the Company's assessment of future regulatory reviews of filed tax
returns. Such reserves, which are recorded in income taxes payable, are based on
management's estimates and accordingly are subject to revision based on
additional information. The provision no longer required for any particular tax
year, is credited to the current period's income tax expenses. Conversely, in
the event of a future tax examination, if the Company does not prevail on
certain tax positions taken in filed returns, the tax expense related thereto
will be recognized in the period in which examiners position is determined to be
final.

     During the year ended December 31, 2005, 2004 and 2003, the effective
income tax rate was 40.2%, 11.4% and 24.7%, respectively. The tax rate for the
year ended December 31, 2005 is impacted by reversal of tax reserve of $2.6
million, provision for valuation allowance of $1.7 million and the tax related
to the repatriation of $12.3 million. Without the above,  the effective tax rate
for the year ended December 31, 2005 would have been 17.8%. During year ended
December 31, 2004 the tax rate was impacted by


                                       51

<PAGE>

reversal of tax reserve of $1.7 million, tax credit of $0.5 million in Syntel
India and the research and development tax credit of $0.5 million in Syntel Inc.
Without the above, the effective income tax rate during the year ended December
31, 2004 would have been 17.3%. During year ended December 31, 2003, the tax
rate was impacted by provision of tax reserve of $3.1 million. Without the
above, the effective income tax rate during the year ended December 31, 2003
would have been 19%. The tax rate continues to be positively impacted by the
combined effects of offshore transition and reduced onsite profitability.

     Syntel India has not provided for disputed Indian income tax liabilities
amounting to $2.51 million for the financial years 1995-96 to 2001-02. Syntel
India has obtained an opinion from one independent legal counsel (a former Chief
Justice of the Supreme Court of India) for the financial year 1998-99 and
opinions from another independent legal counsel (also a former Chief Justice of
the Supreme Court of India) for the financial years 1995-96, 1996-97, 1997-98,
1999-2000 and 2000-01 and for subsequent periods to date, which support Syntel
India's position in this matter.

     Syntel India had filed an appeal with the Commissioner of Income Tax
(Appeals) for the financial year 1998-99 and received a favorable decision. A
similar appeal filed by Syntel India with the Commissioner of Income Tax
(Appeals) for the financial year 1999-2000 was however dismissed in March 2004.
Syntel India has appealed this decision with the Income Tax Appellate Tribunal.
Syntel India has since also received orders for appeals filed with the
Commissioner of Income Tax (Appeals) against the demands raised in March 2004 by
the Income Tax Officer for similar matters relating to the financial years
1995-96, 1996-97, 1997-98 and 2000-01 and received a favorable decision for
1995-96 and the contention of Syntel India was partially upheld for the other
three years. Syntel India has gone into further appeal with the Income Tax
Appellate Tribunal for the amounts not allowed by the Commissioner of Income Tax
(Appeals). The Income Tax Department has appealed the favorable decisions for
1995-96 and 1998-99 and the partially favorable decisions for the other years
with the Income Tax Appellate Tribunal.

     Syntel India has also not provided for other disputed Indian income tax
liabilities aggregating to $4.40 million against which Syntel India has filed or
is in the process of filing appeals with the Commissioner of Income Tax
(Appeals). Syntel India has obtained opinions from independent legal counsels,
which support Syntel India's position in this matter.

     Further, Syntel India has not provided for disputed income tax liabilities
aggregating to $0.10 million, for which Syntel India has filed or is in the
process of filing appeals or petitions.

     All the above tax exposures involve complex issues and may need an extended
period to resolve the issues with the Indian income tax authorities. Management,
after consultation with legal counsel, believes that the resolution of the above
matters will not have a material adverse effect on the Company's financial
position.

TAX CREDIT

     During the year ended December 31, 2004, the provision for income tax was
reduced by research and development tax credits claimed. The tax credits relate
to increased qualified expenditures for software development. The Company
completed a review of such qualified expenditures and filed refund claims for
the tax years ended December 31, 1999, 2000,


                                       52

<PAGE>

2001 and 2002. The appropriate tax benefit for these years has been recorded
currently in conjunction with the completion of the review. This tax credit had
a positive impact of $0.5 million on taxes.

     In addition, during the year ended December 31, 2004, Syntel India has
accounted for a credit of approximately $0.5 million in respect of US branch
profit taxes related to prior periods up to June 30, 2004 and also reclassified
in the balance sheet $1.0 million from Income taxes payable to deferred tax
liability.

RECENT ACCOUNTING PRONOUNCEMENTS

     During December 2004, the Financial Accounting Standards Board issued SFAS
No. 123R, "Share-Based Payment" (SFAS 123R),which requires companies to measure
and recognize compensation expense for all stock-based payments at fair value.
Stock-based payments include stock option grants and other transactions under
Company stock plans. The Company grants options to purchase common stock to some
of its employees and directors under various plans at prices equal to the market
value of the stock on the dates the options were granted. The Company is
required to adopt SFAS 123R by the first quarter of fiscal 2006. The Company
will use the modified prospective application transition method and estimates
that the adoption of SFAS No. 123R for share-based awards issued to employees
will not have a significant impact on its statement of consolidated income or
financial position for 2006. This estimate is based upon various assumptions,
including an estimate of the number of share-based awards that will be granted,
cancelled or expired during 2006, as well as the Company's future stock prices.
These assumptions are highly subjective and changes in these assumptions could
significantly affect the Company's estimate.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS No. 154"), which replaces APB Opinion No. 120, "Accounting
Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements." SFAS No. 154 changes the requirements for accounting and reporting
a change in accounting principle, and applies to all voluntary changes in
accounting principles, as well as changes required by an accounting
pronouncement in the unusual instance it does not include specific transition
provisions. Specifically, SFAS No. 154 requires retrospective application to
prior periods' financial statements, unless it is impracticable to determine the
period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the effects of the change, the new accounting
principle must be applied to the balances of assets and liabilities as of the
beginning of the earliest period for which retrospective application is
practicable and a corresponding adjustment must be made to the opening balance
of retained earnings for that period rather than being reported in an income
statement. When it is impracticable to determine the cumulative effect of the
change, the new principle must be applied as if it were adopted prospectively
from the earliest date practicable. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. SFAS No. 154 does not change the transition provisions of any existing
pronouncements. The Company has evaluated the impact of SFAS No. 154 and does
not expect the adoption of this statement to have a significant impact on its
consolidated statement of income or financial condition. The Company will apply
SFAS No. 154 in future periods, when applicable.


                                       53

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to the impact of interest rate changes and foreign
currency fluctuations.

INTEREST RATE RISK

     The Company considers investments purchased with an original or remaining
maturity of less than three months at date of purchase to be cash equivalents.
The following table summarizes our cash and cash equivalents and investments in
marketable securities (in thousands):

<TABLE>
<CAPTION>
                            DECEMBER 31,   DECEMBER 31,
          ASSETS                2005           2004
          ------            ------------   ------------
<S>                         <C>            <C>
Cash and cash equivalents     $ 99,390       $109,142
Short term Investments          21,083         58,899
                              --------       --------
Total                         $120,473       $168,041
                              ========       ========
</TABLE>

     The Company's exposure to market rate risk for changes in interest rates
relates primarily to our investment portfolio. The Company does not use
derivative financial instruments in its investment portfolio. The Company's
investments are in high-quality Indian Mutual Funds and, by policy, limit the
amount of credit exposure to any one issuer. At any time, changes in interest
rates could have a material impact on interest earnings for our investment
portfolio. The Company protects and preserves our invested funds by limiting
default, market and reinvestment risk. Investments in interest earning
instruments carry a degree of interest rate risk. Floating rate securities may
produce less income than expected if there is a decline in interest rates. Due
in part to these factors, the Company's future investment income may fall short
of expectations, or the Company may suffer a loss in principal if the Company is
forced to sell securities, which have declined in market value due to changes in
interest rates as stated above.


                                       54

<PAGE>

FOREIGN CURRENCY RISK

The Company's sales are primarily sourced in the United States and its
subsidiary in the United Kingdom and are mostly denominated in U.S. dollars or
UK pounds, respectively. Its foreign subsidiaries incur most of their expenses
in the local currency. Accordingly, all foreign subsidiaries use the local
currency as their functional currency. The Company's business is subject to
risks typical of an international business, including, but not limited to
differing economic conditions, changes in political climate, differing tax
structures, other regulations and restrictions, and foreign exchange rate
volatility. Accordingly, the Company's future results could be materially
adversely impacted by changes in these or other factors. The risk is partially
mitigated as the Company has sufficient resources in the respective local
currencies to meet immediate requirements. The Company is also exposed to
foreign exchange rate fluctuations as the financial results of foreign
subsidiaries are translated into U.S. dollars in consolidation. As exchange
rates vary, these results, when translated, may vary from expectations.

     During 2005, the Indian rupee has depreciated by 1.7% as compared to 2004,
which has marginally increased the Company's gross margin by 0.08%. For the year
ended December 31, 2005, the Indian rupee denominated cost of revenues and
selling, general and administrative cost were 30% and 30%, respectively, which
did not have a significant impact.

     Although the Company cannot predict future movement in interest rates or
fluctuations in foreign currency rates, the Company does not currently
anticipate that interest rate risk or foreign currency risk will have a
significant impact.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements filed herewith are set forth on the Index to
Financial Statements on page F-1 of the separate financial section which follows
page 63 of this Report and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their evaluation of
the Company's disclosure controls and procedures as of the end of the period
covered by this Report as well as mirror certifications from senior Management,
the Company's Chairman, President and Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and are operating in an effective manner. There
have been no changes in the Company's internal controls over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) during the last quarter
that materially affected, or are reasonably likely to materially affect, the


                                       55

<PAGE>

Company's internal control over financial reporting.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS. Disclosure Controls are procedures
designed to ensure that information required to be disclosed in our reports
filed under the Exchange Act, such as this Report, is recorded, processed,
summarized and reported within the time periods specified in the U.S. Securities
and Exchange Commission's (the SEC) rules and forms. Disclosure Controls are
also designed to ensure that such information is accumulated and communicated to
our management, including the CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure. Internal Controls are procedures
designed to provide reasonable assurance that (1) our transactions are properly
authorized; (2) our assets are safeguarded against unauthorized or improper use;
and (3) our transactions are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with generally accepted
accounting principles.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS. The Company's management,
including the CEO and CFO, does not expect that our Disclosure Controls or our
Internal Controls will prevent all error and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system's objectives will be met. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the company have been detected. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. The design of
any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with its policies or procedures.

SCOPE OF THE CONTROLS EVALUATION. In the course of the Controls Evaluation, we
sought to identify data errors, control problems or acts of fraud and confirm
that appropriate corrective actions, including process improvements, were being
undertaken. Our Internal Controls are also evaluated on an ongoing basis by our
Internal Audit Department and by other personnel in our organization. The
overall goals of these various evaluation activities are to monitor our
Disclosure Controls and our Internal Controls, and to modify them as necessary;
our intent is to maintain the Disclosure Controls and the Internal Controls as
dynamic systems that change as conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were
any "significant deficiencies" or "material weaknesses" in the company's
Internal Controls, and whether the company had identified any acts of fraud
involving personnel with a significant role in the company's Internal Controls.
This information was important both for the Controls Evaluation generally, and
because the Rule 13a-14 Certifications of the CEO and CFO require that the CEO
and CFO disclose that information to our Board's Audit Committee and our
independent auditors. We also sought to deal with other controls matters in the
Controls Evaluation, and in each case if a problem was identified, we considered
what revision, improvement and/or correction to make in accordance with our
ongoing procedures.

CONCLUSIONS. Based upon the Controls Evaluation, our CEO and CFO have concluded
that as of December 31, 2005, our disclosure controls and procedures are
effective to ensure that material information relating to Syntel and its
consolidated subsidiaries is made known to management,


                                       56

<PAGE>

including the CEO and CFO, particularly during the period when our periodic
reports are being prepared, and that our Internal Controls are effective to
provide reasonable assurance that our financial statements are fairly presented
in conformity with generally accepted accounting principles.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f). Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on our evaluation under the framework in Internal Control - Integrated
Framework, our management concluded that our internal control over financial
reporting was effective as of December 31, 2005 and meets the criteria of the
Internal Control-Integrated Framework.

Crowe Chizek and Company LLC, an independent registered public accounting firm,
has audited the consolidated financial statements of Syntel, Inc. and its
subsidiaries as of December 31, 2005 and for the year then ended included in
this Annual Report on Form 10-K and, as part of its audit, has issued its
report, included herein, (1) on our management's assessment of the effectiveness
of our internal controls over financial reporting and (2) on the effectiveness
of our internal control over financial reporting.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. From the date of the
Controls Evaluation to the date of this Report, there have been no significant
changes in Internal Controls or in other factors that could significantly affect
Internal Controls.

ITEM 9B. OTHER INFORMATION

None


                                       57

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information set forth in the sections entitled "Proposal 1. Election of
Directors" and "Additional information - Compliance with Section 16 (a) of The
Exchange Act" in the Registrant's Proxy Statement for the Annual Shareholders'
Meeting to be held on or about June 1, 2006 (the "Proxy Statement") is
incorporated herein by reference. The information set forth in the section
entitled "Executive Officers of the Registrant" in Item 1 of this report is
incorporated herein by reference.

     The Company has adopted a Code of Ethical Conduct applicable to all of the
Company's employees, executive officers and directors. The Code of Ethical
Conduct, as currently in effect (together with any amendments that may be
adopted from time to time), is posted in the "Investors - Corporate Governance"
section of the Company's website at www.syntelinc.com. Amendments to, and any
waiver from, any provision of the Code of Ethical Conduct that requires
disclosure under applicable SEC rules will be posted on the website at the
address specified above.

ITEM 11. EXECUTIVE COMPENSATION

     The information set forth under the sections entitled "Executive
Compensation" and "Proposal 1. Election of Directors - Compensation of
Directors" in the Registrant's Proxy Statement is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     The information set forth under the captions "Equity Compensation Plan
Information" in Item 5 of this report is incorporated herein by reference. The
information set forth under the captions "Principal Shareholders" and "Security
Ownership of Management" in the section entitled "Additional Information" in the
Registrant's Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


                                       58

<PAGE>

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Crowe Chizek and Company LLC served as the Company's independent auditors for
the financial statements prepared for the years ended December 31, 2005 and
2004, and for the quarter ended September 30, 2004. Ernst & Young LLP served as
the Company's independent auditors for the year ended December 31, 2003, for all
quarters in 2003 and for the quarters ended March 31, 2004 and June 30, 2004.
The following table lists the aggregate fees for professional services rendered
by Crowe Chizek and Company LLC and Ernst & Young LLP for all "Audit Fees,"
"Audit-Related Fees," "Tax Fees," and "All Other Fees" which pertain to the last
two years.

<TABLE>
<CAPTION>
                            FISCAL YEAR ENDED
                       ---------------------------
                       DECEMBER 31,   DECEMBER 31,
                           2005           2004
                       ------------   ------------
<S>                    <C>            <C>
Audit Fees               $306,250       $342,100
Audit - Related Fees     $  8,500       $  7,500
Tax Fees                 $  7,500       $ 64,667
All Other Fees           $ 23,245       $ 14,085
</TABLE>

     Audit Fees represent fees for professional services rendered for the audit
of the consolidated financial statements of the Company and assistance with
review of documents filed with the SEC and the audit of management's assessment
of the effectiveness of internal control over financial reporting. Audit-Related
Fees represent professional fees in connection with the statutory audit services
relative to Syntel India and Syntel Germany and the 401K plan for Syntel Inc.
Tax Fees represent fees for the services related to tax compliance, tax advice
and tax planning. All Other Fees represent consultation on matters related to
transfer pricing, dividend and other advisory services.

AUDIT COMMITTEE AUTHORIZATION OF AUDIT AND NON-AUDIT SERVICES

     The Audit Committee has the sole authority to authorize all audit and
non-audit services to be provided by the independent audit firm engaged to
conduct the annual statutory audit of the Company's consolidated financial
statements. In addition, the Audit Committee has adopted pre-approval policies
and procedures that are detailed as to each particular service to be provided by
the independent auditors, and such policies and procedures do not permit the
Audit Committee to delegate its responsibilities under the Securities Exchange
Act of 1934, as amended, to management. The Audit Committee pre-approved fees
for all audit and non-audit services provided by the independent audit firm
during the fiscal year ended December 31, 2005 as required by the Sarbanes-Oxley
Act of 2002.

     The Audit Committee has considered whether the provision of the non-audit
services is compatible with maintaining the independent auditor's independence,
and has advised the Company that, in its opinion, the activities performed by
Crowe Chizek and Company LLC on the Company's behalf are compatible with
maintaining the independence of such auditors.


                                       59

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a)(1) The financial statements and supplementary financial information
filed herewith are set forth on the Index to Financial Statements on page F-1 of
the separate financial section which follows page 63 of this Report, which is
incorporated herein by reference.

     (a)(2) The consolidated financial statement schedules of the Company and
its subsidiaries have been omitted because they are not required, are not
applicable, or are adequately explained in the financial statements included in
Part II, Item 8 of this report.

     (a)(3) The following exhibits are filed as part of this Report. Those
exhibits with an asterisk(*) designate the Registrant's management contracts or
compensation plans or arrangements for its executive officers.

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                   DESCRIPTION
-------                                 -----------
<S>       <C>
3.1       Amended and Restated Articles of Incorporation of the Registrant filed
          as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
          the quarterly period ended June 30, 2005, and incorporated herein by
          reference.

3.2       Bylaws of the Registrant filed as an Exhibit to the Registrant's
          Quarterly Report on Form 10-Q for the quarterly period ended March 31,
          2005, and incorporated herein by reference.

10.1      Line of Credit Agreement, dated August 31, 2002, between the
          Registrant and Bank One, Michigan filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2002, and incorporated herein by reference.

10.2      Lease, dated October 24, 2001, between Big Beaver / Kilmer Associates
          L.L.C. and the Registrant filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2002, and
          incorporated herein by reference.

10.3      Indentures of Lease entered into between the President of India and
          Syntel Limited (formerly known as Syntel Software Pvt. Ltd.) on
          various dates in 1992 and 1993 for the Mumbai Global Development
          Center and filed as an Exhibit to the Registrant's Registration
          Statement on Form S-1 dated June 6, 1997, and incorporated herein by
          reference.

10.4      Rental Agreement, dated February 24, 1997, between Syntel Limited
          (formerly known as Syntel Software Pvt. Ltd.) and the Landlords for
          the Chennai Global Development Center, filed as an Exhibit to the
          Registrant's Registration Statement on Form S-1 dated
</TABLE>


                                       60
<PAGE>

<TABLE>
<S>       <C>
          June 6, 1997, and incorporated herein by reference.

10.5*     1997 Stock Option and Incentive Plan, (Amended and Restated) filed as
          an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the
          quarterly period ended September 30, 2005 and incorporated herein by
          reference.

10.6*     Employee Stock Purchase Plan, filed as an Exhibit to the Registrant's
          Registration Statement on Form S-1 dated June 6, 1997, and
          incorporated herein by reference.

10.7*     Form of Stock Option Agreement, filed as an Exhibit to the
          Registrant's Current Report on Form 8-K dated June 2, 2005, and
          incorporated herein by reference.

10.8*     Incentive Restricted Stock Grant Agreement (Amended and Restated),
          filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q
          for the quarterly period ended September 30, 2005, and incorporated
          herein by reference.

10.9*     Restricted Stock Grant Agreement for Non-Employee Directors.

10.10     Amendment to Credit Agreement dated August 25, 2003, between the
          Registrant and Bank One, NA filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2003, and
          incorporated herein by reference.

10.11     Amendment to Credit Agreement dated August 19, 2004, between the
          Registrant and Bank One, NA filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2004, and
          incorporated herein by reference.

10.12     Amendment to Credit Agreement dated August 23, 2005, between the
          Registrant and JPMorgan Chase Bank, N.A., successor in interest to
          Bank One, NA.

10.13     Leave and License Agreement, dated June 11, 2004, between Lake View
          Developers and Syntel Sourcing Pvt. Ltd. filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.

10.14     Lease Deed, dated September 23, 2004 between Arihant Foundation and
          Housing Ltd. and Syntel Limited filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.

10.15     Lease Deed, dated October 6, 2004, between Arihant Foundation and
          Housing Ltd. and Syntel Limited filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.
</TABLE>


                                       61

<PAGE>

<TABLE>
<S>       <C>
14        Code of Ethical Conduct filed as an Exhibit to the Registrant's Annual
          Report on Form 10-K for the year ended December 31, 2004, and
          incorporated herein by reference.

21        Subsidiaries of the Registrant.

23        Consent of Independent Registered Public Accounting firm.

31.1      Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2      Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32        Section 1350 Certification of Chief Executive Officer and Chief
          Financial Officer
</TABLE>


                                       62

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                        SYNTEL, INC.


                                        By: /S/ Bharat Desai
                                            ------------------------------------
                                            Bharat Desai, Chairman,
                                            President and Chief Executive
Dated: March 14, 2006                       Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
          Signature                        Title                   Date
          ---------                        -----                   ----


<S>                            <C>                             <C>
/S/ Bharat Desai               Chairman, President and Chief   March 14, 2006
----------------------------   Executive Officer
Bharat Desai                   (Principal Executive Officer)


/S/ Revathy Ashok              Chief Financial Officer         March 14, 2006
----------------------------   (Principal Financial and
Revathy Ashok                  Accounting Officer)


/S/ Neerja Sethi               Director and Vice President,    March 14, 2006
------------------             Corporate Affairs
Neerja Sethi


/S/ Paritosh K. Choksi         Director                        March 14, 2006
----------------------
Paritosh K. Choksi


/S/ George R. Mrkonic          Director                        March 14, 2006
---------------------
George R. Mrkonic


/S/ Vasant Raval               Director                        March 14, 2006
----------------
Vasant Raval
</TABLE>


                                       63

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE(S)
                                                                         -------
<S>                                                                      <C>
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm as of December
31, 2005 and 2004 and the years then ended ...........................       65
Report of Independent Registered Public Accounting Firm on Internal
Control over Financial Reporting as of December 31, 2005 .............       66
Report of Independent Registered Public Accounting Firm for the year
ended December 31, 2003 ..............................................       68

CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets ..........................................       69
Consolidated Statements of Income ....................................       70
Consolidated Statements of Shareholders' Equity ......................       71
Consolidated Statements of Cash Flows ................................       72
Notes to Consolidated Financial Statements ...........................    73-98
</TABLE>


                                       64

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Syntel, Inc.
Troy, Michigan

We have audited the accompanying consolidated balance sheets of Syntel, Inc. and
its subsidiaries as of December 31, 2005 and 2004 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the two
years in the period ended December 31, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Syntel, Inc. and its
subsidiaries as of December 31, 2005 and 2004, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2005 in conformity with United States generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Syntel, Inc.'s
internal control over financial reporting as of December 31, 2005, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 8, 2006 expressed an unqualified opinion thereon.


Fort Wayne, Indiana                     /s/ Crowe Chizek and Company LLC
March 8, 2006


                                       65


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Syntel, Inc.
Troy, Michigan

We have audited management's assessment, included within item 9A as Management's
Report on Internal Control Over Financial Reporting, that Syntel, Inc.
maintained effective internal control over financial reporting as of December
31, 2005, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Syntel, Inc's. management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the company's internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Syntel, Inc. maintained effective
internal control over financial reporting as of December 31, 2005, is fairly
stated, in all material respects, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Also in our opinion, Syntel,


                                       66

<PAGE>

Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2005, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Syntel, Inc. as of December 31, 2005 and 2004, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the two
years in the period ended December 31, 2005, and our report dated March 8,
2006 expressed an unqualified opinion on those consolidated financial
statements.


Fort Wayne, Indiana                     /s/ Crowe Chizek and Company LLC
March 8, 2006


                                       67

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of
Syntel, Inc.

We have audited the accompanying consolidated statements of income,
shareholders' equity and cash flows of Syntel, Inc. and Subsidiaries (the
"Company") for the year ended December 31, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, Syntel,Inc.'s consolidated results of operations and
cash flows for the year ended December 31, 2003 in conformity with U.S.
generally accepted accounting principles.


Detroit, Michigan                       /s/ Ernst & Young LLP
February 20, 2004


                                       68

<PAGE>

SYNTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                             DECEMBER 31,   DECEMBER 31,
                                                                 2005           2004
                                                             ------------   ------------
<S>                                                          <C>            <C>
ASSETS

Current assets:

   Cash and cash equivalents                                   $ 99,390       $109,142
   Short term investments                                        21,083         58,899
   Accounts receivable, net of allowance for doubtful
      accounts of $2,575 and $1,213 at December 31, 2005
      and December 31, 2004, respectively                        27,907         28,790
   Revenue earned in excess of billings                           8,366          4,390
   Deferred income taxes and other current assets                10,003          5,891
                                                               --------       --------
      Total current assets                                      166,749        207,112

Property and equipment                                           54,690         37,754
   Less accumulated depreciation and amortization                25,504         21,290
                                                               --------       --------
      Property and equipment, net                                29,186         16,464
Goodwill                                                            906            906
Deferred income taxes and other non current assets                1,320          2,486
                                                               --------       --------
   TOTAL  ASSETS                                               $198,161       $226,968
                                                               ========       ========
   LIABILITIES AND SHAREHOLDERS' EQUITY

   LIABILITIES

Current liabilities:
   Accounts payable                                            $  6,890       $  2,394
   Accrued payroll and related costs                             15,906         13,963
   Income taxes payable                                           9,809          6,290
   Accrued liabilities                                            7,446          6,015
   Deferred revenue                                               3,356          5,231
   Dividends payable                                              2,476          2,433
                                                               --------       --------
      Total current liabilities                                  45,883         36,326

   SHAREHOLDERS' EQUITY
   Common Stock, no par value per share, 100,000,000
      shares authorized; 40,679,481 and 40,256,825
      shares issued and outstanding at December 31, 2005
      and December 31, 2004, respectively                             1              1
   Additional paid-in capital                                    60,460         57,185
      Restricted stock 268,630 and 296,900 shares issued and
         outstanding at December 31, 2005 and December 31,
         2004, respectively                                       1,942            828
   Accumulated other comprehensive income                           853          3,466
   Retained earnings                                             89,022        129,162
                                                               --------       --------
      Total shareholders' equity                                152,278        190,642
                                                               --------       --------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  $198,161       $226,968
                                                               ========       ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       69

<PAGE>

SYNTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                   2005       2004       2003
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
Net revenues                                     $226,189   $186,573   $179,507
Cost of revenues                                  135,043    107,120    101,699
                                                 --------   --------   --------
   Gross profit                                    91,146     79,453     77,808

Selling, general and administrative expenses       44,917     36,999     28,278
Reduction in reserve requirements applicable
   to Metier transaction                               --         --       (882)
                                                 --------   --------   --------
   Income from operations                          46,229     42,454     50,412
Other income, principally interest                  4,592      3,773      3,168
                                                 --------   --------   --------
   Income before income taxes                      50,821     46,227     53,580
Provision for income taxes                         20,500      5,253     13,242
                                                 --------   --------   --------
   Income before loss from equity investments      30,321     40,974     40,338

Loss from equity investment                            --         --         34
                                                 --------   --------   --------
   Net income                                    $ 30,321   $ 40,974   $ 40,304
                                                 ========   ========   ========
DIVIDENDS PER SHARE                              $   1.74   $   0.24   $   1.37

EARNINGS PER SHARE:
   Basic                                         $   0.75   $   1.02   $   1.02
   Diluted                                       $   0.75   $   1.01   $   0.99

   Weighted average common shares outstanding:
   Basic                                           40,528     40,216     39,609
   Diluted                                         40,651     40,469     40,797
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       70

<PAGE>

SYNTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                 ACCUMULATED
                                                                                             OTHER COMPREHENSIVE
                                                                                                INCOME (LOSS)
                                                                                          ------------------------
                               COMMON STOCK    RESTRICTED STOCK   ADDITIONAL                             FOREIGN         TOTAL
                             ---------------   ----------------     PAID-IN    RETAINED   UNREALIZED     CURRENCY    SHAREHOLDERS'
                             SHARES   AMOUNT   SHARES    AMOUNT     CAPITAL    EARNINGS      GAIN      TRANSLATION      EQUITY
                             ------   ------   ------    ------   ----------   --------   ----------   -----------   -------------
<S>                          <C>      <C>      <C>       <C>      <C>          <C>        <C>          <C>           <C>
BALANCE, JANUARY 1, 2003     39,068     $1       --     $    --    $43,184     $112,175     $ 677        $(1,193)      $154,844
Net income                                                                       40,304                                  40,304
Unrealized gain on
   investments, net of tax                                                                    136                           136
Translation adjustments                                                                                    1,899          1,899
                                                                               --------     -----        -------       --------
Total comprehensive income                                                       40,304       136          1,899         42,339
                                                                               --------     -----        -------       --------
Common stock repurchases        (10)                                  (160)                                                (160)
Employee stock purchase
   plan                          61                                    696                                                  696
Exercised stock options         687                                  5,842                                                5,842
Tax benefit on stock
   options exercised                                                 2,699                                                2,699
Warrants issued as sales
   incentive converted
   into common stock            210                                  1,777                                                1,777
Dividends, $1.37 per share                                                      (54,661)                                (54,661)
Other                                                                                30                                      30
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
BALANCE, DECEMBER 31, 2003   40,016      1       --          --     54,038       97,848       813            706        153,406
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
Net income                                                                       40,974                                  40,974
Unrealized  (loss) on
   investments, net of tax                                                                   (267)                         (267)
Translation adjustments                                                                                    2,214          2,214
                                                                               --------     -----        -------       --------
Total comprehensive income                                                       40,974      (267)         2,214         42,921
                                                                               --------     -----        -------       --------
Common stock repurchases       (100)                                (1,479)                                              (1,479)
Employee stock purchase
   plan                          73                                  1,021                                                1,021
Exercised stock options         265                                  2,118                                                2,118
Tax benefit on stock
   options exercised                                                 1,410                                                1,410
Restricted Stock                                319       5,838                                                           5,838
Forfeiture of restricted
   stock                                        (22)       (410)                                                           (410)
Unearned compensation
   related to restricted
   stock                                                 (4,600)                                                         (4,600)
Warrants issued as sales
   incentive converted
   into common stock              3                                     77                                                   77
Dividends, $0.24 per share                                                       (9,660)                                 (9,660)
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
BALANCE, DECEMBER 31, 2004   40,257      1      297         828     57,185      129,162       546          2,920        190,642
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
Net income                                                                       30,321                                  30,321
Unrealized gain  on
   investments, net of tax                                                                    (70)                          (70)
Translation adjustments                                                                                   (2,543)        (2,543)
                                                                               --------     -----        -------       --------
Total comprehensive income                                                       30,321       (70)        (2,543)        27,708
                                                                               --------     -----        -------       --------
Common stock repurchases        (35)                                  (676)                                                (676)
Employee stock purchase
   plan                          63                                    945                                                  945
Exercised stock options         362                                  2,472                                                2,472
Tax benefit on stock
   options exercised                                                   534                                                  534
Restricted Stock                 32              55         891                                                             891
Forfeiture of restricted
   stock                                        (84)     (1,208)                                                         (1,208)
Unearned compensation
   related to restricted
   stock                                                  1,431                                                           1,431
Dividends, $1.74 per share                                                      (70,461)                                (70,461)
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
BALANCE, DECEMBER 31,2005    40,679     $1      268     $ 1,942    $60,460     $ 89,022     $ 476        $   377       $152,278
                             ------    ---      ---     -------   --------     --------     -----        -------       --------
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                       71

<PAGE>

SYNTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                2005       2004       2003
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                 $ 30,321   $ 40,974   $ 40,304

   Adjustments to reconcile net income to net cash provided
      by operating activities
      Depreciation and amortization                              4,852      3,024      2,522
      Bad debt provisions / (credits)                            1,564        400       (493)
      Reduction in reserve requirements applicable to the
         Metier transaction                                         --         --       (882)
      Realized gains on sales of short term investments         (1,383)    (2,049)    (1,015)
      Deferred income taxes                                        890      1,101      3,940
      Stock warrants sales incentive                                --         77      1,777
      Compensation expense related to restricted stock           1,596        884         --
      Loss on equity investments                                    --         --         34
      Changes in assets and liabilities:
         Accounts receivable and revenue earned in excess
            of billing, net                                     (6,446)      (469)    (5,836)
         Other current assets                                   (4,191)      (300)       232
         Accrued payroll and other liabilities                  11,155      4,046      4,411
         Deferred revenues                                      (1,921)       783       (851)
                                                              --------   --------   --------
   Net cash provided by operating activities                    36,437     48,471     44,143
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:

      Property and equipment expenditures                      (16,392)   (12,017)    (4,226)
      Equity and other investments                                  --         --        223
      Purchase of short- term investments:
         Investments in mutual funds                           (23,484)   (72,825)   (52,313)
         Investments in term deposits with banks                (4,434)   (21,516)        --
      Proceeds from sales of short term investments:
         Proceeds from sales of mutual funds                    43,255     65,866     33,924
         Maturities of term deposits with banks                 22,682      7,394      2,162
                                                              --------   --------   --------
   Net cash provided by /(used in) investing activities         21,627    (33,098)   (20,230)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Net proceeds from issuance of common stock                 3,417      3,140      6,538
      Common stock repurchases                                    (676)    (1,479)      (160)
      Dividends paid                                           (70,901)    (9,685)   (52,260)
                                                              --------   --------   --------
   Net cash used in financing activities                       (68,160)    (8,024)   (45,882)
                                                              --------   --------   --------
Effect of foreign currency exchange rate changes on cash           344     (1,061)      (170)
                                                              --------   --------   --------
   Change in cash and cash equivalents                          (9,752)     6,288    (22,140)
Cash and cash equivalents, beginning of year                   109,142    102,854    124,994
                                                              --------   --------   --------
Cash and cash equivalents, end of year                        $ 99,390   $109,142   $102,854
                                                              ========   ========   ========
Non cash investing and financing activities:

   Cash dividends declared but unpaid                         $  2,476   $  2,433   $  2,401
   Stock warrants                                                   --         77         --

Cash paid for income taxes                                      19,134      5,543      5,582
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       72

<PAGE>

SYNTEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS

Syntel, Inc. and Subsidiaries (individually and collectively "Syntel" or the
"Company") provide information technology services such as programming, systems
integration, outsourcing and overall project management. The Company provides
services to customers primarily in the financial, manufacturing, healthcare,
transportation, retail, and information/communication industries, as well as to
government entities. The Company's reportable operating segments consist of
Applications Outsourcing, e-Business, TeamSourcing and Business Process
Outsourcing (BPO).

Through Applications Outsourcing, the Company provides higher-value outsourcing
services for ongoing management, development and maintenance of customers'
business applications. In most Application Outsourcing engagements, the Company
assumes responsibility for the management of customer development and support
functions. These services may be provided on either a time-and-material basis or
on a fixed price basis.

Through e-Business, the Company provides development and implementation services
for a number of emerging and rapidly growing high technology applications,
including Web development, Data Warehousing, e-commerce, CRM, SAP and Oracle, as
well as partnership arrangements with leading software firms, to provide
installation services to their respective customers. These services may be
provided on either a time-and-material basis or on a fixed price basis, in which
the Company assumes responsibility for management of the engagement.

Through TeamSourcing, the Company provides professional information technology
consulting services directly to customers on a staff augmentation basis.
TeamSourcing services include systems specification, design, development,
implementation and maintenance of complex information technology applications
involving diverse computer hardware, software, data and networking technologies
and practices. TeamSourcing consultants, whether working individually or as a
team of professionals, generally receive direct supervision from the customer's
management staff. TeamSourcing services are generally invoiced on a time and
material basis.

Through BPO, Syntel provides outsourced solutions for a client's business
processes, providing them with the advantage of a low cost position and process
enhancement through optimal use of technology. Syntel uses a proprietary tool
called IdenteonTM to assist with strategic assessments of business processes and
identifying the right ones for outsourcing.

2.   SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Syntel, Inc.
("Syntel"), a Michigan corporation, its wholly owned subsidiaries, and a joint
venture. All significant inter-company balances and transactions have been
eliminated.

The wholly owned subsidiaries of Syntel, Inc. are:

-    Syntel Limited ("Syntel India"), an Indian limited liability company
     formerly known as Syntel (India) Ltd.;


                                       73

<PAGE>

-    Syntel Singapore PTE., Ltd. ("Syntel Singapore"), a Singapore limited
     liability company;

-    Syntel Europe, Ltd. ("Syntel U.K."), a United Kingdom limited liability
     company;

-    Syntel Canada Inc. ("Syntel Canada"), an Ontario limited liability company;

-    Syntel Deutschland GmbH ("Syntel Germany"), a German limited liability
     company;

-    Syntel Hong Kong Ltd. ("Syntel Hong Kong"), a Hong Kong limited liability
     company;

-    Syntel (Australia) Pty. Limited ("Syntel Australia"), an Australian limited
     liability company;

-    Syntel Delaware LLC ("Syntel Delaware"), a Delaware limited liability
     company;

-    SkillBay LLC ("SkillBay"), a Michigan limited liability company;

-    Syntel (Mauritius) Limited ("Syntel Mauritius"), a Mauritius limited
     liability company;

-    Syntel Consulting Inc ("Syntel Consulting"), a Michigan limited liability
     company;

-    Syntel Sterling BestShores (Mauritius) Limited ("SSBML"), a Mauritius
     limited liability company; and

-    Syntel Worldwide (Mauritius) Limited ("Syntel Worldwide"), a Mauritius
     limited liability company.

The formerly wholly owned subsidiary of Syntel Delaware LLC (as of December 31,
2004) that became a partially owned joint venture of Syntel Delaware LLC on
February 1, 2005 is:

-    Syntel Solutions (Mauritius) Ltd. ("Syntel Solutions"), a Mauritius limited
     liability company.

The wholly owned subsidiary of Syntel Solutions is:

-    Syntel Sourcing Pvt. Ltd. ("Syntel Sourcing"), an Indian limited liability
     company.

The wholly owned subsidiaries of Syntel Mauritius are:

-    Syntel International Pvt. Ltd. ("Syntel International"), an Indian limited
     liability company; and

-    Syntel Global Pvt. Ltd. ("Syntel Global"), an Indian limited liability
     company.

The wholly owned subsidiary of Syntel Sterling BestShores (Mauritius) Limited is
:

-    Syntel Sterling BestShores Solutions Private Limited ("SSBSPL"), an Indian
     limited liability company.

REVENUE RECOGNITION

The Company recognizes revenues from time and material contracts as the services
are performed.

Revenue from fixed-price applications management, maintenance and support
engagements is recognized as earned which generally results in straight-line
revenue recognition as services are performed continuously over the term of the
engagement.

Revenue on fixed-price, applications development and integration projects in the
Company's application outsourcing and e-Business segments are measured using the
proportional performance method of accounting. Performance is


                                       74

<PAGE>

generally measured based upon the efforts incurred to date in relation to the
total estimated efforts to the completion of the contract. The Company monitors
estimates of total contract revenues and cost on a routine basis throughout the
delivery period. The cumulative impact of any change in estimates of the
contract revenues or costs is reflected in the period in which the changes
become known. In the event that a loss is anticipated on a particular contract,
provision is made for the estimated loss. The Company issues invoices related to
fixed price contracts based on either the achievement of milestones during a
project or other contractual terms. Differences between the timing of billings
and the recognition of revenue based upon the proportional performance method of
accounting are recorded as revenue earned in excess of billings or deferred
revenue in the accompanying consolidated balance sheets.

Revenues are reported net of sales incentives.

Reimbursements of out-of-pocket expenses are included in revenue in accordance
with Emerging Issues Task Force Consensus ("EITF") 01-14, "Income Statement
Characterization of Reimbursement Received for 'Out of Pocket' Expenses
Incurred".

CASH AND CASH EQUIVALENTS

For the purpose of reporting Cash and Cash Equivalents, the Company considers
all liquid investments purchased with an original maturity of three months or
less to be cash equivalents. At December 31, 2005 and 2004, approximately $60.8
million and $29.1 million respectively, represent corporate bonds and treasury
notes held by JP Morgan Chase Bank NA, for which "AAA" rated letters of credit
have been provided by the bank. The remaining amounts of cash and cash
equivalents are invested in money market accounts with various banking and
financial institutions.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of the Company's current assets and current liabilities
approximate their carrying values because of their short maturities. Such
financial instruments are classified as current and are expected to be
liquidated within the next twelve months.

CONCENTRATION OF CREDIT RISKS

Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of investments and accounts receivable. Cash on
deposit is held with financial institutions with high credit standings. The
Company has cash deposited with financial institutions that, at times, may
exceed the federally insured limits.

Our customer base consists primarily of Global 2000 companies and accordingly
our accounts receivable is not exposed to significant credit risk. The Company
establishes an allowance for doubtful accounts as a provision for known and
inherent collection risks related to its accounts receivable. The estimation of
the provision is primarily based on our assessment of the probable collection
from specific customer accounts, the aging of the accounts receivable, analysis
of credit data, bad debt write-offs, and other known factors.

SHORT TERM INVESTMENTS

The Company's short-term investments consist of short-term mutual funds, which
have been classified as available-for-sale and are carried at estimated fair


                                       75

<PAGE>

value. Fair value is determined based on quoted market prices. Unrealized gains
and losses, net of taxes, on available-for-sale securities are reported as a
separate component of accumulated other comprehensive income (loss) in
shareholders' equity. Net realized gains or losses resulting from the sale of
these investments, and losses resulting from decline in fair values of these
investments that are other than temporary declines, are included in other
income. The cost of securities sold is determined on the weighted average
method.

Investments include Term deposits with original maturity exceeding three months
and whose maturity date is within one year from the date of the balance sheet.

LONG-LIVED ASSETS (OTHER THAN GOODWILL)

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the Company
reviews its long-lived assets (other than goodwill) for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. When factors indicate that such costs should be
evaluated for possible impairment, we assess the recoverability of the
long-lived assets (other than goodwill) by comparing the estimated undiscounted
cash flows associated with the related asset or group of assets against their
respective carrying amounts. The amount of an impairment charge if any, is
calculated based on the excess of the carrying amount over the fair value of
those assets. Management believes no assets were impaired at December 31, 2005.

OTHER INCOME

Other income includes interest and dividend income, gains and losses from sale
of securities and other investments.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Maintenance and repairs are charged
to expense when incurred. Depreciation is computed primarily using the
straight-line method over the estimated useful lives as follows:

<TABLE>
<CAPTION>
                                              YEARS
                                              -----
<S>                                       <C>
Computer equipment and software                 3
Furniture, fixtures and other equipment         7
Vehicles                                        3
Leasehold improvements                    Life of lease
Leasehold land                            Life of lease
</TABLE>

Depreciation expense for the years ended December 31, 2005, 2004 and 2003 was
$4.9 million, $3.1 million and $ 2.5 million, respectively.

GOODWILL

Effective January 1, 2002 the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets". In accordance with SFAS No. 142, goodwill is no longer
amortized but is evaluated for impairment at least annually.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and


                                       76

<PAGE>

liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Such estimates include, but are not limited to
allowance for doubtful accounts, impairment of long-lived assets and goodwill,
contingencies and litigation, the recognition of revenues and profits based on
the proportional performance method and potential tax liabilities. Actual
results could differ from those estimates and assumptions used in the
preparation of the accompanying financial statements.

During 2005, the Company has reversed $2.6 million of the accrual for income
taxes related to the year 2001 and credited it to the current year's income tax
provision. In determining the tax provisions, the Company also provides for tax
contingencies based on the Company's assessment of future regulatory reviews of
filed tax returns. Such reserves, which are recorded in income taxes payable,
are based on management's estimates and accordingly are subject to revision
based on additional information. The portion of the reserve that is no longer
required for any particular tax year, is credited to the current year's income
tax provision.

In addition, during 2005 the Company has reversed $0.9 million related to the
payroll tax provision and provided for a valuation allowance of $1.6 million
attributable to certain deferred tax assets.

During 2005, the Company provided $1.6 million towards allowance for doubtful
accounts. At December 31, 2005 the allowance for doubtful accounts was $2.6
million. These estimates are based on management's assessment of the probable
collection from specific customer accounts, the aging of accounts receivable,
analysis of credit data, bad debt write-offs, and other known factors.

The revision in estimates during 2005 had an after-tax impact of increasing the
diluted earnings per share for the year ended December 31, 2005 by $0.01 per
share.

During 2004, the Company reversed $1.7 million of the accrual for income taxes
related to the year 2000 and credited it to the current year's income tax
provision. In determining the tax provisions, the Company also provides for tax
contingencies based on the Company's assessment of future regulatory reviews of
filed tax returns. Such reserves, which are recorded in income taxes payable,
are based on management's estimates and accordingly are subject to revision
based on additional information. The portion of the reserve no longer required
for any particular tax year, is credited to the current year's income tax
provision.

In addition, during 2004 Syntel India accounted for a credit of approximately
$0.5 million with respect of US branch profit taxes related to prior periods up
to June 30, 2004.

The revision in estimates during 2004 above had an after tax impact of
increasing the diluted earnings per share for the year ended December 31, 2004
by $0.05 per share.

During 2003, in connection with settlements and other changes in estimates for
underlying litigation and related legal costs, the Company reduced its accrued
liabilities and Metier related liabilities by $2.9 million, net of amounts paid.
The Company also reduced its allowance for doubtful accounts by $0.5 million
primarily on account of the successful collection of overdue debts. Also, in
2003 management revised its estimate of 2002 bonus compensation and reversed
$0.8 million of previously recorded accruals. The revision in estimates during
2003 had an after tax impact of increasing the diluted earnings per share for
the year ended December 31, 2003 by $0.06 per share.


                                       77

<PAGE>


FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's foreign subsidiaries use the currency
of the primary economic environment in which they operate as its functional
currency. Revenues, costs and expenses of the foreign subsidiaries are
translated to U. S. dollars at average period exchange rates. Assets and
liabilities are translated to U. S. dollars at period-end exchange rates with
the effects of these cumulative translation adjustments being reported as a
separate component of accumulated other comprehensive income in shareholders'
equity. Transaction gains and losses, are reflected within 'Selling, general and
administrative expenses' in the consolidated statements of income, for the years
presented and were not material.

EARNINGS PER SHARE

Basic and diluted earnings per share are computed in accordance with SFAS No.
128 "Earnings Per Share".

Basic earnings per share are calculated by dividing net income by the weighted
average number of shares outstanding during the applicable period.

The Company has stock options, which are considered to be potentially dilutive
to the basic earnings per share. Diluted earnings per share is calculated using
the treasury stock method for the dilutive effect of shares which have been
granted pursuant to the stock option plan, by dividing the net income by the
weighted average number of shares outstanding during the period adjusted for
these potentially dilutive options, except when the results would be
anti-dilutive. The potential tax benefits on exercise of stock options is
considered as additional proceeds while computing dilutive earnings per share
using the treasury stock method.

EMPLOYEE BENEFITS

The Company maintains a 401(k) retirement plan that covers all regular employees
on Syntel's U.S. payroll. Eligible employees may contribute up to 15% of their
compensation, subject to certain limitations, to the retirement plans. The
Company may make contributions to the plans at the discretion of our Board of
Directors; however, through December 31, 2005, no contributions have been made.

Eligible employees of the Company receive benefits under the Provident Fund
("PF"), which is a defined contribution plan. Both the employee and the Company
make monthly contributions equal to a specified percentage of the covered
employee's salary. The Company has no further obligations under the plan beyond
its monthly contributions. These contributions are made to the fund administered
and managed by the Government of India. The Company's monthly contributions are
charged to income in the period they are incurred.

In accordance with the Payment of Gratuity Act, 1972 of India, the Indian
subsidiary provides for gratuity, a defined retirement benefit plan (the
"Gratuity Plan") covering eligible employees. The Gratuity Plan provides a lump
sum payment to vested employees at retirement, death, incapacitation or
termination of employment, based on the respective employee's salary and the
tenure of employment. Liabilities with regard to the Gratuity Plan are
determined by actuarial valuation and are charged to income in the period
determined. The Gratuity Plan is a non-funded plan. The amounts accrued under
this plan are $1.1 million and $0.7 million as of December 31, 2005 and 2004,
respectively, and are included within 'Accrued payroll and related costs'.


                                       78

<PAGE>

VACATION PAY

The accrual for unutilized leave balance is determined for the entire available
leave balance standing to the credit of the employees at period-end. The leave
balance eligible for carry-forward is valued at gross compensation rates and
eligible for compulsory encashment at basic compensation rates.

STOCK BASED COMPENSATION

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company has elected to measure stock based compensation cost using the intrinsic
value method, in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and has adopted the disclosure requirements of SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of FASB Statement No. 123". Had the fair value of each stock option
granted been determined consistent with the methodology of SFAS No. 123, the pro
forma impact on the Company's net income and earnings per share is as follows:


                                       79

<PAGE>

<TABLE>
<CAPTION>
                                                              Year Ended December 31
                                                           ---------------------------
                                                             2005      2004      2003
                                                           -------   -------   -------
                                                            (In thousands, except per
                                                                   share data)
<S>                                                        <C>       <C>       <C>
Net income as reported                                     $30,321   $40,974   $40,304
   Add, stock- based compensation expenses recognized in
   statement of income, net of tax                           1,384       713        --
   Deduct, stock- based compensation expense determined
   under the fair value method, net of tax                  (1,704)   (1,642)   (1,216)
                                                           -------   -------   -------
   Pro forma net income                                    $30,001   $40,045   $39,088
                                                           =======   =======   =======

Earnings per share as reported
   Basic                                                   $  0.75   $  1.02   $  1.02
   Diluted                                                    0.75      1.01      0.99

Earnings per share, pro forma
   Basic                                                   $  0.74   $  1.00   $  0.99
   Diluted                                                    0.74      0.99      0.96

Weighted average common shares outstanding
   Basic                                                    40,528    40,216    39,609
   Diluted                                                  40,651    40,469    40,797

Estimated fair value of options granted                    $  2.36   $  5.78   $  5.61
</TABLE>

Under SFAS No. 123, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions for grants:

<TABLE>
<CAPTION>
                            2005      2004      2003
                          -------   -------   -------
<S>                       <C>       <C>       <C>
Risk free interest rate      4.60%     3.72%     3.35%
Expected life             5 years   5 years   5 years
Expected volatility         68.08%    71.94%    75.80%
Expected dividend yield      8.35%     1.37%     0.97%
</TABLE>

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax laws is recognized in income in the
period that includes the enactment date.


                                       80

<PAGE>

PROVISION FOR UNUTILIZED LEAVE

During the year ended December 31, 2005, Syntel Limited has changed its leave
policy, resulting in a reduction of the maximum permissible accumulation of
unutilized leave from 150 days to 60 days. The balance exceeding the maximum
permissible accumulation is compulsorily encashed at basic salary. Accordingly,
an amount of $0.51 million was paid at basic salary and $1.14 million
representing the difference between the basic salary and gross compensation
rates was reversed.

The gross charge for unutilized earned leave was $0.23 million, $1.4 million and
$0.9 million for the years ended December 31, 2005, 2004 and 2003 respectively.

The amounts accrued for unutilized earned leave are $3.7 million and $4.4
million as of December 31, 2005 and December 31, 2004, respectively, and are
included within 'Accrued payroll and related costs'.

RECENTLY ISSUED ACCOUNTING STANDARDS

During December 2004, the Financial Accounting Standards Board issued SFAS No.
123R, "Share-Based Payment" (SFAS 123R),which requires companies to measure and
recognize compensation expense for all stock-based payments at fair value.
Stock-based payments include stock option grants and other transactions under
Company stock plans. The Company grants options to purchase common stock to some
of its employees and directors under various plans at prices equal to the market
value of the stock on the dates the options were granted. The Company is
required to adopt SFAS 123R by the first quarter of fiscal 2006. The Company
will use the modified prospective application transition method and estimates
that the adoption of SFAS No. 123R for share-based awards issued to employees
will not have a significant impact on its statement of income or financial
position for 2006. This estimate is based upon various assumptions, including
an estimate of the number of share-based awards that will be granted, cancelled
or expired during 2006, as well as the Company's future stock prices. These
assumptions are highly subjective and changes in these assumptions could
significantly affect the Company's estimate.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS No. 154"), which replaces APB Opinion No. 120, "Accounting
Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements." SFAS No. 154 changes the requirements for accounting and reporting
a change in accounting principle, and applies to all voluntary changes in
accounting principles, as well as changes required by an accounting
pronouncement in the unusual instance it does not include specific transition
provisions. Specifically, SFAS No. 154 requires retrospective application to
prior periods' financial statements, unless it is impracticable to determine the
period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the effects of the change, the new accounting
principle must be applied to the balances of assets and liabilities as of the
beginning of the earliest period for which retrospective application is
practicable and a corresponding adjustment must be made to the opening balance
of retained earnings for that period rather than being reported in an income
statement. When it is impracticable to determine the cumulative effect of the
change, the new principle must be applied as if it were adopted prospectively
from the earliest date practicable. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. SFAS No. 154 does not change the transition provisions of any existing
pronouncements. The Company has evaluated the impact of SFAS No. 154 and does
not expect the adoption of this statement to have a significant impact on its
consolidated statement of income or financial condition. The Company will apply
SFAS No. 154 in future periods, when applicable.


                                       81

<PAGE>

3.   ACQUISITIONS

METIER, INC.

During 1999, the Company acquired substantially all the business and assets of
Metier, Inc. The consideration for the Metier acquisition in 1999 included a
$1.6 million dollar payment to the Metier shareholders, which was to be made in
April 2000, and 300,000 shares of Syntel Common Stock, which were to be issued
in September 2000. During 2000, the Company entered into litigation with the
former shareholders of Metier and consequently, the $1.6 million dollar payment
was not made and the 300,000 shares were not issued. In April 2002, the Company
reached a resolution with the Metier shareholders wherein the $1.6 million
dollar payment was not made, the 300,000 shares were not issued and the Company
paid $2.3 million in settlement and legal costs. Additionally, during the last
quarter of 2002, the Company also settled certain of the Metier related and
other litigation and in connection with these settlements, the Company reversed
an accrual of approximately $5.7 million of the accrued Metier liability during
2002 having an earnings per share impact of $0.08 per share. The final
settlements relating to the Metier liability were made during the third quarter
of 2003 and accordingly, the remaining accrual of approximately $0.9 million was
also reversed.

4.   SHORT TERM INVESTMENTS

     Short term investments included the following at December 31, 2005 and
     2004:

<TABLE>
<CAPTION>
                                   2005      2004
                                 -------   -------
                                   (in thousands)
<S>                              <C>       <C>
Investments in mutual funds at
   carrying value                $16,814   $36,106
Term deposits with banks           4,269    22,793
                                 -------   -------
Total                            $21,083   $58,899
                                 =======   =======
</TABLE>

     Information related to investments in mutual funds (primarily Indian Mutual
     Funds) is as follows:

<TABLE>
<CAPTION>
                                               2005      2004      2003
                                             -------   -------   ------
                                                    (in thousands)
<S>                                          <C>       <C>       <C>
Cost                                         $16,275   $35,456   $25,220
Unrealized gain, net                             539       650       917
                                             -------   -------   -------
Carrying value                               $16,814   $36,106   $26,137
                                             =======   =======   =======
Gross realized gains                         $ 1,383   $ 2,049   $ 1,015
Gross realized losses                             --        --        --
Dividend income                                   --        --        --
Proceeds on sale of short term investments    43,255    65,866    33,924
Purchase of short term investments            23,484    72,825    52,313
</TABLE>


                                       82

<PAGE>

     Investment in term deposits with banks included the following at December
     31, 2004 and 2003:

<TABLE>
<CAPTION>
                                2005      2004      2003
                              -------   -------   -------
                                     (in thousands)
<S>                           <C>       <C>       <C>
Cost                          $ 4,269   $22,793   $ 7,845
                              -------   -------   -------
Maturities of term deposits   $22,682   $ 7,394   $ 2,162
Purchase of term deposits       4,434    21,516        --
</TABLE>

5.   STOCK WARRANTS SALES INCENTIVE

     During 2002, the Company granted to a significant customer immediately
     exercisable warrants entitling the customer to purchase 322,210 shares of
     the Company's stock at an exercise price of $7.25 per share. The stated
     exercise price was based upon the customer achieving a specified minimum
     level of purchases of services (the "Performance Milestone") from the
     Company over a specified performance period that ended on October 16, 2003.
     The customer exercised the warrant in February 2003 and received 209,739
     shares in a cashless exercise.

     The customer earned the sales incentive as they met the performance
     milestone over the specified performance period that ended on October 16,
     2003.

     In accordance with EITF 01-09, "Accounting for Consideration Given by a
     Vendor to a Customer or a Reseller of the Vendor's Products", the Company
     has recorded the value of sales incentive as a reduction of revenues, to
     the extent of revenues earned up to October 16, 2003.

     The measurement of the sales incentive, which previously was based on the
     market value of the Company's stock at each period end, was finalized based
     on sale of the shares in quarter ended September 30, 2003 by the customer
     at an average sale price of $22.31. Accordingly, the final value of the
     sales incentive was $4.7 million. Cumulatively, the Company had recorded
     $2.9 million of the sales incentive as a reduction of revenue up to
     December 31, 2002. The remaining sales incentive of $1.8 million was
     recorded during the year 2003.

     The Company has also granted the same customer certain additional
     performance warrants at significantly higher performance milestones. The
     Company has estimated that such higher performance milestones will not be
     met. Accordingly, the Company has not accounted for these performance
     warrants. If and when the Company estimates that such higher performance
     milestones will be met, the sales incentive associated with the performance
     warrants will be recorded as a reduction of revenue.


                                       83

<PAGE>

6.   REVENUE EARNED IN EXCESS OF BILLINGS AND DEFERRED REVENUE

     Revenue earned in excess of billings consists of:

<TABLE>
<CAPTION>
                                                   2005     2004
                                                  ------   ------
                                                   (In thousands)
<S>                                               <C>      <C>
Unbilled revenue for time and material projects   $3,027   $2,144
Unbilled revenue for fixed price projects          5,339    2,246
                                                  ------   ------
                                                  $8,366   $4,390
                                                  ======   ======
</TABLE>

     Deferred revenue consists of:

<TABLE>
<CAPTION>
                                             2005     2004
                                            ------   ------
                                             (In thousands)
<S>                                         <C>      <C>
Deferred revenue on uncompleted fixed
   price development contracts              $3,087   $4,123
Advance billing on application management
    and support contracts                      195    1,025
Other deferred revenue                          74       83
                                            ------   ------
                                            $3,356   $5,231
                                            ======   ======
</TABLE>

7.   PROPERTY AND EQUIPMENT

     Property and equipment at December 31, 2005 and 2004 is summarized as
     follows:

<TABLE>
<CAPTION>
                                                   2005      2004
                                                 -------   -------
                                                   (In thousands)
<S>                                              <C>       <C>
Computer equipment and software                  $21,387   $17,651
Furniture, fixtures  & other equipment            11,947     9,966
Vehicles                                           1,050     1,032
Leasehold improvements                             1,765     1,499
Leasehold land                                     1,828     1,856
Capital advances / work in progress               16,713     5,750
                                                 -------   -------
                                                  54,690    37,754
Less accumulated depreciation and amortization    25,504    21,290
                                                 -------   -------
                                                 $29,186   $16,464
                                                 =======   =======
</TABLE>

8.   LINE OF CREDIT

The Company has a line of credit with JP Morgan Chase Bank NA, which provides
for borrowings up to $15.0 million ($20.0 million at December 31, 2004). The
line of credit has been renewed and amended and now expires on August 31, 2006.
The line of credit has a sub-limit of $5.0 million for letters of credit, which
bear a fee of 1% per annum of the face value of each standby letter of credit
issued. Borrowings under the line of credit bear interest at (i) a formula
approximating the Eurodollar rate plus the applicable margin of 1.25%, (ii) the
bank's prime rate minus 1.0% or (iii) negotiated rate plus 1.25%. There were no
outstanding borrowings at December 31, 2005 and 2004.


                                       84

<PAGE>

9.   LEASES

The Company leases certain facilities and equipment under operating leases.
Current operating lease obligations are expected to be renewed or replaced upon
expiration. Future minimum lease payments under all non-cancelable leases
expiring beyond one year as of December 31, 2005 are as follows:

<TABLE>
<CAPTION>
             (In thousands)
             --------------
<S>          <C>
2006             $2,667
2007              2,240
2008              1,794
2009              1,720
2010              1,454
Thereafter          113
                 ------
                 $9,988
                 ======
</TABLE>

Total rent expense amounted to approximately $2.9 million; $2.2 million and $2.6
million for the years ended December 31, 2005, 2004 and 2003, respectively.


                                       85

<PAGE>

10.  INCOME TAXES

     Income before income taxes for the Company's U. S. and foreign operations
     was as follows:

<TABLE>
<CAPTION>
            2005      2004      2003
          -------   -------   -------
                 (In thousands)
<S>       <C>       <C>       <C>
U. S      $18,410   $12,147   $15,168
Foreign    32,523    34,080    38,412
          -------   -------   -------
          $50,933   $46,227   $53,580
          =======   =======   =======
</TABLE>

     The provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                             2005     2004      2003
                                           -------   ------   -------
                                                 (In thousands)
<S>                                        <C>       <C>      <C>
Current
   Federal                                 $ 7,382   $1,672   $ 3,947
   State                                     1,346      305       720
   Foreign                                  10,882    2,175     4,635
                                           -------   ------   -------
      Total current provision               19,610    4,152     9,302
                                           -------   ------   -------
Deferred
   Federal                                     931      221     3,332
   State                                       170       40       608
   Foreign                                    (211)     840        --
                                           -------   ------   -------
      Total deferred provision (benefit)       890    1,101     3,940
                                           -------   ------   -------
      Total provision for income taxes     $20,500   $5,253   $13,242
                                           =======   ======   =======
</TABLE>

     The components of the net deferred tax asset are as follows:

<TABLE>
<CAPTION>
                                                      2005      2004
                                                    -------   -------
                                                      (In thousands)
<S>                                                 <C>       <C>
Deferred tax assets
   Impairment of investments and capitalized
      development costs                             $ 1,814   $ 1,814
   Valuation Allowance                               (1,664)       --
   Property, plant and equipment                         71       149
   Accrued expenses and allowances                    2,235     1,717
   Advanced billing receipts                            835       602
                                                    -------   -------
Total deferred tax assets                             3,291     4,282
                                                    -------   -------
   Deferred tax liabilities
   Provision for branch tax on dividend
      equivalent in India                            (1,089)   (1,183)
   Provision for tax on unrealized gains in India       (63)     (102)
                                                    -------   -------
Total deferred tax liabilities                       (1,152)   (1,285)
                                                    -------   -------
Net deferred tax assets                             $ 2,139   $ 2,997
                                                    =======   =======
</TABLE>


                                       86

<PAGE>

     Balance sheet classification of the net deferred tax asset is summarized as
     follows:

<TABLE>
<CAPTION>
                                   2005     2004
                                  ------   ------
                                   (In thousands)
<S>                               <C>      <C>
Deferred tax asset, current       $2,139   $1,895
Deferred tax asset, non-current       --    1,102
                                  ------   ------
                                  $2,139   $2,997
                                  ======   ======
</TABLE>

During 2001, the Company had recorded deferred tax assets related to tax
benefits on write-off of certain investments. In 2005 the company has created a
valuation allowance of $1.7 million against these deferred tax assets, as these
tax benefits are not expected to be recognized.

Syntel's software development centers/units are located in Mumbai, Chennai and
Pune. Units in Mumbai are located in a Special Economic Zone (SEZ), the unit at
Chennai is 100% Export Oriented Unit (EOU) and units at Pune are registered with
Software Technologies Park of India (STPI). Under the Indian Income Tax Act,
1961 (the "Act"), 100% EOUs at Chennai, units registered with STPI at Pune and
certain units located in SEZ are eligible for an exemption from payment of
corporate income taxes for up to 10 years of operations on the profits generated
from these undertakings or March 31, 2009, whichever is earlier. Certain units
located in SEZ are eligible for 100% exemption from payment of corporate taxes
for the first 5 years of operation and a 50% exemption for the next 5 years.

Effective April 1, 2003 one of the Company's Software Development Units has
ceased to enjoy the above-mentioned tax exemption. Another development unit
ceased to enjoy the tax exemption on April 1, 2005. Provision for Indian Income
Tax is made only in respect of business profits generated from these software
development units, to the extent they are not covered by the above exemptions
and on income from investments and interest income.

The benefit of the tax Holiday granted by the Indian authorities was $11
million, $7.6 million and $9.1 million for the years 2005, 2004 and 2003,
respectively.

The American Jobs Creation Act of 2004 provided a special one-time favorable
effective federal tax rate for U.S.-based organizations. The Company repatriated
cash dividends of $61.0 million during 2005 out of the retained earnings of its
controlled foreign subsidiary, Syntel Limited, to the U.S. in accordance with
the Act. The Company recorded a tax charge of approximately $12.3 million,
including U.S. Federal and state taxes and the Indian dividend distribution tax
under the Indian Income Tax laws, during the fourth quarter of 2005. Proceeds
from these extra ordinary dividends are required to be invested in the United
States for specific purposes permitted under Act pursuant to an approved written
domestic reinvestment plan. As of December 31, 2005, the Company has invested
approximately $42.5 million towards permitted investments under the Act against
this extra ordinary dividend pursuant to an approved Domestic reinvestment plan.

The Company intends to use remaining accumulated and future earnings of foreign
subsidiaries to expand operations outside the United States and accordingly
undistributed earnings of foreign subsidiaries are considered to be indefinitely
reinvested outside the United States and no provision for U. S. federal and
state income tax or applicable dividend distribution tax has been provided
thereon.

                                       87

<PAGE>

If the company determines to repatriate all undistributed repatriable earnings
of foreign subsidiaries as of December 31, 2005, the company would have accrued
taxes of approximately $34.1 million.

The following table accounts for the differences between the actual tax
provision and the amounts obtained by applying the statutory U. S. federal
income tax rate of 35% to income before income taxes:

<TABLE>
<CAPTION>
                                          2005       2004       2003
                                        --------   --------   --------
                                                (In thousands)
<S>                                     <C>        <C>        <C>
Income before income taxes              $50,933    $46,227    $53,580
                                        -------    -------    -------
Statutory provision                        35.0%      35.0%      35.0%
State taxes, net of federal benefit         1.3%       1.0%       1.0%
Tax-free investment income                 (0.2%)     (0.4%)     (0.6%)
Foreign effective tax rates different
   from US Statutory Rate                 (18.3%)    (19.3%)    (16.4%)
Tax reserves                               (5.0%)     (3.8%)      5.7%
Valuation Allowance                         3.2%       0.0%       0.0%
Tax on Repatriation                        24.2%       0.0%       0.0%
Other, net                                  0.0%      (1.1%)      0.0%
                                        -------    -------    -------
Total Provision                            40.2%      11.4%      24.7%
                                        =======    =======    =======
</TABLE>

The Company records provisions for income taxes based on enacted tax laws and
rates in the various taxing jurisdictions in which it operates. In determining
the tax provisions, the Company also provides for tax contingencies based on the
Company's assessment of future regulatory reviews of filed tax returns. Such
reserves, which are recorded in income taxes payable, are based on management's
estimates and accordingly are subject to revision based on additional
information. The provision no longer required for any particular tax year, is
credited to the current period's income tax expenses. Conversely, in the event
of a future tax examination, if the Company does not prevail on certain tax
positions taken in filed returns the tax expense related thereto will be
recognized in the period in which examiners position is determined to be final.

During the year ended December 31, 2005, 2004 and 2003, the effective
income tax rate was 40.2%, 11.4% and 24.7%, respectively. The tax rate for the
year ended December 31, 2005 is impacted by reversal of tax reserve of $2.6
million, provision for valuation allowance of $1.7 million and the tax related
to the repatriation of $12.3 million. Without the above, the effective tax rate
for the year ended December 31, 2005 would have been 17.8%. During year ended
December 31, 2004 the tax rate was impacted by reversal of tax reserve of $1.7
million, tax credit of $0.5 million in Syntel India and the research and
development tax credit of $0.5 million in Syntel Inc. Without the above, the
effective income tax rate during the year ended December 31, 2004 would have
been 17.3%. During year ended December 31, 2003, the tax rate was impacted by
provision of tax reserve of $3.1 million. Without the above, the effective
income tax rate during the year ended December 31, 2003 would have been 19%. The
tax rate continues to be positively impacted by the combined effects of offshore
transition and reduced onsite profitability.

Syntel India has not provided for disputed Indian income tax liabilities
amounting to $2.51 million for the financial years 1995-96 to 2001-02.


                                       88

<PAGE>

Syntel India has obtained an opinion from one independent legal counsel (a
former Chief Justice of the Supreme Court of India) for the financial year
1998-99 and opinions from another independent legal counsel (also a former Chief
Justice of the Supreme Court of India) for the financial years 1995-96, 1996-97,
1997-98, 1999-2000 and 2000-01 and for subsequent periods to date, which support
Syntel India's position in this matter.

Syntel India had filed an appeal with the Commissioner of Income Tax (Appeals)
for the financial year 1998-99 and received a favorable decision. A similar
appeal filed by Syntel India with the Commissioner of Income Tax (Appeals) for
the financial year 1999-2000 was however dismissed in March 2004. Syntel India
has appealed this decision with the Income Tax Appellate Tribunal. Syntel India
has since also received orders for appeals filed with the Commissioner of Income
Tax (Appeals) against the demands raised in March 2004 by the Income Tax Officer
for similar matters relating to the financial years 1995-96, 1996-97, 1997-98
and 2000-01 and received a favorable decision for 1995-96 and the contention of
Syntel India was partially upheld for the other three years. Syntel India has
gone into further appeal with the Income Tax Appellate Tribunal for the amounts
not allowed by the Commissioner of Income Tax (Appeals). The Income Tax
Department has appealed the favorable decisions for 1995-96 and 1998-99 and the
partially favorable decisions for the other years with the Income Tax Appellate
Tribunal.

Syntel India has also not provided for other disputed Indian income tax
liabilities aggregating to $4.40 million against which Syntel India has filed or
is in the process of filing appeals with the Commissioner of Income Tax
(Appeals). Syntel India has obtained opinions from independent legal counsels,
which support Syntel India's position in this matter.

Further, Syntel India has not provided for disputed income tax liabilities
aggregating to $0.10 million, for which Syntel India has filed or is in the
process of filing appeals or petitions.

All the above tax exposures involve complex issues and may need an extended
period to resolve the issues with the Indian income tax authorities. Management,
after consultation with legal counsel, believes that the resolution of the above
matters will not have a material adverse effect on the Company's financial
position.

TAX CREDIT

During the year ended December 31, 2004, the provision for income tax was
reduced by research and development tax credits claimed. The tax credits relate
to increased qualified expenditures for software development. The Company
completed a review of such qualified expenditures and filed refund claims for
the tax years ended December 31, 1999, 2000, 2001 and 2002. The appropriate tax
benefit for these years has been recorded currently in conjunction with the
completion of the review. This tax credit had a positive impact of $0.5 million
on taxes.

In addition, during the year ended December 31, 2004, Syntel India has accounted
for a credit of approximately $0.5 million in respect of US branch profit taxes
related to prior periods up to June 30, 2004 and also reclassified in the
balance sheet $1.0 million from Income taxes payable to deferred tax liability.


                                       89

<PAGE>

11.  EARNINGS PER SHARE

     The reconciliation of earnings per share computations for the years 2005,
     2004, and 2003 are as follows:

<TABLE>
<CAPTION>
                                           2005             2004             2003
                                      --------------   --------------   --------------
                                                Per              Per              Per
                                      Shares   Share   Shares   Share   Shares   Share
                                      ------   -----   ------   -----   ------   -----
                                            (In thousands, except per share data)
<S>                                   <C>      <C>     <C>      <C>     <C>      <C>
Basic earnings per share (1)          40,534   $0.75   40,216   $1.02   39,609   $1.02
Potential dilutive effect of stock
   options and warrants outstanding      137   (0.00)     253   (0.01)   1,188   (0.03)
                                      ------   -----   ------   -----   ------   -----
                                      40,671   $0.75   40,469   $1.01   40,797   $0.99
                                      ======   =====   ======   =====   ======   =====
</TABLE>

(1)  Represents weighted average number of common shares

     As of December 31, 2005, 2004 and 2003, stock options to purchase 66,700,
     135,700 and 44,500 shares of Common Stock, respectively, at a weighted
     average price per share of $24.55, $24.13 and $25.00 respectively, were
     outstanding but were not included in the computation of diluted earnings
     per share. The options' exercise price was greater than the average market
     price of the common shares and was anti-dilutive.

12.  DIVIDEND

     The Board of Directors at its meeting on March 3, 2005 declared a special
     dividend of $1.50 per share payable to Syntel shareholders of record at the
     close of business on March 14, 2005. The dividend was paid on March 31,
     2005.

     The shareholders of record as of December 31, 2004 have been paid $0.06 per
     share on January 14, 2005.

     The Board of Directors at its meeting in July 2003 declared a one-time
     special dividend of $1.25 per share payable to Syntel shareholders of
     record at the close of business on August 29, 2003, which was paid on
     September 12, 2003.

     In addition, the Board of Directors at the same meeting approved the
     initiation of quarterly cash dividends. The initial dividend rate will be
     $0.06 per share per quarter.

     Per share dividends paid in 2005, 2004 and 2003 were $1.74, $0.24 and $1.31
     respectively.

13.  STOCK COMPENSATION PLANS

     The Company established a stock option plan in 1997 under which 3 million
     shares of Common Stock were reserved for issuance. The dates on which
     granted options are first exercisable are determined by the Compensation
     Committee of the Board of Directors, but generally vest over a four-year
     period from the date of grant. The term of any option may not exceed ten
     years from the date of grant.

     For certain options granted during 1997, the exercise price was less than
     the fair value of the Company's stock on the date of grant and,


                                       90

<PAGE>


     accordingly, compensation expense is being recognized over the vesting
     period for such difference. For the options granted thereafter, the Company
     grants the options at the fair market value on the date of grant of the
     options. The Company applies APB Opinion No. 25 and related interpretations
     in accounting for this plan. In accordance with APB Opinion No. 25, no
     compensation cost would need to be recognized for the options granted post
     1998 as the exercise price equaled the fair value of the shares on the date
     of the grant.


                                       91

<PAGE>

Stock option activity during the years ended December 31, 2005, 2004 and 2003 is
as follows:

<TABLE>
<CAPTION>
                                                   Weighted
                                         Number     Average
                                       of Shares     Price
                                       ---------   --------
<S>                                    <C>         <C>
Shares under option
   Outstanding, January 1, 2003        2,338,474      9.07
Activity during 2003
   Granted, price equals fair value      273,250     18.90
   Exercised                             694,858      8.39
   Forfeited                             587,127     11.55
   Expired                                14,329     10.92
                                       ---------    ------
   Outstanding, December 31, 2003      1,315,410     10.33
Activity during 2004
   Granted, price equals fair value       85,711     25.33
   Exercised                             264,613      8.01
   Forfeited                             247,352     15.95
   Expired                                 5,833      7.74
                                       ---------    ------
      Outstanding, December 31, 2004     883,323     10.93
Activity during 2005
   Granted, price equals fair value        1,500     16.33
   Exercised                             360,740      6.85
   Forfeited                              68,400     22.38
   Expired                                17,432     16.84
                                       ---------    ------
      Outstanding, December 31,2005      438,251     12.28
                                       =========    ======
      Exercisable, December 31, 2003     379,672    $ 7.94
      Exercisable, December 31, 2004     400,830    $ 8.38
      Exercisable, December 31, 2005     302,651    $ 9.52
                                       =========    ======
</TABLE>

The following tables sets forth details of options outstanding and exercisable
at December 31, 2005:

<TABLE>
<CAPTION>
                               OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                      -------------------------------------   ----------------------
                                      Weighted
                                       Average     Weighted                 Weighted
                                      Remaining     Average                  Average
 Range of Exercise       Number      Contractual   Exercise      Number     Exercise
       Prices         Outstanding   Life (years)     Price    Exercisable     Price
 -----------------    -----------   ------------   --------   -----------   --------
<S>                   <C>           <C>            <C>        <C>           <C>
$3.3191 - $6.6380       111,922         4.40        $ 5.02      111,922      $ 5.02
$6.6381 - $9.9570        69,536         4.30          8.35       69,536        8.35
$9.9571 - $13.2760       62,468         5.40         11.64       45,293       11.41
$13.2761 - $16.5950     125,025         6.60         14.61       62,400       14.47
$16.5951 - $19.9140       2,600         6.30         18.55        1,800       18.44
$19.9141 - $23.2330      17,700         8.10         21.15        2,100       21.28
$23.2331 - $26.5520      31,500         8.00         24.40        7,850       24.28
$26.5521 - $29.8710      17,500         4.50         28.25        1,750       28.25
                        -------         ----        ------      -------      ------
                        438,251         5.60        $12.28      302,651      $ 9.52
                        -------         ----        ------      -------      ------
</TABLE>


                                       92

<PAGE>

The Company has an employee stock purchase plan, which provides for employees to
purchase pre-established amounts of the Company's Common Stock as determined by
the compensation committee. The price at which employees may purchase Common
Stock is set by the compensation committee as not less than the lesser of 85% of
the fair market value of the Common Stock on the NASDAQ National Market on the
first day of the purchase period or 85% of the fair market value of the Common
Stock on the last day of the purchase period. The Company has reserved 1.5
million shares of Common Stock for issuance under the Company's employee stock
purchase plan. Under the terms of the plan, eligible employees may elect to have
up to 5% of their regular base earnings withheld to purchase company stock, with
a maximum contribution value, which may not exceed $21,250 for each calendar
year in which a purchase period occurs. As of December 31, 2005 and 2004 the
Company has $0.4 million and $0.5 million, respectively of employee
withholdings, included in accrued payroll and related costs in the balance sheet
to be used to purchase company stock. As of December 31, 2005 and 2004, 785,968
and 848,899 shares of Common Stock were available under the plan.

RESTRICTED STOCK:

On different dates during the quarter ended June 30, 2004 the Company issued
319,300 shares of incentive restricted stock to its non-employee directors and
some employees as well as to some employees of its subsidiaries. The shares were
granted to employees for their future services as a retention tool at a zero
exercise price, with the restrictions on transferability lapsing with regard to
10%, 20%, 30%, and 40% of the shares issued on or after the first, second, third
and fourth anniversary of the grant dates, respectively.

On different dates during the year ended December 31, 2005 the Company issued
additional 54,806 shares of incentive restricted stock to its non-employee
directors and some employees as well as to some employees of its subsidiaries.
The shares were granted to employees for their future services as a retention
tool at a zero exercise price, with the restrictions on transferability lapsing
with regard to incremental 25% of the shares issued on or after the first,
second, third and fourth anniversary of the grant dates, respectively.

Based upon the market value on the grant dates, the Company recorded $5.84
million during the quarter ended June 30, 2004 and $0.89 million during the year
ended December 31, 2005 of unearned compensation included as a separate
component of shareholders' equity to be expensed over the four- year service
period on a straight line basis. During the years ended December 31, 2005 and
2004, the Company reversed $1.21 million and $0.41 million, respectively, of
unearned compensation towards forfeiture of restricted stock on account of
termination of employees and expensed $1.59 million and $0.83 million,
respectively, as compensation cost on account of these stock grants.

The recipients are also eligible for dividends declared on their restricted
stock. The dividends paid on shares of unvested restricted stock are charged to
compensation cost. For the years ended December 31, 2005 and 2004, the Company
recorded $0.48 million and $0.05 million, respectively, as compensation cost for
dividends paid on shares of unvested restricted stock.

For the restricted stock issued during the year ended December 31, 2005 the
dividend will be accrued and paid subject to the same restriction as the
restriction on transferability.


                                       93

<PAGE>

14.  COMMITMENTS & CONTINGENCIES

     Syntel's subsidiaries have commitments for capital expenditures (net of
     advances) of $2.9 million primarily related to the technology Campus being
     constructed at Pune, India, as of December 31, 2005.

     The Company and its subsidiaries are parties to litigation and claims,
     which have arisen, in the normal course of their activities. Although the
     amount of the Company's ultimate liability, if any, with respect to these
     matters cannot be determined with reasonable certainty, management, after
     consultation with legal counsel, believes that the resolution of such
     matters will not have a material adverse effect upon the Company's
     consolidated financial position.

     Syntel India's operations are carried out from their development
     centers/units in Mumbai forming part of a Special Economic Zone ('SEZ') and
     in Chennai and Pune, which are registered under the Software Technology
     Parks ('STP') scheme. Under these schemes the registered units have export
     obligations, which are based on the formula provided by the
     notifications/circulars issued by the STP and SEZ authorities from time to
     time. The consequence of not meeting the above commitments would be a
     retroactive levy of import duty on items previously imported duty free for
     these units. Additionally the respective authorities have rights to levy
     penalties for any defaults on a case-by-case basis. The Company is
     confident of meeting these obligations.

15.  EMPLOYEE BENEFIT PLANS

     Provident Fund Contribution expense recognized by Syntel India was $ 0.66
     million; $0.5 million and $0.2 million for the years ended December 31,
     2005, 2004 and 2003, respectively.

     Expense recognized by Syntel India under the Gratuity Plan was $ 0.47
     million; $0.02 million and $0.3 million for the years ended December 31,
     2005, 2004 and 2003, respectively.

16.  ALLOWANCES FOR DOUBTFUL ACCOUNTS

     The movement in the allowance for doubtful accounts for the years ended
     December 31, 2005, 2004 and 2003 is summarized as follows:

<TABLE>
<CAPTION>
                                2005     2004      2003
                               ------   ------   -------
                                    (In thousands)
<S>                            <C>      <C>      <C>
Balance, beginning of year     $1,213   $  809   $ 3,551
Provisions (reductions), net    1,564      400      (493)
Write-offs                       (202)     (27)   (2,267)
Others                             --       31        18
                               ------   ------   -------
Balance, end of year           $2,575   $1,213   $   809
                               ------   ------   -------
</TABLE>


                                       94

<PAGE>

17.  SEGMENT REPORTING

     The Company has adopted SFAS No. 131, "Disclosures about Segments of an
     Enterprises and Related Information", which requires reporting information
     about operating segments in annual financial statements. It has also
     established standards for related disclosures about its business segments
     and geographic areas. Operating segments are defined as components of an
     enterprise about which separate financial information is available. This
     information is reviewed and evaluated regularly by the management, in
     deciding how to allocate resources and in assessing the performance.

     The Company is organized geographically and by business segment. For
     management purpose, the Company is primarily organized on a worldwide basis
     into four business segments:

          -    Application outsourcing,

          -    e-Business,

          -    TeamSourcing; and

          -    Business Process outsourcing (BPO).

     These segments are the basis on which the Company reports its primary
     segment information to management.

     Through Application Outsourcing, the Company provides higher-value
     applications management services for ongoing management, development and
     maintenance of customers' business applications.

     Through e-Business, the Company provides development and implementation
     services for a number of emerging and rapidly growing high technology
     applications, including Web development, Data Warehousing, e-commerce, CRM,
     Oracle, and SAP; as well as partnership agreements with software providers.

     Through TeamSourcing, the Company provides professional information
     technology consulting services directly to customers on a staff
     augmentation basis. TeamSourcing services include systems specification,
     design, development, implementation and maintenance of complex information
     technology applications involving diverse computer hardware, software, data
     and networking technologies and practices.

     Through BPO, Syntel provides outsourced solutions for a client's business
     processes, providing them with the advantage of a low cost position and
     process enhancement through optimal use of technology. Syntel uses a
     proprietary tool called IdenteonTM to assist with strategic assessments of
     business processes and identifying the right ones for outsourcing.

     The accounting policies of the segments are the same as those presented in
     Note - 2. Management allocates all corporate expenses to the segments. No
     balance sheet/identifiable assets data is presented since the Company does
     not segregate its assets by segment.


                                       95

<PAGE>

<TABLE>
<CAPTION>
                                          2005       2004       2003
                                        --------   --------   --------
                                                (In Thousands)
<S>                                     <C>        <C>        <C>
Net Revenues
   Applications Outsourcing             $171,331   $143,007   $136,424
   e-Business                             31,210     29,249     33,795
   TeamSourcing                           16,953     12,480      9,288
   BPO                                     6,695      1,837         --
                                        --------   --------   --------
                                         226,189    186,573    179,507
Gross Profit
   Applications Outsourcing               72,411     62,696     62,282
   e-Business                              9,687     11,302     14,389
   TeamSourcing                            4,886      4,598      1,137
   BPO                                     4,162        857         --
                                        --------   --------   --------
                                          91,146     79,453     77,808
Selling, general and administrative
   expenses                               44,917     36,999     28,278
Reduction in reserve requirements for
   Metier transaction                         --         --       (882)
                                        --------   --------   --------
INCOME FROM OPERATIONS                  $ 46,229   $ 42,454   $ 50,412
                                        ========   ========   ========
</TABLE>


     The Company's largest customer in 2005, 2004 and 2003 was American Express,
     which was the only customer who accounted for revenues in excess of 10% of
     total consolidated revenues. Revenue from this customer was approximately
     $36.2 million, $29.4 million and $28.8 million, contributing approximately
     16%, 16% and 16% of total consolidated revenues during 2005, 2004 and 2003,
     respectively. At December 31, 2005 and 2004 accounts receivable, from this
     customer were $1.1 million and $1.5 respectively. All revenue from this
     customer was generated in the Applications Outsourcing segment.


                                       96

<PAGE>

18.  GEOGRAPHIC INFORMATION

     Customers of the Company are primarily situated in the United States. Net
     revenues and net income (loss) from each geographic location were as
     follows:

<TABLE>
<CAPTION>
                                               2005       2004       2003
                                            ---------   --------   --------
                                                     (In thousands)
<S>                                         <C>         <C>        <C>
Net revenues
   North America, primarily United States   $ 205,376   $167,240   $163,121
   India                                      113,571     90,230     71,823
   UK                                          12,119     13,410     15,303
   Far East, primarily Singapore                1,090      1,501        907
   Germany                                      1,540      2,692        720
   Mauritius                                      931         --         --
   Inter-company revenue elimination
      (primarily India)                      (108,438)   (88,500)   (72,367)
                                            ---------   --------   --------
   Net revenues                             $ 226,189   $186,573   $179,507
                                            =========   ========   ========
Net income (loss)
   North America, primarily United States   $   9,394   $ 10,459   $  6,650
   India                                       19,737     28,831     33,168
   UK                                           1,667      1,732        895
   Far East, primarily Singapore                   27        194       (114)
   Germany                                       (472)      (242)      (295)
   Mauritius                                      (32)        --         --
                                            ---------   --------   --------
   Net Income                               $  30,321   $ 40,974   $ 40,304
                                            =========   ========   ========
Assets, December 31
   North America, primarily United States   $ 107,143   $110,613   $ 99,740
   India                                       58,815    106,014     75,754
   UK                                          10,019      8,892      9,015
   Far East, primarily Singapore                  555        560         80
   Germany                                      1,136        889        609
   Mauritius                                   20,493         --         --
                                            ---------   --------   --------
      Total assets                          $ 198,161   $226,968   $185,198
                                            =========   ========   ========
</TABLE>


                                       97

<PAGE>

19.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Selected financial data by calendar quarter were as follows:

<TABLE>
<CAPTION>
                                                First     Second    Third     Fourth
                                               Quarter   Quarter   Quarter   Quarter   Full Year
                                               -------   -------   -------   -------   ---------
                                                     (In thousands, except per share data)
<S>                                            <C>       <C>       <C>       <C>       <C>
2005

Net revenues                                   $50,732   $54,677   $58,501   $62,279    $226,189
Cost of revenues                                29,704    32,754    35,298    37,287     135,043
                                               -------   -------   -------   -------    --------
   Gross profit                                 21,028    21,923    23,203    24,992      91,146

Selling, general and administrative expenses    11,165    10,699    10,533    12,520      44,917
                                               -------   -------   -------   -------    --------
   Income from operations                        9,863    11,224    12,670    12,472      46,229

Other income, principally interest               1,136       708       810     1,938       4,592
                                               -------   -------   -------   -------    --------
   Income before income taxes                   10,999    11,932    13,480    14,410      50,821

Provision for income taxes                       2,005     2,246     1,741    14,508      20,500
                                               -------   -------   -------   -------    --------
   Net income                                  $ 8,994   $ 9,686   $11,739   $   (98)   $ 30,321
                                               =======   =======   =======   =======    ========
Earnings per share, diluted (a)                $  0.22   $  0.24   $  0.29   $  0.00    $   0.75
                                               =======   =======   =======   =======    ========
Weighted average shares outstanding, diluted    40,526    40,570    40,669    40,838      40,651
                                               =======   =======   =======   =======    ========
2004

Net revenues                                   $45,089   $45,846   $46,602   $49,036    $186,573
Cost of revenues                                26,085    26,234    27,014    27,787     107,120
                                               -------   -------   -------   -------    --------
   Gross profit                                 19,004    19,612    19,588    21,249      79,453

Selling, general and administrative expenses     8,839     8,822     8,850    10,488      36,999
                                               -------   -------   -------   -------    --------
   Income from operations                       10,165    10,790    10,738    10,761      42,454

Other income, principally interest                 996       357       753     1,667       3,773
                                               -------   -------   -------   -------    --------
   Income before income taxes                   11,161    11,147    11,491    12,428      46,227

Provision for (benefit from) income taxes        1,839     1,742      (402)    2,074       5,253
                                               -------   -------   -------   -------    --------
   Net income                                  $ 9,322   $ 9,405   $11,893   $10,354    $ 40,974
                                               =======   =======   =======   =======    ========
Earnings per share, diluted (a)                $  0.23   $  0.23   $  0.29   $  0.26    $   1.01
                                               =======   =======   =======   =======    ========
Weighted average shares outstanding, diluted    40,614    40,510    40,355    40,416      40,469
                                               =======   =======   =======   =======    ========
</TABLE>

a)   Earnings per share for the quarter are computed independently and may not
     equal the earnings per share computed for the total year.


                                       98

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.   Description
-----------   -----------
<S>           <C>
3.1       Amended and Restated Articles of Incorporation of the Registrant filed
          as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
          the quarterly period ended June 30, 2005, and incorporated herein by
          reference.

3.2       Bylaws of the Registrant filed as an Exhibit to the Registrant's
          Quarterly Report on Form 10-Q for the quarterly period ended March 31,
          2005, and incorporated herein by reference.

10.1      Line of Credit Agreement, dated August 31, 2002, between the
          Registrant and Bank One, Michigan filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2002, and incorporated herein by reference.

10.2      Lease, dated October 24, 2001, between Big Beaver / Kilmer Associates
          L.L.C. and the Registrant filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2002, and
          incorporated herein by reference.

10.3      Indentures of Lease entered into between the President of India and
          Syntel Limited (formerly known as Syntel Software Pvt. Ltd.) on
          various dates in 1992 and 1993 for the Mumbai Global Development
          Center and filed as an Exhibit to the Registrant's Registration
          Statement on Form S-1 dated June 6, 1997, and incorporated herein by
          reference.

10.4      Rental Agreement, dated February 24, 1997, between Syntel Limited
          (formerly known as Syntel Software Pvt. Ltd.) and the Landlords for
          the Chennai Global Development Center, filed as an Exhibit to the
          Registrant's Registration Statement on Form S-1 dated June 6, 1997,
          and incorporated herein by reference.

10.5*     1997 Stock Option and Incentive Plan, (Amended and Restated) filed as
          an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the
          quarterly period ended September 30, 2005 and incorporated herein by
          reference.

10.6*     Employee Stock Purchase Plan, filed as an Exhibit to the Registrant's
          Registration Statement on Form S-1 dated June 6, 1997, and
          incorporated herein by reference.

10.7*     Form of Stock Option Agreement, filed as an Exhibit to the
          Registrant's Current Report on Form 8-K dated June 2, 2005, and
          incorporated herein by reference.

10.8*     Incentive Restricted Stock Grant Agreement (Amended and Restated),
          filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q
          for the quarterly period ended September 30, 2005, and incorporated
          herein by reference.

10.9*     Restricted Stock Grant Agreement for Non-Employee Directors.

10.10     Amendment to Credit Agreement dated August 25, 2003, between the
          Registrant and Bank One, NA filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2003, and
          incorporated herein by reference.

10.11     Amendment to Credit Agreement dated August 19, 2004, between the
          Registrant and Bank One, NA filed as an Exhibit to the Registrant's
          Annual Report on Form 10-K for the year ended December 31, 2004, and
          incorporated herein by reference.

10.12     Amendment to Credit Agreement dated August 23, 2005, between the
          Registrant and JPMorgan Chase Bank, N.A., successor in interest to
          Bank One, NA.

10.13     Leave and License Agreement, dated June 11, 2004, between Lake View
          Developers and Syntel Sourcing Pvt. Ltd. filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.

10.14     Lease Deed, dated September 23, 2004 between Arihant Foundation and
          Housing Ltd. and Syntel Limited filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.

10.15     Lease Deed, dated October 6, 2004, between Arihant Foundation and
          Housing Ltd. and Syntel Limited filed as an Exhibit to the
          Registrant's Annual Report on Form 10-K for the year ended December
          31, 2004, and incorporated herein by reference.

14        Code of Ethical Conduct filed as an Exhibit to the Registrant's Annual
          Report on Form 10-K for the year ended December 31, 2004, and
          incorporated herein by reference.

21        Subsidiaries of the Registrant.

23        Consent of Independent Registered Public Accounting Firm.

31.1      Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2      Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32        Section 1350 Certification of Chief Executive Officer and Chief
          Financial Officer
</TABLE>


                                       99