<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    FORM 20-F

       [ ]      REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
                    (g) OF THE SECURITIES EXCHANGE ACT OF 1934
                                        or
       [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended March 31, 2002
                                        or
       [X]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
            For the transition period from April 1, 2002 to June 30, 2002

                        Commission file number: 001-15919

                         SILVERLINE TECHNOLOGIES LIMITED
              (Exact Name of Registrant as Specified in Its Charter
               and Translation of Registrant's Name Into English)

                                Republic of India
                                (Jurisdiction of
                         Incorporation or Organization)

                              Kolshet Road, Dhokali

                           Thane (West), India 400 607

                                 91-22 533-8160
                    (Address of Principal Executive Offices)

 Securities registered or to be registered pursuant to Section 12(b) of the Act

         Title of each class           Name of each exchange on which registered
Equity Shares represented by American
 Depositary Shares and evidenced by            The New York Stock Exchange
    American Depositary Receipts

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

                                      None

        Securities for which there is a reporting obligation pursuant to
                            Section 15(d)of the Act:

                                      None

    Indicate the number of outstanding shares of each of the issuer's classes
            of capital or common stock as of the close of the period
                          covered by the annual report:

Equity Shares, par value Rs. 10......................................107,854,884
                                   (as of March 31, 2002)

Indicate by check mark whether the registrant (1) has filed all reports required
   to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
        registrant was required to file such reports), and (2) has been
           subject to such filing requirements for the past 90 days.

                                  Yes  X  No ___
                                      ---

      Indicate by check mark which financial statement item the registrant
                             has elected to follow:

                              Item 17 ___ Item 18  X
                                                  ---

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                          <C>
PART I                                                                         2

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS...............  2

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.............................  2

ITEM 3.  KEY INFORMATION.....................................................  2
         A.  Selected Financial Data.........................................  2
         B.  Capitalization and Indebtedness.................................  5
         C.  Reasons for the Offer and Use of Proceeds.......................  5
         D.  Risk Factors....................................................  5

ITEM 4.  INFORMATION ON THE COMPANY.......................................... 31
         A.  History and Development of the Company.......................... 31
         B.  Recent Developments............................................. 31
         C.  Business Overview............................................... 33
         D.  Organizational Structure........................................ 46
         E.  Property, Plants and Equipment.................................. 47

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................ 48
         A.  Operating Results............................................... 48
         B.  Liquidity and Capital Resources................................. 61
         C.  Research and Development, Patents and Licenses.................. 65
         D.  Trend Information............................................... 66

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................... 68
         A.  Director and Senior Management.................................. 68
         B.  Compensation.................................................... 70
         C.  Board Practices................................................. 71
         D.  Employees....................................................... 72
         E.  Share Ownership................................................. 74

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS................... 78
         A.  Major Shareholders.............................................. 78
         B.  Related Party Transactions...................................... 79
         C.  Interests of Experts and counsel................................ 81

ITEM 8.  FINANCIAL INFORMATION............................................... 82
         A.  Consolidated Statements and Other Financial Information......... 82
         B.  Significant Changes............................................. 91

ITEM 9.  OFFER AND LISTING DETAILS........................................... 93
         A.  Market Information.............................................. 93
         B.  Plan of Distribution............................................ 95
         C.  Markets......................................................... 95
         D.  Selling Shareholders............................................ 95
         E.  Dilution........................................................ 96
         F.  Expense of the Issue............................................ 96
</TABLE>

<PAGE>

<TABLE>
<S>                                                                           <C>
ITEM 10. ADDITIONAL INFORMATION..............................................  96
         A.  Share Capital...................................................  96
         B.  Memorandum and Articles of Association..........................  96
         C.  Material Contracts.............................................. 104
         D.  Exchange Controls............................................... 104
         E.  Foreign Direct Investment....................................... 104
         F.  Dual Fungibility................................................ 105
         G.  Taxation........................................................ 106
         H.  Dividend and Paying Agents...................................... 114
         I.  Statement by Experts............................................ 114
         J.  Documents on Display............................................ 114
         K.  Subsidiary Information.......................................... 115

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK........... 115

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.............. 115

PART II                                                                       115

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................... 115

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
         OF PROCEEDS......................................................... 115

ITEM 15. CONTROLS AND PROCEDURES............................................. 117

ITEM 16. Reserved............................................................ 117

PART III                                                                      117

ITEM 17. FINANCIAL STATEMENTS................................................ 117

ITEM 18. FINANCIAL STATEMENTS................................................ 118

ITEM 19. EXHIBITS............................................................ 119
</TABLE>

                                       ii

<PAGE>

                                  INTRODUCTION

         In this Annual Report, the "Company," "Silverline," "we," "us" and
"our" refer to Silverline Technologies Limited and its subsidiaries. References
to the "ADSs" are to our American Depositary Shares.

         We prepare consolidated financial statements in Indian rupees. Such
consolidated financial statements have been translated into United States
dollars in accordance with U.S. GAAP, and as so translated are referred to
herein as the "Consolidated Financial Statements." In this Annual Report,
references to "Rs." are to Indian rupees and references to "$" and "U.S.
dollars" are to United States dollars. On January 31, 2003, the commercial
exchange rate (buy) was Rs.47.90 = $1.00 and on March 31, 2002 and June 30, 2002
such commercial exchange rates were Rs.48.89 and Rs.48.95 to one v.s. dollar. In
India, we are required to file our accounts with the fiscal year ended on March
31.

         This Annual Report contains forward-looking statements that involve
risks and uncertainties. We use words such an "anticipates," "believes,"
"plans," "expects," "future," "intends" and similar expressions to identify such
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this Annual
Report. Our actual results could differ materially from those anticipated in
these forward-looking statements for many reasons, including the risks faced by
us described below under the caption "Risk Factors" and elsewhere in this Annual
Report.

         Although we believe that the expectations reflected in such
forward-looking statements are reasonable at this time, we can give no assurance
that such expectations will prove to be correct. Given these uncertainties,
readers are cautioned not to place undue reliance on such forward-looking
statements. Important factors that could cause actual results to differ
materially from our expectations are contained in cautionary statements in this
Annual Report, including, without limitation, in conjunction with the
forward-looking statements included in this Annual Report and specifically under
Item 3.D, "Risk Factors."

         All subsequent written and oral forward-looking statements attributable
to Silverline are expressly qualified in their entirety by reference to these
cautionary statements.

         This is our annual report for the fiscal year ended March 31, 2002 and
a transition report for the period from April 1, 2002 to June 30, 2002.
Following our fiscal year ended December 31, 2000, we changed our fiscal year
end from December 31 to March 31, and filed a transition report on Form 20-F for
the three month period ended March 31, 2001 together with our annual report on
Form 20-F for the fiscal year ended December 31, 2000. Subsequently, on April
30, 2002, we changed our fiscal year end to June 30.

         References to "fiscal" years means, with respect to fiscal 2002 and
fiscal 2001, the 12-month period ended March 31, 2002 and 2001, respectively,
and with respect to all other fiscal years, the 12-month period ended December
31 of the year in question.

<PAGE>

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

A.   Selected Financial Data

     The consolidated statements of operations data for the fiscal years ended
December 31, 1999 and 2000 and the consolidated balance sheet data as of
December 31, 1999 and 2000, have been derived from our consolidated financial
statements included elsewhere in this annual report which have been audited by
Deloitte Haskins & Sells (a member firm of Deloitte Touche Tohmatsu),
independent auditors. The consolidated statements of operations data for the
fiscal years ended March 31, 2001 and 2002 and the consolidated balance sheet
data as of March 31, 2001 and 2002 have been derived from our consolidated
financial statements included elsewhere in this report which have been audited
by Ram Associates, independent auditors. The consolidated statement of
operations data for the year ended December 31, 1998 and the consolidated
balance sheet data as of December 31, 1998 were derived from the unaudited
consolidated financial statements, which are not included in this annual report
that were prepared in accordance with Indian GAAP and have been recast in
accordance with U.S. GAAP. The unaudited consolidated financial statements have
been prepared on substantially the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for these periods. Our financial
statements are prepared in Indian rupees and for U.S. GAAP purposes are
translated into U.S. dollars using the average monthly exchange rate for
revenues and expense and the exchange rate at the end of the reporting period
for assets and liabilities. The following selected consolidated financial data
reflects our financial position, results of operations and cash flows, including
Silverline Technologies, Inc., a Delaware corporation, which we acquired on
December 28, 1999. Because Silverline Technologies, Inc. had been under common
control with us, the acquisition was accounted for in a manner similar to a
pooling of interests. See note 1 to consolidated financial statements. The March
31, 2001, 2002 and unaudited three month stub period ended June 30, 2002
information is derived from unaudited financial information contained elsewhere
in this Form 20-F. Following our fiscal year ended December 31, 2000, we changed
our fiscal year end from December 31 to March 31, and filed a transition report
on Form 20-F for the three month period ended March 31, 2001 together with our
annual report on Form 20-F for the fiscal year ended December 31, 2000.
Subsequently, on April 30, 2002, we changed our fiscal year end to June 30, and
we are filing a transition report for the transition period from April 1, 2002
to June 30, 2002 together with this annual report for the fiscal year ended
March 31, 2002. In order to provide comparable financial statements, the Company
has included in this report, and its independent auditors Ram Associates have
consolidated, the audit of the financial statements of our company for the
fiscal year ended March 31, 2001.

                                        2

<PAGE>

Statement Data:

<TABLE>
<CAPTION>
                                                                                        Three Months ended
                                                  Year ended December 31                     March 31,          Year ended March 31,
                                         ---------------------------------------      ----------------------  ----------------------
                                              1998         1999           2000           2000       2001        2001        2002
                                         ---------------------------------------      ----------------------  ----------------------
<S>                                      <C>              <C>            <C>           <C>        <C>         <C>          <C>
Statement of Operations Data:              (in thousands, except per share data)
Revenues................................    $60,219       $87,577       $141,956       $30,998  $  41,225     $152,183    $142,913
Cost of revenues sold...................     31,273        49,446         76,644        16,112     30,442      90,974       78,941
                                            -------       -------       --------       -------  ---------    --------     --------
Gross profit............................     28,946        38,131         65,312        14,886     10,783      61,209       63,972
                                            -------       -------       --------       -------  ---------    --------     --------
Operating expenses:
Selling, general and administrative
 expenses...............................     11,316        13,141         31,316         5,688     27,055      52,683       57,706
Stock-based compensation................         --           532          1,635           862         30         803           95
Depreciation and amortization...........      4,415         4,095          6,378           939      1,023       4,722        5,075
                                            -------       -------       --------       -------  ---------    --------     --------
Total operating expenses................     15,731        17,768         39,329         7,489     28,108      58,208       62,876
                                            -------       -------       --------       -------  ---------    --------     --------
Operating income........................     13,215        20,363             --            --    (17,325)      3,001        1,096
Other income (expense), net.............       (895)       (1,380)         3,817          (284)      (593)      3,508       (3,106)
                                            -------       -------       --------       -------  ---------    --------     --------
Income before income taxes and
 extraordinary item.....................     12,320        18,983         29,800         7,113    (17,918)      6,509       (2,010)
Provision for income taxes..............      1,482         2,808          2,676         1,230        639       2,086           22
                                            -------       -------       --------       -------  ---------                 --------
Income before extraordinary item........     10,838        16,175         27,124         5,883    (18,557)      4,423       (2,032)
Extraordinary item (net of taxes).......         --           375             --            --     95,675     (95,674)      52,576
                                            -------       -------       --------       -------  ---------    --------     --------
Net income (Loss).......................    $10,838       $15,800       $ 27,124       $ 5,883  $(114,232)   $(91,251)    $(54,608)
                                            =======       =======       ========       =======  =========    ========     ========
Earnings per equity share
  Basic:
    Income before extraordinary items...    $  0.26       $  0.28       $   0.39       $  0.09  $    0.06    $   0.06     $  (0.02)
    Extraordinary items.................         --       $ (0.01)            --            --         --    $  (1.25)    $  (0.60)
    Net income..........................    $  0.26       $  0.27       $   0.39       $  0.09  $    0.06    $  (1.19)    $  (0.62)
  Diluted:
    Income before extraordinary items...    $  0.19       $  0.25       $   0.39       $  0.09  $    0.06    $   0.06     $  (0.02)
    Extraordinary items.................         --       $ (0.01)            --            --         --    $  (1.25)    $  (0.58)
    Net income..........................    $  0.19       $  0.24       $   0.39       $  0.09  $    0.06    $  (1.19)    $  (0.60)
Earnings per ADS
  Basic:
    Income before extraordinary items...    $  0.52       $  0.56       $   0.78       $  0.18  $    0.12    $   0.12     $  (0.04)
    Extraordinary items.................         --       $ (0.02)            --            --         --    $  (2.50)    $  (1.19)
    Net income..........................    $  0.52       $  0.54       $   0.78       $  0.18  $    0.12    $  (2.38)    $  (1.23)
  Diluted:
    Income before extraordinary items...    $  0.38       $  0.50       $   0.78       $  0.18  $    0.12    $   0.12     $  (0.04)
    Extraordinary items.................         --       $ (0.02)            --            --         --    $  (2.50)    $  (1.16)
    Net income..........................    $  0.38       $  0.48       $   0.78       $  0.18  $    0.12    $  (2.38)    $  (1.20)
Weighted average equity shares used in
computing
  earnings per equity share
  Basic.................................     42,450        57,150         42,450        64,500     76,659      76,659       88,631
  Diluted...............................     56,314        65,596         62,289        66,297     76,659      76,659       90,876
ADSs used in computing earnings per ADS
  Basic.................................     21,225        28,575         21,225        32,250     38,329      38,329       44,315
  Diluted...............................     28,157        32,798         31,145        33,149     38,329      38,329       45,438
  Dividends per share...................    $  0.03/(1)/  $  0.04/(1)/  $   0.03/(1)/       --         --          --           --


<CAPTION>
                                                Three Months ended
                                                June 30, (unaudited)
                                            --------------------------
                                              2001             2002
                                            ---------        --------
<S>                                         <C>              <C>
Statement of Operations Data:
Revenues................................     45,565           27,169
Cost of revenues sold...................     25,958           16,957
                                            -------          -------
Gross profit............................     19,607           10,212
                                            -------          -------
Operating expenses:
Selling, general and administrative
 expenses...............................     11,593            8,850
Stock-based compensation................         25               37
Depreciation and amortization...........      5,794            3,245
                                            -------          -------
Total operating expenses................     17,412           12,132
                                            -------          -------
Operating income........................      2,195           (1,920)
Other income (expense), net.............     (1,006)          (1,508)
                                            -------          -------
Income before income taxes and
 extraordinary item.....................      1,189           (3,428)
Provision for income taxes..............        485               --
                                            -------          -------
Income before extraordinary item........        704           (3,428)
Extraordinary item (net of taxes).......          0               --
                                            -------          -------
Net income (Loss)...............            $   704          $(3,428)
                                            =======          =======
Earnings per equity share
  Basic:
    Income before extraordinary items...       0.01            (0.04)
    Extraordinary items.................         --               --
    Net income..........................       0.01            (0.04)
  Diluted:
    Income before extraordinary items...       0.01            (0.04)
    Extraordinary items.................         --               --
    Net income..........................       0.01            (0.04)
Earnings per ADS
  Basic:
    Income before extraordinary items...       0.02            (0.02)
    Extraordinary items.................         --               --
    Net income..........................       0.02            (0.02)
  Diluted:
    Income before extraordinary items...       0.02            (0.02)
    Extraordinary items.................         --               --
    Net income..........................       0.02            (0.02)
Weighted average equity shares used in
computing
  earnings per equity share
  Basic.................................     85,654           94,166
  Diluted...............................     86,393           94,166
ADSs used in computing earnings per ADS
  Basic.................................     42,827           47,083
  Diluted...............................     43,196           47,083
  Dividends per share...................         --               --
</TABLE>

/(1)/ Dividends paid for the twelve months ended March 31.

                                        3

<PAGE>

Balance Sheet Data:

<TABLE>
<CAPTION>
                                                                       At March 31,            At June 30,
                                                                                  -
                                                                  ----------------------  ----------------------
                                 1998        1999        2000        2001        2002        2001        2002
                              ----------  ----------  ----------  ----------  ----------  ----------  ----------
<S>                           <C>         <C>         <C>         <C>         <C>         <C>         <C>
Cash and cash equivalents....  $ 12,528    $ 20,662    $ 11,512    $ 9,150    $  1,894    $  5,605    $  1,357
Working capital..............    21,783      29,075      86,859     (5,241)    (45,321)      2,801     (62,024)
Total assets.................    69,275      87,646     234,736    222,460     195,858     210,553     180,892
Long-term debt (net of
current portion).............     5,510         317          30      6,642          63      10,340          63
Total shareholders' equity...    43,280      68,640     189,394    115,183      88,814     118,568      77,658
Amount of capital stock......    13,238      18,306      20,250     22,926      27,487      22,926      27,488
</TABLE>

Exchange Rate Information

     The table below provides the following information for the years indicated
concerning the number of Indian rupees for which one U.S. dollar could be
exchanged:

     .    the noon buying rate at each year end;

     .    the average of the noon buying rates on the last day of each month
          during each year;

     .    the high noon buying rate during the year; and

     .    the low noon buying rate during the year.

     The noon buying rate is the U.S. dollar buying rate in the City of New York
for cable transfers in Indian rupees at noon as certified for customs purposes
by the Federal Reserve Bank of New York. Such rates are provided solely for your
convenience and should not be construed as a representation that rupee amounts
actually represent such dollar amounts or that such rupee amounts could have
been, or could be, converted into dollars at that rate or at any other rate. We
do not use such rates in the preparation of our consolidated financial
statements included elsewhere herein. See the notes to our consolidated
financial statements included elsewhere in this annual report.

<TABLE>
<CAPTION>
     Year                         Year End        Average        High          Low
     ----                         --------        -------        ----          ---
     <S>                          <C>             <C>           <C>           <C>
     1997                          Rs 39.30       Rs 36.53      Rs 39.30      Rs 35.72
     1998                             42.52          41.43         42.65         38.80
     1999                             43.51          43.20         43.59         42.50
     2000                             46.75          45.00         46.82         43.59
     2001                             48.34          47.23         48.53         46.25
     2002                             48.04          48.68         49.31         47.66
</TABLE>

     The following table provides information regarding the high and the low
noon buying rate for each of the previous six completed months of 2002.

                                        4

<PAGE>

     Month                                                 High          Low
     -----                                                 ----          ---
     August 2002                                         Rs 48.94      Rs 48.20
     September 2002                                         48.80         48.11
     October 2002                                           48.66         48.05
     November 2002                                          48.63         47.90
     December 2002                                          48.55         47.66
     January 2003                                           48.22         47.59


     On January 31, 2003, the noon buying rate was Rs. 47.90 to $1.00.


B.   Capitalization and Indebtedness

     Not applicable.

C.   Reasons for the Offer and Use of Proceeds

     Not applicable.

D.   Risk Factors

     Investing in our American Depository Shares, or ADSs, Global Depository
Shares, or GDSs, and equity shares involves a high degree of risk and
uncertainty. You should carefully consider the risks and uncertainties described
below before investing in our ADSs, GDSs or equity shares. If any of the
following risks actually occurs, our business, prospects, financial condition
and results of operations could be harmed. In that case, the value of our ADSs,
GDSs and equity shares could decline, and you could lose all or part of your
investment.


                      Risk Factors Related to Our Business

We experienced a substantial net loss in fiscal 2002 and the three months ended
June 30, 2002.

     We have incurred substantial consolidated losses and negative cash flows
from operations in each of the last two twelve-month fiscal years ended March
31, 2001 and 2002, and in the three months ended June 30, 2002. We may continue
to incur substantial losses and negative cash flows for the foreseeable future.
We had consolidated net losses of approximately $54.61 million and $3.4 million
for fiscal 2002 and the three months ended June 30, 2002, as compared to a
consolidated net loss of $91.25 million and a consolidated net profit of $0.7
million for the 12 month period ended March 31, 2001 and three months ended June
30, 2001. It is possible that we may never again achieve profitability. Even if
we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future. Our future
performance will depend, in part, on the amount and rates of growth in our net
revenue from our various businesses, and on our ability to control our operating
expenses, which may increase as we implement our new business strategy. If
revenues do not grow at anticipated rates, or if our operating expenses exceed
expectations or cannot be adjusted in response to slower revenue growth, it
could have a material adverse effect on our business.

                                        5

<PAGE>

We may be unable to continue as a going concern unless we raise additional
capital in the future.

     Due to our operating losses and lack of cash flow from operations, our
consolidated working capital surplus of $86.8 million as of December 31, 2000
was reduced to a consolidated working capital deficit of $109.1 million as of
March 31, 2002. As a result, we need to raise additional funds in order to
conduct our business and prospects. The failure to raise additional funds may
prevent us from implementing our business strategy, which would materially and
adversely affect our business and prospects. Currently, we depend upon revenues
from operations and offerings of our equity and debt securities. In May 2002,
HSBC Bank, a lender to our company, issued a notice to recall its line of credit
amounting to approximately $27 million, and instituted legal proceedings against
the Company. For a description of such legal proceedings and the Company's
settlement discussions with HSBC, please see "Item 8 - Financial Information -
Consolidated Statements and Other Financial Information - Legal Proceedings."
There can be no assurance that we will achieve projected revenues, that our bank
credit facilities will be renewed or disputes related to them settled or
otherwise resolved in a manner favorable to our company, or that additional bank
borrowings will be available to us on commercially attractive terms or at all.
In addition, there can be no assurance that the costs actually incurred to
operate our business will not exceed our budget. In addition, if we expand our
operations or add services or other capabilities presently contemplated, either
alone or with a strategic partner, revenues from operations and available bank
borrowings will be insufficient to meet our capital requirements for such
expansion. If we are unable to obtain additional funds on acceptable terms or at
all, we would be unable to complete any such expansion as planned and our
business and financial condition would be materially and adversely affected.
There is no assurance that any additional financing will be available on
commercially attractive terms, in a timely fashion, in sufficient amounts, or at
all.

     Any additional equity financing may be on terms that dilute the value of
our company for our existing shareholders, including holders of our American
Depositary Shares. In addition, new securities may contain certain rights,
preferences or privileges that are senior to those of our ordinary shares and
American Depositary Shares. Debt financing, if available, may involve
restrictive covenants which limit our operating flexibility.

     As discussed in Note 1 to our financial statements, there are existing
uncertain conditions that we face relative to capital raising activities. These
conditions include uncertainty over whether the business can continue as a going
concern. There can be no assurance that the Company can continue as a going
concern. Accordingly, our independent auditors have included an explanatory
paragraph in their report on our financial statements for the fiscal year ended
March 31, 2002, which describes that there are substantial doubts as to our
ability to continue as a going concern.

Our revised business strategy of Business Process Outsourcing and IT Enabled
Services may not be successful.

     In July 2002, we implemented new business strategies which focus on
providing Business Process Outsourcing (BPO) and IT Enabled Services (ITES). We
will continue to provide applications development and software consulting
services. We may not be able to successfully execute our new business strategy.
Even if we successfully execute this new business strategy, there can be no
assurance that such strategy will improve our operating results.

                                        6

<PAGE>

Furthermore, other conditions may exist such as increased competition, reduction
in demand for such services, the continuance of the current economic downturn
and future economic downturns which may offset any improved operational results
that are attributed to our revised business strategy.

Our new business strategy will strain our resources if our services are not
received favorably by consumers and businesses.

     The pursuit of our new BPO and ITES business strategies will place a
significant strain on our managerial, operational and financial resources. We
will need to improve our financial and management controls, reporting systems
and procedures. We also will have to expand, train and manage our work force for
marketing, sales and technical support, and product development, and manage
multiple relationships with various customers, strategic partners and other
third parties. We will need to continually expand and upgrade our technology
infrastructure and systems and ensure continued high levels of service, speedy
operation, and reliability. In addition, we will have to improve our methods for
measuring the performance and commercial success of our different services to
better respond to customer demands and to better determine which products and
services can be developed most profitably.

Our brand and reputation will suffer if our services are not favorably received
by the marketplace.

     We plan to introduce our new BPO and ITES services in order to generate
additional revenues, attract more customers and respond to competition. There
can be no assurance that we will be able to offer our current and new services
in a cost-effective or timely manner or that our efforts will be successful.
Furthermore, any new services we launch that are not favorably received by
customers could damage our reputation or our brand name. Expansion of our
services may also require significant additional expenses and development and
may strain our management, financial and operational resources. Our inability to
generate sufficient revenues from our new services would have a material adverse
effect on our business, financial condition and results of operations.

Maintaining our brand recognition and reputation are essential to our success.

     We believe that our success will depend to a large degree on our ability to
successfully maintain our brand recognition and reputation. In order to maintain
a good reputation and strong brand name, we will need to continue to invest
heavily in our marketing and maintain high standards for actual and perceived
quality, usefulness, reliability, security and ease of use of our services. Even
if we continue to provide good service to our customers, factors outside of our
control, including security breaches and software defects, could affect our
brand and the perceived quality of our services, thereby damaging our business.

     We may need to raise additional funds on either a debt or equity basis for
future acquisitions. Fund raising on an equity basis would dilute the ownership
interests of all of our stockholders.

     We currently have no agreements in place for any material investment or
acquisition. Any proposed acquisition, investment, strategic partnership or
other venture outside India may

                                        7

<PAGE>

require us to obtain the prior approval of the Reserve Bank of India and the
Government of India. No assurance can be given that any such approval can be
obtained or, if obtained, will be on terms satisfactory to our company.

We face risks associated with potential acquisitions, investments, strategic
partnerships or other ventures, including whether any such transactions can be
identified and completed on favorable terms and whether any acquired business
can be successfully integrated.

     We may not identify suitable acquisition, investment or strategic
partnership candidates, or if we do identify suitable candidates, we may not be
able to complete those transactions on commercially acceptable terms or at all.
If we acquire another company or its assets, we could have difficulty in
assimilating that company's personnel, operations, technology and software, even
if we are successful in raising the full amount we are seeking in our offering
on the Luxembourg Stock Exchange. In addition, the key personnel of the acquired
company may decide not to work for us. If we make other types of acquisitions,
we could have difficulty in integrating the acquired products, services or
technologies into our operations. These difficulties could disrupt our ongoing
business, distract our management and employees and increase our expenses.

If we are unable to effectively manage our growth, our business may be
disrupted.

     Through March 31, 2002, we had experienced significant growth both in
revenues and in the number of our employees. As of March 31, 2002, we employed
approximately 1,729 employees worldwide in eight software development facilities
(five of which are in India), as compared to approximately 800 employees in
three facilities as of January 1, 1999. However, since March 31, 2002, we have
experienced significant reductions in revenues and other problems which have
affected our financial performance and business prospects. As a result, since
March 31, 2002, we have laid off or transferred, through transitions of existing
business lines, substantial portions of our workforce, which has reduced the
number of our employees and our payroll significantly. Nevertheless, we intend
to grow again in the foreseeable future and to pursue existing and potential
market opportunities, including acquisitions, in an effort to implement and
establish our new BPO and ITES lines of business and to grow our existing
business lines. Any such growth will place significant demands on our management
and operational resources, particularly with respect to:

     .    recruiting and retaining skilled technical, marketing and management
          personnel in an environment where there is intense competition for
          skilled personnel;

     .    managing a larger, more complex international organization;

     .    expanding our facilities and other infrastructure in a timely manner
          to accommodate a significantly larger global workforce;

     .    maintaining high employee utilization rates, which is important to
          cover our relatively high fixed costs;

     .    expanding our sales and marketing efforts;

                                        8

<PAGE>

     .    providing adequate training and supervision to maintain our high
          quality standards; and

     .    strengthening our financial and management controls in a manner
          appropriate to a larger enterprise and preserving our culture, values
          and entrepreneurial environment.

     In order to manage our growth effectively, we must concurrently develop
more sophisticated operational systems, procedures and controls, both in India
and elsewhere. If we fail to develop these systems, procedures and controls on a
timely basis our business, operational results and financial position may be
adversely affected.

Our services and products may not be compatible with future industry standards.

     Failure to respond successfully to technological developments, or to
respond in a timely or cost-effective manner, will harm our business and
operational results. Our success is dependent upon our ability to offer services
that keep pace with continuing changes in technology, evolving industry
standards and changing client preferences. In addition, we must hire, train and
retain technologically knowledgeable professionals so they can fulfill the
increasingly sophisticated and changing needs of our clients.

The merger between Silverline Acquisition Corp. and SeraNova, Inc. may cause
SeraNova, Inc. to become liable for taxes payable by its former parent,
Intelligroup, Inc. in connection with its spin-off of SeraNova, Inc.

     On July 5, 2000, Intelligroup, Inc., the former parent of our wholly owned
subsidiary, SeraNova, Inc., distributed its SeraNova, Inc. stock pro rata to its
shareholders in a transaction that was treated by both companies as a tax-free
spin-off pursuant to section 355 of the Internal Revenue Code. However, Section
355(e) of the Code provides that if one of the companies involved in the
spin-off is acquired or sold within a two-year period after the spin-off, the
spin-off may become taxable to Intelligroup, Inc. SeraNova, Inc. has agreed to
indemnify Intelligroup, Inc. for any tax liabilities which Intelligroup, Inc.
may incur if the completion of the merger between Silverline Acquisition Corp.
and SeraNova, Inc., were to result in the spin-off being deemed a taxable
transaction. If Section 355(e) were to apply, it is possible that Intelligroup,
Inc. would be liable for tax in an amount as high as $60-$65 million, to which
would be added interest and, possibly, penalties. SeraNova, Inc. is obligated to
indemnify Intelligroup, Inc. for those amounts. We received an opinion dated
March 2, 2001 from a major accounting firm to the effect that Section 355(e)
should not apply to the distribution of the stock of SeraNova, Inc. by
Intelligroup, Inc. by reason of our acquisition of the stock of SeraNova, Inc.
The opinion was based on, among other things, factual representations by
SeraNova, Inc. and Intelligroup, Inc. and on proposed Treasury regulations in
existence at that time. The opinion is not binding on the Internal Revenue
Service and has no other official status or effect of any kind. To the extent
the facts and other assumptions on which the opinion relies may be incorrect,
its conclusion similarly may be incorrect. Moreover, the opinion has not been
updated to reflect changes in proposed or temporary Treasury regulations.
Finally, the opinion of the accounting firm is solely for our benefit and the
benefit of our shareholders and may not be relied upon by any other person or
entity, without the accounting firm's prior written consent.

The success of our business is substantially dependent on the services of a few
management personnel whose loss could seriously affect our business.

     Our success depends significantly upon the continued contributions of
members of our board of directors, senior management and other key technical and
managerial personnel, including Ravi Subramanian, our founder, Chairman and
Chief Executive Officer, and Krishna K. Subramanian, or Vice Chairman, Acting
Chief Financial Officer and Executive for International Initiatives, and K.
Kulathu Subramanian, our Wholetime Director. We have not entered into employment
agreements with any members of our senior management. We do not restrict any of
our senior management and other key personnel from leaving our company and
competing against us. In view of the financial position of the Company the loss
of any such persons could have a material adverse effect on our business,
operational results and financial position.

We give no assurance that the products and services offered to us do not
infringe any third party's intellectual property rights.

     Substantial litigation regarding intellectual property rights exists in the
software industry. In connection with our operations, we license software from,
and develop software applications for, various third parties. Although we
believe that our services do not infringe upon the intellectual property rights
of third parties, we cannot assure you that such a claim will not be asserted
against us in the future by third parties from whom we have licensed software or
by other third parties who allege misappropriation of their proprietary products
and processes. We expect that the risk of infringement claims against us and our
clients will increase if more of our competitors are able to obtain patents for
software products and processes.

     Further, a portion of our business involves the development of software for
clients. Ownership of client-specific software is generally retained by the
client. We cannot assure you

                                        9

<PAGE>

that our clients or assignees will not assert intellectual property rights
against us and that disputes will not arise that will affect our ability to
resell or reuse these applications.

     We typically indemnify our clients against intellectual property claims.
The issuing of a claim against us or our clients could result in litigation. We
may not prevail in the litigation or be able to obtain a license for the use of
any infringed intellectual property from a third party on commercially
reasonable terms. Any of these claims, regardless of their outcome, could harm
our reputation, damage our relationships with clients, result in substantial
costs to us, divert management's attention from our operations and could
adversely affect our business, results of operation and financial condition.

The laws of India do not protect intellectual property rights to the same extent
as those of the United States and other countries. We may be unsuccessful in
protecting such rights.

     Intellectual property rights are important to our business. We rely on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect our intellectual property.
Although proprietary rights in the products created by us for customers are
generally retained by the customer, we typically retain the ownership of the
source code.

     Our efforts to protect our intellectual property may not be adequate to
prevent misappropriation of proprietary information or to ensure that we will be
able to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. Our competitors may independently develop similar
technology or duplicate our products or services. Unauthorized parties may
infringe upon or misappropriate our products, services or proprietary
information. In addition, the laws of India do not protect proprietary rights to
the same extent as laws in certain other countries such as the United States,
and the global nature of the Internet makes it difficult to control the ultimate
destination of our products and services. For example, Indian statutory law does
not currently protect service marks. The misappropriation or duplication of our
intellectual property could disrupt our ongoing business, distract our
management and employees, reduce our revenues and increase our expenses. In the
future, litigation may be necessary to enforce our intellectual property rights
or to determine the validity and scope of the proprietary rights of others. Any
such litigation could be time-consuming and costly.

     We could be subject to intellectual property infringement claims as the
number of our competitors grows and our service and product offerings overlap
with our competitors' offerings, or if our competitors are able to obtain
patents for software products and processes. Defending against these claims,
even if such claims are not meritorious, could be expensive and divert our
attention from our business. If we are adjudged liable to third parties for
infringing their intellectual property rights, we could be required to pay
substantial damage awards and be forced to cease selling the applications that
contain the infringing technology and develop non-infringing technology or
obtain a license. We may also be forced to develop non-infringing technology. We
may be unable to develop non-infringing technology or obtain a license on
commercially reasonable terms, or at all.

                                       10

<PAGE>

Our business, operating results and financial condition could be adversely
affected if we are unable to collect the significant accounts receivable we have
generated.

     We generate significant accounts receivable in connection with providing
information technology services to our customers. Our accounts receivable
decreased from approximately $58.40 million at March 31, 2000 to approximately
$41.89 million at March 31, 2002. Our accounts receivable as a percentage of
revenues was approximately 29% and 38% as of March 31, 2002 and 2001,
respectively. In recent years the average number of days that our accounts
receivable were outstanding have increased in each of the 31-60,61-90 and 90+
day aging periods. If one or more of our major customers refused to pay or were
to become insolvent or otherwise unable to pay for the services provided by us,
our business, operating results and financial condition would be adversely
affected.

Our revenues are difficult to predict and can vary significantly from period to
period, which adversely affects our ability to manage our business in accordance
with our operating budgets.

     We derive our revenue for services provided on a project-by-project basis.
While these projects vary in size, scope and duration, typically, a limited
number of projects account for a significant percentage of our revenues.
Therefore, our revenues are difficult to predict for any particular period. This
adversely affects our ability to manage our business in accordance with our
operating budgets.

A significant portion of our business is subject to fixed-price contracts, any
of which could prove to be unprofitable for us.

     We offer a significant portion of our services on a fixed-price basis,
rather than on a time-and-material basis. Increasing competition for our
services may result in our clients being able to demand that an increasing
amount of our services be provided on a fixed-price basis. Although we use
specified software engineering processes and our past project experience to
reduce the risks associated with estimating, planning and performing fixed-price
projects, we bear the risk of costs overruns, completion delays and wage
inflation in connection with these projects. Our business, operational results
and financial position would suffer if, with respect to a fixed-price project,
we fail to either:

     .    estimate accurately the resources and time required or the future
          rates of wage inflation and currency exchange rates; or

     .    complete our contractual obligations within the time frame committed.

If the Internet does not continue to develop, our business would be adversely
affected because we intend to expand our Internet and e-commerce services.

     Our future success is substantially dependent upon the continued growth in
the use of the Internet. The adoption of the Internet for commerce and
communications, particularly by individuals and companies that have historically
relied upon alternative means of commerce and communication, generally requires
the understanding and acceptance of a new way of conducting business and
exchanging information. In particular companies that have already invested
substantial resources in other means of conducting commerce and exchanging
information may be particularly reluctant or slow to adopt a new, Internet-based
strategy that

                                       11

<PAGE>

may take their existing personnel and infrastructure obsolete. To the extent
that businesses do not consider the Internet a viable commercial medium, our
client base for Internet related work may not grow.

If we lose our major clients or if they significantly reduce the amount of work
they give us, or, due to current financial challenges, decide to restructure or
terminate business, our revenues and operating income would be materially
adversely affected.

         We expect that a small number of clients will continue to account for a
substantial portion of our revenues for the foreseeable future. As a result, if
we were to lose our major clients or if our major clients significantly reduce
their volume of business with us or cancel or restructure or defer a significant
project with us, our business, operational results and financial position would
be materially adversely affected.

         Industries in which we have focused our sales and marketing efforts,
including business information services, financial services and
telecommunications industries, have begun consolidating and we believe that this
trend will continue for a number of years. Industry consolidation or the
formation of joint ventures or alliances could reduce our client base, and
consequently the demand for our services. A merger or acquisition of one of our
clients may result in the elimination, postponement or reduction of outsourced
information technology services utilized by the newly combined company.

We face intense competition that could cause our revenues and margins to suffer.

         The market for information technology services is rapidly evolving and
highly competitive. We expect that competition to intensify. We face competition
in India and elsewhere from a number of companies.

         Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater name recognition than we have. Some
of these competitors currently provide a broader range of services than we
provide.

         Moreover, major U.S. and international companies are increasingly
moving a portion of their operations to India and other overseas locations. Part
of our competitive advantage has historically been a labor cost advantage
relative to service providers in the United States, Japan and Western Europe.
Labor costs in India are presently increasing at a significantly faster rate
than those in the United States, Japan, Western Europe, China and the
Philippines. These factors will reduce the advantages that we have in terms of a
cost effective, highly skilled pool of information technology professionals and
will mean we may become less competitive over time. As a result, we may not be
able to compete successfully against our present or future competitors.

Barriers to entry to our business are low and new competitors could cause our
revenues and margins to decline.

         There are relatively low barriers to entry into our business. Many U.S.
companies have already established offshore locations in India, either
independently or through joint ventures with our domestic competitors. There are
no significant barriers to preclude or inhibit these

                                       12

<PAGE>

companies from expanding their Indian information technology service operations.
In addition there are no barriers to prevent other U.S. or other foreign
companies from establishing similar operations in India or elsewhere. Our
competitors may independently develop and patent or copyright technologies that
are superior or substantially similar to our technologies. The costs of
developing and providing information technology professional services are low.
Therefore, we expect to continue to face additional competition from new
entrants into our markets, which could materially adversely affect our business.

If we cannot keep pace with rapidly changing technology, industry standards and
client preferences, we will lose business.

         Our market and the enabling technologies used by our clients are
characterized by rapid technological change. Failure to respond successfully to
these technological developments, or to respond in a timely or cost-effective
way, will result in serious harm to our business and operating results. Our
success will depend, in part, on our ability to offer services that keep pace
with continuing changes in technology, evolving industry standards and changing
client preferences. In addition, we must hire, train and retain technologically
knowledgeable professionals so they can fulfill the increasingly sophisticated
and changing needs of our clients.

There are risks associated with acquisitions we have made of which we may make
in the future which could negatively impact our business prospects.

         A key element of our growth strategy is the acquisition of businesses
and assets, and the establishment of strategic partnerships and joint ventures,
that complement our current businesses. There can be no assurance that we will
be able to identify attractive acquisition, strategic partnership or joint
venture opportunities, obtain financing for acquisitions on satisfactory terms
or successfully acquire identified targets. In addition, there can be no
assurance that we will be successful in integrating acquired businesses into our
existing operations or that such integration will not result in unanticipated
liabilities or unforeseen operational difficulties, which may be material, or
requires a disproportionate amount of management's attention. Such acquisitions
may result in our company incurring additional indebtedness or issuing shares of
our capital stock. In addition, there can be no assurance that competition for
acquisition opportunities in the industry will not escalate, thereby increasing
the cost to us of making acquisitions or causing us to refrain from making
further acquisitions. In addition, the terms and conditions of future debt
instruments, if available, may impose, restrictions on us that, among other
things, restrict our ability to make acquisitions.

         In addition, our senior management faces the difficult and potentially
time consuming challenge of implementing uniform standards, controls, procedures
and policies throughout our Indian, United States and other foreign offices,
particularly in connection with the integration of acquired businesses. Any
difficulties in this process could disrupt our ongoing business, distract our
management, result in the loss of key personnel or clients, increase our
expenses and otherwise adversely affect our business.

The global nature of our operations could strain our management resources.

         Our software development facilities and offices are currently located
in India, the United States, Canada, Hong Kong, and the U.K. Our directors,
executive officers and other key employees

                                       13

<PAGE>

are similarly dispersed. In addition, we maintain offices in Mumbai, Piscataway,
New Jersey, London and Hong Kong, to market and sell our services in those
countries and surrounding regions. This geographic dispersion requires
significant management resources that our more locally based competitors do not
need to devote to their operations.

         In addition, we may develop new software development facilities or
sales offices in other regions. The development of new infrastructure could have
a material adverse effect on our business, operational results and financial
position.

         In addition, our lack of experience with facilities outside of India
and the United States subjects us to further risk with regard to:

         .    foreign regulation, including restrictions against the
              repatriation of earnings, acquisitions, export requirements and
              restrictions, and multiple and possibly overlapping tax
              structures; and

         .    overseas facilities management, including difficulties relating to
              administering our business globally and managing foreign
              operations and currency exchange rate fluctuations.

         If we fail to manage our geographically dispersed organization, our
business, operational results and financial position may be materially adversely
affected.

Litigation may harm our financial strength and reduce our profitability.

          We are a defendant in actions arising out of our credit facilities
with our lenders, certain investments made by third parties in our company,
among other things, and in connection with our acquisition of SeraNova, Inc. and
other matters. These lawsuits are costly to litigate and we will not be able to
recover our costs. If we are not successful in defending these lawsuits, we will
incur substantial litigation costs in connection to their defense and in paying
any damage awards ordered by the courts. Similarly, if we settle any of these
matters, we may be forced to pay substantial sums of money. Litigation costs,
damages or settlement payments could divert our financial resources from
building and operating our business. Furthermore, we expect these lawsuits to
continue to consume substantial amounts of our financial and managerial
resources. As a result, our business financial condition, results of operations
and business prospects could be materially and adversely affected. For more
information about the litigation we are currently involved in, please see "Item
8 - Financial Information - Consolidated Statements and Other Financial
Information - Legal Proceedings."

Public announcements of litigation events may hurt our stock price

         During the course of the lawsuits we are involved in, there may be
public announcements of the results of hearings, motions, and other interim
proceedings or developments in the litigation. If securities analysts or
investors perceive these results to be negative, it could have a substantial
effect on the trading price of our securities, including our ADSs.

                                       14

<PAGE>

Our inability to hire new qualified information technology professionals or
retain our information technology professionals would hinder our ability to grow
and serve our clients.

         There is intense global competition, particularly in the United States
and India, for information technology professionals with the skills necessary to
perform the services we offer. The intense level of competition among
information technology companies means that skilled personnel are frequently
being recruited by other companies offering attractive compensation packages. In
addition, approximately 15% of our client contracts permit our clients to hire
our information technology professionals as full time employees who may compete
with us without penalty. We believe that we will need to significantly expand
our information technology professional workforce, including our number of
project managers, for our e-business and other services. We may not be able to
hire and retain an adequate number of qualified personnel, or be able to do so
in a cost-effective manner. Any inability to hire, manage and retain additional
qualified personnel, or any increase in our attrition rates, will impair our
ability to bid for or obtain new projects, implement our new business strategy
and expand our business which would adversely affect our business, results of
operations and financial condition.

         Further, we may not be able to redeploy and retrain our professionals
to keep pace with continuing changes in information technology, evolving
standards and changing client preferences. Our failure to attract and retain
skilled personnel to the extent required would have a material adverse effect on
our business, results of operation and financial condition.

Labor costs could adversely affect our competitive position and reported
results.

         Our labor costs in India have historically been significantly lower
than labor costs in the United States for comparably skilled information
technology professionals. However, our labor costs in India for information
technology professionals increased by approximately 23% and 25% during the
periods from 2000 to 2001 and from 1999 to 2000, respectively, while during the
same periods our labor costs in the United States increased only 10% in total
for comparably skilled professionals. During fiscal 2002, our labor costs in the
U.S. and India did not materially increase, primarily as a result of the global
economic downturn and in the information technology sector in particular. If the
global economy, and in particular the information technology sector, recovers
and strengthens, we expect to experience intense global competition for
information technology professionals in the U.S. and India, which could
significantly increase our labor costs. These labor cost increases could have an
adverse effect on our profit margins and may erode our competitive advantage.

Our quarterly operating results are subject to fluctuations and if we fail to
meet the expectations of securities analysts or investors in any quarter, our
Equity Share and ADS price could decline significantly.

         Our quarterly operating results have historically fluctuated and may
fluctuate significantly in the future. Accordingly, our operating results in a
particular period are difficult to predict and may not meet the expectations of
securities analysts or investors. If this were to occur, the share price of our
equity shares and ADSs are likely to decline significantly. Factors that may
cause our operating results to fluctuate include many of the risk factors
discussed elsewhere in this annual report, and also include (but are not limited
to):

                                       15

<PAGE>

         .    the number, size, scope, timing, duration and profitability of our
              projects due to the long and unpredictable sales cycle of our
              services;

         .    the fixed nature of a significant proportion of our operating
              expenses, particularly personnel and facilities;

         .    the effect of seasonal expenditures on information technology
              solutions by our clients;

         .    the effect of seasonal hiring and training patterns, employee
              utilization rates and the time required to train and productively
              engage new employees;

         .    the proportion of services performed at client sites rather than
              at our off-shore facilities, because our profit margins for
              services performed at our off-shore facilities are higher;

         .    unanticipated increases in wage rates;

         .    our success in expanding our sales and marketing programs;

         .    currency exchange rate fluctuations and other general economic
              factors;

         .    changes in our pricing policies or those of our competitors; and

         .    unanticipated project terminations, delays or deferrals.

         Accordingly, we believe that quarter-to-quarter comparisons of our
results of operations are not necessarily meaningful. You should not rely on the
results of one quarter as an indication of our future performance.

We face intense competition that could cause our revenues and margins to suffer.

         The market for our information technology services, BPO and ITES
services is rapidly evolving and highly competitive. We expect that competition
will continue to intensify. We face competition in India and elsewhere from a
number of companies, including:

         .    Indian information technology services companies, such as HCL
              Technologies, Infosys Technologies Ltd., Satyam Computer Services
              Limited, Tata Consultancy Services and Wipro Limited;

         .    U.S. information technology services companies with off-shore
              capabilities, such as Cognizant Technology Solutions Corp.,
              Complete Business Solutions Inc. and iGate Capital Corporation;

         .    Internet professional services firms, such as AGENCY.COM Ltd.,
              Proxicom Inc., Razorfish Inc., Sapient Corp., Scient, and iXL;

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<PAGE>

         .    Systems consulting and integration firms, such as American
              Management Systems Inc., Cambridge Technology Partners Inc.,
              Computer Horizons Corp. and marchFIRST;

         .    Large international accounting firms and their consulting
              affiliates, such as Andersen Consulting LLP, Ernst & Young LLP and
              PricewaterhouseCoopers LLP;

         .    General management consulting firms, such as McKinsey & Co., Bain
              & Company and Boston Consulting Group;

         .    Outsourcing firms, such as Computer Sciences Corp., Electronic
              Data Systems Corp., International Business Machines Corp. and
              Perot Systems Corp.; and

         .    In-house information technology, BPO and ITZS departments.

         Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater name recognition than we have. Some
of these competitors currently provide a broader range of services than we
provide.

         Moreover, major U.S. and international companies are increasingly
moving a portion of their operations to India and other overseas locations. Part
of our competitive advantage has historically been a labor cost advantage
relative to service providers in the United States, Japan and Western Europe.
Labor costs in India are presently increasing at a significantly faster rate
than those in the United States, Japan, Western Europe, China and the
Philippines. These factors will reduce the advantages that we have in terms of a
cost effective, highly skilled pool of information technology professionals in
India and will mean we may become less competitive over time. As a result, we
may not be able to compete successfully against our present or future
competitors. For additional information, please see Item 4B "Business
Overview--Competition."

Our e-business and customer relationship management, BPO and ITES services
require skills and strategies different from our traditional lines of business,
and if our e-business, customer relationship management, BPO and ITES services
are not successful, we would lose opportunities to grow our business.

         Many e-business projects, particularly Internet projects as opposed to
intranet projects, require skills ranging from understanding and building
software architecture to making a client's website user-friendly and attractive.
Other skills are required to establish and maintain successful BPO and ITES
services. Many of these skills are different from the skills we have developed
to date. Also, our e-business, BPO and ITES projects require us to interact with
a broader set of decision makers, including marketing and consulting departments
within our clients. Historically, we have mostly dealt with information
technology departments. Our lack of relationships with these new decision makers
may adversely affect our ability to develop e-business projects. If we are
unable to develop or acquire these skills on a timely basis, our e-business
services may not be successful and our business, results of operations and
financial condition would be adversely affected.

                                       17

<PAGE>

Our clients may terminate projects before completion or choose not to renew
contracts, which could adversely affect our results of operations.

         Any failure to meet a client's expectations could result in a
cancellation or non-renewal of a contract. Our contracts with clients may be
terminated by our clients with or without cause, with little or no advance
notice and without penalty. Additionally, our contracts with clients typically
are limited to a specific project and not any future work. There are also a
number of factors other than our performance which are not within our control
that could cause the loss of a client. Our clients may demand price reductions,
change their outsourcing strategy by moving more work in-house, or replace their
existing software with packaged software supported by licensors, any of which
would adversely affect our business, results of operation and financial
condition.

We are not insured against all potential losses and we could be seriously harmed
and our reputation damaged by unexpected liabilities.

         Many of our contracts involve projects that provide benefits to our
clients' businesses that may be difficult to quantify. Any failure in a client's
system could adversely affect our reputation and result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. In addition, our failure to meet client expectations or to deliver
error free services may result in adverse publicity for us and damage to our
reputation. Our business, results of operations and financial condition would be
materially adversely affected if any of these developments were to occur.

We have been materially adversely affected by the economic downturn in the
United States.

         We believe that the economic slowdown in the U.S. has been one of the
factors which have negatively affected, and will continue to negatively affect
for the foreseeable future, our revenue growth and operating results. The
economic slowdown in the U.S. has adversely impacted the growth of spending on
information technology by companies that operate in many industry segments,
including the insurance, banking and financial services and telecommunications
segments, which constitute a significant portion of our customer base.
Consequently, these companies have cut their information technology spending and
have postponed decisions regarding new information technology expenditures. The
decrease in our revenues or margins or increase in the number of days it takes
us to collect our accounts receivable due to the economic slowdown adversely
affects our results of operations and financial condition.

       Risks Related to Investment in Us Because We Are an Indian Company

Political instability related to the current multi-party coalition government in
India could halt or delay the liberalization of the Indian economy and adversely
affect business and economic conditions in India generally and our business in
particular.

         We are a public limited company incorporated under the laws of India.
Many of our directors and executive officers and a majority of our employees,
assets and facilities are located in India. Consequently, our financial
performance and the market price of our ADSs will be affected by political,
social and economic developments in India, including changes in exchange

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<PAGE>

rates and controls, interest rates and Indian government policies, including
taxation and foreign investment policies.

         Since 1991, the Indian government has pursued policies of economic
liberalization, including significantly relaxing restrictions on the private
sector. Nevertheless, the role of the Indian central and state governments in
the Indian economy as producers, consumers and regulators remains significant,
and is substantially larger than the role played by U.S. and Western European
governments in their own economies. The government of India has changed six
times since 1996. India's current multi-party coalition government, formed in
October 1999, has announced some policies and taken some initiatives that
support the continued economic liberalization policies that were pursued by
previous governments. We cannot assure you that these liberalization policies
will continue or that the rate of economic liberalization in India will not
decline. We also cannot assure you that Indian laws, government policies,
foreign investment restrictions, currency exchange rates and other matters
generally affecting investments in our securities will not change. Any
significant change in India's economic liberalization and deregulation policies
could materially adversely affect business and economic conditions in India
generally, and our business, results of operations and financial condition in
particular.

         In addition, financial turmoil in U.S. in 2001 and 2002 significantly
affected the world's securities markets, including in the United States and
India. Financial downturns in these countries could cause decreases in
securities prices on the United States and abroad, including the market prices
of our equity shares and the ADSs.

Regional conflicts and terrorism in South Asia could adversely affect the Indian
economy and cause our business to suffer.

         South Asia continually experiences instances of civil unrest and
hostilities among neighboring countries, including between India and Pakistan
both of which possess nuclear weapons. In April 1999 and subsequent thereto,
India and Pakistan both conducted long-range missile tests. Since May 1999,
military confrontations between India and Pakistan have occurred frequently in
the disputed Himalayan region of Kashmir, and in early 2002, tensions were
extremely high. In October 1999, the leadership of Pakistan changed as a result
of a military coup led by the military, which increased tensions between India
and Pakistan. In late 2002, there was a failed attempt to bomb the Indian
Parliament which India attributed to Pakistan. Each country has recalled its
Ambassador to the other and routinely expels the other's diplomats. India's
relations with neighboring China also are tense. Events of this nature in the
future could have a negative impact on the Indian economy and could have a
material adverse effect on the market for securities of Indian companies,
including our securities, and on the market for our services.

Because we operate a substantial part of our business in India, exchange rate
fluctuations may affect the market value of our securities independent of our
operating results.

         The exchange rate between the rupee and the U.S. dollar and the Euro
has changed substantially in recent years and may fluctuate substantially in the
future. During the period commencing January 1, 1999 and ending on June 28,
2002, the value of the rupee appreciated against the Euro by an aggregate of
approximately 0.10%. During the three-year period from September 30, 1999
through June 30, 2002, the value of the rupee declined against the U.S.

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<PAGE>

dollar by an aggregate of approximately 12.71%. Devaluation of the rupee will
result in an increase in the Company's cost to purchase certain capital
equipment denominated in U.S. dollars. In addition, the market price of our
securities could be materially adversely affected by the devaluation of the
rupee if investors analyze our results based on the U.S. dollar equivalent of
our financial condition and operational results.

         For the fiscal year ended March 31, 2002, our U.S. dollar-denominated
revenues represented approximately 86% of our total revenues. We expect that a
majority of our revenues will continue to be generated in U.S. dollars and Euro
dollars for the foreseeable future and that a significant portion of our
expenses, including personnel costs and capital and operating expenditures, will
continue to be denominated in rupees. Consequently, our operating results will
be adversely affected to the extent that the rupee appreciates against the U.S.
and Euro dollars, which is possible in light of India's current foreign exchange
balances of over $70 billion.

         Fluctuations in the exchange rate between the rupee and the U.S.
dollar/Euro will affect the U.S. dollar/Euro conversion by the depositary of any
cash dividends paid in rupees on the shares represented by our ADSs. In
addition, fluctuations in the exchange rate between the rupee and the U.S.
dollar/Euro will affect the U.S. dollar/Euro equivalent of the rupee price of
our securities on the Indian stock exchanges and, as a result, are likely to
affect the prices of our ADSs. Such fluctuations will also affect the U.S.
dollar/Euro value of the proceeds a holder would receive upon the sale in India
of any shares withdrawn from the depositary under the deposit agreement. There
can be no assurance that holders of GDSs or ADSs will be able to convert rupee
proceeds into U.S. dollars, Euros or any other currency or with respect to the
rate at which any such conversion could occur.

The Government of India has introduced measures to curtail or eliminate tax
benefits that we have historically benefited from.

         We have historically benefited from certain significant tax incentives
under Indian tax laws. As a result of these incentives, or operations have been
subject to relatively insignificant Indian tax liabilities. These tax incentives
included:

         .    a 10-year tax holiday from payment of Indian corporate income
              taxes for operation of our software development centres which are
              "Export Oriented Undertakings" or located in "Software Technology
              Parks" or "Export Processing Zones" under sections 10A and 10B of
              the Indian Income Tax Act; and

         .    an income tax deduction of 100% for profits derived from exporting
              information technology services under section 80HHE of the Indian
              Income Tax Act. We have used either of these two tax incentives
              mentioned above. Further, we are currently eligible for exemptions
              from other taxes, including customs duties.

         As a result of these tax incentives, historically our operations in
India have been subject to a relatively insignificant tax liability. We pay
corporate income tax in foreign countries on income derived from operations in
those countries.

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<PAGE>

         The Finance Act, 2000 phases out these tax benefits over the financial
years 2000-2001 to the financial year 2008-2009. Accordingly, facilities set up
on or before March 31, 2001 have a 9-year tax benefit, new facilities set up on
or before March 31, 2002 have a 8-year tax benefit and so forth, the tax
benefits would not be available to new facilities set up after March 31, 2009.
Our tax benefits extend until 2002, 2003, 2008 and 2009, respectively, for our
Mumbai (Bombay), Chennai (Madras) facility and for our new Thane and new Chennai
facilities. In addition, the new sections 10A and 10B introduced by the Finance
Act, 2000 and 2001, which replace the earlier sections 10A and 10B, restrict the
scope of the tax exemption by allowing a deduction of export income earned by
the software development centres which are "Export Oriented Undertakings" or
located in "Software Technology Parks" or "Export Processing Zones" from its
total income, as compared to the earlier total exemption which was available to
the business profits earned by them.

         Under the combined effect of the Finance Act, 2000 and 2001, Indian
software companies will lose their tax benefit with respect to a particular
software development centre if there is a change of more than 49% in their
ownership between the last date of the financial year in which that centre was
set up and the last date of any subsequent financial year. As a result,
companies are more likely to lose their tax benefits if large shareholders sell
their shares or if new shares are issued in order to raise capital, for
acquisitions or otherwise. In addition, companies are more likely to lose their
tax benefits with respect to their older facilities, because more time will have
elapsed in which to accumulate the 49% ownership change.

         Further the Finance Act, 2002 has introduced taxation on 10% of
software export profits generated from Software Technology Park, Export
Promotion Zone and Export Oriented Undertakings. This will take effect for the
fiscal year beginning April 1, 2002. Our operations from our India-based
software development, BPO and ITES centres will be affected by the provisions
introduced in the Finance Act, 2002.

Trade sanctions against India could significantly harm our business.

         In May 1998, the United States imposed economic sanctions against India
in response to India's testing of nuclear devices. The United States later
waived some of these sanctions in response to the government of India's
indication that it would sign the Comprehensive Test Ban Treaty. In April 1999,
India and Pakistan conducted long range missile tests which were met with an
expression of regret from the United States and other countries subjecting India
to additional sanctions. These sanctions, or additional sanctions, could
restrict our access to technology that is available only in the United States
and that is required to operate our business. We cannot assure you that any of
these sanctions will continue to be waived, that additional economic sanctions
of this or a similar nature will not be imposed, or that sanctions will not have
a material adverse effect on our business or on the markets for our equity
shares in India and ADSs in the United States.

The Government of India may not grant our approvals for acquisitions or
investments in non-Indian companies that we may need to grow our business.

         Under Indian law we cannot make certain acquisitions of, or investments
in, a non-Indian company without governmental approval. We cannot assure you
that the government of India

                                       21

<PAGE>

will grant the required approvals or, even if it does, that such approvals will
not have conditions attached to them that may render such acquisitions or
investments unfeasible.

         This approval process may require us to submit project and feasibility
reports and may take a significant amount of time. We may not receive
governmental approval on a timely basis, if at all. Since acquisitions and
investments are an important part or our growth strategy, our business may be
adversely affected by these approval requirements.

         Even if we are able to successfully acquire or invest in a non-Indian
company, dividends or profits realized from the acquired company may have to be
remitted to us in India within a period of 60 days from the date on which they
are declared. Further, we would be required to remit to India any entitlements
due to us by way of royalty, technical fees and other entitlements within a
period of 60 days from the date they become due from the acquired non-Indian
company. This may subject us to a risk of the depreciation of the Indian rupee
for repatriated funds.

Indian income tax surcharges and dividend taxes may adversely affect us and the
holders of our ADSs.

         The statutory corporate income tax rate in India for the year ended
March 31, 2002, is 35%, plus a 2% surcharge, resulting in an effective statutory
tax rate of 35.7%. Going forward, the statutory corporate income tax rate will
be 35%, plus a 5% surcharge, resulting in an effective statutory rate of 36.75%.
Because our Indian tax incentives do not apply to dividends we receive from
subsidiaries, such dividends will be subject to this effective statutory tax
rate, depending on the availability of foreign tax credits. Currently, our U.S.
subsidiaries are required by the government of India to remit dividends to us
which will be subject to corporate income tax plus the surcharge in India and
U.S. withholding taxes, subject to the benefits available under the U.S.-India
tax treaty and available foreign tax credits. We cannot assure you that the
Indian government will repeal or reduce the corporate tax rate and the
surcharge, or that the Indian government will not increase the tax rate and
surcharge, in the future. Any increase in the Indian corporate tax rate and
surcharge may increase our tax liabilities to the extent we receive significant
dividends from our U.S. subsidiaries.

         In addition, dividends declared, distributed or paid by us are subject
to a tax of 10.2%, including the 2% surcharge for the year ended March 31, 2002.
For the year ended March 31, 2002 and going forward, the Government of India has
cancelled all taxes on dividends declared. We cannot assure you that dividend
distribution taxes and surcharge thereon imposed by the government of India will
not be increased in the future. This tax is neither paid by shareholders nor is
it a withholding requirement, but rather it is a direct tax payable by the
corporation. We did not declared and paid any cash dividends on our equity share
in fiscal 2002. We declared 1.75 rupees (approximately $0.04) per equity share
in fiscal 2000 and 1.75 Indian rupees (approximately $0.04) per equity share in
fiscal 1999. For the financial year ended March 31, 2001, we declared a cash
dividend of 1.25 rupees (approximately $0.03) per equity share. For the
financial year ended March 31, 2002, we declared no dividends or distributions.
We cannot assure you that any future dividends will be declared or paid, or as
to the amount of those dividends. To the extent we do pay dividends these
dividends will be taxed as described above, in addition to any other tax payable
on dividends by holders of our ADSs.


                                       22

<PAGE>

Risk related to uncertainty of tax implications in India of the merger between
Silverline Acquisition Corp. and SeraNova, Inc.

         Cross border mergers and acquisitions by Indian companies such as the
acquisition of SeraNova by us and future acquisitions which we make in the U.S.
and other countries are new phenomena. There is no direct precedent in respect
of the tax implications of such transactions. Therefore, there is considerable
uncertainty regarding the issues that may be raised by the Indian tax
authorities for such transactions. Therefore, we cannot give an assurance as to
the interpretation of these transactions by the Indian tax authorities.

U.S. immigration law may restrict our ability to hire non-U.S. workers and
therefore affect our business.

         Our non-U.S. worker personnel, who are employed on temporary and
extended assignments at our offices or clients' facilities in the United States,
are required to obtain employment authorization from the U.S. Immigration and
Naturalization Service. As of March 31, 2002, approximately 35% of our personnel
in the United States were either employed pursuant to specialty occupation
("H-1B") status (525 persons) or intracompany transferee ("L-1") status (91
persons). Both H-1B and L-1 visas have maximum durations. H-1B visas may be
obtained for a maximum period of 6 years. L-1 visas may be obtained for up to 5
years for individuals with specialized knowledge and up to 7 years for
executives and managers. As a result of these time limits, we may have a
disruption with the provision of services. There may be additional delays in
staffing a project due to processing times in the adjudication of the H-1/L-1
petitions.

         Every U.S. governmental fiscal year (October 1--September 30) there is
a limit to the number of H-1B professionals that may enter the United States.
Once that limit has been reached for the fiscal year, we will not be able to
hire additional non-U.S. workers, with H-1B status, until the beginning of the
new fiscal year. In the past few years this cap has been reached prior to the
end of the fiscal year. The limited availability of H-1B visas may affect our
ability to staff projects. (The U.S. government does not place a limit on the
number of L-1 visas available each fiscal year.) Changes in the immigration laws
could also potentially have an adverse impact on

                                       23

<PAGE>

our ability to provide services to clients as well as a material and adverse
effect on our operational and financial condition.

         A significant percentage of our workforce is comprised of non-U.S.
employees. Under the American Competitiveness and Workforce Improvement Act, or
the ACWIA, companies that are dependent on H-1B employees will have to make
attestations to the Department of Labor that they are not displacing qualified
U.S. workers in favor of non-U.S. workers. As of January 19, 2001, the company
must comply with Department of Labor regulations published on December 20, 2000
that implement the American Competitiveness and Workforce Improvement Act of
1998 (ACWIA). In particular, the ACWIA requires employers to determine if they
are H-1B dependent, and if so then to comply with certain additional
attestations regarding anti-displacement and recruitment of U.S. worker
obligations.

Indian courts might not enforce judgments rendered outside of India and you may
not be able to bring an original action in India or enforce a U.S. judgment in
India, which may adversely affect your ability to sue us.

         We are a limited liability company incorporated under the laws of
India. The majority of our directors, executive officers and employees are
residents of India, where their assets and a majority of our assets also are
located. It may be difficult for you to effect service of process on these
directors, executive officers and our Indian experts. In addition, it will be
extremely difficult for you to enforce judgments obtained in the United States
in India, including judgments based on the civil liability provisions of the
federal securities laws of the United States, because there is no reciprocal
treaty between the United States and India for enforcement of judgments rendered
in the United States. As a result a judgment of a court in the United States may
be enforced in India only by a suit upon the judgment, not by proceedings in
execution. A suit upon the judgment must be brought in India within three years
from the date of the judgment. In this type of suit, a defendant can raise
defenses that the judgment:

         .    has not been pronounced by a court of competent jurisdiction;

         .    has not been given on the merits of the case;

         .    appears on its face to be founded on an incorrect view of
              international law or a refusal to recognize the law of India were
              applicable;

         .    has been obtained in proceedings opposed to natural justice;

         .    has been obtained by fraud; or

         .    is founded on a breach of law or public policy in India.

         A party seeking to repatriate any amount recovered on a foreign
judgment is required to obtain approval from the government of India. Also,
there are significant delays in obtaining resolutions of lawsuits in India. In
addition, it is highly unlikely that an Indian court would enforce a U.S.
judgment if it believed the amount of damages awarded to be excessive,
inconsistent with Indian practice or in the nature of punitive damages.

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<PAGE>

         Importantly, Indian courts will not enforce U.S. default judgments. As
a result, an Indian defendant could elect simply not to appear in any U.S.
proceeding against it, which would leave the U.S. plaintiff with a default
judgment that is unenforceable in India.

         We have also been advised by our Indian legal counsel that it is
theoretically possible that a party may file an original suit in India against
our directors, our executive officers or us that is predicated upon the
provisions of the civil liability provisions of the federal securities laws of
the United States. To our knowledge, no suit predicated on the federal
securities laws of the United States has ever been brought in India. It is
highly unlikely that a court in India would award damages on the same basis as a
U.S. court if such an action is brought in India.

The trading price of our ADSs may be materially adversely affected by exchange
rate fluctuations between the U.S. dollar and the Indian rupee.

         Fluctuations in the exchange rate between the U.S. dollar and the
Indian rupee may affect the value of your investment in our ADSs. Specifically,
as the relative value of the Indian rupee to the U.S. dollar declines, each of
the following values will also decline:

         .    the U.S. dollar equivalent of the Indian rupee trading price of
              equity shares in India and indirectly the U.S. dollar trading
              price of our ADSs in the United States;

         .    the U.S. dollar equivalent of the proceeds that you would receive
              upon the sale in India of any equity shares that you withdraw from
              the depositary; and

         .    the U.S. dollar equivalent of cash dividends, if any, paid in
              Indian rupees on the equity shares represented by the ADSs.

Our results of operations may be materially adversely affected if the Indian
rupee appreciates against the U.S. dollar.

         Although a majority of our revenues are denominated in U.S. and Euro
dollars, a portion of our expenses, including labor costs as well as capital and
operating expenditures, are incurred in Indian rupees. In the years ended March
31, 2002, 2001 and December 31, 2000, our U.S. dollar-denominated revenues
represented 20%, 89% and 99%, respectively, of our total revenues; and
rupee-denominated expenses represented 13%, 13% and 21%, respectively, of our
total expenses. We expect that, for the foreseeable future, a majority of our
revenues will continue to be generated in Euro and U.S. dollars and a portion of
our expenses will continue to be denominated in rupees. As a result, our results
of operations will be adversely affected to the extent that the rupee
appreciates against the U.S. dollar.

Your ability to sell in India any of our equity shares received upon conversion
of any ADSs may be subject to delays if approvals required from the government
of India.

         ADS holders seeking to sell in India any of our equity shares received
upon conversion of any ADSs, will require approval from the government of India
for each transaction, unless the sale of the equity shares is made on an Indian
stock exchange or in connection with an offer made under Indian regulations
regarding takeovers. We cannot guarantee that any approval will be obtained in a
timely manner or at all. Because of possible delays in obtaining requisite
approvals, investors who hold equity shares may be prevented from realizing
gains during

                                       25

<PAGE>

periods of price increases or limiting losses during periods of price declines.
For additional information, please see Item 10 "Additional Information -
Exchange Controls."

Our service delivery model is subject to potential disruption in
telecommunications and power, which would adversely affect our business.

         Our service delivery model requires us to maintain active voice, data
and video communications among our clients' offices, our facilities and our
other offices in India, Europe and the United States. Indian telecommunications
infrastructure and power delivery is generally less reliable than
telecommunications infrastructure and power delivery in the United States. Any
significant loss of, or disruption in, local utility and telecommunications
services would have a material adverse effect on our business, results of
operations and financial condition.

There may be less company information available in Indian securities markets
than securities markets in developed countries.

         There is a difference between the level of regulation and monitoring of
the Indian securities markets and the activities of investors, brokers and other
participants and that of markets in Luxembourg, the United States and other
developed economies. The Securities and Exchange Board of India (SEBI), which is
responsible for approving disclosure and other regulatory standards for the
Indian securities markets, has issued regulations and guidelines on disclosure
requirements, insider trading and other matters. There may, however, be less
publicly available information about Indian companies than is regularly made
available by public companies in developed economies.

Conditions in the Indian securities markets may affect the price or liquidity of
our securities, including the ADSs.

         Our equity shares are listed in India on The Stock Exchange, Mumbai,
the Madras Stock Exchange Ltd., Chennai and The Stock Exchange, Ahmedabad. Our
equity shares are also traded on The National Stock Exchange and most major
exchanges in India. Over 90% of recent trading in our securities has been
carried out on The Stock Exchange, Mumbai and The National Stock Exchange.

         The regulation and monitoring of Indian securities markets and the
activities of investors, brokers and other participants differs, in some cases
significantly, from those in the United States and Western European countries.
In addition, Indian stock exchanges have in the past experienced problems,
including temporary exchange closures, broker defaults, settlement delays and
strikes by brokerage firm employees, which, if these or similar problems were to
continue or recur, could affect the market price and liquidity of the securities
of Indian companies, including our equity shares and ADSs, in both domestic and
international markets. There have been several occasions when trading was
disrupted for up to five hours on The Stock Exchange, Mumbai due to power
outages.

         There have been no closures of The Stock Exchange, Mumbai and The
National Stock Exchange in response to "panic" trading or large fluctuations.
The Stock Exchange, Mumbai and the National Stock Exchange do, however, have a
specific price band for each security listed. When a price fluctuation exceeds
the specified limits of the price band, trading of the security is stopped for
that trading session. Such price volatility controls and the specific price
bands are

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<PAGE>

decided by each individual exchange and may differ from exchange to exchange. A
closure of or trading stoppage on The Stock Exchange, Mumbai and The National
Stock Exchange could adversely affect the price of the equity shares represented
by the ADSs and would consequently affect the trading price of the ADSs. In
addition, the liquidity and trading patterns of securities quoted on The Stock
Exchange, Mumbai may be substantially different from those of securities quoted
on the New York Stock Exchange. Historical trading prices, therefore, may not be
indicative of the prices at which the ADSs will trade in the future. For
additional information, please see Item 9A "Offer and Listing Details."

The inadequacy of public records in India means that you may not be able to
obtain reliable information about us.

         Information relating to litigation and bankruptcies are not on public
record in India and as a result it is difficult to obtain conclusive information
on us regarding these matters from searching public records. Even documents,
which are filed by us, may not be available for public inspection if the
Registrar of Companies believes that they have not been completely filled in.
Consequently, the information publicly available about us in India may be
inadequate and may not contain material documents. In addition, the filing
systems in the Registrar of Companies office are manual, not electronic, and
otherwise imperfect and documents filed by us may not be available or complete.

                            Risks Related to the ADSs

We were not in compliance with certain of the continued listing standards of the
New York Stock Exchange, and if we fail to correct such non-compliance, our ADSs
could be de-listed from the New York Stock Exchange.

         Due to, among other factors, the downturn in the market for information
technology services, the trading price for our ADSs on the New York Stock
Exchange (NYSE) had fallen below the $1.00 minimum requirement, and as a result,
we are not currently in compliance with the minimum share price continued
listing requirements of the NYSE. The NYSE's rules allow for a cure period of
six months, subject to certain conditions. We believe that with our new business
focus and plan, our share price will come into compliance with the NYSE's
requirements. However, if we fail to come into compliance with this continued
listing standard, or becomes non-compliant with other listing standards, our
ADSs could be de-listed from the NYSE.

         On January 21, 2003, a board of directors approved an amendment to the
exchange ratio of our American Depository Receipts. As a result, the exchange
rating of our ADSs will be changed from two underlying equity shares per ADS to
10 underlying equity shares per ADS. The change in the exchange ratio will
become effective following the completion of an amendment to our deposit
agreement with J.P. Morgan Chase, which is currently being processed, the
subsequent filing with the Securities and Exchange Commission of a Registration
Statement on Form F-6, and the submission of our application to the New York
Stock Exchange.

Pre-emptive rights in respect of the equity shares underlying our ADSs may be
unavailable to United States ADS holders, which would reduce their proportional
ownership interests in us.

         Under Indian law, prior to issuing any new equity shares, we must offer
holders of our equity shares pre-emptive rights to purchase a proportionate
number of shares to maintain their existing ownership, unless the pre-emptive
rights have been waived by three-fourths of our shareholders present and voting
at a general meeting.

         Although the government of India has begun to allow non-resident
holders to exercise pre-emptive rights, the government of India could reverse
its position in the future. In addition,

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<PAGE>

before U.S. holders may exercise pre-emptive rights, a registration statement
under the U.S. Securities Act of 1933 must be filed by the issuer and must be
effective with respect to the securities relating to such rights, unless an
exemption from the registration requirements of the Securities Act is available.

         At the time of any pre-emptive rights offering, we will evaluate the
costs and potential liabilities associated with filing a registration statement,
as well as the perceived benefits of enabling holders of the ADSs to exercise
their pre-emptive rights. We cannot assure you that we will file a registration
statement or otherwise seek the approval of the government of India.

         If in the future our ADS holders are allowed to exercise pre-emptive
rights, the equity shares may be issued to the depositary, which may sell them
for the benefit of the holders of the ADSs. We cannot assure you of the value,
if any, that the depositary would receive upon the sale of those equity shares.

         To the extent that holders of the ADSs are unable to exercise
pre-emptive rights, the proportional interests of such holders in us would be
reduced. For additional information regarding the pre-emptive rights of holders
of ADSs, please see Item 10B "Memorandum and Articles of Association."

Holders of ADSs may be restricted in their ability to exercise voting rights.

         As a holder of our ADSs, you generally will have the right under the
deposit agreement to instruct the depositary to exercise voting rights for the
equity shares represented by your ADSs.

         At our request, the depositary will mail you any notice of any
shareholders' meeting received from us, together with information explaining how
to instruct the depositary to exercise the voting rights of the securities
represented by ADSs. If the depositary receives voting instructions for a holder
of ADSs on a timely basis, it will endeavor to vote the securities representing
the holder's ADSs in accordance with those voting instructions. The ability of
the depositary to carry out voting instructions, however, may be limited by
practical and legal limitations, such as time zone differences and logistical
problems.

         We cannot assure that you will receive voting materials in time to
enable you to return voting instructions to the depositary in a timely manner.
If no voting instructions have been received by the depositary, the depositary
will appoint a person designated by us as proxy to vote the securities. For
additional information regarding the voting rights of holders of equity shares,
please see "Item 10B "Memorandum and Articles of Association--Voting Rights."

We may experience volatility in our share price, which could negatively affect
your investment.

         The trading price of our ADSs and equity shares has been volatile.
Indian securities markets are substantially smaller than the securities markets
in the United States and Western Europe and have been extremely volatile from
time to time. The market for technology and Internet-related companies also has
been extremely volatile and fluctuations often have been unrelated to the
operating performance of particular companies. These fluctuations may adversely
affect the trading price of our shares, regardless of our actual operating
performance.

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Requirements under Indian law relating to the payment of dividends may reduce
the value of the equity shares underlying the ADSs.

         Under current Indian laws, we may pay cash dividends out of our profits
in the financial year in which the dividend is declared or out of our
undistributed profits from previous financial years. A financial year beings on
April 1 and ends on March 31 in the immediately following year.

         With respect to equity shares issued by our company during a particular
financial year of our company, cash dividends declared and paid for that year
were prorated from the date of issuance to the end of that financial year.
However, pursuant to a letter dated February 18, 2001 issued by the Securities
and Exchange Board of India, shares issued by Indian companies whose shares are
being traded compulsorily in dematerialized form in India, should be pari-passu
in all respects so that the same ISIN number as the other outstanding shares can
be allotted to the newly issued shares. The shares issued by our company are
being traded compulsorily in dematerialized form and hence, shares issued during
the course of a financial year after February 18, 2001 will be treated in the
same way as the equity shares already issued by our company in the past.
Therefore, dividends on such shares will be paid for the full year even though
they have been issued during the course of the year. In addition, to the extent
that we distribute cash dividends, if exchange rates fluctuate during a time
when the depositary cannot convert Indian rupees into U.S. dollars, you may lose
some or all of the value of the distribution.

The market for the ADSs may be illiquid which could increase the volatility in
our ADS price and reduce the price at which you could sell the ADSs.

         There is no public market for our equity shares in the United States.
Although the holders of the ADSs are entitled to withdraw the equity shares
underlying their ADSs from the depositary at any time under current Indian law,
withdrawn equity shares may not be re deposited with the depositary. Therefore,
the number of outstanding ADSs will decrease to the extent that any equity
shares are withdrawn from the depositary, which may adversely affect the market
price and the liquidity of the market for the ADSs.

           Risks Related to Our Corporate Charter and Share Ownership

Compliance with Indian law could delay or prevent an acquisition or merger of
our company, even if such a transaction would be beneficial to our shareholders.

         Certain provisions under Indian law may have the effect of delaying,
preventing or making more difficult an acquisition or merger of our company,
even if the acquisition or merger is beneficial to our shareholders. Indian law
requires any person who acquires 5% or more of our equity shares to disclose the
same to each stock exchange on which our shares are listed in India.

         In addition, if any person or its associates acquires more than 15% of
our equity shares, that person must publicly offer to acquire another 20% of our
equity shares. However, no public offer is required if a person who holds
between 15% and 75% of our equity shares does not acquire more than an
additional 5% of our equity shares in any 12-month period. These requirements do
not apply to the acquisition of ADSs, but will apply upon conversion of ADSs
into equity shares.

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         Our charter documents provide for a staggered board of directors, which
means a potential acquirer would have to wait more than two years before being
able to elect enough directors to take over control of our Board of Directors.
We currently have seven directors, and our charter documents allow our board to
appoint additional directors, up to a maximum of twelve total directors, without
shareholder approval.

         These provisions could delay or prevent a change in control of our
company, impede a business combination or discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of our company
and thus could have a material adverse effect on the market price of the ADSs.

Most of our ADSs issued in the merger with SeraNova, Inc. are eligible for
immediate resale; substantial sales of ADS shares could cause the market price
to fall.

         Following the merger with SeraNova, Inc. we had 85,654,884 equity
shares outstanding, including approximately 12,454,884 equity shares represented
by ADSs issued in connection with the merger. If former SeraNova, Inc.'s
shareholders sell a large number of our ADSs in the public market, the trading
price of our ADSs could decrease dramatically. Further, any perception that
these sales could occur could also result in a dramatic decline in the trading
price of our shares. These sales also might make it more difficult for us to
sell equity or equity-related securities in the future at a time and price that
we deem appropriate.

         The former directors and executive officers of SeraNova, Inc., Messrs.
Rajkumar Koneru, Nagarjun Valluripalli, Ravi Singh and Rajan Nair, agreed that
without our written consent, they will not sell on the New York Stock Exchange
the ADSs they receive in the merger between SeraNova, Inc. and Silverline
Acquisitions Corp. for a period of one year from the effective date of the
merger ending March 5, 2002. Nevertheless, most of our ADSs issued in the
merger, most of the our equity shares, and all the ADSs issued prior to the
merger are currently, freely tradable. Sales of substantial amounts of our
equity shares and ADSs, or the availability of such shares for sale, could
materially adversely affect the market price of our ADSs. Further, 1,329,454
ADSs held by Messrs. Rajkumar Koneru and Nagarjun Valluripalli are pledged with
Bank of America against their margin accounts. Recently, Bank of America sold
these ADSs or the underlying shares to recover the amount due to them.

Our lenders may be entitled to appoint directors to our Board of Directors.

         Our articles of association give our lenders, as well as some Indian
public financial institutions, the right to appoint their own nominees to our
Board of Directors. A lender may only exercise this right to the extent
permitted under its loan or other agreement with us. We have been advised by our
Indian counsel that this provision is common in the articles of association of
Indian companies.

         Our articles of association provide that any directors nominated to our
Board of Directors by lenders will not be subject to re-election. Indian law
limits the number of directors not subject to re-election to be one-third of the
total number of directors on our Board of Directors not subject to re-election
include directors nominated by lenders, as well as wholetime directors and
managing directors. Wholetime directors work full time for us and are appointed
for a fixed term that may be determined by our Board of Directors. Our existing
Board of Directors includes

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one wholetime director who has been appointed for a fixed term of five years
expiring in November 2003, and one managing director. Accordingly, the most
directors our lenders could currently nominate to our Board of Directors is
one-third of the total size of our Board of Directors. Our articles of
association provide that our maximum Board size is 12 directors, however, this
number does not include the nominee directors, ex-officio directors, special
directors, directors nominated by debenture holders and mortgage holders.

     We do not currently have any lender nominated directors on our Board of
Directors, and our existing loan agreements do not currently grant our lenders
the right to nominate directors. However, we may in the future grant our lenders
this right, especially since it is common practice in India for Indian public
financial institutions and other lenders to have nominee rights.

ITEM 4. INFORMATION ON THE COMPANY

A.   History and Development of the Company

     We were incorporated under the laws of the Republic of India on April 13,
1992 for an indefinite term. We are a public limited liability company and
operate under the Indian Companies Act, 1956, as amended. Our principal place of
business are located at Kolshet Road, Dhokali, Thane (West), India 400607 and
our telephone number is 91-22-22049161. Our registered office is at 1405 Maker
Chamber V, Nariman Point, Mumbai 40002, India. Our address on the internet is
www.silverline.com. The information on our website is not incorporated by
reference into, and does not constitute a part of, this annual report.

     We are an India-based provider of information technology services. We
provide consulting services for customized projects, architect and implement
open client server systems, perform offshore development, maintenance and
support, and re-engineer and maintain legacy systems. We provide e-business
solutions, customer relationship management, legacy transformation, and
application development, maintenance and outsourcing. In July 2002, we
implemented new business strategies which focus on providing Business Process
Outsourcing (BPO) and IT Enabled Services (ITES). We will continue to provide
applications development and software consulting services. The Company is in
negotiations with major BPO and ITES vendors in the United States and Europe and
expects to begin outsourcing of new projects in these areas from its Software
Technology Park Centers in Chennai and Thane, India in 2003, although there can
be no assurances. From April 2000 until March 2001 we consummated the six
transactions described below.

    o. In April 2000, our wholly owned Canadian subsidiary, Silverline
       Technologies Canada, Inc., acquired CIT Canada, a software development
       firm in Toronto, Canada, for approximately $4.2 million in cash.

    o. In September 2000, Silverline Technologies, Inc. acquired Megasys
       Software Services, Inc., an information technology services provider
       based in Columbus, Ohio, for $6.22 million in cash.

    o. In September 2000, Silverline Technologies, Inc. invested $6.5 million
       for a 36% equity interest in Expo 24-7.com, a U.K.-based eCommerce
       company, and $5.0 million for a 15% equity interest in Unified Herbal, a
       U.K.-based company.

    o. In October 2000, we acquired our second largest customer, Sky Capital
       International Ltd., a Hong Kong based information technology consulting
       company, for $22.0 million in cash.

    o. In August 2000, we finalized an investment and a strategic alliance
       agreement with TIS Worldwide, Inc., an e-business solutions integrator
       now known as Starpoint Solutions, Inc. ("Starpoint"), that specializes
       in delivery of Internet-based applications to help corporations
       increase and improve customer services. We invested $10 million for
       approximately 5% equity interest in Starpoint. We were to be
       Starpoint's, exclusive Indian supplier for all software development
       services for a period of three years. In January 2002, Starpoint filed
       a lawsuit against our company alleging breach of contract. In November
       2002, Silverline and Starpoint entered into a settlement agreement to
       settle the claims brought by Starpoint and the counterclaims brought
       by our company against Starpoint. For more information concerning the
       lawsuit and settlement, see "Item 8--Financial
       Information--Consolidated Statements and Other Information--Legal
       Proceedings."

    o. In March 2001, we completed a merger between SeraNova, Inc., a New Jersey
       corporation that provides Internet professional services to businesses,
       and our wholly owned subsidiary, Silverline Acquisition Corp., in
       consideration of the issue of 6,227,442 ADSs by us to the shareholders of
       SeraNova, Inc. The all-stock transaction was valued, at the time of its
       closing on March 6, 2001 at $39.24 million. Following the merger,
       SeraNova, Inc. became our wholly owned subsidiary and former SeraNova,
       Inc. shareholders, owned approximately 14.54% of our then outstanding
       equity shares.

    o. On March 6, 2002 we acquired eComServer Inc. USA, a software design and
       service company specializing in custom design interactive voice response
       solutions, in an all stock transaction valued at US$18.36 million.


B.   Recent Developments

Public Offering of Global Depositary Shares

     On November 22, 2002, we did an offering on the Luxembourg Stock Exchange
of Global Depository Shares (GDSs) represented by Global Depository Receipts.
Each GDS represents four of our Equity Shares. Net of discounts, commissions and
offering expenses, including legal fees, we will realize proceeds of
approximately $13

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million. We intend to use the net proceeds from the offering to reduce debt and
for working capital purposes. Our GDSs trade on the Luxembourg Stock Exchange
under the ticker symbol "SLVT.LX". Following the completion of the offering, we
had a total of 167,854,884 Equity Shares outstanding. For information about
certain of the uses of proceeds of the offering, see "Item 8 - Financial
Information - Consolidated Statements and Other Financial Information - Legal
Proceedings - HSBC Bank USA v. Silverline Technologies Inc., Silverline
Technologies Limited, Silverline Technologies (Canada) Inc., Silverline
Technologies UK Limited, SeraNova Inc., and Ravi Subramanian."

Transition of Certain Employees and Other Events

         We recently completed the following three transactions pursuant to
which we transitioned certain employees in order to raise cash to, among other
things, repay certain borrowings from HSBC Bank, our secured lender, and to pay
certain amounts owed to our vendors and creditors.

Transactions With Cognizant Technology Solutions U.S. Corporation

         Effective October 23, 2002, the Company and its subsidiaries
transitioned certain of their employees to Cognizant Technology Solutions U.S.
Corporation. Under the transaction, the Company terminated and Cognizant hired
employees and subcontractors based in the United States, India, and the United
Kingdom who were engaged in providing information technology services to
American Express (the "Amex Business"). The fee paid by Cognizant for the
transition was $9,786,023, of which approximately $4,603,000 was paid to HSBC
Bank to repay certain borrowings made by the Company, $388,134 was paid to the
Company's subcontractors, $331,732 was paid to certain vendors, and $497,000 was
paid to a judgment creditor. The remaining portions of the fee were used to pay
certain employee liabilities of the Company, including salaries and related
expenses.

         In addition, Cognizant entered into a three-month renewable services
agreement pursuant to which the Company will provide to Cognizant certain
hardware, software and associated information infrastructure utilized by the
Company in the Amex Business. In exchange, Cognizant will reimburse the Company
for certain of its operating costs for providing such services.

Transactions With Logic Soft, Inc.

         On November 20, 2002, the Company transitioned, effective October 15,
2002, certain of its information technology professionals to Logic Soft, Inc. In
exchange, Logic Soft paid, for the benefit of the Company, a fee of
approximately $195,952 to certain vendors and creditors of the Company.

Transactions With i-Flex Solutions Inc.

         On December 10, 2002, the Company and its subsidiaries transitioned,
effective December 4, 2002, their employees engaged in providing certain
information technology services to Citicorp and Greenpoint Mortgage to i-Flex
Solutions, Inc. In exchange, i-Flex paid, for the benefit of the Company, a fee
of approximately $425,621, and assumed certain obligations of the Company
totaling approximately $415,688, consisting primarily of certain

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<PAGE>

employee liabilities, including salaries and related expenses. Of the total fee
paid, $250,000 was paid to HSBC Bank to repay certain borrowings made by the
Company and its subsidiaries.

     In addition, the Company entered into three one-month renewable services
agreements with i-flex, pursuant to which the Company will provide to i-flex
certain software, interfaces and other infrastructure necessary to operate and
service the Citicorp and Greenpoint Mortgage accounts. In exchange for such
services, i-flex will reimburse the Company for certain of its operating costs
for providing such services.

Decrease in Value of Investment

     Due to the decline in the technology sector, the value of our investment in
TIS Worldwide, Inc., an e-business solutions integrator now known as Starpoint
Solutions, Inc. ("Starpoint"), has significantly diminished since the time we
entered into an investment and strategic alliance agreement with Starpoint in
August 2000. For more information concerning the lawsuit and settlement, see
"Item 8 - Financial Information - Consolidated Statements and Other Information
- Legal Proceedings - Starpoint Solutions Inc. v. Silverline Technologies
Limited."

C.   Business Overview

Overview

     We are an Indian provider of information technology services. We offer our
clients a broad range of these services, including application development,
migration and maintenance, e-business solutions and software consulting
services. In July 2002, we implemented new business strategies which focuses on
Business Process Outsourcing (BPO) and IT Enabled Services (ITES). We will
continue to provide applications development and software consulting services.
The Company also announced that it is in negotiations with major BPO and ITES
vendors in the United States and Europe and expects to begin outsourcing of new
projects in these areas from its Software Technology Park Centers in Chennai and
Thane, India. As a result, the Company's onsite-based activities in Piscataway,
New Jersey, will be scaled down.

     Our flexible off-shore/off-site delivery capabilities, which we use on many
of our projects, allow us to access highly skilled, relatively low cost
information technology professionals in India and to integrate our work on a
client project at one of our software development centers with our efforts at
the project site. We undertake engagements both on a project management basis,
where we have complete responsibility for managing the project, and, to a lesser
extent, on a more integrated basis where our employees work in-house for our
clients' information technology departments. Some of our project management
assignments are also done exclusively on-site at the project's location. We
believe that our services are distinguished by our proven processes and
methodologies.

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Industry Background

The Information Technology Professional Services Industry

         Worldwide demand for information technology services is growing and
certain segments within the information technology services market are
experiencing particularly strong growth. Due to the market downturn in late 2001
and 2002, companies are increasingly outsourcing their services to locations
where costs are significantly less. In addition, Information Data Corporation
predicts that the total worldwide information technology services market related
to CRM solutions will increase from $33.2 billion in 1998 to approximately $125
billion by 2004.

         Factors contributing to the growth in the information technology
services industry, as it transitions from a traditional back-office role to
becoming a key driver in competitively positioning enterprises, include:

         .    Impact of the Internet. We believe that the development of the
              Internet has resulted in increased customer expectations, reduced
              barriers to market entry, reduced costs and increased competition.
              As a result, companies are seeking to build, implement or enhance
              their existing or alternative solutions, as well as offer more
              sophisticated Internet services in order to meet customers'
              expectations, remain competitive and effectively benefit from new
              customer information. We believe that companies that are able to
              successfully develop and maintain an Internet presence will be
              able to more efficiently conduct business with their partners and
              suppliers, communicate with customers and employees, and address
              the rapidly growing, global base of business-to-customer and
              business-to-business online transactions.

         .    Competitive necessity. Deregulation, globalization and
              technological innovation are accelerating the pace of business
              competition. Companies face constant pressures to improve the
              quality of their products and services, reduce the cost and time
              to market them, improve operating efficiencies and strengthen
              customer relationships. In order to achieve these objectives,
              companies are re-engineering their business processes and
              improving their information systems to enable and support their
              re-engineered processes. Using information technology as a
              strategic tool for addressing critical business issues enables
              enterprises to reduce cycle times and production costs, improve
              the rate of introduction of new products and services and price
              products and services more competitively.

         .    Increasing complexity of information technology. Designing,
              developing and implementing information technology solutions has
              become increasingly complex. Information technology departments
              must integrate and manage computing environments often consisting
              of multiple operating systems, databases, programming languages
              and networking protocols, and must implement both custom and
              packaged software applications. Many businesses do not have the
              time, resources or experience to keep pace with rapid industry and
              technological changes or to build appropriate and cost-effective
              information technology solutions. Globally, enterprises are
              increasingly focusing on their core business competencies and
              outsourcing to specialized firms to provide

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              information technology solutions on a timely basis and assist them
              in changing business processes to meet specific business
              objectives.

         .    Growth in packaged software applications. Businesses are
              increasingly turning to e-commerce, CRM and enterprise resource
              planning packaged software applications such as those made by
              BroadVision, Inc.,

         .    Commerce One, Inc., Oracle Corporation, SAP AG and Siebel Systems
              Inc. Businesses use these integrated applications packages to
              replace, on an enterprise-wide basis, existing or legacy
              applications that have limited functionality and integration
              capability. Customizing and implementing these packages is often a
              major undertaking that requires highly specialized skill sets and
              functional experience, all of which is in short supply.

         As a result of these trends, together with recent advances in
telecommunications, we believe companies are increasing their reliance on the
outsourcing of information technology services. Businesses seek experienced
information technology services providers that not only have the knowledge and
experience to address the complexities of rapidly changing technologies, but
also possess the capability to understand and automate their business processes
and organizational knowledge base. The number of available, qualified technical
professionals has not kept pace with the development of the Internet and the
increasing demand for information technology services, particularly in regions
such as North America, Western Europe and Japan.

         Historically, information technology services companies used offshore
professionals primarily to supplement internal project management staffing
requirements of their customers. More recently, information technology services
companies have increasingly used offshore resources to provide higher
value-added project management services, such as e-business, application
development, and migration. We believe that our off-shore infrastructure offer a
number of benefits over more traditional outsourcing methods, including faster
delivery of new information technology solutions, more flexible scheduling and
significant cost savings.

         However, in recent months we have witnessed an unprecedented turbulence
in the technology sector in the U.S., which in turn has contributed to a
slowdown in the overall economy. Technology sector valuations have dropped;
revenue shortfalls, profit warnings and layoffs have become commonplace; most
dot-coms are on the way to accelerated oblivion; and the urgency for large
corporations to adopt new initiatives has declined.

         Information technology budgets are now subject to careful
consideration. Companies now seek to maximize the return on their information
technology investments and therefore focus on short-gestation projects that
promise predictable, substantial payoffs. As the me-too approach to new
technology experimentation fades out, CIOs increasingly focus on consolidation,
integration and convergence imperatives, rather than on radical advances in
technology infrastructure. There is an unmistakable shift towards
value-for-money and, as a result, towards longer decision-making cycle times.

         Clearly, these are challenging times for an information technology
services company. As self-preservation and prudence descend on U.S. industry,
the near-term demand outlook for

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information technology services is not as promising as in the boom years. The
immediate future is therefore uncertain.

         Indeed, it is during times like these that industries undergo profound
transformations. The information technology services sector has begun to witness
an unprecedented flight to quality. Customers, investors and employees will
gravitate towards companies that have committed high-quality management teams,
deep client relationships, an impeccable track record of customer satisfaction,
a de-risked business model, high financial discipline, a strong value system
and, above all, the ability to manage change.

         We believe that large corporations are still in the early stages of
their e-business build-out and will face huge integration and enhancement
imperatives with their existing systems. Further, despite the current venture
funding environment, we believe that select high-quality ventures will continue
to push the technology envelope and will need strong information technology
partnerships to achieve their vision.

         Further, we strongly believe that, at the end of the ongoing
turbulence, India will emerge stronger than ever as a preferred destination for
information technology outsourcing. With many U.S.-based Information Technology
services players facing extinction, with value-for-money emerging as a key CIO
imperative, and with the increasing recognition of the quality of its talent,
India is all set to consolidate its position as a major force on the global
Information Technology services map.

         We continue to be in close contact with our clients and have factored
in our growth expectations from both existing and new clients. Nevertheless, we
continue to be fully prepared to tap into additional business opportunities that
may arise and intend to have all the ingredients of growth in place -
infrastructure, people, processes and systems. We also continue to focus on
building strong relationships with large corporations, gaining an in-depth
understanding of their decision cycles, and maintaining an impeccable record in
customer satisfaction.

The Indian Information Technology Industry

         Since the late 1980's, a significant amount of information technology
work has moved offshore. Many large international software firms, such as
Microsoft Corporation, Oracle Corporation, SAP AG and Sun Microsystems Inc. have
set up operations in India. Large multinationals also use Indian companies to
outsource software services. According to a study released in December 1999 by
McKinsey & Company, Inc. on behalf of India's National Association of Software
and Service Companies or NASSCOM, approximately 20% of Fortune 1000 companies
utilize the services of Indian information technology companies. In addition,
the McKinsey study states that information technology services exports from
India have grown at a compounded annual growth rate of more than 50% a year
since 1992. Further, the McKinsey study states that NASSCOM should target $87
billion in annual revenues from the industry by 2008.

         We believe that India's growth in the information technology services
industry is attributable to the following factors, among others:

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         .    Large base of highly skilled information technology professionals.
              According to NASSCOM, India, with 4.3 million technical workers,
              currently has the second largest English-speaking pool of
              scientific professionals, second only to the United States. There
              are over 1,900 educational institutions, including engineering
              colleges, technical institutes and polytechnics that annually
              train over 73,500 computer professionals. In addition, we believe
              that the quality of technical training in India is among the
              highest in the world.

         .    High quality information technology services companies. Indian
              information technology services companies have developed the
              capability to deliver a high quality product. Many of India's
              leading information technology services companies have been
              measured against international quality standards and have received
              certification and recognition for their processes and quality
              controls. A NASSCOM analysis of international quality standards
              conducted in December 1999 showed that about 145 of the top 300
              Indian information technology service companies had already been
              assessed by the International Standards Organization, a standards
              assessment organization, at ISO 9000. ISO 9000 is a model for
              quality assurance in design, development, production, installation
              and services. As of December 1999, 12 of the 19 organizations
              worldwide that had achieved Level 5 certification under the
              Software Engineering Institute's Capability Maturity Model (or
              "SEI-CMM"), a rating system for information technology companies,
              were Indian companies. Further, as of December 1999, 15 of the 40
              organizations worldwide that had achieved SEI-CMM Level 4
              certification were Indian companies.

         .    Significantly lower wages for information technology
              professionals. India's sizable pool of information technology
              talent is available to companies worldwide at relatively low labor
              costs. Historically, the labor costs have been substantially lower
              in India compared to the U.S. Although wages in India are rising
              significantly faster than in the United States, the wage rate
              differential is anticipated to remain a substantial competitive
              advantage for Indian companies in the foreseeable future.

         .    Near 24-hour service using time zone differences. Indian
              information technology companies use the 9 1/2 to 10 1/2 hour time
              difference between India and the eastern United States to create,
              when combined with U.S. operations, a near 24-hour software
              development office.

e-commerce Potential

         Based on Peterborough, New Hampshire-based ActivMedia Research's sixth
annual "Real Numbers behind Net Profits" study, it is estimated that the global
e-commerce revenues reached $95 billion in 1999, and will exceed $1.3 trillion
by 2003. The report states "Expanding cross-language capabilities create
increasingly permeable global boundaries. Speedy digital information flow
facilitates free trade and business worldwide. Political improvements coupled
with faster, more efficient cross-cultural communications are fueling global
e-commerce."

         The report also states:

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         .    72% of web sites are still based in the U.S.;

         .    92% of e-commerce is generated through U.S.-based web sites;

         .    Exports are becoming increasingly critical to U.S. e-commerce
              growth; and

         .    9 in 10 revenue dollars are product and service sales, not
              advertisements.

The Silverline Solution

         We believe that the combination of the following capabilities and
characteristics enable us to capitalize on the rapid growth in the information
technology services industry and to provide a faster time to market,
comprehensive, flexible solutions to our clients:

         A broad range of information technology services. We provide a broad
range of information technology services, including application development,
migration and maintenance, and e-business solutions. We have also begun focusing
on CRM services. We have significant software project knowledge and experience
across multiple systems and technologies that we believe allow us to function as
a virtual extension of our clients' information technology departments. Instead
of using multiple vendors to design and implement complex information technology
projects, our clients are able to rely solely on us to provide strategy, coding
and implementation of their information technology solutions. By using us as
their single source provider of information technology services for a project,
our clients are able to reduce their time to market.

         Proven, scaleable processes with SEI-CMM Level 4 rating. We have
developed our own proven processes and methodologies in order to facilitate
timely, cost-effective management and the seamless delivery of well documented,
high quality software projects in multiple locations using on-site, off-site and
off-shore personnel. The processes and methodologies we use at our four software
development facilities in India conform to ISO 9001 standards and were assessed
in December 1999 as SEI-CMM Level 4. We are continually improving our processes
and methodologies so that they can be used in conjunction with the latest
technologies.

         Highly skilled, relatively low cost information technology
professionals in India:. As of March 31, 2002, 54% of our approximately 1,729
information technology professionals were employed at on of our five software
development centres in India. We have approximately 41 project managers and
senior technical personnel on our staff who provide in-depth project management
experience to our clients. Our information technology professionals have
experience over a broad range of competencies, averaging more than 5 years of
industry and technical experience per person. Our five software development
centres are staffed with relatively low cost professionals. , For large projects
with short time frames, our multiple off-shore facilities allow for simultaneous
processing of various development phases to accelerate delivery time. In
addition, we are able to use the excess capacity of our clients' existing
computing facilities during off-peak centers. This allows us to undertake
additional projects without substantial client investment in new hardware and
software.


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         Our industry-specific knowledge and experience. We have extensive
knowledge and experience in the following industries: business information
services, financial services, telecommunications, automotive, healthcare and
insurance, and technology. We disseminate this knowledge and experience
throughout our company using our intranet. We intend to continue to expand our
capabilities through acquisitions and hiring. We believe our knowledge and
experience helps us reduce our learning curve on new engagements in these
industries, and accurately deliver solutions that effectively address the
challenges that our clients face.

Our Business Strategy

         Our business strategy emphasizes the following elements:

         Expansion of services offered. In July 2002, we implemented new
business strategies which focus on providing Business Process Outsourcing (BPO)
and IT Enabled Services (ITES). We will continue to provide applications
development and software consulting services. The Company is in negotiations
with major BPO and ITES customers in the U.S. and Europe and expects to begin
outsourcing of new projects in these areas from its Software Technology Park
Centers in Chennai and Thane, India.

         Expansion of off shore services. We are continually seeking to provide
a greater proportion of our services at our off-shore facilities rather than at
our client sites or at our New Jersey facility. The services we perform at a
client's site typically generate higher revenue per information technology
professional because we charge higher rates for work performed on-site and
on-shore. However, on-site or on-shore services result in lower profit margins
than equivalent services performed off -shore at our facilities in India
primarily because the compensation expenses associated with providing our
services at these locations are disproportionately higher. By moving services
off-shore, we are able to significantly reduce our costs, allowing us to charge
our client lower rates and to earn higher profit margins. We have been
successful in performing a significant proportion of our e-business services at
our off-shore software development centres.

         Capitalize on our investments in infrastructure. Since 1993, we have
made significant investments in our infrastructure which has allowed us to
perform engagements off-site with full integration of our systems and our
client's systems whilst at the same time leaving sensitive databases, programs,
development and support activities at the clients' site. We currently maintain
sales offices in the United States, India, United Kingdom and Hong Kong. In

                                       39

<PAGE>

addition, we have substantial unused space at our new software development
centres in Thane and Chennai, which, will give us the capacity to house
approximately 2,000 additional information technology professionals. As
capacity, client and geographical demands require, we intend to continue to
expand our current facilities and may construct new facilities.

Our Service Offerings

         End to End Solutions. We advise clients on their IT strategy, solutions
and management

         Strategy

         .    Business Knowledge

         .    Technical Knowledge

         .    ROI Analysis

         .    Program Management

         Solutions

         .    Custom Development / Migration / Transformation

         .    Package Implementation

         .    System Integration

         Management

         .    Application Management

         .    Content Management

         .    Managed Hosting

         .    Round the clock/365 days a year support

         Applications Development. We design, develop and implement our clients'
applications in a wide variety of programming languages, architectures and
platforms. A typical application development project includes:

         .    assessment, strategy and definition;

         .    application design and customization;

         .    database design;

         .    user interface design;

                                       40

<PAGE>

         .    implementation; and

         .    testing.

         Applications Migration and Maintenance. Our application migration
services are designed to assist clients in converting to new technologies while
extending the life cycle of their existing, functional systems. Migration
projects include re-engineering software in order to transfer applications from
mainframe to client/server architectures. This enables clients to link large
computers or servers, with smaller computers and other system component, or
clients and facilitate the transfer from existing operating systems. In addition
it is possible to update from a non-relational or non-integrated to a relational
or integrated database technology. Our application maintenance services include
on-going management, systems maintenance, support, testing and enhancement of
software applications. As with our other services, we have developed processes
and methodologies that govern the planning, execution and testing of the
software migration and maintenance.

         e-business: We provide the technical expertise for our clients to
engage in e-commerce and otherwise use the Internet and corporate intranets by
providing the following services:

         .    internet integration;

         .    internet, intranet and extranet strategy;

         .    intranet and extranet development; and

         .    website design

         Our e-business solutions have focused on integrating clients' legacy
applications, which have limited functionality and integration capability, with
the Internet and developing corporate intranet applications to transmit clients'
data through the Internet or a corporate intranet in a more effective manner. We
have also developed custom Internet software solutions and adapted
Internet-based components to function with our clients' existing software
applications

Mobile Computing

         Our Mobile Computing solutions have focused on integrating the back-end
and legacy application through various mobile devices. Predominantly our mobile
computing solutions have helped in enhancing counterpart Internet solutions and
we have developed mobile computing solutions for clients in the retail and
healthcare industry. Silverline has developed processes and methodologies that
govern the planning, execution and testing of the software migration and
maintenance in mobile computing. Our mobile computing solutions include study,
design and architecting as well as full life-cycle development of application
development projects.

         We offer services in the following horizontal technology platforms:

         .    Enterprise Application Integration

         .    Enterprise Information Management

                                       41

<PAGE>

         .    Supply Chain Management

         .    Channel Management

         .    Electronic Payment Technologies

Quality Standards

         Our project management, risk management and quality control processes
and methodologies undertaken at our software development centers in India are
certified both under SEI-CMM Level 4 and ISO 9001.

         SEI-CMM Level 4 Certification: In December 1999, three of our software
development centers in India were certified at SEI-CMM Level 4. As of November
1999, of the 21 organizations worldwide that had achieved SEI-CMM Level 5
certification, 10 of them were Indian. Further, as of November 1999, 14 of the
40 organizations worldwide that had achieved SEI-CMM Level 4 certification were
Indian companies. The SEI-CMM is recognized within the information technology
industry as one of the leading standards for measuring the effectiveness, or
maturity, of information technology development and management processes. This
maturity model describes the key elements of an effective software process,
outlining an evolutionary improvement path through five maturity levels, from an
ad hoc, immature process (Level 1), to a mature, disciplined and repeatable
process (Level 5). The SEI-CMM covers practices for planning, engineering and
managing software development and maintenance, which improve the ability of
organizations to meet goals for cost, schedule, functionality and product
quality. According to the Software Engineering Institute, the key process areas
at Level 4, which is described as the managed level, focus on establishing a
quantitative understanding of both the software process and the software work
products being built. This level of process capability allows an organization to
predict trends in process and product quality because the process is measured
and operates within measurable limits, and results in software products of a
predictably high quality.

         ISO 9001 Certification: Two of our software development centers in
India have been certified as being in compliance with ISO 9001. ISO 9001 is a
series of standards that provide specifications and guidelines for establishing,
documenting and maintaining an effective quality management system. The purpose
of ISO 9001 is to demonstrate an organization's commitment to quality, their
capability to satisfy customer requirements and ultimately achieve total
customer satisfaction through the prevention of error. ISO 9001 conformance
gives an organization the capabilities and tools to implement continuous
improvement programs that will ultimately translate into good product and
service quality. Over 100 countries are members of the International Standards
Organization and participate in writing and revising the organization's
standards. The principles and disciplines of ISO 9001 are accepted and
recognized worldwide as a sound basis for quality management systems.

                                       42

<PAGE>

Sales and Marketing

         Silverline's sales and marketing activities are concentrated on driving
sales organically from existing customers and inorganically through new customer
acquisition. New customer acquisitions are made typically through existing
client references as well as direct sales interaction and offshore telesales
force supported by sales and marketing.

         We have focused our sales and marketing efforts on expanding the scope
and depth of our relationships with existing clients. Although initially we may
provide only one service to a client, we seek to convince our clients to expand
and diversify the type of services they outsource to us. As a part of our
customer service philosophy, we assign a relationship manager who is responsible
for the success of individual projects and for ensuring that our client needs
are met. We also aim to strengthen our relationships with our clients by closely
integrating our services with our clients' information and technology
operations.

Software Development Centers

         Our software development centres are off-site facilities that design,
engineer, construct, test and support our managed information technology
solutions. Each software development center has project teams dedicated to
clients and separate quality assurance groups to ensure the delivery of well
documented high quality, and cost effective solutions in accordance with our
software development methodologies and processes. Our software development
centres have common infrastructure, organizational units and human resource
practices that allow projects and personnel to be shifted among our software
development centres to maximize utilization rates and meet client requirements.
Our software development centres enable us to divide our information technology
project deliverables between our off-shore / off-site software development
facilities and our client's on-site location.

         We maintain three training facilities and software development centres
in India. In a typical off-shore software development project, we assign a small
team of information technology professionals, including a project manager, to
visit a client's site and determine the scope and requirements of the project.
Once the specifications of the engagement have been established, the team
returns to India to supervise the development of the required software or

                                       43

<PAGE>

system by a much larger group of professionals. Some of our professionals remain
at the clients' site to tract changes in scope and address new requirements as
the project progresses. The client's systems are then linked via dedicated
telecommunications linked to our software development facilities enabling
simultaneous processing of data. Once development is completed, a team returns
to the client's site to install the software system and ensure its
functionality. Our professionals often maintain a continued presence at the
client site to perform comprehensive maintenance services through one of our
off-shore / off-site software development facilities. In contrast to development
projects, a typical maintenance assignment requires a larger team of
professionals to visit client's site to gain a thorough understanding of all
aspects of the clients' system. A majority of the maintenance team will return
to one of our software development centres, where it assumes responsibility for
day to day maintenance of the client's system, while coordinating with a few
maintenance professionals who remain stationed at the client's site.

         In addition to our project management services, we conduct in-house
assignments for certain of our clients. This involves providing a small team of
our information technology professionals, who work at a client's site on a
project which is usually managed by our client. Our information technology
professionals provide the necessary expertise which our client may require. Our
on-site information technology professionals have the full support of our
processes and methodologies while working on such an assignment. We believe that
these in-house assignments provide us with the opportunity to cross-sell our
higher margin project management services.

Competition

         The market for information technology, BPO and ITES services is rapidly
evolving and highly competitive. We expect that competition will continue to
intensify. We face competition in India and elsewhere from numerous companies,
including:

         .    Indian information technology services companies, such as HCL
              Technologies, Infosys Technologies Ltd., Satyam Computer Services
              Limited, Tata Consultancy Services and Wipro Limited;

         .    U.S. information technology services companies with off-shore
              capabilities, such as Cognizant Technology Solutions Corp.,
              Complete Business Solutions Inc. and iGate Capital Corporation;

         .    Internet professional services firms, such as AGENCY.COM Ltd.,
              Proxicom Inc., Razorfish Inc., Sapient Corp., Scient, and iXL;

         .    Systems consulting and integration firms, such as American
              Management Systems Inc., Cambridge Technology Partners Inc.,
              Computer Horizons Corp. and marchFIRST;

         .    Large international accounting firms and their consulting
              affiliates, such as Andersen Consulting LLP, Ernst & Young LLP and
              PricewaterhouseCoopers LLP;

                                       44

<PAGE>

         .    General management consulting firms, such as McKinsey & Co., Bain
              & Company and Boston Consulting Group;

         .    Outsourcing firms, such as Computer Sciences Corp., Electronic
              Data Systems Corp., International Business Machines Corp., Perot
              Systems Corp.; and

         .    Indian outsourcing companies such as Infosys, WIPRO, Tata
              Consultancy Services and Sutyam

         .    In-house information technology, outsourcing and ITES departments.

         We believe that the principal competitive factors in the market for
Information Technology, Internet outsourcing and ITES services include technical
expertise, breadth of service offerings, reputation, financial stability and
price. To be competitive, we must respond promptly and effectively to the
challenges of technological change, evolving standards and our competitors'
innovations by continuing to enhance our service offerings and expand our sales
channels. Any pricing pressure, reduced margins or loss of market share
resulting from our failure to compete effectively could materially affect our
business.

         Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater name recognition than we have. Some
of these competitors currently provide a broader range of services than we
provide.

         We anticipate that future competition will increasingly include firms
with operations in countries with lower labor costs than those prevailing in
India. Major U.S. companies are increasingly moving a portion of their
operations to India and other overseas locations. Part of our competitive
advantage has historically been a cost advantage relative to service providers
in the United States, Japan and Western Europe, China and the Philippines. Labor
costs in India are presently increasing at a significantly faster rate than in
these countries. These factors will reduce the advantages that we have in terms
of a cost effective, highly skilled pool of information technology professionals
in India and will mean we may become less competitive over time.

         We believe that our ability to compete also depends in part on a number
of factors outside of our control, including:

         .    our competitors' abilities to attract and retain skilled
              information technology professionals;

         .    prices at which our competitors offer comparable services;

         .    our competitors' responsiveness to client needs; and

         .    loss of information technology professionals to foreign markets
              including the U.S.

                                       45

<PAGE>

Intellectual Property

         We have applied for registration of "SILVERLINE" as a trademark in
India and we have obtained such registration in United States. We do not have
any patents or registered copyrights anywhere in the world. Ownership of the
software and associated deliverables created by us for a client is generally
retained by or assigned to the client. As a result, we generally do not retain
any intellectual property interest in our work product. We currently require our
information technology professionals to enter into non-disclosure and assignment
of rights agreements to limit use of, access to and distribution of our
confidential information.

D.       Organizational Structure

         We have interests in several subsidiaries. Below is a list of our
subsidiaries, including name, country of incorporation or residence, and
percentage ownership interest in each such subsidiary as of January 31, 2003:

<TABLE>
<CAPTION>
                                                                              Country of         Ownership
Name                                     Business Description                 Incorporation      Percentage
----                                     --------------------                 -------------      ----------

<S>                                     <C>                                  <C>                   <C>
Silverline Technologies, Inc. ........   Sales office                         Delaware               100%

Silverline Technologies U.K.
   Limited/(1)/ ......................   Sales office and software            The U.K.               100%
                                         development

Sky Capital International Ltd. .......   Provides computer-consulting         Hong Kong              100%
                                         services.

SeraNova Inc. ........................   Provides computer-consulting         New Jersey             100%
                                         services.

eComServer Inc. ......................   Provides custom design interactive   United States          100%
                                         voice response solutions.
</TABLE>

----------
/(1)/ A subsidiary of Silverline Technologies, Inc.

                                       46

<PAGE>

         In addition, Silverline Technologies, Inc. holds a 36% equity interest
in Expo24-7.com, a U.K. company, engaged in planning of Expositions, and a 15%
equity interest in Unified Herbal, a U.K. company, engaged in alternative
medicine. We hold approximately a 5% interest in Starpoint Solutions, Inc.,
f/k/a TIS Worldwide, Inc., a U.S. corporation, which is an e-business solutions
integrator that specializes in delivery of Internet-based applications to help
corporations increase and improve customer services.

E.       Property, Plants and Equipment

Facilities

         Our global headquarters are located in Mumbai (Bombay), India. Our
registered office is located at 1405 Maker Chamber V, Nariman Point, Mumbai
(Bombay) 400021. Our U.S. headquarters are located in Piscataway, New Jersey and
are the primary location for our domestic off-site outsourcing marketing and
sales. Our training facilities and off-shore software development centres are
located in the Indian cities of Mumbai (Bombay), Thane and Chennai. The
following table sets forth certain information as of January 31, 2003 relating
to our principal facility.

         The following table sets forth certain information as of March 31, 2002
relating to our principal facilities developments:

<TABLE>
<CAPTION>
Location                       Approximate             Status/Term              Type of facility
--------                       square feet             -----------              ----------------
                               -----------

<S>                            <C>                    <C>                     <C>
Thane, India                   120,000, of which       Owned                    Software Development and
                               110,000                                          Training Center
                               is built-out and
                               operational

Mumbai (Bombay), India            58,000               Leased/                  Global Headquarters,
                                                       August 2002 to           Software Development and
                                                       August 2006              Training Center

Mumbai (Bombay), India             1,500               Owned                    Corporate Office

Mumbai, (Bombay), India           30,000               Owned                    Residential Complex

Chennai (Madras), India        160,000, of which       Owned                    Software Development and
                               110,000                                          Training Center
                               is built-out and
                               operational

Hyderabad, India                   8,613               Owned                    Software Development and
                                                                                Training Center

Hyderabad, India                  21,453               Leased February 2000     Software Development and
                                                       to February 2008         Training Center
</TABLE>

                                       47

<PAGE>

<TABLE>
<CAPTION>
Location                       Approximate             Status/Term              Type of facility
--------                       square feet             -----------              ----------------
                               -----------

<S>                              <C>                  <C>                      <C>
Hyderabad, India                  45,549               Leased December 2000     Software Development and
                                                       to November 2009         Training Center

Piscataway, New Jersey            65,000               Leased through January   U.S. Headquarters, Sales
                                                       2013                     Office and Software
                                                                                Development and Training
                                                                                Center

Phoenix, Arizona                  20,000               Leased                   Office, no operations
                                  (approx)             October 1999 to
                                                       October 2003

Hatton, United Kingdom             3,500               Leased/April 2000 to     Delivery Center
                                                       April 2005

Hong Kong, China                   2,500               Leased through April     Sales Offices
                                                       2003
</TABLE>

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.       Operating Results

         You should read the following discussion and analysis in conjunction
with our Consolidated Financial Statements and notes thereto included elsewhere
in this annual report. The results shown in this annual report are not
necessarily indicative of the results we will achieve in any future periods.

Overview

         We are an Indian provider of information technology services. Revenues
are derived from fees for the position of software consulting services. We are
engaged on both a project management basis, where we have complete
responsibility for managing the project, and, to a lesser extent, on a more
integrated basis where our employees work in-house for our clients' information
technology departments. Project management work is performed either entirely at
our clients' sites or in conjunction with our Indian and overseas facilities.

         In the year ending March 31, 2002 and March 31, 2001 and the full year
of 2000 and 1999, revenues from our U.S. clients represented approximately 76%,
75%, 64% and 84% of our revenues, respectively, while services performed for our
Indian clients represented 1%, 1%, 1%

                                       48

<PAGE>

and 1% of our revenues, respectively, and the remainder of our revenues during
these years were derived from our clients in other countries. The amount of work
performed at our facilities and at clients' sites varies from project to
project. We charge higher rates and incur higher compensation expenses for work
performed at a client's site or in our U.S. facility. The services performed at
a client's site or in our U.S. facility typically generate higher revenues per
employee but at a lower gross margin than similar services performed at our
Indian facilities.

         We generally provide our services on either a time and materials basis
or a fixed-price basis. Although terminations have historically been rare, our
service agreements typically can be terminated by a client without penalty with
little or no advance notice and without cause. Also, while significantly all our
work is performed for clients under master or other detailed contracts,
approximately 30% of our time and materials work is performed on the basis of
limited written or verbal work orders. Without detailed written work orders in
place, our ability to enforce termination provisions as well as collect fees,
protect our intellectual property and protect ourselves from liability to others
may be impaired. Under time and materials contracts, we recognize revenues as we
perform services. Under fixed-price contracts, we recognize revenues upon the
achievement of specified milestones identified in the related services.

Cost of Revenues

         Cost of revenues represent our most significant expense and consist
primarily of salaries, bonuses and employee benefits for our personnel dedicated
to client assignments. Non-billable time incurred by our information technology
professionals resulting from start-up time for new hires, time off between
projects and training time incurred to upgrade skills of existing staff are
charged to our cost of revenues.

         We typically bill our clients on a monthly basis to monitor client
satisfaction and manage our outstanding accounts receivable balances. We
continuously monitor our engagements in order to manage billing and utilization
rates effectively. Actual billing rates are established on an
engagement-by-engagement basis. During the period up to December, 2000, our
average hourly billing rates have increased primarily due to a higher percentage
of billable hours related to e-business and CRM solutions, which command higher
billing rates. Subsequent to this, following the industry slow down that
affected IT spending by our clients, we have experienced reduction of average
billing rates by about 7.5% to 10% during the year ended March 31, 2002.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses consist primarily of
salaries, bonuses and employee benefits for our support staff and non-project
personnel, as well as occupancy costs, staff recruiting costs, travel expenses,
telecommunication expenses and promotional costs. Our sales and marketing costs
are expected to increase as a percentage of our revenues as we maximize our
selling efforts. In anticipation of business growth, we expect to incur
significantly higher operating costs and capital expenditures. We may not
continue to grow at a pace that will support these costs and expenditures. To
the extent that our revenues do not increase at a rate commensurate with these
additional costs and expenditures, our operational results and liquidity could
be materially adversely affected.

                                       49

<PAGE>

         In connection with stock options granted in November 1999 to our
employees, we recorded, deferred stock-based compensation of approximately $2.7
million. This amount represents the difference between the exercise price and
the deemed fair market value of our equity shares for accounting purposes on the
date we granted these stock options. This amount is included as a component of
shareholders' equity and is being amortized on a straight-line basis by charges
to operations over the vesting period of the options. For the first three months
of 2001, the year 2000 and 1999, we recorded approximately $29,610, $1,635,086
and $532,000 of stock-based compensation amortization expense, respectively. The
amortization of the remaining deferred stock-based compensation will result in
additional charges over the periods ending December 31 2001, 2002, 2003,
amounting to $118,440 (of which $29,610 is for the quarter ending March 31
2001), $63,846 and $12,794, respectively.

Depreciation and Amortization

         This section relates to depreciation and amortization expenses related
to hardware, desktop software and upgrades, goodwill from prior acquisitions,
and property, plant and equipment.

Interest and Finance Costs

         Interest and finance costs include income realized from the investment
of liquid assets in fixed income securities and interest expense associated with
our credit facilities with banks and on short term financing facilities taken
with various lenders.

Taxes

         We are subject to payment of taxes in various jurisdictions in
accordance with U.S., UK, Hong Kong and Indian law. The majority of our profits
are derived from Indian operations and accordingly, our tax expenses are
relatively low. Our effective tax rate as of March 31, 2001 , was approximately
1.4% and as of March 31, 2002 no taxes were payable in the absence of taxable
profits. From April 1, 2002, the Government of India has introduced taxation on
10% of our software export profits generated from India based development
centres. These operations were hitherto exempt from corporate income tax subject
to compliances and conditions.

Principles of Currency Translation

         In the year ended March 31, 2002, over 86% of our revenues was
generated in U.S. dollars. Approximately 12% of our expenses were incurred in
Indian rupees, and the balance was incurred in U.S. dollars and other
currencies. We use the Indian rupee as our functional currency, while our U.S.
subsidiaries use the U.S. dollar as their functional currency. Revenues
generated in foreign currencies are translated using the annual average
exchange. Expenses of overseas operations incurred in foreign currencies are
translated using the annual average exchange. Assets and liabilities held in
foreign currency are translated using the exchange rate at the end of the
applicable reporting period. For the year ended March 31, 2002 and year ended
March 31, 2001 and the full year ended 2000 and 1999, the net gains from foreign
currency fluctuations comprised $(1,904,745), $703,065, $819,740 and $9,763
respectively.

         In order to comply with IAS requirements, our financial statements are
translated into U.S. dollars using the annual average exchange rate for revenues
and expenses and the period

                                       50

<PAGE>

end rate for assets and liabilities. The gains or losses arising from
translation are reported as other comprehensive income, a separate component of
shareholders' equity.

         A majority of our revenues are generated in U.S. dollars and other
non-Indian currencies and a portion of our expenses, including labor costs as
well as capital and operating expenditures, will continue to be denominated in
Indian rupees. Consequently, our operational results will be adversely affected
to the extent the Indian rupee appreciates against the U.S. dollar, which could
occur given India's strong foreign exchange reserve balance. Historically, the
Indian rupee has generally depreciated against the U.S. dollar, which has
positively affected our financial condition. As a result, we have chosen not to
enter into currency hedging arrangements.

Basis of Presentation

         The consolidated financial statements reflect our financial position,
operational results and cash flows, including our subsidiaries. Silverline
Technologies, Inc. had been under common control with us and accordingly, the
acquisition was accounted as a pooling of interests. The other acquisitions were
on a purchase method of accounting.

Results of Operations

         The following table presents for the periods indicated certain
financial data as a percentage of our revenues:

<TABLE>
<CAPTION>
                                                                                     (Unaudited)
                                          Year ended           Year ended           Three Months
                                         December 31,           March 31,          ended June 30,
                                    --------------------    ------------------    ------------------
                                      1999       2000         2001       2002       2001       2002
                                    -------    -------      -------    -------    -------    -------
<S>                                  <C>        <C>          <C>        <C>        <C>        <C>
Revenues ........................     100.0%     100.0%       100.0%     100.0%     100.0%     100.0%
Cost of revenues ................      56.5       54.0         59.8       55.2       57.0       62.4
                                    -------    -------      -------    -------    -------    -------
Gross profit ....................      43.5       46.0         40.2       44.8       43.0       37.6
Selling, general and
   administrative expenses ......      15.0       22.1         34.6       40.4       25.4       32.6
Stock-based compensation ........       0.6        1.1          0.5        0.1        0.1        0.1
Depreciation and amortization ...       4.6        4.5          3.1        3.6       12.7       11.9
                                    -------    -------      -------    -------    -------    -------
Operating income ................      23.3       18.3          2.0        0.7        4.8       (7.0)
Other income (expenses), net ....      (1.6)       2.7          2.3       (2.2)      (2.2)      (5.6)
                                    -------    -------      -------    -------    -------    -------
Income before income taxes and
   extraordinary item ...........      21.7       21.0          4.3       (1.5)       2.6      (12.6)
Provisions for income taxes .....       3.2        1.9          1.4        0.0        1.1        0.0
                                    -------    -------      -------    -------    -------    -------
Income before extraordinary
   item .........................      18.5      19.10          2.9       (1.5)       1.5      (12.6)
Extraordinary item (net of
   taxes) .......................       0.4         --         62.9       36.8        0.0        0.0
                                    -------    -------      -------    -------    -------    -------
Net income ......................      18.1%     19.10%       (60.0)     (38.3)       1.5      (12.6)
                                    =======    =======      =======    =======    =======    =======
</TABLE>

      /1/ The Company changed its accounting reference date to March 31 on March
      31, 2001. Consequently, the Company did not prepare audited accounts for
      the period ended December 30, 2001. Instead, the Company prepared audited
      accounts for the period beginning on April 1, 2000, and ending on
      March 31, 2001, and prepared audited accounts for the 12-month period
      commencing on March 31, 2001 and ending on March 31, 2002. However, for
      internal comparison

                                       51

<PAGE>

  purposes only, the Company prepared unaudited pro forma accounts for the
  12-month period commencing on April 1, 2000 and ending on March 31, 2001. Such
  figures are set forth above for comparison purposes only.

     Silverline's quarterly operating results have historically fluctuated and
may continue to fluctuate significantly as a result of numerous external
factors. Silverline believes, that past operating results and period to period
comparisons should not be relied upon as an indication of future performance.

Three Months ended June 30, 2002 Compared to Three Months ended June 30, 2001

     Revenues. Total revenues were $27.1 million for the three months ended June
30, 2002 representing a decrease of 40.4% over total revenues of $45.6 million
for the same period in prior year. Decrease in revenue in the three months ended
June 30, 2002, in part is attributable to market downturn and decline in the IT
business in general following the effects of September 11.

     Cost of Revenue. Cost of revenue was $17.0 million for the three months
ended June 30, 2002, representing a decrease of $9.0 million or 19.8% for the
same period in the prior year. The substantial decrease in cost of revenue is
attributable to the Company's cost reduction measures and reduction of staff of
the Company.

     Selling, General and Administration Expenses. Selling, general and
administrative expenses were $8.9 million in the three months ended June 30,
2002, representing a decrease of $2.7 million or 6.0% over the same period in
the prior year. The decrease in selling, general and administration expenditures
in part is attributable to the various cost cutting measures the Company
implemented, such as reductions in personnel and consolidated certain
operations of some subsidiaries.

     As a percentage of revenue, in the three months ended June 30, 2002,
selling, general and administration expenditures was $8.8 million, or 32.6%, as
compared to $11.6 million, or 25.4% in the same period for the prior year.

     Amortization of Deferred Stock Compensation Costs. In the three months
ended June 30, 2002, the amortization of deferred stock compensation costs was
$36,701 as compared to $25,156 in the same period for the prior year, from the
grant of stock options and warrants to employees.

     Depreciation and Amortization. Depreciation and amortization was $3.2.
million in the three months ended June 30, 2002 representing a decrease of $2.6
million over the same period for the prior year. The decrease in depreciation
costs is attributable to the write-offs of assets of some of the Company's
subsidiaries. Capital assets deployed in property, plant and equipment as at
June 30, 2002 were $54.9 million compared to $53.6 million as at June 30, 2001.

                                       52

<PAGE>

accumulated amortization arising from the new businesses acquired in the year
2000 and March 2001.

     Other Income/(expenses). Expenses in the three months ended June 30, 2002
was $1.5 million representing a increase of $0.5 million as compared to the same
period for the prior year. The increase in expenses is attributable to the
borrowings from financial institutions.

     In the three months ended June 30, 2002, the increase in other income was
offset by higher incidence of interest/finance costs on the larger borrowings
from banks and non-convertible debentures for working capital purposes at $55.8
million as compared to bank borrowings of $65.0 million in the same period for
the prior year.

     Provision for Income Taxes. Provisions for taxes were $0.02 million for the
year ended March 31, 2002 as against $2.1 million in the same period for the
prior year. There were no taxes payable for the three months ended June 30, 2002
as against 1.06% in the same period for the prior year.

Year ended March 31, 2002 compared to March 31, 2001

     Revenues. Total revenues were $142.91 million for the year ended March 31,
2002, representing a decrease of $9.27 million from $152.18 million for the year
ended March 31, 2001. The revenues in the fiscal year ending March 31, 2002
decreased by 6.0% against the backdrop of an overall industry wide recession
stretching through the year and reduced information technology spending over
most markets and regions, including in the U.S., Europe and Asia. The revenue
decrease is attributable to a marginally lower volume of service offerings of
managed software projects in the key technology sectors namely, e-business,
legacy, mainframe and CRM. In line with the industry trends, most of our clients
preferred not to embark upon or commission new IT development due to clamp down
on their respective IT budgets. Project work continued however without
significant disruption.

     During the year there was a strategic shift away from low yielding
assignments such as on-site consulting and migration projects. Off-shore project
services constituted 70% of revenues in the year ended March 31, 2002 as against
72% in the year ended March 31, 2001. Client site services constituted 30% of
revenue in the year ended March 31, 2002 as against 28% in the year ended March
31, 2001. E-business and legacy mainframe projects constituted 67% of revenues
in the year ended March 31, 2002 as against 54% in year ended March 31, 2001.
CRM projects and other miscellaneous projects, application software and web
based applications constituted 33% in the year ended March 31, 2002 as against
46% in the year ended March 31, 2001. With the assimilation of SeraNova's
business, our Europe based client constituted 6% of revenues for the year ended
March 31, 2002 as compared to 2% in year ended March 31, 2001. The United States
and Canada are the key markets from where we derive 76% of revenues. Clients
located in the Far East and Japan contributed 17% of the revenues for the year
ended March 31, 2002.

     Repeat business constituted 62% of our revenues in the year ended March 31,
2002, as compared to 58% in the year ended March 31, 2001. With the complete
integration of SeraNova's business, revenues from new clients added in the
vertical segments of banking, automotive and insurance adequately compensated
for the discontinuance of the consulting business.

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<PAGE>

     With the infrastructural facilities in India attaining completion we had an
average strength of software professionals of 1,386 in year ended March 31,
2002. The average utilization of software personnel on projects activity was in
the range of 70% to 76% during the year ended March 31, 2002, as against 60% to
62% in the previous year ended March 31, 2001.

     Cost of Revenue. Cost of revenue was $79.0 million for the year ended March
31, 2002. This represents a decrease of 13.2% over the year ended March 31,
2001. The reduction is attributed to the cost reduction and consolidation of
SeraNova's subsidiaries and its activities.

     Cost of revenues decreased marginally to 55.2% of revenues for the year
ended March 31, 2002, as against 60% in the year ended March 31, 2001.

     Lower direct costs were incurred due to salary and wage revisions and due
to substantial reduction of the workforce of professionals following market
downturn and slowdown in the IT business after 9/11.

     Selling, General and Administrative expenses. Selling, general and
administrative expense amounted to $57.7 million for the year ended March 31,
2002 as against $52.7 million for the year ended March 31, 2001. The larger
scale of sales and marketing activity in U.S. and Europe, necessitated by the
industry slow down and the integration of marketing infrastructure in the
current year ending March 31, 2002, resulted a rise in selling and marketing
expenses of 9.5%. Such expenses as a percentage of sales has consequently
increased to 40.3% the year ended March 31, 2002 as against 34% in the previous
year ended March 31, 2001.

     Selling, general and administrative expenses arising from supporting the
expanded sales and marketing infrastructure in USA, Europe, etc. caused the rise
of 9.0% for the year ended March 31, 2002, over the year ended March 31, 2001.

     Stock based compensation. Amortization of deferred stock compensation
expenses for the year ended March 31, 2002 was $0.09 million in accordance with
the vesting plan of the option plans, as against $0.80 million for the year
ended March 31, 2001.

     Depreciation. Depreciation expense was $5.0 million for the year ended
March 31, 2002 representing an increase of $0.3 million over $4.7 million for
the year ended March 31, 2001. The increase resulting from commissioning of high
capacity software development centres in India leading to an increase in
depreciation charge on buildings, plant and equipment.

     Amortization expenses. There was no amortization for the periods ended
March 31, 2001 and 2002 as the management decided to write off the entire amount
of goodwill.

     Interest Expenses. Interest expense for the year ended March 31, 2002 was
$5.2 million and set off by interest and other income earned on deployment of
short-term surplus funds, of $2.1 million, leading to net interest expenditure
of $3.1 million, this represents an increase of $6.6 million or 180% over $3.5
million for the year ended March 31, 2001. With the industry slow down over a
substantial part of year ended March 31, 2002, due to slow collection cycles on
our sales, we had to resort to maximum utilization of external capital/bank
finance for substantial part of the year causing thereby the finance charges to
rise.

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<PAGE>

     Other Income. Other income for the year ended March 31, 2002 at $2.1
million was 65% lower than $6.4 million earned during the year ended March 31,
2001.

     Extraordinary expenses. Consequent to the industry wide recessionary
trends, the events of September 11 and changes in the IT environment and
spending by our clients, we resorted to restructuring our operations to focus on
the right skills and technology mix required by our clients. Also post
integration of SeraNova it was necessary to review the skill availability and
our personnel strength in the U.S. and other centres was downsized to suit the
client/project needs and in effect separation costs of $3.6 million were
incurred. In addition some sales and marketing facilities post integration of
SeraNova were discontinued resulting in a one time winding up cost of $1.1
million. These costs being non re-curing in nature have been classified under
extra-ordinary expense /non-recurring write-offs category. Due to substantial
slowdown in the STI (US) and SeraNova, Inc., a major portion of goodwill,
accounts receivable and fixed assets were written off. Such expenses were $95.7
million and $52.6 million for the years ended March 31, 2001 and March 31, 2002.

     Provision for Income Taxes. The provision for income tax was $0.02 million
for the year ended March 31, 2002 as against $2.0 million for the year ended
March 31, 2001. There was no tax provision for the year ended March 31, 2002 due
to the deficit in net income.

     Net Income. The net loss after tax provisions for the year ended March 31,
2002 was $54 million as compared to a loss of $91.2 million for the year ended
March 31, 2001. Among other factors, the fall in net income is attributable to
the depressed business conditions in our largest markets, including in the U.S.
and Europe, leading to lower sales realization, reduced margin on our prices,
continuing market expansion activities, higher operating and finance costs and
expense on restructuring of operation.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Revenues. Revenues increased $54 million or 62% to $141.9 million in 2000
from $87.6 million in 1999. Revenue increases are primarily attributable to
increase in service offerings in all the segments of our businesses namely in
consulting, software applications development, project services or enhancements,
maintenance and consulting. The newly built out infrastructure in the India
development centers at Thane and Chennai have facilitated the execution of
larger volumes of information technology projects activity in the year 2000.
Substantial increases in business from certain existing clients and new clients
particularly in segments of Banking, financial services and Telecommunication
have led to the growth in revenues. Revenue from existing clients constituted
86% of total revenues in 2000 as against 81% of total revenues in 1999. The
increase in revenues is attributable to the extent of 5.63% from revenues of the
Hong Kong based company SCI Ltd., the company we acquired in October, 2000.

     We did not generate any revenues from Year-2000 work (Y2K) in 2000 compared
with approximately $11.4 million or 13% of our revenues in 1999 from Y2K
assignments. With the expanded infrastructure and capabilities we have increased
the number of our information technology professionals by 33% to approximately
1,850 at December 31, 2000, from approximately 1,350 at March 31, 2000.
E business and CRM project services segments contributed to 48% of the total
revenue, while legacy maintenance and development work on

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<PAGE>

main frame system and other services contributed to 29% of revenues in 2000. In
1999 e-business and CRM project services revenues were 32% of the total revenue
and mainframe systems work, including Year 2000 (Y2K) conversion work
contributed 51% of total revenue. Revenues from project services grew to 76% in
the year 2000 as against 65% in 1999. Client site services which accounted for
35% of revenues in 1999 stands reduced to 24% in the year 2000 indicating
thereby a significant shift of higher margin yielding offshore work executed at
India development centers. Revenues from USA and Europe represented 78.1% in
2000 and 21.9% from Far East, Japan and Asia as compared to 84% and 16%
respectively in 1999.

     Cost of Revenues. Cost of revenue was $76.6 million for the year 2000
representing an increase of 55% over the cost of revenues of $49.4 million in
1999. As a percentage of revenue, cost of revenue decreased to 54% in the year
2000 from 56.5% in 1999, primarily due to a higher proportion of projects
services rendered from the India Development Centers in 2000 as compared in
1999. The decrease in cost of revenues has offset in part the increase in
personnel cost by 46% mainly from deployment of larger number of employees
referred to above, salary/wage increments granted to employees and increase in
on site living cost in the year 2000.

     Increased cost of revenue in part attributable to the inclusion of SCI's
cost of revenue following the merger of SCI Limited in October, 2000, is $0.3
million.

     Selling, General and Administration Expenses. Selling, general and
administration expense was $31.316 million for the year 2000 representing an
increase of 138% from $13.14 million for the year 1999. As a percentage of
revenue, selling, general and administration expenses has increased to 23% of
total revenue in the year 2000 from 15% of total revenue in the year 1999.

     The increases in selling, general and administration expenses are primarily
attributable to larger scale of sales activity with the opening of several sales
offices in USA, Canada, UK and Far East, recruitment cost for the expanded sales
and marketing personnel and higher wage cost for the sales, marketing and
support staff. The inclusion of SCI Limited's selling and general expenses after
its acquisition in October, 2000 increased our selling, general and
administration expenses by $ 0.2 million. Salaries for administration and
support staff represented 3.9% of revenues in the year 2000 as compared to 3.5%
in the year 1999. Rental and establishment expenses represented 3.2% of revenues
in the year 2000 as compare to 1.9% of revenues in 1999. Selling expenses
attributed to 6.5% of revenues in the year 2000 as against 4.1% of revenues in
1999.

     Expansion of our sales force to 32 people in 2000 from 19 in 1999 and
higher marketing activities during the year 2000 have all contributed to the
increased marketing expenditure in 2000.

     Stock-Based Compensation. Amortization of deferred stock compensation
expense in 2000 was $1.6 mm. as against 0.5 million in 1999, mainly arising from
the grant of stock options and warrants to employees in November, 1999.

     Depreciation and Amortization. Depreciation and amortization was $6.4
million in 2000 representing an increase of 56% over $4.1 million in 1999.
Depreciation expense increased by 20% due to higher capital expenditure on the
build out of our infrastructural facilities in India

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<PAGE>

Development Centers at Thane and Chennai. In the year 2000, capitalization of
plant, equipment and infrastructural facilities was higher by $ 18.7 mm.
bringing the net fixed assets to $49.48 million as against $34.6 million in
1999. Depreciation expense in 2000 of $3.88 million was higher by 20% as
compared to $3.23 million in 1999.

     Amortization expense in the year 2000 was $2.5 million, an increase of
$1.6 million over 1999 (representing an increase of 56.25%), primarily arising
from the acquisition of businesses in the year. Goodwill arising from the
acquisition of SCI Limited, a company in Hong Kong, in October, 2000 was $18.2
million and amortization of the goodwill amount for the period up to December
31, 2000 was $0.65 million. Amortization of goodwill of other acquisitions was
$0.95 million in 2000.

     Provision for Income Tax. Taxes were $2.6 million in 2000 as compared to
$2.8 million in 1999. Our effective tax rate decreased to 8.98% in 2000 as
compared to 14.8% in 1999 due to an increased proportion of operating income
being derived offshore where the tax rate is significantly lower than in the
U.S.

     Other income. Other income grew by $5.2 million in the year 2000 as
compared to $0.283 million expense in the year 1999. The increase in other
income substantially is attributable to the exchange gains arising from the
incomes earned from the deployment of the proceeds of our initial public
offering on June, 2000 the increase in income derived from investments has been
off set in part from the increase in interest expense by $0.9 million on the use
of increased borrowings for working capital in the year 2000.

     Extraordinary items. There were no extraordinary items in 2000 compared to
$0.4 million we incurred in a repayment penalty for the prepayment of
outstanding foreign currency loans of $3.8 million.

     Net Income. We had net income of $27.1 million in 2000 compared to net
income of $15.8 million in 1999.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1999

     Revenues. Revenues increased $27.4 million or 45.5% to $87.6 million in
1999 from $60.2 million in 1998. This increase was primarily attributable to
increases in both the size and number of client projects resulting from the
Lorin Group acquisition and the expansion of our infrastructure and
capabilities. The expansion of our infrastructure and capabilities primarily
resulted from a 50% increase in the number of our information technology
professionals to approximately 1,200 at December 31, 1999, from approximately
800 at December 31, 1998. Revenues from existing clients contributed 71% of our
total revenues in 1999, new client business represented 18%, and business
revenues from the Lorin Group acquisition accounted for the balance.

     Cost of Revenues. Cost of revenues increased $18.1 million or 57.8% to
$49.4 million in 1999 from $31.3 million in 1998. As a percentage of revenues,
cost of revenues increased to 56.5% in 1999 from 51.9% in 1998. This increase,
both in terms of dollar amount and as a percentage of revenues, was primarily
attributable to 55% higher labor costs for our skilled information technology
professionals in 1999. These labor costs consist predominantly of a 50% increase
in the number of information technology professionals to 1,200 at December 31,
1999,

                                       57

<PAGE>

from 800 at December 31, 1998, and a 27% increase in our labor costs in 1999
from 1998 for our information technology professionals in India given the
shortage of, and significant demand for, information technology professionals.

     Cost of revenues both in terms of dollar amount and as a percentage of
revenues were also higher in 1999 compared to 1998 due to an increased
percentage of our revenues coming from on-site assignments resulting from the
Lorin Group acquisition. In addition, client concerns relating to Year 2000
conversion issues led to less offshore work in favor of on-site work because a
significant portion of the Year 2000 work was performed on-site at the clients.
Increased training costs relating to retraining our employees who had been
working on Year 2000 projects also contributed to higher cost of revenues in
1999.

     Selling, General and Administration Expenses. Selling, general and
administrative expenses increased $1.8 million or 15.9% to $13.1 million in 1999
from $11.3 million in 1998. This increase was attributable to an increased
number of sales offices and higher labor costs for our administrative and
support staff. As a percentage of revenues, selling, general and administrative
expenses decreased to 15.0% in 1999 from 18.8% in 1998. This decrease is
attributable to our 45.4% revenue growth without proportional increases in these
expenses. Salaries for administrative and support staff represented 3.5% of
revenues, rent and office maintenance represented 1.9% of revenues, and selling
expenses accounted for 4.1% of revenues in 1999 as compared to 3.8%, 2.0% and
4.5%, respectively, in 1998.

     Stock-Based Compensation. Stock-based compensation increased from $0 in
1998 to approximately $532,000 in 1999. This increase was due to the grant of
stock options in November 1999 to employees in connection with our new employee
stock option plans.

     Depreciation and Amortization. Depreciation and amortization decreased
$300,000 or 6.8% to $4.1 million in 1999 from $4.4 million in 1998. This
decrease was primarily attributable to fewer assets being subject to
depreciation during a substantial part of the year.

     Provision for Income Taxes. Taxes increased $1.3 million or 86.7% to
$2.8 million in 1999 from $1.5 million in 1998. Our effective tax rate was 14.8%
for 1999.

     Extraordinary Items. In 1999, we used internally generated funds to prepay
outstanding foreign currency loans of $3.8 million. For this purpose, we
incurred $400,000 as a prepayment penalty. The loss per share due to this
prepayment was $0.01.

     Net Income. We had net income of $15.8 million in 1999 compared to net
income of $10.8 million in 1998.

Quarterly Results of Operations

     The following table presents certain condensed unaudited quarterly
financial information for each of the eight quarters from June 30, 2000 through
March 31, 2002. This information is derived from our unaudited financial
statements that include, in the opinion of our management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of operational results, when read in conjunction with our financial
statements and the notes to thereto appearing elsewhere in this annual report.

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<PAGE>

<TABLE>
<CAPTION>
                                                     Three-Month Period Ended
                           ------------------------------------------------------------------------------
                             June 30  Sept. 30  Dec. 31    Mar. 31  June 30   Sept. 30 Dec. 31   Mar. 31
                               2000     2000      2000       2001     2001      2001     2001      2002
                               ----     ----      ----       ----     ----      ----     ----      ----
<S>                        <C>        <C>       <C>       <C>       <C>       <C>      <C>       <C>
Revenue                      $32,883   $36,569   $41,506  $  41,225  $45,565   $39,744  $41,554  $ 16,050

Cost of Revenue               17,563    18,810    24,159     30,442   25,958    21,674   25,974     5,335

Gross Profit                  15,320    17,759    17,347     10,783   19,607    18,070   15,581    10,715
Selling, general and
administrative expenses        5,112     7,115    13,401     27,055    8,350     9,881   11,188    28,287

Stock-based compensation         773       115      (115)        30       25        19       25        26

Depreciation and
Amortization                   1,581     1,095     1,023      1,023    5,794     6,108    6,196   (13,023)

Operating income               7,854     9,434     3,038    (17,325)   5,438     2,062   (1,829)   (4,575)
Other income (expenses) Net,
taxes                           (398)    3,859       640       (593)  (1,006)     (139)  (1,394)     (567)
Income before income taxes
and extraordinary item         7,456    13,293     3,678    (17,918)   4,433     1,922   (3,223)   (5,142)

Provisions for income Taxes    1,100     1,231      (885)       640      485        25      887    (1,375)
Income before extraordinary
item                           6,356    12,062     4,563    (18,558)   3,948     1,897   (4,109)   (3,767)
Extraordinary item (net of
taxes)                             -         -         -     95,674    3,243     7,995    1,503    39,836
                             -------   -------   -------  ---------  -------   -------  -------  --------

Net income                   $ 6,356   $12,062   $ 4,563  $(114,232) $   704   $(6,098) $(5,612) $(43,603)
</TABLE>

     Our quarterly operating results have historically fluctuated and may
continue to fluctuate significantly as a result of numerous external factors.
For a description of some of these factors, please see Item 3D "Risk Factors -
Our quarterly operating results are subject to fluctuations and if we fail to
meet the expectations of securities analysts or investors in any quarter, our
Equity Share and ADS price could decline significantly." We believe, therefore,
that past operating results and period-to-period comparisons should not be
relied upon as an indication of our future performance.

Conditions in India

     We are incorporated under the laws of India and many of our directors and
executive officers and a majority of our employees, assets and facilities are
located in India. Consequently, we are directly affected by political, economic
and military conditions in India.

Political Conditions

     India's relations with neighboring Pakistan, each a nuclear power, are
tense. In April 1999, India and Pakistan each conducted long-range missile
tests. Since May 1999, military confrontations between India and Pakistan have
occurred in the disputed Himalayan region of Kashmir. India's relations with
neighboring China are also tense. Events of this nature in the future could
influence the Indian economy and have a material adverse effect on the market
for securities of Indian companies and on our business. See Item 3D "Risk
Factors - Regional conflicts and terrorism in South Asia could adversely affect
the Indian economy and cause our business to suffer."

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<PAGE>

Economic Conditions

         The role of the Indian central and state governments in the Indian
economy as producers, consumers and regulators is substantially larger than the
role of U.S. and Western European governments. The government of India has
changed six times since 1996. India's current government, formed in October
1999, has announced policies and taken initiatives that continue to support the
economic liberalization policies that were pursued by previous governments.
However, the economy and businesses, including ours, remain heavily regulated.
We cannot assure you that these liberalization policies will continue or that
the rate of economic liberalization in India will not decline. Nor can we assure
you that Indian laws, government policies, foreign investment restrictions,
currency exchange rates and other matters generally affecting information
technology companies will not change. Any significant change in Indian economic
liberalization and deregulation that may occur with respect to these matters
could materially adversely affect business and economic conditions in India
generally and our business, results of operations and financial condition.

         The government of India and the government of the Sate of Maharashtra
are involved in a controversy over the fate of the Dabhol Power Corporation, or
DPC, which is a subsidiary of Enron. DPC has established a power plant in the
State of Maharashtra, and entered into an agreement with the Maharashtra State
Electricity Board, or the MSEB, to sell power. When the MSEB failed to make
payment for the purchase of power, DPC invoked the guarantee given by the State
of Maharashtra. When the State government did not honor the guarantee, the DPC
invoked the counter guarantee issued by the government of India. There have been
several claims and suits filed by the concerned parties. Events of this nature
could affect the in-flow of foreign investment into India.

Trade Sanctions

         In May 1998, the United States imposed economic sanctions against India
in response to India's testing of nuclear devices. The United States later
waived some of these sanctions in response to the government of India's
indication that it would sign the Comprehensive Test Ban Treaty. In April 1999,
India and Pakistan conducted long range missile tests which were met with an
expression of regret from the United States and other countries subjecting India
to additional sanctions. These sanctions, or additional sanctions, could
restrict our access to technology that is available only in the United States
and that is required to operate our business. We cannot assure you that any of
these sanctions will continue to be waived, that additional economic sanctions
of this or a similar nature will not be imposed, or that sanctions will not have
a material adverse effect on our business or on the markets for our equity
shares in India and ADSs in the United States.

Tax Matters

         We have benefited from certain significant tax incentives under Indian
tax laws. As a result of such incentives, our operations have been subject to
relatively insignificant Indian tax liabilities. These tax incentives included:

         .    a 10-year tax holiday from payment of Indian corporate income
              taxes for operation of our software development centres which are
              "Export Oriented

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<PAGE>

              Undertakings" or located in "Software Technology Parks" or "Export
              Processing Zones" under sections 10A and 10B of the Indian Income
              Tax Act; and

         .    an income tax deduction of 100% for profits derived from exporting
              information technology services under section 80HHE of the Indian
              Income Tax Act. We have used either of these two tax incentives
              mentioned above. Further, we are currently eligible for exemptions
              from other taxes, including customs duties.

         We pay corporate income tax in foreign countries on income derived from
operations in those countries.

         The Finance Act, 2000 phases out the tax benefit over the financial
years 2000-2001 to the financial year 2008-2009. Accordingly, facilities set up
on or before March 31, 2001 have a 9-year tax benefit, new facilities set up on
or before March 31, 2002 would have a 8-year tax benefit and so forth until the
tax benefit would not be available to new facilities set up after March 31,
2009. Our tax benefit extends until 2002, 2003, 2008 and 2009, respectively, for
our Mumbai (Bombay), Chennai (Madras), Thane and Chennai facilities. In
addition, the new sections 10A and 10B introduced by the Finance Acts, 2000 and
2001, which replace the earlier sections 10A and 10B, restrict the scope of the
tax exemption by allowing a deduction of export income earned by the software
development centres which are "Export Oriented Undertakings" or located in
"Software Technology Parks" or "Export Processing Zones" from its total income,
as compared to the earlier total exemption which was available to the business
profits earned by them.

         The combined effect of the Finance Acts, 2000 and 2001 mean that,
Indian software companies will lose their tax benefit with respect to a
particular software development centre if there is a change of more than 49% in
their ownership between the last date of the financial year in which that centre
was set up and the last date of any subsequent financial year. As a result,
companies are more likely to lose their tax benefits if large shareholders sell
their shares or if new shares are issued in order to raise capital, for
acquisitions or otherwise. In addition, companies are more likely to lose their
tax benefits with respect to their older facilities, because more time will have
elapsed in which to accumulate the 49% ownership change.

         From April 1, 2002 Government of India has introduced taxation on 10%
of our software export profits generated from India based development centres.
These operations were hitherto exempt from corporate income tax subject to
compliances and conditions.

         Our effective tax rate as of March 31, 2001 (pro forma) was
approximately 9.1% and for March 31, 2002 no taxes were payable in the absence
of taxable profits.

B.       Liquidity and Capital Resources

         Historically, we have financed our business through cash generated by
operations, borrowings under lines of credit and various credit facilities,
funds generated by our public offerings in September 1992 in India
(approximately $10.3 million), in June 2000 in the U.S. (approximately $101.1
million), and in Luxembourg in November 2002 and a private placement of equity
in 1994 and 1999 of approximately $14.72 million.

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<PAGE>

         In the year ended March 31, 2002 net cash used in operating activities
from short term application and sources was $2.2 million as against $5.06
million for the year ended March 31, 2001.

         For the year ended March 31, 2002 cash flow from financing activities
was $28.7 million and cash used in investing activities was $38 million. For the
year ended March 31, 2001, financing activities provided $49.9 million and $49
million was used in investing activities.

         During the year ended March 31, 2002, our capital expenditure totaled
approximately $21.3 million. This include $4.1 million relating to the build out
of the facilities and equipments installed at our software development centres
in India and $0.31 million for the completion of the residential building
complex at Andheri, India and technology equipment acquired in the U.S. office
for $8.3 million. Our capital expenditure as of the year ended March 31, 2002
includes approximately $10.72 million advanced towards development the
Technology Park facilities in Thane, India.

         Capital expenditure was approximately $18.76 million for 2000 and $16.8
million for 1999. In 2000 the $4.5 million of such expenditure relate to the
construction of a new Chennai facility. In 1999, the majority of capital
expenditure was attributable to $2.7 million related to the construction and
build-out of a new facility at Thane, $12.0 million for the construction and
build-out of our new facility at Chennai, and $2.1 million for the construction
of a residential complex for employees in Mumbai, (Bombay). In December 2000, we
budgeted $28 million of aggregate capital expenditure for 2001 and 2002, in
addition to the $10.23 million spent in 2000 in order to further build-out and
equip our two new facilities at Thane and Chennai. We had contractual
commitments for $2.4 million of capital expenditure throughout that same period.
We anticipate an increase in capital expenditure and lease commitments
consistent with our anticipated growth in operations, infrastructure and
personnel.

         As of March 31, 2002, our contracted commitments towards the completion
of the built out of Development Centres was approximately $10.5 million.

         For the year ended March 31, 2001, our capital expenditure was
approximately $12.4 million. Of this amount $8.10 million was incurred towards
build-out of our development centres in India and for the part build-out of a
residential complex at Andheri in India.

         In the year ended March 31, 2002, U.S. 16.8 million was invested in the
acquisition of eComServer Inc and SeraNova Inc liabilities to creditors of
SeraNova Inc amount to $10 million were settled by the issue of ADSs, to such
creditors aggregating to $29.81 million including costs. Loans to SeraNova Inc
in the sum of $3.9 million were repaid during the year.

         Additional working capital lines were used from banks in the year ended
March 31, 2002 for meeting with operational requirements of $8.2 million.

         In the year ended March 31, 2001, SeraNova Inc was acquired for U.S.
$41.1 million, the consideration being restricted by the issue of ADS. By virtue
of this transaction $21.9 million of debts were acquired.

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<PAGE>

         As of March 31, 2002, cash and cash equivalent expenditure amounted to
$0.4 million as opposed to $7.8 million as of March 31, 2001. For the same
periods working capital expenditure decreased by $25.4 million.

         Net cash used in operating activities was $47 million in 2000. This
amount was primarily due to increase in service offerings. Net cash provided by
operating activities was $24.6 million in 1999.

         On December 18, 2001, at an Extra-ordinary General Meeting, Silverline
Technologies Limited resolved to offer, issue and allot, for a cash
consideration, on a preferential basis, 20 million warrants convertible into
equity shares, to Subra Mauritius Ltd., a company owned by Mr. Krishna K.
Subramanian, our Vice-Chairman, Acting Chief Financial Officer and Executive for
International Initiatives, on such terms as may be deemed appropriate by the
Board, in accordance with Indian laws and regulations. The warrant holder shall
have the option of subscribing for one equity share per warrant at a price of
Rs. 51 per share at any time within 18 months from the date of the allotment of
the warrant. The allotted company Subra Mauritius Limited has subscribed for the
warrants and upon the terms of the Preferential Placement Guidelines of The
Securities and Exchange Board of India, in accordance with which the placement
was made. The equity share to be issued shall rank pari-passu with the existing
issued share capital.

Loan and Credit Facilities

         On January 16, 2001, Silverline Technologies Inc. and HSBC Bank and
Bank of Baroda entered into a loan agreement. HSBC Bank had made available to
Silverline Technologies Inc., a line of credit totaling $40 million. Bank of
Baroda have participated in the line of credit as co-lender for a facility of
$10 million. This facility also includes interest rate swap arrangements with
maximum weighted cash risk of $1.0 million. Interest on the credit facility
utilized has been calculated on variable rates and the borrowings will be short
term, secured by accounts receivable and non-encumbered equipment, chattel paper
and general intangibles of Silverline Technologies Inc. The facility is
guaranteed by Silverline Technologies Limited and other subsidiaries. The loan
by Bank of Baroda is also secured by a second mortgage on our property at Thane.
In May 2002, HSBC Bank issued a notice to recall its line of credit amounting to
approximately $27 million, and instituted legal proceedings against the Company.
Bank of Baroda has also threatened legal proceedings. For a description of such
legal proceedings and the Company's settlement discussions with HSBC, please see
"Item 8 - Financial Information - Consolidated Statements and Other Financial
Information - Legal Proceedings."

         On May 31, 2000, Intelligroup, Inc., the former parent of SeraNova,
Inc., entered into a new credit facility with a bank. Under the terms of the
facility, Intelligroup Inc. was not permitted to loan funds to SeraNova, Inc.
Separately, on May 31, 2000, SeraNova, Inc. entered into a $15,100,000 unsecured
promissory note with Intelligroup, Inc. reflecting funds borrowed from
Intelligroup Inc. The note bears interest at the prime rate plus 1/2%. A payment
of $3,000,000 was made on September 29, 2000 with some of the proceeds from the
sale of SeraNova Inc.'s 6% Series A convertible preferred stock, and the balance
of $12,100,000 was due on July 31, 2001. SeraNova Inc., made a further payment
of $3.96 million to Intelligroup and disputed the balance amount claimed. For
additional information about this dispute, please

                                       63

<PAGE>

see "Item 8 - Financial Information - Consolidated Statements and Other
Financial Information - Legal Proceedings."

         On June 19, 2002, SeraNova India executed an agreement with Andhra Bank
for a fixed asset-based revolving term loan that will provide SeraNova India
with up to Rs. 66.44 million (approximately $1.36 million). The term loan is
secured by substantially all fixed assets of SeraNova India. In addition, the
SeraNova India arranged on June 19, 2002, an overdraft facility secured against
substantially all fixed assets of SeraNova India. The loan agreement contains
customary representations, warranties, default provisions and financial
covenants. As of January 31, 2003, the outstanding balance on the loan and the
overdraft is approximately Rs. 2.74 million (approximately $5.9 million). See
"Item 8 - Financial Information - Consolidated Statements and Other Financial
Information - Legal Proceedings - International Litigation, Including
India-Based Matters - Andhra Bank Litigation."

         On July 19, 2002, Indian Overseas Bank, Hong Kong, approved a cash
credit facility a sum of Hong Kong Dollars (HKD) 2.0 million for our subsidiary
company in Hong Kong, SCI Ltd. The facility is secured by trade debts of SCI
Ltd. and our Corporate Guarantee. The amount outstanding as of January 31, 2003
was approximately $2.74 million HKD ($1.57 million), including interest.

         In order to augment the working capital requirements in India, on
January 3, 2002, we borrowed the sum of Rs. 340 million (equivalent to
approximately $6.96 million) through the issue of non-convertible debentures. In
addition on February 28, 2002, the Company took a short term loan and bill
discounting facility from Development Bank of Singapore Limited. As at
January 31, 2003, Rs. 155 million (equivalent to $3.23 million), including
interest is outstanding. Both the non-convertible debentures as well as the
short term loan are repayable on January 3, 2003, and March 31, 2002,
respectively. The Company is in the process of negotiating a repayment schedule.
There can be no assurance that the Company and the bank will be able to agree on
a repayment schedule.

         On August 10, 2001 and September 13, 2001, the Company entered into
credit arrangements with Indian Bank for bills discounting up to a maximum of
Rs. 110 million (approximately $2.3 million). Both these facilities were
utilized to the maximum, and as of January 31, 2003, the aggregate amount
outstanding under these facilities was Rs. 130.5 million ($2.73 million). As of
January 31, 2003, the Company was in default under the terms of these
facilities. The Company is negotiating a repayment schedule. There can be no
assurance that the Company and the bank will be able to agree on a repayment
schedule.

         In September 2002, a short term loan was obtained from Global Trust
Bank, Ltd. for the amount of Rs. 30.0 million (approximately $620,000). The loan
amount, including interest, is due on March 25, 2003.

         All the above facilities are secured by charges/hypothecation/mortgages
of company properties and current assets, and bear an interest rate of 10% to
12% per annum.

Current and Future Financing Needs

         We have incurred substantial consolidated losses and negative cash
flows from operations since the first quarter of fiscal 2002. As of March 31,
2002, we had a consolidated working capital deficit of $109.1 million and cash
and cash equivalents and short-term investments of approximately $1.8 million.
We expect to continue to incur substantial losses and negative cash flows for
the foreseeable future as we implement our new business strategy and

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<PAGE>

integrate acquired businesses. At this time, funds from operations are not
sufficient to meet our operating needs and other anticipated financial
requirements. Our current plans for the next 12 months exceed our current cash,
cash equivalents and short-term investments. As a result, we need to raise
additional funds in order to conduct our business.

         We expect to raise additional funds through:

           .   anticipated revenue growth;

           .   realization of overdue receivables;

           .   equity or loans;

           .   cost savings realized from the restructuring of certain of our
               subsidiaries during fiscal 2002 and 2003; and

           .   the implementation of additional cost cutting measures.

         There can be no assurance that anticipated revenue growth will
materialize or that we will be able to realize sufficient proceeds from
operations, realization from debtors, additional funding facilities with loans
or equity. There also can be no assurance that anticipated cost-savings
resulting from recent corporate restructurings and the implementation of
additional cost-cutting measures will be sufficient to meet our capital
requirements.

         Other potential sources of financing include public or private sales of
our shares or debt, strategic relationships and related parties. We do not have
any committed sources of financing at this time and we are uncertain whether
additional funding will be available when we need it on terms that will be
acceptable to us or at all. If we raise funds by selling additional capital
shares, the interests of our existing shareholders will be diluted. If we are
not able to obtain financing when we need it, or if our currently available
funding is not renewed, we may be required to curtail our operations
significantly, including possibly closing some or all of our subsidiaries. Such
actions may have a material adverse affect on our business, financial condition,
results of operations and prospects. Due to our cash position and the
uncertainties concerning our ability to raise additional funds, our independent
auditors have included an explanatory paragraph in their report on our financial
statements for the fiscal year ended March 31, 2002 which describes that there
are substantial doubts as to our ability to continue as a going concern, as
further described in Note 1 to our financial statements.

C.       Research and Development, Patents and Licenses

Research and Development

         None.

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<PAGE>

D.       Trend Information

         We believe that the economic slowdown in the U.S. may affect its
revenue growth and operating results for fiscal 2002. There are indications that
the economic slowdown in the U.S. has impacted the growth prospects of companies
that operate in some industry segments including the insurance, banking and
financial services and telecom segments. Consequently, these companies may cut
their IT spending or postpone decisions regarding new expenditure with respect
to information technology spending. For further information, please see "Risk
Factors- We may be materially adversely affected by the softening of the
economy." referenced herein.

         Such cuts are expected to have a significant impact on the prospects of
information technology services companies and is likely to have some negative
impact on the growth prospects of Silverline as well in the short term. In the
long term, pressure on information technology budget of corporations affected by
the economic slowdown is likely to accelerate the trend towards offshore
outsourcing and could have a beneficial impact on our company's prospects.

         The above mentioned expectations and projections regarding our future
performance are forward-looking statements. These expectations and projections
are based on currently available economic and financial information along with
our operating plans and are subject to future uncertainties that could cause
actual results to differ materially from those that may be indicated by these
statements. We do not undertake to update any forward-looking statement that may
be made from time to time by or on our behalf.

Increase in Costs for Information Technology Personnel in India

         We plan to increase the number of our information technology
professionals in order to support our planned business growth. However, global
competition for information technology professionals is intense and we may not
be able to hire or retain sufficient additional personnel to support our
business plan. Further, there is significant immigration of information
technology professionals from India, depleting the pool of available engineers
from India. Historically, costs for skilled information technology professionals
in India have been significantly lower relative to labor costs in the United
States. The higher relative profitability of our Indian operations principally
results from such lower overhead and personnel costs. Although we believe that
the significant labor cost differential between India and the U.S. will
continue, the increases in our labor costs will have an adverse effect on our
profit margins, unless we are able to recover these cost increases through
increases in our billing rates, improvements in the efficiency and productivity
of our information technology professionals, or depreciation of the rupee.

Recent Accounting Pronouncements

         In June, 1998 the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activity". SFAS No. 133, as amended by SFAS
No. 137 and No. 138, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No. 133 is
effective for all fiscal quarters of fiscal

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<PAGE>

years beginning after June 15, 2000. We have evaluated the impact of SFAS No.
133 on our consolidated financial statements. The adoption of SFAS No. 133 did
not have a material impact on our consolidated financial statements.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the Staff's view in applying generally accepted
accounting principles to revenue recognition in financial statements. We applied
the guidance in SAB 101 in the fiscal year 2000 and this did not have a
significant impact on our operating results or financial position.

         The Financial Accounting Standards Board issued FASB Interpretation No.
44, "Accounting for Certain Transactions involving Stock Compensation--an
interpretation of APB Opinion No. 25" (FIN 44) in March 2000 effective July 1,
2000 prospectively to new awards, exchanges or modifications of awards and
changes in grantee status, with minor exceptions. FIN 44 provides guidance only
for certain issues that arose in applying APB Opinion No. 25, "Accounting for
Stock Issued to Employees" and the issues addressed in FIN 44 were resolved
within the framework of the intrinsic value method prescribed by APB No. 25.

         On July 5, 2001, the Financial Accounting Standards Board, or the FASB,
concluded the voting process on its business combinations project. Board members
unanimously voted in favor of the two statements: Statement No. 141, "Business
Combinations" and Statement No. 142, "Goodwill and Other Intangible Assts". Both
statements will change the accounting for business combinations and goodwill in
two significant ways. First, Statement No. 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001. Use of the pooling-of-interest method will be prohibited. Second,
Statement No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach. Thus amortization of goodwill, including
goodwill recorded in past business combination, will cease upon adoption of that
statement, which for companies with calendar year ends, will be January 1, 2002.

Cautionary Statement Regarding Forward-Looking Statements

         This annual report on Form 20-F contains various "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, and
within the Private Securities Litigation Reform Act of 1995, as amended. Such
forward-looking statements reflect our current view with respect to future
events and financial results. Forward-looking statements usually include the
verbs, "anticipates," "believes," "estimates," "expects," "intends," "plans,"
"projects," "understands" and other verbs suggesting uncertainty. We remind
shareholders that forward-looking statements are merely predictions and
therefore inherently subject to uncertainties and other factors and involve
known and unknown risks that could cause the actual results, performance, levels
of activity, or our achievements, or industry results, to be materially
different from any future results, performance, levels of activity, or our
achievements expressed or implied by such forward-looking statements. Investors
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

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<PAGE>

     We have attempted to identify additional significant uncertainties and
other factors affecting forward-looking statements in a Risk Factors section
that appears in Item 3 - "Key Information."

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   Director and Senior Management

     Set forth below are the name, age, principal position and biographical
description of each of our directors and executive officers, as of January 31,
2003.

<TABLE>
<CAPTION>
     Name                                        Age     Position
     ------------------------------------------ -----    ---------------------------------------------------
     <S>                                        <C>      <C>
     Ravi Subramanian (1)(2)...................   45     Chairman of the Board of Directors, Chief Executive
                                                         Officer and Managing Director
     Krishna K. Subramanian (3)(5).............   41     Vice-Chairman of the Board of Directors, Acting Chief
                                                         Financial Officer (Principal Accounting Officer) and
                                                         Executive for International Initiatives
     K. Kulathu Subramanian (5)................   47     Wholetime Director
     Arjan R. Daswani (3)......................   57     Independent Director
     Prem Ranjani (1)..........................   34     Independent Director
     P. Murari (3).............................   68     Independent Director
     Vaidyanathan Panchapakesan (1)............   67     Independent Director
</TABLE>

---------------
(1)  Ravi Subramanian, P. Murari, and Vaidyanathan Panchapakesan will serve
     as directors until our 2002 annual general meeting of shareholders.
(2)  Ravi Subramanian was appointed Chief Executive Officer of the Company
     on December 3, 2002, upon the resignation of Dr. Nirmal Jain, who had
     served as the Company's Vice Chairman of the Board, President and Chief
     Executive Officer since August 6, 2002.
(3)  Krishna K. Subramanian, Arjan Daswani and Prem Ranjani will serve as
     directors until our 2003 annual general meeting of shareholders.
(4)  K. Kulathu Subramanian will serve as a wholetime director pursuant to
     the provisions of the Indian Companies Law for a five-year term from
     the date of his appointment until October 28, 2007.
(5)  Ravi Subramanian, Krishna K. Subramanian and K. Kulathu Subramanian are
     brothers.

     Ravi Subramanian is our founder and has served as our Chairman of the Board
of Directors and Chairman of Silverline Technologies, Inc. since 1992, and as
Chairman of Silverline Holdings Corp., since 1996. Mr. Subramanian was appointed
Chief Executive Officer and Managing Director of our company on December 3,
2002. Previously, Mr. Subramanian was the founder and Managing Director of
Silverline Electronics Private Limited., a personal computer service and
reselling firm. Mr. Subramanian is the brother of Messrs. Krishna K. Subramanian
and K. Kulathu Subramanian.

     Krishna K. Subramanian has served as director of our company and as
Executive for International Initiatives since January 2000. Mr. Subramanian has
served as our Acting Chief Financial Officer since December 2001. From January
2000 until August 2002, Mr. Subramanian was Vice-Chairman of our company. On
December 3, 2002, he was reappointed as Vice-Chairman. Mr. Subramanian
previously served as our wholetime director from 1992 until January 2000. From
1987 to 1992, Mr. Subramanian was a director of Silverline Electronics Private
Ltd. Mr. Subramanian is the founder and sole shareholder of Subra Mauritius

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<PAGE>

Ltd., KS Software Technologies Ltd. and Shreyas Holdings Ltd. Mr. Subramanian is
the brother of Messrs. Ravi Subramanian and K. Kulathu Subramanian.

     K. Kulathu Subramanian has served as our wholetime director since 1994
until August, 2002. He was re-appointed wholetime director on October 29, 2002
for a five year term. He has been a Director of Silverline Industrial Fabrics
Private Ltd. since 1980 and a Director of Silverline Electronics Private Limited
since 1987. Mr. Subramanian has been responsible for the development of the new
facilities in Thane and Chennai. Mr. Subramanian is the brother of Messrs. Ravi
Subramanian and Krishna K. Subramanian.

     Arjan R. Daswani has served as our Director since 1992. He is the
Chairman/Managing Director of Myquest Group of Companies headquartered in Hong
Kong and engaged in International Finance, Manufacturing and Real Estate
Development and having branches in 11 countries.

     Prem Ranjani was appointed as a Director of our company in August 2002. He
is a Solicitor and has been associated with Crawford Bayley & Co. , Solicitors
for a period of seven years. He is currently a Partner of Ranjani Associates, a
law firm in Mumbai. Mr. Ranjani passed his L.L.B. in May 1990 and his Solicitors
Examination conducted by the Bombay Incorporated Law Society in March 1992 and
that conducted by The Law Society, London in April 1994.

     P. Murari has served as our director since April 2000. He is an Advisor to
the President of the Federation of Indian Chambers of Commerce and Industry. He
is also an Advisor to a number of government and industrial groups and holds
directorships on the boards of several Indian public companies. Mr. Murari is a
director of the following companies: Mukand Ltd. (Nominee - ICICI), Abanloyd
Chiles Offshore Ltd, Herdilla Chemicals Ltd, Indian Rayon & Industries Ltd,
Credit Capital Asset Management Co. Ltd, Nova Iron & Steel Ltd, HEG Ltd, Bhoruka
Power Corp Ltd, Xpro India Ltd, South Asian Petrochem Ltd, SMV Consultants Pvt
Ltd, Smithkline Beecham Pharmaceuticals (I) Ltd, and Smithkline Beecham Consumer
Healthcare Ltd. Mr. Murari has also been Chairman of Committees on Deep Sea
Fishing Industry, Ministry of Food Processing Industries; the Indian Institute
of Mass Communications, Ministry of Information & Broadcasting and the Steering
Committee of the World Marketing Congress, Institute of Marketing Management.
Mr. Murari held several senior positions with the government of India, the last
being Secretary to the President of India. He holds an M.A. degree in Economics
from Madras University, India.

     Vaidyanathan Panchapakesan has served as our director since 1999. He has
been a consultant for Banque National De Paris since 1996. From 1979 to 1996,
Mr. Panchapakesan worked for Banque Nationale De Paris, Hong Kong. Since
December 1999, Mr. Panchapakesan has been engaged as an advisor to Rabobank,
Singapore.

Board of Directors

     Our articles of association provide for a minimum of three directors and a
maximum of twelve directors, excluding managing directors, wholetime directors
and nominee directors, if any, appointed by Indian public financial institutions
and other lenders as discussed below, ex-officio directors, special directors
and directors nominated by the debenture holders and

                                       69

<PAGE>

mortgage holders. We currently have seven directors and our charter documents
allow our Board of Directors, without shareholder approval, to appoint
additional directors, up to the maximum Board of Directors size of twelve. Both
Indian law and our articles of association provide that at least two thirds of
our directors must be subject to reelection by shareholders and at least one
third of these directors are subject to reelection at each annual meeting of
shareholders.

     Our articles of association also provide for the appointment by our Board
of Directors of a managing director and that the appointment is for a fixed term
up to five years and during this period the managing director will not be
subject to reelection.

     Our articles of association also provide for appointment of wholetime
directors who manage and administer our affairs. Wholetime directors are
appointed by our Board of Directors and are not subject to reelection. On
October 23, 1997, and November 26, 1998, Messrs. Krishna K. Subramanian and K.
Kulathu Subramanian, respectively, were appointed as our wholetime directors,
each for a five-year term. These appointments were confirmed by our shareholders
at our annual general meeting held on December 28, 1998. Mr. Krishna K.
Subramanian resigned as a wholetime director effective January 12, 2000, but
continues to serve as a director of our company. Mr. K. Kulathu Subramanian
resigned as Wholetime Director effective August 6, 2002, and was reappointed as
Wholetime Director effective October 29, 2002 for a five year term.

     Our Articles of Association permit certain financial institutions who are
lenders to the Company to appoint executive or non-executive Directors so long
as any amount remains owing to them by the Company. Such Directors are known as
"nominee directors". There are currently no nominee directors on our Board.

     The Companies Act provides that, in the case of mismanagement of a company
or the oppression of its minority shareholders, the Company Law Board may
appoint such number of directors as it deems fit. The Company Law Board is a
statutory body which administers the Companies Act and other regulations
relating to the companies in India. The Company Law Board has never exercised
this power in relation to the Company.

Management

     Our executive officers are responsible for our day-to-day management. The
executive officers have individual responsibilities established by our Board of
Directors. Executive officers are appointed by and serve at the discretion of
the Board of Directors, subject to any applicable employment agreements.

B.   Compensation

     The following table sets forth all compensation we paid with respect to all
of our directors and executive officers as a group for the fiscal year ended
March 31, 2002.

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<PAGE>

<TABLE>
<CAPTION>
                                                     Salaries, fees,             Pension,
                                                     commissions and      retirement and similar
                                                        bonuses                 benefits
                                                    -----------------    ------------------------
          <S>                                       <C>                  <C>
          All directors and executive
           officers as a group, consisting
           of seven persons......................     $1,581,333                $19,327
</TABLE>

     Indian law provides that we may pay our directors any remuneration by way
of salary, inflation adjustment allowance, perquisites, commission and other
allowances that shall not exceed 11% of our net profits. During the year ended
December 31, 2000, Messrs. Krishna K. Subramanian and K. Kulathu Subramanian
were paid an aggregate of approximately $33,094 in their capacity as wholetime
directors. In addition, they were entitled to perquisites, allowances and
reimbursement of certain expenses totaling approximately $19,327. During fiscal
2002, Mr. K. Kulathu Subramanian, our current wholetime director, was paid
aggregate compensation and perquisites of approximately $29,630 per annum.
During fiscal 2002, Ravi Subramanian, our Chairman and Chief Executive Officer,
was paid aggregate compensation and perquisites of approximately $250,000 per
annum, while Krishna K. Subramanian, our Vice Chairman, Acting Chief Financial
Officer and Executive for International Initiatives, received no compensation
for his services. During fiscal 2002, no compensation was paid to our directors.

     Our directors are reimbursed for certain expenses in connection with their
attendance at Board of Directors and committee meetings.

     At our annual general meeting, the shareholders approved a resolution
authorizing our Board of Directors to draw up a commission plan for remunerating
our independent directors, subject to a maximum sum equivalent to $50,000 per
annum.

C.   Board Practices

     Under Indian law, our shareholders must approve the remuneration and
benefits of all the directors on our board of directors at an annual general
meeting of shareholders. As discussed above, we have a formal written contract
with our one-wholetime director.

Audit Committee

     The Company's Board has established an Audit Committee that consists of
three independent non-executive directors Mr. V. Panchapakesan, Mr. P. Murari
and Mr. Arjan Daswani, members.

     The Audit Committee is required to meet at least three times each year,
once immediately before the finalization of the Company's annual accounts and
once every six months. Its powers and responsibilities include:

     .    supervising the Company's financial reporting procedures to ensure
          that the financial statements give a true and fair view of the
          financial position of the Company;

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<PAGE>

     .    reviewing with management, the external auditors and the internal
          auditors the adequacy of internal control systems;

     .    reviewing the findings of the internal auditors relating to any
          internal investigations into matters where there is a suspected
          fraud or irregularity or failure of internal control systems of a
          material nature and reporting the same to the Board;

     .    reviewing the Company's financial and risk management policies;

     .    reviewing with management the annual financial statements before
          submission of the statements to the Board, focusing primarily on
          any change in accounting policies and practices, qualifications in
          audit reports, compliance with accounting standards, compliance
          with stock exchange and legal requirements concerning financial
          statements and any related party transactions that may create a
          potential conflict of interest with the Company's interests;

     .    recommending the appointment and removal of external auditors and
          audit fees; and

     .    investigating any default in the payment by the Company to its
          shareholders, debenture holders, depositors or creditors.

Remuneration Committee

     Our remuneration committee is currently composed of Messrs. P. Murari, V.
Panchapakesan and Prem Ranjani, who are all independent directors. The
responsibilities of the remuneration committee are to review, assess and
recommend the remuneration package of the executive directors and executive
managers.

Compensation Committee

     Our compensation committee is currently composed of Messrs. V.
Panchapakesan, Chairman, Krishna K. Subramanian, and P. Murari. The compensation
committee administers our Indian Employee Stock Option Plan, the Indian Employee
Welfare Trust Program and the U.S. Employee Stock Option Plan.

Shareholder Complaints Committee

     Our shareholder complaints committee is currently composed of Messrs.
Krishna K. Subramanian and Arjan Daswani. The committee reviews shareholder and
investor grievances and complaints.


D.   Employees

     As of March 31, 2002, we employed approximately 1,729 employees, with about
964 in India and 765 in the United States and the other countries that we
operate in. As of January 31, 2003, we have

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<PAGE>

approximately 503 employees. The number of employees over the last three
financial years are as follows:

                                          Fiscal Year Ended March 31,
                             --------------------------------------------------
                                 2000              2001               2002
                                 ----              ----               ----

    Number of Employees         1,275             2,600              1,729

Recruiting

     There is global competition, particularly in the United States and India,
for information technology professionals with the skills necessary to perform
the services offered by us. We invest heavily in our programs to recruit, train
and retain qualified employees. We seek to attract, motivate and retain our
professionals by offering:

     .    multiple professional challenges and to opportunity to work in one
          or more of our consulting and training divisions;

     .    the ability to work with leading edge technology;

     .    attractive compensation plans that align employees interest with
          our own; and

     .    a stimulating, flexible and entrepreneurial work environment.

Training

     We currently provide programs at the Silverline Institute on many of the
ebusiness technologies, as well as our software development and quality
processes. We also offer advanced courses affiliated with the Centre for
Development for Advance Computing and India's National Centre for Software
Technology, including courses to satisfy the requirements for a Post Graduate
Diploma in Software Technology. We believe that the Silverline Institute
provides us with a competitive advantage in recruiting and retaining information
technology professionals.

     Management rewards employees annually based on periodic appraisals of
performance. The Company's employees do not belong to any labor unions and are
not subject to any collective bargaining agreements.

                                       73

<PAGE>

E.   Share Ownership

Beneficial Ownership of Executive Officers and Directors

     The following table sets forth certain information as of January 31, 2003,
regarding the beneficial ownership by each of our directors and executive
officers:

<TABLE>
<CAPTION>
                                                   Number of Equity
                                                         Shares            Percentage of
Name                                              Beneficially Owned(1)    Ownership (2)
----                                              ---------------------    -------------
<S>                                               <C>                      <C>
Krishna K. Subramanian (3)(5).................         4,599,591                   *
Ravi Subramanian (4)(5).......................         4,585,654                   *
K. Kulathu Subramanian........................                 0                  --
Arjan R. Daswani..............................            44,500                   *
Prem Ranjani..................................                 0                  --
P. Murari.....................................                 0                  --
Vaidyanathan Panchapakesan....................                 0                  --
</TABLE>

----------------
 * Less than 1%

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Equity shares relating to
     options currently exercisable or exercisable within 60 days of the date of
     this annual report are deemed outstanding for computing the percentage of
     the person holding such securities but are not deemed outstanding for
     computing the percentage of any other person. Except as indicated by
     footnote, and subject to community property laws where applicable, the
     persons named in the table above have sole voting and investment power with
     respect to all shares shown as beneficially owned by them.

(2)  The percentages shown are based on 167,854,884 equity shares issued and
     outstanding as of January 31, 2003.

(3)  Of such shares, 4,585,654 equity shares are held directly by Silverline
     Holdings Corp., a Delaware corporation, whose business address is 53
     Knightsbridge Road, Piscataway, NJ 08854, 1,670 equity shares are held
     directly by Subra Mauritius Ltd., a Mauritius corporation, whose business
     address is 3rd Floor, Cerne House, Le Chaussee, Port Louis, Mauritius, and
     12,267 equity shares are held directly by Shreyas Holdings Ltd., a Maurit
     corporation, whose business address is Les Cascades Edith Cavell Street,
     Port Louis, Mauritius. Ravi Subramanian, our Chairman and Chief Executive
     Officer and Chairman of Silverline Holdings Corp., KS Software Technologies
     Ltd., a British Virgin Islands corporation, and Subra Mauritius Ltd.,
     beneficially own approximately 46.30%, 45.04% and 8.66%, respectively, of
     the outstanding voting securities of Silverline Holdings Corp. Krishna K.
     Subramanian, a Director, Acting Chief Financial Officer and Executive of
     International Initiatives of our company, beneficially owns 100% of the
     outstanding voting securities of KS Software Technologies Ltd. and 100% of
     the outstanding voting securities of Subra Mauritius Ltd. Accordingly, Ravi
     Subramanian and Krishna K. Subramanian may be deemed to the beneficial
     owners of the 4,585,654 equity shares held by Silverline Holdings Corp. and
     Krishna K. Subramanian may be deemed to be the beneficial owner of the
     1,670 equity shares held directly by Subra Mauritius Ltd. Krishna K.
     Subramanian also beneficially owns 100% of the outstanding voting
     securities of Shreyas Holdings Ltd. Accordingly, Krishna K. Subramanian may
     be deemed to be the beneficial owner of the 12,267 equity shares held by
     Shreyas Holdings Ltd.

(4)  Such 4,585,654 equity shares are held directly by Silverline Holdings
     Corp. Ravi Subramanian, our Chairman and Chief Executive Officer and
     Chairman of Silverline Holdings Corp., KS Software Technologies Ltd., and
     Subra Mauritius Ltd., beneficially own approximately 46.30%, 45.04% and
     8.66%,

                                       74

<PAGE>

     respectively, of the outstanding voting securities of Silverline Holdings
     Corp. Krishna K. Subramanian, a Director, Acting Chief Financial Officer
     and Executive of International Initiatives of our company, beneficially
     owns 100% of the outstanding voting securities of KS Software Technologies
     Ltd. and 100% of the outstanding voting securities of Subra Mauritius Ltd.
     Accordingly, Ravi Subramanian and Krishna K. Subramanian may be deemed to
     the beneficial owners of the 4,585,654 equity shares held by Silverline
     Holdings Corp.

(5)  The difference between the shares beneficially owned by Krishna K.
     Subramanian and Ravi Subramanian contained in our annual reports on Form
     20-F for the fiscal years ended December 31, 2000 and March 31, 2002, is
     primarily due to foreclosures and sales by lenders to whom the shares were
     pledged as collateral for loans.

Employee Benefit Plans

Stock Options and Warrants

     On November 12, 1999, the Company granted 1,000,000 stock options to the
resident Indian employees, under an Indian Stock Option Plan I. All options
under the plan are exercisable for equity shares, on a one to one basis at an
exercise price of Rs.425/-, being the market price of the Company's equity
shares on the date of the grant of the option. The options have been granted
with a vesting period as below:

          Date of Vesting               No of Options
          4/1/2001                          237,037
          4/1/2002                          312,960
          4/1/2003                          450,003
                 Total                    1,000,000

     The employees have one year to exercise the options from the date of
vesting.

     On June 20, 2000, the Company granted 1,000,000 stock options to the
employees of its wholly owned subsidiaries, under an ADR Linked Stock Option
Plan. All options under the plan will be exercisable for ADSs, on a one to one
basis (each ADS equals 2 underlying equity shares), at a price of USD 25 per ADS
being the price at which the initial ADS issue has been made by the Company. The
options have been granted with a vesting period as below:

          Date of Vesting               No of Options
          07/01/2001                        673,107
          01/01/2002                        167,234
          07/01/2002                          2,729
          01/01/2003                        154,430
          07/01/2003                          2,500
                 Total                    1,000,000

     The employees have three years to exercise the options from the date of
vesting.

     On April 16, 2001, the Company granted 700,000 stock options to the
resident Indian employees under an Indian Stock Option Plan II. All options
under the plan will be exercisable for equity shares, on a one to one basis at
an exercise price of Rs.61, being the market price of

                                       75

<PAGE>

the Company's equity shares on the date of the grant of the option. The options
have been granted with a vesting period as below:

           Date of Vesting         No of Options
           6/30/2002               175,000
           6/30/2003               175,000
           6/30/2004               350,000
                    Total          700,000

     The employees have one year to exercise the options from the date of
vesting.

     Pursuant to the acquisition of SeraNova Inc., on April 16, 2001, the
Company allotted 2,000,000 stock options to the employees of SeraNova Inc, USA
and its subsidiary, in exchange for options held by them in SeraNova Inc.
U.S.A., under an ADR linked stock option plan II. All options under the plan
will be exercisable for ADSs, on a one to one basis (each ADS equals 2
underlying equity shares), at a price of $2.95 per ADS being the market price of
the Company's ADSs on the date of grant of the option. The options have been
granted with a vesting period as below:

           Date of Vesting         No of Options
           04/16/2001                551,630
           04/16/2002                289,674
           10/16/2002                289,674
           04/16/2003                289,674
           10/16/2003                289,674
           04/16/2004                289,674
                    Total          2,000,000

     The employees have five years to exercise the options from the date of
vesting.

     Further, on the same day the company issued 1,000,000 stock options to the
employees of its subsidiaries under an ADR linked Indian Stock Option Plan III.
All options under the plan will be exercisable for ADSs on a one to one basis
(each ADS equals 2 underlying equity shares), at an exercises price of $2.95 per
ADS, being the market price of the company's ADS on the date of grant of the
option. The options have been issued with a vesting period as below:

           Date of Vesting         No of Options
           04/16/2002                500,000
           10/16/2003                200,000
           04/16/2002                100,000
           10/16/2003                100,000
           04/16/2002                100,000
                    Total          1,000,000

     The employees have five years to exercise the options from the date of
vesting.

     None of the employees have exercised any options as of January 31, 2003.

                                       76

<PAGE>

Indian Employee Stock Option Plans

     Our Indian Employee Stock Option Plan I authorizes the grant of options to
purchase 1,000,000 equity shares to eligible employees meeting certain
performance criteria. On November 12, 1999, we granted all 1,000,000 options to
employees, at an exercise price equal to Rs. 425 per share. Of such options,
options to purchase 1,000,000 equity shares were granted to our executive
officers and directors. The options vesting on April 1, 2001, 2002 or 2003, and
are exercisable for one year from such dates. The Compensation Committee
established by our Board of Directors administers the plan.

Indian Employee Welfare Trust Program

     Our Indian Employee Welfare Trust Program authorizes the grant of warrants
to purchase 2,000,000 equity shares to eligible employees. Each warrant provides
the right to subscribe for one equity share at an exercise price equal to Rs.
365 per share. The program was approved by our shareholders and adopted by our
board of directors on November 5, 1999 and is administered by our Board of
Directors. All 2,000,000 warrants have been granted to employees on November 5,
1999. The trust established by the program has paid approximately $1.7 million
towards a 10% amount required to be paid under Indian law on the warrants issued
by us to the trust. The trust may exercise the warrants upon payment of the
balance of $15.3 million due upon such exercise at any time prior to July 11,
2001.

     As none of the employees exercised their options, they have now lapsed.

     In addition, the Committee has the authority to amend, suspend or terminate
the plan, provided that no such action may affect any ADS previously issued and
sold or any option previously granted under the plan.

     Options granted under the plan are generally not transferable by the
optionee. The options must generally be exercised within three months of the
termination of employment of the optionee with us or the optionee's service as
director, but in no event later than the expiration of the option's term. In the
event of termination for cause, the options will expire immediately upon the
date a termination notice is given to the optionee. In the event of the
optionee's termination of employment due to retirement or disability, the
vesting and exercisability of the optionee's option will accelerate in full and
the option may be exercised within three years following such termination of
employment due to retirement or disability, but in no event later than the
expiration of the option's term.

     The plan provides that in the event of a merger of our company with or into
another corporation, a sale of substantially all of our assets or a similar
transaction, each option will become immediately exercisable.

                                       77

<PAGE>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   Major Shareholders

     The following table sets forth certain information as of January 31, 2003,
regarding the beneficial ownership by all shareholders known to us to own
beneficially 5.0% or more of our equity shares:

<TABLE>
<CAPTION>
                                                     Number of Equity Shares     Percentage of
Name and Address                                     Beneficially Owned (1)      Ownership (2)
--------------------------------------------------- -------------------------   ---------------
<S>                                                 <C>                         <C>
Krishna K. Subramanian (3)(4)(6)..................         4,599,591                       *
Ravi Subramanian (5)(6)............................         4,585,654                      *
Silverline Holdings Corp. (3)(6)...................         4,585,654                      *
Subra Mauritius Ltd. (7)...........................             1,670                      *
Shereyas Holdings (7)..............................            12,267                      *
</TABLE>

------------------
*Less than 1%.

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Equity shares relating to
     options currently exercisable or exercisable within 60 days of the date
     of this annual report are deemed outstanding for computing the
     percentage of the person holding such securities but are not deemed
     outstanding for computing the percentage of any other person. Except as
     indicated by footnote, and subject to community property laws where
     applicable, the persons named in the table above have sole voting and
     investment power with respect to all shares shown as beneficially owned
     by them.

(2)  The percentages shown are based on 167,854,884 equity shares issued and
     outstanding as of January 31, 2003.

(3)  Of such shares, 4,585,654 equity shares are held directly by Silverline
     Holdings Corp., a Delaware corporation, whose business address is 53
     Knightsbridge Road, Piscataway, NJ 08854, 1,670 equity shares are held
     directly by Subra Mauritius Ltd., a Mauritius corporation, whose
     business address is Cerne House, 3/rd/ Floor, LeChaussee, Port Louis,
     Mauritius, and 12,267 equity shares are held directly by Shreyas
     Holdings Ltd., a Mauritius corporation, whose business address is Les
     Cascades, Edith Cavells, Port Louis, Mauritius. Ravi Subramanian, our
     Chairman and Chief Executive Officer and Chairman of Silverline
     Holdings Corp., KS Software Technologies Ltd., a BVI corporation, and
     Subra Mauritius Ltd., beneficially own approximately 46.30%, 45.04% and
     8.66%, respectively, of the outstanding voting securities of Silverline
     Holdings Corp. Krishna K. Subramanian, a Director, Acting Chief
     Financial Officer and Executive of International Initiatives of our
     Company, beneficially owns 100% of the outstanding voting securities of
     KS Software Technologies Ltd. and 100% of the outstanding voting
     securities of Subra Mauritius Ltd. Accordingly, Ravi Subramanian and
     Krishna K. Subramanian may be deemed to the beneficial owners of the
     4,585,654 equity shares held by Silverline Holdings Corp. and Krishna
     K. Subramanian may be deemed to be the beneficial owner of the 1,670
     equity shares held directly by Subra Mauritius Ltd. Krishna K.
     Subramanian also beneficially owns 100% of the outstanding voting
     securities of Shreyas Holdings Ltd. Accordingly, Krishna K. Subramanian
     may be deemed to be the beneficial owner of the 12,267 Equity shares
     held by Shreyas Holdings Ltd.

(4)  The address of Krishna K. Subramanian is 1st Floor Gulshan Villa, Oomer
     Park, Warden Rd., Mumbai 400026.

(5)  The address of Ravi Subramanian is 216 Mountain Blvd. Watchung, NJ
     07060 USA. See also note 3.

                                       78

<PAGE>

(6)  The difference between the shares beneficially owned by Krishna K.
     Subramanian and Ravi Subramanian contained in our annual reports on
     Form 20-F for the fiscal years ended December 31, 2000 and March 31, 2002,
     is primarily due to foreclosures and sales by lenders to whom the shares
     were pledged as collateral for loans.

(7)  See Note 3.

     As of January 31, 2003 we had 167,854,884 equity shares issued and
outstanding. As of January 31, 2003, there were approximately 63 registered
holders of ADSs (underlying 8,465,176 Equity Shares), of which 51 holders had
addresses in the United States. As of January 31, 2003, there was one registered
holder of GDRs representing 36,760,176 underlying equity shares. As of such
date, there were approximately 225,000 registered holders holding 98,164,476
equity shares listed and traded on stock exchanges in India.

B.   Related Party Transactions

Related Party Transactions

     Other than compensation agreements and other arrangements, described in
"Item 6 - Directors, Senior Management and Employees" and the transactions or
series of transactions described below, since January 1, 1999, there has not
been, nor is there currently proposed, any transaction or series of transactions
to which Silverline is or will be a party:

     .    in which the amount involved is or was material; and

     .    in which any of its directors or officers, or any member of their
          immediate family, or any company or government entity which holds
          a controlling interest in Silverline's equity shares has, had or
          will have a direct or indirect material interest.

Silverline Technologies Inc., USA (STI)

     On December 28, 1999, Silverline Holdings Corp., a Delaware corporation
controlled by Mr. Ravi Subramanian, our Chairman and Chief Executive Officer,
sold 50,000 shares of common stock of STI (representing 100% of the stock held
by it in STI) to our company in exchange for the issue to it of 4.5 million
equity in the capital of our company having a value of approximately $46.25
million.

     Further, our company made additional investments of $54.7 million in the
common stock of STI for expansion of sales and marketing operations and for
meeting the consequent additional working capital requirement. Against such
additional investment, we have been allotted 58,815 shares of common stock of
STI having a par value of $100 per share. In addition, we have given a guarantee
of $40 million to Hong Kong and Shanghai Banking Corporation Ltd., USA for
banking facilities granted by the bank to STI. The credit facility to the extent
of $30 million is presently not operational. See Item 8 - Financial Information
- Consolidated Statements and Other Financial Information - Legal Proceedings -
HSBC Bank USA v. Silverline Technologies Inc., Silverline Technologies Limited,
Silverline Technologies (Canada) Inc., Silverline Technologies UK Limited,
SeraNova Inc., and Ravi Subramanian."

                                       79

<PAGE>

     In 1999, STI made an advance of $3.6 million in the form of payments made
to Silverline Holdings Corp. in connection with its corporate restructuring. The
entire amounts advanced have been repaid as of December 31, 1999.

     STI made advances in the form of payments made on behalf of Ravi
Subramanian, our Chairman and Chief Executive Officer, totaling $787,640, and
$1,885,000 during 1999 and 2000. The amount has been repaid as at the end of
1999 and 2000.

     During 2000, STI made an advance to K S Software International Inc., a
corporation controlled by Krishna K. Subramanian, our Vice Chairman, Acting
Chief Financial Officer and Executive for International Initiatives, in the
amount of $1.0 million. The entire amount advanced was repaid as of December 31,
2000.

     During 2000 and 2001, STI has paid rent of $750,000 to Silverline Holdings
Corp. STI made advances of $3,558,911 and $10,530,529 during 1999 and 2000,
respectively, to Silverline Holdings Corp. As of March 31, 2002, $4,881,290
remained outstanding and is included in prepaid expenses and other current
assets.

     We have an agreement with our wholly owned subsidiary STI to execute
offshore software consulting, design and programming services for projects
designated by STI. This agreement is regularly reviewed. The rates adopted for
inter-company business are in line with accepted practices in the industry.


     During the fiscal year ended March 31, 2002, STI paid rent of $732,248 to
Silverline Holdings Corp. For the three months ended June 30, 2002, STI paid
rent of $140,000 to Silverline Holdings Corp.

                                       80

<PAGE>

Issuance of Warrants to Promoter Company

     On December 18, 2001, at an Extra-ordinary General Meeting, the
shareholders of our company resolved to offer, issue and allot, for cash
consideration, on a preferential basis, 20.0 million warrants convertible into
equity shares to Subra Mauritius Ltd., a company owned by Mr. Krishna K.
Subramanian, our Vice-Chairman, Acting Chief Financial Officer and Executive for
International Initiatives. The warrant holder shall have the option of
subscribing for one equity share per warrant at a price of Rs. 51/- at any time
within 18 months from the date of the allotment of the warrant i.e. March 16,
2002. Subra Mauritius Ltd. has subscribed to the warrants in accordance with the
terms of the Preferential Placement Guidelines of The Securities and Exchange
Board of India. Subra Mauritius Ltd. declined to exercise the warrants, and the
warrants lapsed. As a result, our company has forfeited the application monies
received from Subra Mauritius.

International Real Estate Ventures, LLC

     International Real Estate Ventures, LLC, or IREV, is a limited liability
company owned by Himanshu P. Shukla, a former employee and former consultant of
our U.S. subsidiary, Silverline Technologies, Inc. On December 31, 1997,
Silverline Technologies, Inc. sold a building to IREV for $4.0 million. The
purchase was financed through a mortgage from The Chase Manhattan Bank, which
was guaranteed by Silverline Technologies, Inc. and Ravi Subramanian, our
Chairman of the Board of Directors and principal beneficial shareholder. The net
book value of the property on December 31, 1997 was $2.2 million. On August 14,
1998, Chase, in consideration of the payment by IREV of the sum of $1.5 million
to Chase as cash collateral, released Silverline Technologies, Inc. as
guarantor.

     On February 2, 2000, IREV sold the building to Silverline Holdings Corp.,
our principal shareholder. Sovereign Bank financed 80% of the fair market value
of the building that was $5.5 million. In addition, the bank agreed to provide
Silverline Holdings Corp. a construction loan of $1.6 million. These loans were
guaranteed by Mr. Ravi Subramanian, and he was released from the guarantee of
IREV's mortgage with the Chase Manhattan Bank.

Loans to Executive Officers

     During fiscal 2002, Silverline Technologies, Inc., our U.S. subsidiary,
loaned Ravi Subramanian, our Chairman and Chief Executive Officer, an aggregate
of $75,000. As of March 31, 2002, there was $15,000 outstanding on these loans
to Mr. Subramanian.


C.   Interests of Experts and Counsel

     Not applicable.

                                       81

<PAGE>

ITEM 8. FINANCIAL INFORMATION

A.   Consolidated Statements and Other Financial Information

     See the consolidated financial statements, including the notes thereto, and
exhibits listed in Item 19 hereof and incorporated herein by this reference.

Legal Proceedings

     Other than as described below, there are currently no other material legal
proceedings pending or, to the knowledge of our management, threatened against
us other than legal proceedings and claims which may have arisen in the ordinary
course of business and which when ultimately concluded and determined, will not,
in the opinion of our management, have a material effect on the results of our
operations or on our financial position.

U.S.-Based Litigation

CIT Canada Inc and Net Objects Inc v. Gaming Lottery Corporation

     Our wholly-owned subsidiary CIT Canada Inc. commenced a lawsuit on June 17,
1998, in the Superior Court of the Province of Ontario, Court File No.
98-CV-149817 against the Gaming Lottery Corporation for the improper repudiation
of a Software Development Agreement, claiming Cdn.$21.0 million in damages. The
Gaming Lottery Corporation has asserted counterclaims against CIT Canada and has
claimed damages in the amount of Cdn.$10.0 million. We believe that the
counterclaims have no merit. A hearing is scheduled for April 11, 2003, at which
time it is expected that a court order setting a timetable to complete discovery
will be established.

NSA Investments II LLC v. SeraNova Inc., Rajkumar Koneru, Ravi Singh,
Intelligroup Inc., and Silverline Technologies Limited

     On February 7, 2001, NSA Investments II LLC, ("NSA"), filed a lawsuit in
the United States District Court for the District of Massachusetts, Case No.
01-10223 (PBS), against our company and its subsidiary, SeraNova, and two of its
officers, Rajkumar Koneru and Ravi Singh, and Intelligroup, Inc.,
("Intelligroup"), the former parent company of SeraNova. In or about May, 2001,
NSA agreed to dismiss Silverline from the action without prejudice. This action
arises from a $4.0 million investment made by NSA in SeraNova in March 2000
(when SeraNova was owned by Intelligroup), as part of a private placement of
SeraNova's securities. NSA alleges, among other things, that SeraNova breached
the terms of the stock purchase agreement pursuant to which NSA made its
investment in SeraNova. The complaint alleges: (i) negligent misrepresentation,
fraudulent misrepresentation, and securities law violations against SeraNova,
Mr. Koneru and Mr. Singh; (ii) breach of contract and unfair trade practices
against SeraNova; and (iii) securities law violations against Intelligroup. NSA
also seeks unspecified damages and unspecified multiple damages and attorneys'
fees from SeraNova, Intelligroup and the two individual defendants.

     SeraNova and Messrs. Koneru and Singh answered NSA's complaint and intend
to vigorously contest and deny the allegations of wrongdoing set forth therein.
By Memorandum

                                       82

<PAGE>

and Order dated September 30, 2002, the court granted, in part, NSA's motion for
partial summary judgment, in connection with NSA's claim for breach of contract
arising out of express representations made in the stock purchase agreement
concerning Intelligroup's spinoff of SeraNova in July 2000. The court scheduled
a pre-trial conference for October 31, 2002. At the pre-trial conference, the
court set a final pre-trial conference for February 11, 2003, and a trial date
of February 24, 2003. On January 20, 2003, the defendants agreed to settle the
matter. On January 24, 2003, counsel for NSA notified the court that the case
was settled. On January 28, 2003, the court issued an order dismissing the
action without prejudice to any party reopening the action within 30 days if the
settlement is not consummated. On February 13, 2003, NSA's counsel advised
defendant's counsel that NSA would reopen the matter if the settlement is not
consummated by February 14, 2003. As of February 14, 2003, the settlement had
not been consummated.

Montrose Investments, Ltd. and Strong River Investments, Inc. v. Silverline
Holdings, Silverline Technologies, Inc., SeraNova and Ravi Subramanian

     In or about April 2002, Montrose Investments, Ltd., or Montrose, and Strong
River Investments, Inc., or Strong River, commenced action in the Supreme Court
of the State of New York, County of New York, by filing motions for summary
judgment in lieu of a complaint, against Silverline Holdings, Silverline
Technologies, Inc., SeraNova and Ravi Subramanian seeking approximately
$2,395,146 in each action for alleged defaults on promissory notes. The
defendants opposed the motions. In or about July 2002, judgments were entered in
favor of Montrose and Strong River against the defendants, jointly and severally
in the amount of $2,395,146 in each case.

     On July 17, 2002, Strong River and Montrose took steps to enforce the
judgments, including serving restraining notices against the corporate
defendants pursuant to New York Civil Practice Law and Rules, restraining the
corporate defendants from the sale, assignment, transfer or interference with
their property. On or about August 28, 2002, the defendants entered into
settlement agreements under which they agreed to pay $1.5 million to Strong
River and $1.5 million to Montrose. Under the terms of the settlement, each
plaintiff was to be paid $500,000 on or before August 28, 2002 and $1.0 million
on or before October 5, 2002. The plaintiffs agreed to vacate the restraining
notices served on the corporate defendants, and the parties agreed to exchange
releases. We were not able to pay the settlement amounts in time although
approximately $1.5 million was paid to Montrose and Strong River. Because of our
inability to pay settlement amounts in time, Montrose and Strong River claim
that the entire amount of their judgments less amounts received by them are
still due to them.

Intelligroup Inc. v. SeraNova Inc., Silverline Technologies Limited and
Silverline Technologies Inc.

     In August 2001, Intelligroup commenced litigation against SeraNova,
Silverline Technologies, Ltd. (Silverline Ltd.) and Silverline Technologies,
Inc. (Silverline Inc.) in the Superior Court of the State of New Jersey,
Middlesex County, Case No. L-007991-01, to recover approximately $10.5 million
alleged to be due and owing to Intelligroup on a promissory note issued by
SeraNova and approximately $500,000 alleged to be owed by SeraNova to
Intelligroup under a consulting contract under which Intelligroup provided
consulting services to SeraNova. SeraNova has asserted a counterclaim for
reformation of the promissory note on the grounds that the note was supposed to
reflect certain cost allocations to the divisions of Intelligroup, which were
spun off to form SeraNova, but in fact did not properly reflect such costs. In
addition, SeraNova asserted a series of counterclaims seeking damages in excess
of $5.0 million as a result

                                       83

<PAGE>

of breaches by Intelligroup of various contracts, including an alleged improper
termination by Intelligroup of SeraNova's access to a satellite link for
computer data transmission that Intelligroup had procured for the benefit of
both Intelligroup and SeraNova. The parties have exchanged interrogatories,
produced documents and taken depositions. A trial date of February 27, 2003, has
been scheduled.

Intelligroup, Inc. v. SeraNova, Inc., Silverline Technologies Limited, and
Silverline Technologies Inc.

         In March 2002, Intelligroup commenced arbitration proceedings against
SeraNova, Silverline Ltd. and Silverline Inc. with the American Arbitration
Association seeking damages arising from alleged breaches by SeraNova,
Silverline Ltd. and Silverline Inc. of their obligation to pay rent for four
facilities located in Edison, New Jersey, Foster City, California and Phoenix,
Arizona, under a space sharing agreement and a contribution agreement between
Intelligroup and SeraNova. Intelligroup also sought to terminate the various
leases and accelerate all of the payments due, seeking over $4.5 million in
damages.

         Silverline Inc. and Silverline Ltd. objected to the arbitration award
covering them on the grounds that they had not agreed to arbitrate and that only
a court could determine otherwise. The arbitration panel overruled that
objection and conducted an arbitration proceeding in late June 2002. On or about
August 9, 2002, the arbitration panel issued an award in favor of Intelligroup
and against SeraNova, Silverline Inc. and Silverline Ltd. in the sum of
approximately $625,000, and reserved the right to issue additional awards with
respect to each subsequent quarter-year's worth of future lease obligations,
which the panel determined would not form the subject of a current accelerated
award.

         On August 12, 2002, Intelligroup commenced an action in the Superior
Court of the State of New Jersey, County of Middlesex, Case No. 0222-02, to
confirm the arbitration award. Judgment was entered by the court against
SeraNova on the award. Silverline Inc. and Silverline Ltd. renewed their
objection to the arbitration award being confirmed as to them on the grounds
that they had not agreed to arbitrate and that only a court could determine
otherwise. On October 3, 2002, the court entered a judgment against Silverline
Inc. and Silverline Ltd. confirming the award granted by the arbitration panel.

         SeraNova, Silverline Ltd. and Silverline Inc. negotiated a partial
settlement in connection with a transition of a portion of their employees
providing certain information technology services that involved a release from
liability to Intelligroup with respect to one of the four properties at issue in
the arbitration that reduced the amount of the judgment against SeraNova,
Silverline Ltd. and Silverline Inc. by approximately $97,000. For more
information about the employee transition which has since been completed, please
see "Item 4 - Information on the Company - Recent Developments."

         The judgment (subject to reduction as described in the preceding
paragraph) remains outstanding and could be increased if future lease payments
are not made and the arbitration panel issues a subsequent award against
SeraNova, Silverline Inc. and Silverline Ltd.

         In addition, Intelligroup has commenced a subsequent action, docket
number C-350-02 in the same court, seeking to enforce subsequent payment
defaults in court rather than pursue

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arbitration. A judgment of approximately $219,000 has been entered against
SeraNova, Silverline Inc. and Silverline Ltd. on account of subsequent rent
defaults. Intelligroup also has sought a judgment of approximately $236,000
against SeraNova, Silverline Inc. and Silverline Ltd. for legal fees arising out
of the lease breaches. It is anticipated that a judgment for that amount will be
entered shortly.

         Our litigation counsel has advised us that if we do not make future
lease payments, we will not have a defense for non-payment in future
proceedings.

Starpoint Solutions Inc. v. Silverline Technologies Limited

         On January 4, 2002, Starpoint Solutions Inc., a Delaware corporation,
filed a complaint with the United States District Court for the Southern
District of New York, Civil Action No. 02 CV 0083 (PKL), against Silverline Ltd.
The complaint alleged: (i) breach of the terms of a securities purchase
agreement and a memorandum of understanding relating to the obligation of
Silverline Ltd. to purchase certain securities from Starpoint; and (ii) breach
of implied covenant of good faith and fair dealing. On March 18, 2002 Silverline
Ltd. filed an answer disputing the allegations and asserting counterclaims
against Starpoint. On September 26, 2002, Starpoint and Silverline reached an
agreement in principle to settle the dispute and filed a stipulation of
dismissal with the court. Under the proposed settlement agreement: (i) the
lawsuit will be dismissed; (ii) Silverline Ltd. will provide Starpoint with
credit in the amount of $250,000 to be applied against any software development
work to be provided to Starpoint outside North America by Silverline Ltd. from
its development centers in India through August 3, 2003; and (iii) Silverline
Ltd. will provide Starpoint with credit in the amount of $100,000 to be applied
against any IT consulting or staffing services to be provided by Silverline Ltd.
to Starpoint in North America through August 3, 2003. If the settlement is not
consummated, then either party may withdraw the stipulation of dismissal
provided such withdrawal was prior to September 26, 2002. As of September 26,
2002, the stipulation of dismissal had not been withdrawn and the parties
entered into a settlement agreement in accordance with terms described above.

HSBC Bank USA v. Silverline Technologies Inc., Silverline Technologies Limited,
Silverline Technologies (Canada) Inc., Silverline Technologies UK Limited,
SeraNova Inc., and Ravi Subramanian

         On May 28, 2002, HSBC Bank USA, our primary lender, withdrew a secured
line of credit made available to Silverline Inc. due to uncured events of
default committed by Silverline under the loan facility and commenced an action
in the United States District Court for the Southern District of New York, Case
No. 02-CV-4007, against Silverline Inc. and Silverline Ltd., Silverline
Technologies (Canada) Inc. ("Silverline-Canada"), Silverline Technologies UK
Limited ("Silverline-UK"), SeraNova and Ravi Subramanian, as guarantors (the
"Guarantors"), to recover in excess of approximately $27.3 million, plus
interest, in connection with the loans made HSBC to Silverline Inc. under the
loan facility. HSBC Bank currently holds and has begun enforcing a judgment
against all defendants arising out of this proceeding in the approximate amount
of $27.5 million pursuant to a settlement agreement (the "Settlement Agreement")
dated September 18, 2002, approved by the court. Defendants are entitled to a
credit of approximately a little more than $7.0 million against the judgment for
payments made. HSBC's lawsuit is on behalf of itself and as collateral agent of
Bank of Baroda. Bank of Baroda has threatened to file its own lawsuit. HSBC
has issued restraining notices restraining the defendants from sale, transfer or
disposition of their assets. HSBC also moved to seek turnover of the proceeds
from our GDR offering (the Turnover Motion). Pursuant to a letter agreement
between the parties the Turnover Motion has been adjourned without a date.

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Intelligroup, Inc. v. Silverline Technologies, Inc., Silverline Technologies,
Ltd., SeraNova, Inc. and HSBC Bank

         On October 4, 2002, Intelligroup filed a complaint in the Superior
Court for the State of New Jersey, County of Middlesex, Case No.L-9094-02,
against Silverline Technologies, Inc., Silverline Technologies, Ltd., SeraNova,
Inc. and HSBC Bank. As previously disclosed above in this annual report on Form
20-F, HSBC Bank holds a judgment against Silverline in the approximate amount of
$27.5 million pursuant to the Settlement Agreement. In this action, Intelligroup
is alleging, among other things, that it is entitled to recover from HSBC and
the Silverline defendants certain monies that HSBC has received from the
Silverline parties and others in connection with the claims brought by HSBC in
its action against the Company and its subsidiaries.

Sovereign Bank v. Silverline Holdings Corp., Ravi Subramanian and Silverline
Technologies Inc.

         In June 2002, Sovereign Bank (Sovereign) commenced two separate actions
in the Superior Court of New Jersey, Middlesex County, Docket Nos. L-5092-02 and
F-10240-02, against Silverline Holdings, Inc. (Holdings), Ravi Subramanian and
Silverline Technologies, Inc. (collectively, the Silverline Parties) relating to
what Sovereign claims are defaulted construction and term loans which were not
repaid according to their terms. Sovereign claims to be owed approximately $6.5
million.

         The collateral for the loan is the office building owned by Holdings
located in Piscataway, New Jersey (Property). In the first action, Sovereign
seeks to foreclose its mortgage interest (the Foreclosure Action). In the second
action, Sovereign sought and obtained a money judgment against Holdings as the
borrower under the loan instruments, and as against Ravi Subramanian,
individually, as the guarantor of the loan (the Money Judgment Action).
Silverline Inc. is a tenant at the property and is obligated to pay rent to
Holdings pursuant to a lease between the parties.

         In the Foreclosure Action, the Silverline Parties entered into a
partial settlement with respect to Silverline Inc.'s continued tenancy and the
appointment of a receiver for the Property. Under the settlement, Silverline
Inc. is obligated to pay $75,000 per month to Sovereign, representing its rent
payments otherwise due to Holdings, and must pay real estate taxes accruing on
the Property. Silverline Inc. may continue this arrangement without the
appointment of a receiver as long as the rent payments continue to be made.
Payments were made until November 2002. Real estate taxes, however, remain in
arrears. In early December 2002, the court presiding over the Foreclosure Action
appointed a receiver for the Property. The receiver has made a demand for
payment and commenced an eviction action for non-payment of rent and Silverline
Inc.'s breach of the lease. The eviction action is scheduled to be heard on
February 19, 2003. Sovereign has joined certain junior lienholders in the
Foreclosure Action for the purposes of extinguishing their interest in the
Property. These lienholders include Bank of India, Countywide Architectural, and
Dellanno Construction.

         Sovereign has scheduled a judicial sale of the Property for March 5,
2003 unless the debt is otherwise paid or refinanced.

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         In October 2002, the court presiding over the Money Judgment Action
issued a judgment against Holdings and Subramanian in the approximate amount of
$6.4 million, but not against Silverline Inc. since it is not an obligor of the
loan. Neither Holdings nor Subramanian have appealed the court's judgment.

         On November 27, 2002, Sovereign moved for an order permitting it to
sell the Property at a judicial sale. The court decided the motion on or about
December 30, 2002, and issued a final judgment. The foreclosure sale will take
on March 5, 2003, although Holdings has the right to adjourn it for four weeks
until early April 2003.

Information Leasing Corporation, Inc.  v. Silverline Technologies Inc.

         On August 5, 2002, Information Leasing Corporation commenced litigation
in the Superior Court of New Jersey, Middlesex County, Case No. L-7259-02,
against Silverline Inc., relating to Silverline's failure to make lease payments
on certain equipment leased from Information Leasing Corporation. Information
Leasing Corporation is demanding the payment of $204,244 (as of June 7, 2002),
plus interest and late fees. This litigation is currently in the discovery
phase, and at this time, the Company is not able to express any view as to
whether it will prevail in this action.

Gajanan Vengurlekar and Umesh Pachpande v. Silverline Technologies, Ltd.,
SeraNova, Inc., Silverline Technologies, Inc. Dr. Nirmal Jain, Ravi Subramanian,
Kulathu Subramanian and Doe Corporation 1-20.

         On September 25, 2002, Gajanan Vengurlekar and Umesh Pachpande
commenced litigation against our company, certain of its officers, and other
parties in the United States District Court for the Southern District of New
York, Case No. 02-CV-7724. Plaintiffs purport to represent a class of all
current and former U.S. employees of Silverline Technologies, Inc. and SeraNova,
Inc. Plaintiffs have not sought or obtained class certification. The Amended and
Supplemental Class Action Complaint alleges that the class was not paid wages,
salaries and other compensation, that withheld taxes were not paid, and that
pension plan contributions were wrongfully retained by defendants. Silverline
served its answer and defenses on the plaintiffs on January 29, 2003. Plaintiffs
have made a settlement demand for $889,486.38. This action is currently pending.
We are considering all of our options, including exploring an out-of-court
settlement with plaintiffs and vigorously contesting defendants' liability in
the action.

New Jersey Department of Labor v. Ravi Subramanian and Silverline Technologies,
Inc.

         The New Jersey Department of Labor brought an administrative action
against Silverline Inc., Case #GE-2009-0702-STO. On December 17, 2002, the New
Jersey Department of Labor issued a Final Order requiring the payment of
$4,583,265 in unpaid employee wages, $100,000 in administrative penalties, and
$528,786.77 in administrative fees. The New Jersey Department of Labor has
threatened to file its order as a judgment, but Silverline Inc. has objected to
the Department of Labor's attempt to enter judgment without affording an
opportunity for a hearing. The Department of Labor has rejected Silverline
Inc.'s request for a hearing. Silverline Inc. is exploring all of its options,
including an out-of-court settlement and vigorously contesting liability in this
administrative matter.

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eWork Services (f/k/a Tristep Inc., f/k/a Brava Services) v. Silverline
Technologies Inc. (f/k/a SeraNova)

         eWork Services filed suit on April 15, 2002 in the Superior Court of
California, County of San Joaquin, Docket Number TY 06040, alleging non-payment
pursuant to a temporary services agreement dated May 3, 2000, between SeraNova
and Brava Services, Inc., eWork's predecessor-in-interest. eWork seeks judgment
in the amount of $17,891.49. On August 26, 2002, eWork filed an Entry of Default
against defendant. Silverline Inc. is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

Northwest Business Center, LLC v. Silverline Technologies Inc.

         On July 12, 2002, Northwest Business Center, as landlord, filed claims
against Silverline Inc. in Arizona Superior Court, Maricopa County, Case No. CV
2002-013434, for failure to pay rent at a commercial site and failure to pay a
dishonored check. Northwest Business Center seeks approximately $200,000 in
damages and attorneys fees. On August 22, 2002, Northwest Business Center filed
an application for entry of default in this proceeding. Management is
considering all of its options, including exploring an out-of-court settlement
with plaintiff and vigorously contesting defendant's liability in the action.

PR Newswire Association, Inc. v. Silverline Technologies Inc. and Silverline
Technologies, Ltd.

         On September 10, 2002, PR Newswire filed a complaint against Silverline
Ltd. and Silverline Inc. in the Superior Court of New Jersey, Middlesex County,
Special Civil Part, Docket No. DC-10881-02, for failure to pay invoices for
information services rendered in the amount of $12,845.00. Silverline Ltd. and
Silverline Inc. filed an answer on November 26, 2002. PR Newswire has moved to
strike the answer on the ground that we have not replied to their discovery
request. The matter is pending and the parties are currently engaged in
settlement discussions.

Parker Interior Plantscape, Inc. v. Silverline Technologies, Inc.

         On August 13, 2002, Parker Interior filed a complaint in the Superior
Court of New Jersey, Middlesex County, Special Civil Part, Docket No.
DC-11021-02, against Silverline Inc. for failure to pay invoices for
horticultural services rendered in the amount of $8,922.83, and Silverline Inc.
filed an answer on November 26, 2002. The matter is currently pending.
Silverline Inc. is considering all of its options, including exploring an
out-of-court settlement with plaintiff and vigorously contesting defendant's
liability in the action.

Simonik Moving & Storage, Inc. v. Silverline Technologies, Inc.

         Simonik Moving filed a complaint on August 15, 2002 in the Superior
Court of New Jersey, Middlesex County, Docket No. 10063-02, against Silverline
Inc. for failure to pay invoices for moving services rendered in the amount of
$5,702.34. Silverline Inc. is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

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Oak Brook International Associates Limited Partnership v. Silverline
Technologies Inc.

         On August 22, 2002, Oak Brook International Associates brought this
action in New York City Civil Court, Index No. 2002-08210, to enforce a judgment
that it had obtained against Silverline Inc. on March 11, 2002 in the State of
Illinois in the amount of $22,270.34. On August 20, 2002, Oak Brook served a
copy of the summons and complaint upon Silverline Inc. through the Secretary of
State of the State of New York. Silverline Inc. is considering all of its
options, including exploring an out-of-court settlement with plaintiff and
vigorously contesting defendant's liability in the action.

Colonial Pacific Leasing Corporation d/b/a GE Capital, Colonial Pacific Leasing
Corporation Assignee of Jules and Associates, Inc. v. Silverline Technologies,
Inc.

         In a letter dated September 24, 2002, purported plaintiff threatened a
lawsuit in the Superior Court of New Jersey, Middlesex County for default under
an equipment lease in the amount of $169,478.91. Silverline Inc. is considering
all of its options, including exploring an out-of-court settlement with
purported plaintiff and vigorously contesting liability in the action.

Dow Jones Reuters Business Interactive, LLC d/b/a Factiva v. SeraNova

         Dow Jones Reuters Business Interactive filed a complaint against
SeraNova on September 11, 2002, in the Superior Court of New Jersey, Middlesex
County, Docket No. 7835-02 for failure to pay invoices for information
technology services rendered in the amount of $16,841.75. SeraNova filed an
answer on November 13, 2002. The matter is currently pending. SeraNova is
considering all of its options, including exploring an out-of-court settlement
with plaintiff and vigorously contesting defendant's liability in the action.

Republic Bank, Inc. v. Silverline Technologies, Inc.

         Republic Bank filed a complaint against Silverline Inc. on July 16,
2002 in the Third Judicial District Court of Salt Lake County, State of Utah,
Docket No. 020906661, for breach of a lease agreement in the amount of
$332,861.00. Silverline Inc. is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

Sivaraman Anbarasan and CTC Corp. v. Ravi Subramanian, Silverline Technologies,
Inc., Silverline Technologies Limited and Software Solutions, Inc.

         On July 2, 2002, plaintiffs instituted a lawsuit in the Superior Court
of New Jersey, Middlesex County, Docket No. MID-L-006401-02, suing corporate and
individual defendants for breach of contract, misrepresentation, tortuous
interference, unjust enrichment and breach of covenant of good faith and fair
dealing based on alleged breaches of a stock purchase agreement and other oral
promises. Plaintiffs seek in excess of $250,000 in damages. On January 10, 2003,
the Court granted the defendants' motion to dismiss with leave to amend within
20 days. On January 21, 2003, plaintiffs filed an amended complaint re-alleging
the same causes of action against the same defendants with more specific facts.
Defendants' filed their answer to the amended complaint on February 10, 2003.
Simultaneously, defendants asserted counterclaims for misrepresentation and
securities fraud against plaintiff Anbarasan and filed a third-party complaint
alleging misrepresentation, securities fraud, breach of contract, and breach of
the

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covenant of good faith and fair dealing against E-COMMIT, Inc. This action is
currently pending. We are considering all of our options, including exploring an
out-of-court settlement with plaintiff and vigorously contesting our liability
in the action.

Columbia Bank, a Federal Savings Bank, formerly Columbia Bank, v. Silverline
Technologies Inc.

         Columbia Bank filed a complaint against Silverline Inc. on November 27,
2002, in the Superior Court of New Jersey, Bergen County, Docket No.
BER-L-9670-02, alleging that Silverline Inc. had defaulted on its obligations
under a bank note in the amount of $26,756.09. Silverline Inc.'s answer to the
complaint is due on March 3, 2003, and the matter is currently pending.
Silverline Inc. is considering all of its options, including exploring an
out-of-court settlement with plaintiff and vigorously contesting defendant's
liability in the action.

Other U.S.-Based Matters

Investigation by the United States Department of Labor Pension and Welfare
Benefits Administration

         On or about October 4, 2002, the United States Department of Labor
Pension and Welfare Benefits Administration commenced an investigation into the
ERISA plans of our subsidiaries Silverline Technologies Inc., SeraNova, Inc. and
Megasys, Inc. These entities face potential liabilities of approximately
$900,000 in connection with monies owed to 401(k) and other ERISA plans. As of
the date of this report, the investigation is still pending.

Demand Letter from RMR Systems, Inc.

         On or about January 3, 2003, Silverline Inc. received a demand letter
from RMR Systems, Inc. claiming that Silverline owed RMR Systems $85,525,
pursuant to the terms of a Master Consulting Agreement between Silverline and
RMR Systems. To date, no legal proceedings had been instituted by RMR Systems
against Silverline Inc. in connection with this matter.

International Litigation, Including India-Based Matters

Andhra Bank Litigation

         In December 2002, Andhra Bank commenced legal proceedings in India
against our company and its subsidiaries seeking the recovery of approximately
$5.65 million, plus interest, which was owed by our subsidiary SeraNova India
Pvt. Ltd., and which had been guaranteed by our company. We are currently
negotiating with the bank to extend the time period over which these payments
must be made. No assurance can be given that we will receive any extension. The
next hearing in the case is scheduled for March 26, 2003.

Punjab National Bank Litigation

         In December 2002, Punjab National Bank commenced legal proceedings in
India against our company seeking the recovery of approximately $1.01 million,
plus interest, which we had borrowed from the bank. In connection with the
filing of this lawsuit, the bank has served a notice to us for taking possession
of the assets granted as collateral for the facility. We are currently
negotiating with the bank to extend the time period over which these payments
must be made. No assurance can be given that we will receive any extension. No
hearings have yet been held in this matter, and none are currently scheduled.

Lazard India Ltd. Litigation

         In January 2003, Lazard India Ltd. initiated legal proceedings against
our company in India for the recovery of approximately $40,000, plus interest.
No date has been set for a hearing in this matter.

Intelligroup Litigation

         In July 2002, Intelligroup initiated legal proceedings against our
subsidiary SeraNova India Pvt. Ltd. for the recovery of approximately $160,000,
of which SeraNova India has paid approximately $90,000. We expect the court to
issue schedules for the repayment of the balance owed in the near future.

Legal Proceedings with Landlord

         In December 2002, the landlord of the premises of our SeraNova India
Pvt. Ltd. subsidiary, located in Hyderabad, India, commenced legal proceedings
in India to recover back rent of approximately $3.53 million, plus interest. No
trial date has been set.

Litigation with Aims Communications Ltd. and Tata Finance Ltd.

         In November 2002, Aims Communications and Tata Finance commenced legal
proceedings in India against our company for the recovery of approximately
$60,000, plus interest. We have reached a settlement with these two plaintiffs
pursuant to which we are obligated to pay approximately $500,000, to be paid in
installments. The last installment is due on April 17, 2003.

Dividend Distribution

         Under current Indian laws and regulations, we may pay cash dividends
out of our profits in the year in which the dividend is declared or out of our
undistributed profits from our previous financial years, upon the recommendation
of our Board of Directors and approval by a majority of our shareholders. Our
shareholders may, as part of this approval, decrease, but not increase the
amount of the dividend recommended by the Board of Directors. Before declaring a
dividend greater than 10% of the par value of our equity shares we are required
under Indian law to transfer to our reserves a minimum percentage of our profits
in that year, ranging from 2.5% to 10% depending upon the dividend percentage to
be declared in that year. In addition, the Board of Directors has the discretion
to declare and pay interim dividends without prior shareholder approval.

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         We declared and paid cash dividends of 1.25 Indian rupees ($0.03) per
equity share for the financial year ended March 31, 1998, 1.75 rupees ($0.04)
per equity share for the financial year ended March 31, 1999, 1.75 rupees
($0.04) per equity share for the financial year ended March 31, 2000 and our
directors have recommended a dividend of 1.25 rupees ($0.03) per equity share
for the financial year ended March 31, 2001. We cannot assure you that any
future dividends will be declared or paid or as to the amount of those
dividends.

         Dividends declared, distributed or paid by an Indian corporation were
subject to a tax of 22% until March 31, 2001. Currently they are subject to a
tax of 10.2%. This tax is neither paid by shareholders nor is it a withholding
requirement, but rather it is a direct tax payable by the corporation.

         As an ADS holder, you will generally be entitled to receive dividends
payable in respect of the equity shares represented by your ADSs. Cash dividends
in respect of the equity shares represented by your ADSs will be paid to the
depositary in Indian rupees and, except as otherwise described under Item 10B
"Memorandum and Articles of Association--Dividends and Distributions", will be
converted by the depositary into U.S. dollars. The depositary will distribute
these proceeds to you. The equity shares represented by your ADSs will rank
equally with our existing equity shares in respect of dividends.

B.       Significant Changes

Change in Business Strategy

         In July 2002, we implemented new business strategies which focus on
providing Business Process Outsourcing (BPO) and IT Enabled Services (ITES). We
will continue to provide applications development and software consulting
services. We are in negotiations with major BPO and ITES vendors in the United
States and Europe and expects to begin outsourcing of new projects in these
areas from our Software Technology Park Centers in Chennai and Thane, India in
2003, although we cannot assure you that we will be able to accomplish this
goal. As a result, the Company's onsite-based activities in Piscataway, New
Jersey, will be scaled down.

Public Offering of Global Depositary Shares

         On November 22, 2002, we did an offering on the Luxembourg Stock
Exchange of Global Depository Shares (GDSs) represented by Global Depository
Receipts. In connection with the offering, we issued 15.0 million GDSs
representing 60.0 million of our Equity Shares at $1.16 per GDS. Each GDS
represents four of our Equity Shares. Net of discounts, commissions and offering
expenses, including legal fees, we will realize proceeds of approximately $13.0
million. We intend to use the net proceeds from the offering to reduce debt and
for working capital purposes. Our GDSs trade on the Luxembourg Stock Exchange
under the ticker symbol "SLVT.LX". Following the completion of the offering, we
will have a total of 167,854,884 Equity Shares outstanding. For information
about certain of the uses of proceeds of the offering, see "Item 8 - Financial
Information - Consolidated Statements and Other Financial Information - Legal
Proceedings - HSBC Bank USA v. Silverline Technologies Inc., Silverline
Technologies Limited, Silverline Technologies (Canada) Inc., Silverline
Technologies UK Limited, SeraNova Inc., and Ravi Subramanian."

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Transition of Certain Employees

         We recently completed the following three transactions pursuant to
which we transitioned certain employees in order to raise cash to, among other
things, repay certain borrowings from HSBC Bank, our secured lender, and to pay
certain amounts owed to our vendors and creditors.

Transactions With Cognizant Technology Solutions U.S. Corporation

         Effective October 23, 2002, the Company and its subsidiaries
transitioned certain of their employees to Cognizant Technology Solutions U.S.
Corporation. Under the transaction, the Company terminated and Cognizant hired
employees and subcontractors based in the United States, India, and the United
Kingdom who were engaged in providing information technology services to
American Express (the "Amex Business"). The fee paid by Cognizant for the
transition was $9,786,023, of which approximately $4,603,000 was paid to HSBC
Bank to repay certain borrowings made by the Company, $388,134 was paid to the
Company's subcontractors, $331,732 was paid to certain vendors, and $497,000 was
paid to a judgment creditor. The remaining portions of the fee were used to pay
certain employee liabilities of the Company, including salaries and related
expenses.

         In addition, Cognizant entered into a three-month renewable services
agreement pursuant to which the Company will provide to Cognizant certain
hardware, software and associated information infrastructure utilized by the
Company in the Amex Business. In exchange, Cognizant will reimburse the Company
for certain of its operating costs for providing such services. This service
agreement has since been terminated.

Transactions With Logic Soft, Inc.

         On November 20, 2002, the Company transitioned, effective October 15,
2002, certain of its information technology professionals to Logic Soft, Inc. In
exchange, Logic Soft paid, for the benefit of the Company, a fee of
approximately $195,952 to certain vendors and creditors of the Company.

Transactions With i-Flex Solutions Inc.

         On December 10, 2002, the Company and its subsidiaries transitioned,
effective December 4, 2002, their employees engaged in providing certain
information technology services to Citicorp and Greenpoint Mortgage to i-Flex
Solutions, Inc. In exchange, i-Flex paid, for the benefit of the Company, a fee
of approximately $425,621, and assumed certain obligations of the Company
totaling approximately $415,688, consisting primarily of certain employee
liabilities, including salaries and related expenses. Of the total fee paid,
$250,000 was paid to HSBC Bank to repay certain borrowings made by the Company
and its subsidiaries.

         In addition, the Company entered into three one-month renewable
services agreements with i-flex, pursuant to which the Company will provide to
i-flex certain software, interfaces and other infrastructure necessary to
operate and service the Citicorp and Greenpoint Mortgage accounts. In exchange
for such services, i-flex will reimburse the Company for certain of its
operating costs for providing such services.

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Changes in Management

         On October 29, 2002, Mr. K. Kulathu Subramanian was appointed a
Wholetime Director of the Company, and on December 3, 2002, Dr. Nirmal Jain,
then the Company's Vice Chairman of the Board of Directors, President and Chief
Executive Officer, resigned from his positions with the Company for personal
reasons. Dr. Jain had served in such capacities since August 6, 2002. Ravi
Subramanian, the Company's Chairman of the Board of Directors, was appointed
Chief Executive Officer by the Board.

Change in Fiscal Year

         On April 30, 2002, the Board of Directors approved a change in our
fiscal year end from March 31 to June 30. As a result, we are filing in this
Annual Report on Form 20-F a transition report for the transition period from
April 1, 2002 to June 30, 2002.

Change in Independent Auditors

         On December 2, 2002, Ram Associates, an independent audit firm, was
retained to perform the audit for the fiscal year ended March 31, 2002 and for
the three-month period ended March 31, 2001 for Silverline Inc. and SeraNova and
consolidating our worldwide financial results. The financial audit for the year
ended December 31, 2000 had been performed by Deloitte & Touche LLP in the
United States (Deloitte) and Deloitte, Haskins & Sells in India (Deloitte
India). Our present cost-cutting policies necessitated the change in auditors.
Deloitte India continues to be engaged by our company, Silverline Technologies
Limited, for the purpose of auditing our Indian financial statements.

Significant Workforce Reductions

         Through March 31, 2002, we had experienced significant growth both in
revenues and in the number of our employees. As of March 31, 2002, we employed
approximately 1,729 employees worldwide in eight software development facilities
(five of which are in India), as compared to approximately 800 employees in
three facilities as of January 1, 1999. However, since March 31, 2002, we have
experienced significant reductions in revenues and other problems which have
affected our financial performance and business prospects. As a result, since
March 31, 2002, we have laid off or transferred, through sales of existing
business lines, substantial portions of our workforce, which has reduced our
payroll significantly. As of January 31, 2003, we had approximately 502
employees worldwide.

ITEM 9.  OFFER AND LISTING DETAILS

A.       Market Information

         Our equity shares are not directly publicly traded in the United States
or any foreign market other than in India. Our American Depositary Shares or
ADSs are traded on the New York Stock Exchange. Each ADS represents two equity
shares. Price quotations for our ADSs are reported on the New York Stock
Exchange under the symbol "SLT". As of January 31, 2003, we had 167,854,884
equity shares issued and outstanding, of which 4,845,204 are

                                       93

<PAGE>

represented by ADSs evidenced by American Depositary Receipts issued by JP
Morgan Chase, as depositary. As of January 31, 2003, all 4,845,204 of our ADSs
were held of record by one registered holder, our depositary, a United States
company. This represents approximately 2.9% of our outstanding ordinary shares.

         The following table sets forth the following for the periods indicated:

         .    the high and low sale price for our ADSs as reported for New York
              Stock Exchange (NYSE) composite transactions;

         .    the reported high and low closing sales prices for our equity
              shares on The Stock Exchange, Mumbai (BSE);

         .    the imputed high and low closing sales prices for our equity
              shares translated into U.S. dollars based on the noon buying rate
              on the last date of each period presented.

         The noon buying rate is the U.S. dollar buying rate in The City of New
York for cable transfers in Indian rupees at noon on a particular day as
certified for customs purposes by the Federal Reserve Bank of New York:

                                       94

<PAGE>

<TABLE>
<CAPTION>
                              Price Per ADS                         Price Per Equity Share
                            -----------------        ------------------------------------------------

                             NYSE       NYSE           BSE           BSE          BSE            BSE
                             ----       ----           ---           ---          ---            ---
Five Most Recent            High $      Low$         High Rs.      Low Rs.       High $         Low $
                            ------      ----         --------      -------       ------         -----
<S>                         <C>        <C>           <C>           <C>          <C>             <C>
Financial Years
---------------
1998..................           -          -          121.40        25.50         2.93          0.62
1999  ................           -          -          844.00       106.80        19.53          2.47
2000..................       32.00       9.75         1360.75       244.25        30.24          5.43
2001..................       11.57       0.91          278.00        22.50         5.90          0.46
2002..................        2.95       0.48           76.90        15.10         1.58          0.31

2001
----
First Quarter.........        1.57       3.51          278.00        69.10         5.98          1.49
Second Quarter........        5.49       2.40          106.70        51.05         2.28          1.09
Third Quarter.........        3.10       0.91           65.00        22.95         1.38          0.49
Fourth Quarter........        3.70       0.97           83.75        22.50         1.75          0.47

2002
----
First Quarter.........        2.95       2.00           76.90        47.00         1.59          0.97
Second Quarter........        2.30       1.25           54.40        34.10         1.11          0.69
Third Quarter.........        1.65       0.61           42.00        17.80         0.87          0.37
Fourth Quarter........        1.24       0.48           32.00        15.10         0.66          0.31

Most Recent
Six Months
----------
August 2002...........        1.35       0.77           29.40        21.30         0.61          0.44
September 2002........        0.98       0.61           25.45        17.80         0.53          0.37
October 2002..........        0.70       0.48           19.40        15.10         0.40          0.31
November 2002.........        0.96       0.50           24.90        16.00         0.52          0.33
December 2002.........        1.24       0.97           32.20        21.65         0.67          0.45
January 2003..........        1.01       0.58           23.00        12.35         0.48          0.26
</TABLE>

B.       Plan of Distribution

         Not applicable.

C.       Markets

         In addition to the New York Stock Exchange, and The Stock Exchange,
Mumbai (BSE), our securities are traded on The National Stock Exchange, The
Madras Stock Exchange Ltd., Chennai and The Stock Exchange, Ahmedabad all of
which are located in India, as well as the Luxemburg Stock Exchange.

D.       Selling Shareholders

         Not applicable.

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<PAGE>

E.       Dilution

         Not applicable.


F.       Expense of the Issue

         Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.       Share Capital

         Not applicable.


B.       Memorandum and Articles of Association

         We were originally incorporated on April 13, 1992 (Registration No.
11-66360). Our main objects as specified in Clause III of our Memorandum of
Association is to design, develop, alter, make, manufacture, produce, process,
assemble, contract for, buy, sell, export, import, trade or lease, hire or
otherwise deal in computers, computer machinery, spare parts, hardware,
software, computer stationery, peripherals, like printers, monitors, modems,
hard disks, plotters, digitizers, electronic, electrical, machines, controllers
for machines, technical know-how including computer based equipments and
systems, related software and computer programmers and accessories,
telecommunication instruments and systems, facsimile transreceivers, electronic
private automatic branch exchange, cordless telephones and pay phones.

         (a)  A director's power to vote on a proposal, arrangement or contract
              in which the director is materially interested;

         A director of our company must disclose his interest in any contract or
arrangement that the company is entering into. Furthermore, a director of our
company who is interested in any contract, arrangement or proposal being made to
our company is not entitled to vote on the contract, arrangement or proposal.
Even if the director votes on such a contract or arrangement, his/her vote will
not be counted. The director will be entitled to attend the meeting in which the
contracts or arrangement is discussed. However, the director's presence will not
be counted for determining if there has been a quorum for the meeting of the
board of directors.

         (b)  The directors' power, in the absence of an independent quorum, to
              vote compensation to themselves or any members of their body;

         The quorum for the meeting of directors is one-third of the total
number of directors or two, which ever is higher. Since we have seven directors
on our board, a quorum for the meeting of our board of directors is three. A
meeting of the board of directors cannot be held in the absence of a quorum. A
valid quorum is required for the board to pass any resolution relating to the
compensation of our directors. Furthermore, any compensation of our directors is
required to be approved by our shareholders in a general meeting of
shareholders.

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<PAGE>

         (c)   Borrowing powers exercisable by the directors and how such
               borrowing powers can be varied;

         The directors may borrow money for the company and secure its
repayment. However, if the total amount of money borrowed by the company as a
result of any proposed borrowing would exceed the aggregate paid up capital of
the company and its free reserves, the prior consent of the shareholders is
required to be obtained. The directors may secure the repayment of the money
borrowed by the creation of mortgages, charges, debentures, etc. The approval of
a company's shareholders is required for the issue of convertible or optionally
convertible debentures.

         (c1)  Loans given, guarantees provided and investments made by the
               company;

         Our company can make loans, give guarantees, provide security or
acquire the securities of any other body corporate if the total amount of such
loans, guarantees or investments in other body corporates does not exceed sixty
percent of the company's paid-up share capital and free reserves, or the total
amount of the free reserves, which ever is more. Loans, guarantees given by the
company and investments made by a company exceeding the limit referred to above,
would require the prior approval of the shareholders of our company by way of
special resolution of the shareholders where the affirmative vote of at least
three-fourth the total number of shareholders present and voting is necessary.

         (d)   Retirement or non-retirement of directors under an age limit
               requirement; and

         At least two-third's of our directors are subject to retirement by
rotation in the following manner. At least one third of the directors of our
company must retire at every annual general meeting of the shareholders. The
directors who are subject to retirement by rotation each year are those
directors who have been longest in the office. Under the Indian Companies Act,
1956, as amended, the retirement age in case of whole-time directors and
managing directors is 70 years.

         (e)   Number of shares, if any, required for director's qualification.

         There is no requirement for a director of our company to hold shares in
our company.

Share Capital

         Dividends

         Under current Indian laws and regulations, the company may pay cash
dividends out of its profits in the year in which the dividend is declared or
out of its undistributed profits from its previous financial years. The dividend
is recommended by the board of directors and approved by a majority of the
shareholders. The shareholders may decrease, but not increase the amount of the
dividend recommended by the board of directors.

         Before declaring a dividend greater than 10% of the par value of the
company's equity shares, the company must transfer between 2.5% to 10% of its
profits to its reserves depending upon the dividend percentage to be declared in
that year. The company may declare dividends out of the company's accumulated
profits if there are inadequate profits or if there are no profits.

                                       97

<PAGE>

However, this is subject to certain conditions. In addition, the board of
directors has the discretion to declare and pay interim dividends without prior
approval of the shareholders.

         The payment of dividend is subject to the rights of the preference
shareholders and the provisions of reserves that the company has to maintain.
Even if the company makes a profit, the directors may set aside a portion of the
profits to form reserve funds or to meet contingencies or improve the facilities
of the plant and machinery.

         With respect to equity shares issued by our company during a particular
financial year, cash dividends declared and paid for that year were prorated
from the date of issuance to the end of that financial year. However, pursuant
to a letter dated February 18, 2001 issued by the Securities and Exchange Board
of India, shares issued by Indian companies whose shares are being traded
compulsorily in dematerialized form in India, should be pari-passu in all
respects. The shares issued by our company are being traded compulsorily in
dematerialized form and hence, shares issued by us during the course of a
financial year after the letter of the Securities and Exchange Board of India
will be treated in the same way as the equity shares already issued by our
company in the past. Therefore, on such shares dividends will be paid for the
full year even though they have been issued during the course of the year. This
also applies to ADRs traded on the New York Stock Exchange, as long as the ADRs
were issued after the letter of the Securities and Exchange Board of India. In
addition, to the extent that we distribute cash dividends, if exchange rates
fluctuate during a time when the depositary cannot convert Indian rupees into
U.S. dollars, you may lose some or all of the value of the distribution.

         An Indian company is required to transfer to a separate bank account,
the total amount payable as dividends to its shareholders within a period of 5
days from the date of declaration of the dividend. An Indian company is required
to pay out the dividend to its shareholders within a period of 30 days from the
date the dividend has been declared. The dividend remaining in the separate bank
account referred to above after a period of 37 days from the date of its
declaration is required to be transferred by the company to a separate unpaid
dividend account. Any dividend which remains unpaid or unclaimed for a period of
7 years from the date it is due for payment is required to be transferred by the
company to a separate fund called the Investor Education and Protection Fund
established by the Indian Central Government after which the shareholder's
entitlement to such dividend lapses.

         Voting Rights

         At any general meeting, voting is by show of hands unless a poll is
demanded by a shareholder or shareholders present in person or by proxy holding:

         .     at least 10% of the total shares entitled to vote at the general
               meeting; or
         .     shares with an aggregate paid-in capital of at least Rs. 50,000.

         Upon a show of hands, every shareholder entitled to vote and present in
person has one vote. On a poll, every shareholder entitled to vote and present
in person or by proxy has voting rights in proportion to the paid-in capital
held by that shareholder. The chairman of our board of directors has a deciding
vote in the case of any tied vote. Any of our shareholders may appoint a proxy.
The instrument appointing a proxy must be delivered to the company at least 48
hours prior to the applicable meeting. A proxy may not vote except on a poll. A
corporate shareholder

                                       98

<PAGE>

may appoint an authorized representative who can vote on behalf of the
shareholder, both upon a show of hands and upon a poll.

         Ordinary resolutions may be passed by a simple majority of our
shareholders present and voting at any properly called general meeting. Certain
actions must be approved by resolutions which have been passed by the
affirmative vote, whether by show of hands or poll, of not less than three times
the number of votes, if any, cast against the resolution. Such resolutions are
termed as special resolutions. The relevant actions requiring to be passed by
special resolution, among others, include:

         .     amendments to our Memorandum of Association and Articles of
               Association, or our charter documents;
         .     commencement of a new line of business;
         .     waiver of pre-emptive rights for the issuance of any new equity
               shares;
         .     reduction of our share capital; and
         .     winding-down of our company.

         Resolutions passed by postal ballot

         There were no provisions for postal ballot under Indian law prior to
December 2000. The Indian Companies Act, 1956 was amended in December 2000 to
introduce a section on postal ballot. The amendment states that Indian public
companies which are listed on recognized stock exchanges, may in respect of
certain items notified by the Indian central government, get a resolution passed
by means of postal ballot (including electronic voting), instead of transacting
the business in a general meeting of the company. In May 2001, the Indian
central government notified the following list of items that could be resolved
by postal ballot:

         .     alteration in the object clause of the Memorandum of Association;
         .     alteration of Articles of Associations in relation to deletion or
               insertion of provisions defining private company;
         .     buy-back of own shares by the company;
         .     issue of shares with differential voting rights;
         .     change in place of registered office of the company;
         .     sale of whole or substantially the whole of undertaking of a
               company;
         .     giving loans or extending guarantee or providing security in
               excess of the limit prescribed under sub-section (1) of section
               372A;
         .     election of a director under sub-section (1) of section 252;
         .     power to compromise or make arrangements with creditors and
               members; and
         .     variation in the rights attached to a class of shares or
               debentures or other securities.

         Bonus Shares

         In addition to permitting dividends to be paid out of current or
retained earnings as described above, Indian law permits our company's board of
directors to distribute an amount transferred from our general reserve or
surplus in our profit and loss account to our shareholders

                                       99

<PAGE>

in the form of bonus shares which is similar to a stock dividend. Indian law
also permits the issuance of bonus shares from the share premium account,
general reserve account or the amount lying in the credit of a company's profit
and loss account. Bonus shares are distributed to shareholders based on the
recommendation of our board of directors and in proportion to the number of
equity shares each shareholder owns. The distribution of bonus shares is subject
to the approval of the shareholders at a general meeting.

         Liquidation Rights

         On the winding up of the company the workmens' dues and debts due to
secured creditors (to the extent that they cannot recover their dues from the
security provided to them) are given priority and rank pari passu with each
other. After making the aforesaid payments, all revenues and taxes, payable to
the central or state government, wages or salary or other dues to employees, are
required to be made. Any surplus amount is required to be distributed to the
shareholders of the company. The preference shareholders will be entitled to
receive the arrears of preferential dividend and the amount of money paid up on
the preference shares in priority to the equity shareholders. The equity
shareholders are entitled to receive the surplus assets after winding up of the
company in proportion to their shareholding in the company.

         Redemption Provisions

         The company can issue preference shares that must be redeemable, within
a period of twenty years. These shares can be redeemed out of the profits of the
company that can be used for the payment of dividend or by the issue of fresh
shares. These preference shares cannot be redeemed unless they have been fully
paid up. If a premium has to be paid on the redemption of the preference shares
the payment must be from the company security premium account or the profits of
the company.

         If the preference shares are redeemed, but not by a new issuance of
shares, then an amount equal to the nominal value of the preference shares
redeemed will be transferred to a capital redemption reserve account.

         With regard to redemption of debentures, the Indian Companies
(Amendment) Act, 2000 provides that where a company issues debentures after the
above amendment, it shall create a debenture redemption reserve account in which
it will transfer an adequate amount from out of its profits every year until
such debentures are redeemed. The amount credited to the debenture redemption
reserve account is required to be utilized only for the purpose of redemption of
debentures.

         Sinking fund provisions

         None.

         Liability to further capital calls by the company

         The directors may make calls on the shareholders requiring them to make
payment on the unpaid portion of the shares held by them. The call on shares
will be made on a uniform basis on all the shares falling under the same class.

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<PAGE>

         However, the above provision will not apply to ADR holders as the
equity shares underlying the ADRs are fully paid up, i.e. non-assessable.

         Any provisions discriminating against any existing or prospective
holder of such securities as a result of such shareholder owning a substantial
number of shares

         For information on this point please see the "Risk Factors--Risks
Related to Our Corporate Charter and Share Ownership. Our officers, directors
and affiliated entities, including Silverline Holdings Corp., own a significant
percentage of our company and could significantly control us in ways that might
not be favored by our other shareholders and the holders of our ADSs."

Rights of Shareholders

         The rights granted to a class of shareholders may be modified by the
company by an agreement between the company and the person acting on behalf of
that class of shareholders. However, the agreement must be ratified in writing
by persons who hold three-fourth of the nominal value of the shares of that
class. A separate meeting of that class of shareholders must be held where the
resolution is passed with a three-fourth majority.

         There have been recent amendments to the Indian Companies Act, 1956
that permit a public Indian company to issue equity shares with special rights
as to voting, dividend or otherwise, subject to certain terms and conditions.
Previously, it was not possible for Indian public companies to issue shares with
different rights as to voting, dividend or otherwise. We have not yet issued any
shares with special rights as to voting, dividend or otherwise.

Annual General Meetings and Extraordinary Meetings of Shareholders

         An Indian company has to hold at least one annual general meeting, or
AGM, in each year. There gap between two AGMs can not exceed fifteen months. All
meetings of the shareholders other than AGMs are called extra-ordinary general
meetings, or EGMs. An EGM can be convened at any time by the directors. The
directors must convene an EGM if persons who hold at least ten percent of the
paid up capital of the company require a meeting of the shareholders.

         A general meeting of the company may be called by providing a notice of
at least 21 days. However, an AGM can be convened with a shorter notice if all
the members who are entitled to vote agree to a shorter notice. An EGM may be
convened with a shorter notice if members who hold at least 95% of the paid up
share capital of the company that would give them the right to vote, consent to
the shorter notice.

         All the business to be conducted at an AGM are considered to be special
businesses except the following items:

         .     Approval of accounts

         .     Appointment of auditors

         .     Declaration of dividend

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<PAGE>

         .     Reappointment of directors retiring by rotation.

         All the businesses conducted in an EGM are considered to be special
businesses. If any special business is to be conducted in a general meeting, a
statement that describes all the material facts of the business must be
disclosed to the shareholders at the time of the issuing the notice for the
general meeting.

         The quorum for a general meeting is five members who are personally
present. At any general meeting, a resolution can be passed by a show of hands
or by a poll. The chairman has a casting vote if there is an equality of votes.

         The holders of ADSs, generally will have the right under the deposit
agreement to instruct the depositary to exercise voting rights for the equity
shares represented by the ADSs. At the request of the company, the depositary
will mail notices of any shareholders' meeting received from the company
together with information explaining how to instruct the depositary to exercise
the voting rights of the securities represented by ADSs. If the depositary
receives voting instructions for a holder of ADSs on a timely basis, it will
endeavor to vote the securities representing the holder's ADSs in accordance
with those voting instructions.

         Under Indian law, voting of the equity shares is by show of hands
unless a poll is demanded by a member or members present in person or by proxy
holding at least one-tenth of the total shares entitled to vote on the
resolution or by those holding an aggregate paid up capital of at least Rs.
50,000. A proxy may not vote except on a poll.

         As soon as practicable after receipt of notice pursuant to the
Depositary Agreement, among our company, JP Morgan Chase Bank and the beneficial
owners from time to time of American depositary receipts, of any meeting of
holders of equity shares or deposited securities, the depositary shall fix a
record date for determining the holders entitled to receive any distribution on
or in respect of deposited securities, to give instructions for the exercise of
any voting rights and to receive any notice or to act in respect of other
matters and only such holders shall be so entitled.

         As soon as practicable after receipt from our company of notice of any
meeting or solicitation of consents or proxies of holders of shares or other
deposited securities, the depositary shall mail to holders a notice stating (a)
such information as is contained in such notice and any solicitation materials,
(b) that each holder on the record date set by the depositary therefor will be
entitled to instruct the depositary as to the exercise of the voting rights, if
any, pertaining to the deposited securities represented by ADSs evidenced by
such holder's ADRs and (c) instructions to give a discretionary proxy to a
person designated by us. Upon receipt of instructions of a holder on such record
date in the manner and on or before the date established by the depositary for
such purpose, the depositary shall endeavor insofar as practicable and permitted
under the provisions of or governing deposited securities, to vote or cause to
be voted the deposited securities represented by the ADSs, evidenced by such
holder's ADRs, in accordance with such instructions. The depositary will not
itself exercise any voting discretion in respect of any deposited securities.

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<PAGE>

Change in Control Provisions

         Except as set forth in Item 3D "Risk Factors -Risks Related to Our
Corporate Charter and Share Ownership-Compliance with Indian law could delay or
prevent an acquisition or merger of our company", even if such a transaction
would be beneficial to our shareholders", there are no specific provisions in
our Articles of Association that would prevent or delay a change in control of
our company. Further, if any person has to obtain control over our company by
virtue of a new issuance of shares of our company, the prior approval of our
shareholders by way of special resolution would be needed for such issuance of
shares.

         In addition, a non-Indian person or entity would require the prior
approval of the Foreign Investment Promotion Board, or the FIPB, for purchasing
the shares of our company from the existing Indian resident shareholders. FIPB
may not grant such an approval. Furthermore, the FIPB would grant its approval
only after it receives a resolution of the board of directors our company
approving the said transfer.

         Also, the provisions of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeover) Regulations, 1997 would get
attracted in the case of the acquisition of shares of an Indian company, listed
in India. The said provisions are discussed below.

         The above provisions may have an effect of delaying, deferring or
preventing a change in control.

Disclosure of Ownership Interest

         Under the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeover) Regulations, 1997, or takeover code, upon
the acquisition of more than 5% of the outstanding shares or voting rights of a
listed company in India, a purchaser is required to notify the company and the
company in turn is required to notify all the stock exchanges on which the
shares of the company are listed. Upon the acquisition of 15% or more of such
shares or voting rights, or a change in control of the company, the purchaser is
required to make an open offer to the other shareholders offering to purchase at
least 20% of all the outstanding shares of the company at a minimum offering
price, as determined pursuant to the takeover code.

         Since our company is a listed company in India, the provisions of the
takeover code will apply to it. However, the provisions of the takeover code
will apply to an ADS holder only once the holder converts the ADSs into the
underlying equity shares.

         In addition to the above, an Indian listed company is required to file
with the Indian stock exchanges, its shareholding pattern, including details of
the shares held by its promoters, non-residents (i.e. ADR/GDR holders, Foreign
Institutional Investors, non-resident Indians, etc.), financial institutions and
mutual funds, on a quarterly basis, within 15 days of end of the quarter. It is
also required to disclose the names and other details of persons holding more
than 1% of the total share capital of the company.

Changes in Capital

         None.

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<PAGE>

C.       Material Contracts

         None.


D.       Exchange Controls

General

         Prior to June 1, 2000, foreign investment in Indian securities,
including the acquisition, sale and transfer of securities in Indian companies,
was regulated by the Foreign Exchange Regulation Act , 1973. However, since June
1, 2000, foreign investment in Indian securities is regulated by the provisions
of the Foreign Exchange Management Act, 1999, or the FEMA and the accompanying
rules and regulations issued by the Indian Central government and the Reserve
Bank of India thereunder. These include, among others, the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000, or the FDI Regulations, and the notifications issued by the
Ministry of Finance of the government of India and press releases issued by the
Ministry of Commerce and Industry of the government of India.

         Certain regulations issued by the Securities and Exchange Board of
India and the Reserve Bank of India restricting ownership levels in Indian
companies are also discussed herein. A summary of the legislations, regulations
and guidelines referred to above is provided herein below.

E.       Foreign Direct Investment

         Currently, subject to certain exceptions, direct investment in Indian
companies by foreign investors, by individuals of Indian nationality or origin
residing outside India, by non-resident Indians, and by overseas corporate
bodies at least 60% owned by such persons, or overseas corporate bodies, in
Indian companies would not require the prior approval of either the Foreign
Investment Promotion Board, or the FIPB, which is a part of the Ministry of
Commerce and Industry of the government of India or the Reserve Bank of India.
No prior approval of the FIPB or the RBI is required for foreign direct
investment in our ADSs or GDRs.

         In cases where approval of neither the FIPB nor the Reserve Bank of
India is required, a declaration giving details of the foreign investment is
required to be filed with the Reserve Bank of India within a period of 30 days
of bringing in the money into India and another report must be filed within 30
days of issuing shares to foreign investors in the Indian company. Foreign
direct investment in our company is subject to these notification requirements.

         The foreign direct investment regime in India discussed above applies
only to a new issuance of shares made by Indian companies and does not apply to
a transfer of shares.

Restrictions on the sale of equity shares underlying the ADSs

         No approval is required for transfers of ADSs outside India between two
non-residents of India. However, the transfer of the shares underlying the ADSs
by a non-resident of India to an Indian resident is regulated by the Reserve
Bank of India.

                                       104

<PAGE>

         Specific approval of the Reserve Bank of India will have to be obtained
for:

         .     any renunciation of rights in the underlying equity shares in
               favor of a person resident in India; and

         .     the sale of the underlying equity shares by a non-resident of
               India to an Indian resident.

         In such cases, the foreign investor would have to apply to the Reserve
Bank of India by submitting Form TS1, which requires information as to the
transferor, the transferee, the shareholding structure of the company whose
shares are to be sold, the proposed price and other information. The Reserve
Bank of India is not required to respond to a Form TS1 application within any
specific time period and may grant or deny the application at its discretion.

         Exceptions to this requirement of Reserve Bank of India approval
include sales made through a registered Indian broker or through a recognized
stock exchange in India at the prevailing market rates, or the offer of shares
in accordance with the terms of an offer under the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

         The proceeds from any sale of the underlying equity shares by a
non-resident of India to an Indian resident may be transferred outside India
after receipt of Reserve Bank of India approval, if required, and the payment of
applicable taxes and stamp duties.

F.       Dual Fungibility

         Indian law did not provide for the conversion of shares into ADRs. The
Reserve Bank of India has recently permitted registered brokers in India to
purchase the shares of an Indian company on behalf of a person outside India for
the purpose of converting the shares so purchased into ADRs, if the:

         .     shares are purchased on a recognized stock exchange in India;

         .     Indian company has issued ADRs;

         .     shares are purchased with the permission of custodian of the ADRs
               of the concerned Indian company and are deposited with the
               custodian;

         .     number of shares so purchased do not exceed the number of ADRs
               converted into underlying shares and shall be subject to sectoral
               caps as applicable;

         .     non-resident investor, broker, custodian and the overseas
               depository comply with the provisions of the Issue of Foreign
               Currency Convertible Bonds and Ordinary Shares (Through
               Depository Receipt Mechanism) Scheme, 1993, or the Scheme, and
               guidelines issued thereunder by the Indian central government
               from time to time.

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G.       Taxation

Material U.S. Federal Income Tax Consequences

         The following discussion describes the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of our ADSs or equity
shares by a beneficial owner of those ADSs or equity shares, referred to in each
case for purposes of this discussion as a "U.S. Holder," that is:

         .     a citizen or individual resident of the United States;

         .     a corporation or other entity taxable as a corporation for U.S.
               federal income tax purposes that is created or organized in the
               United States or under the law of the United States or of any
               state or the District of Columbia;

         .     an estate whose income is includible in gross income for U.S.
               federal income tax purposes regardless of its source; or

         .     a trust, if (1) a court within the United States is able to
               exercise primary supervision over the administration of the
               trust, and one or more U.S. persons have the authority to control
               all substantial decisions of the trust, or (2) the trust was in
               existence on August 20, 1996 and properly elected to continue to
               be treated as a United States person.

         In addition, certain material aspects of U.S. federal income tax
relevant to a holder other than a U.S. Holder, referred to as a "Non-U.S.
Holder," are discussed below. For U.S. federal income tax purposes, holders of
ADSs will be treated as the owners of the equity shares represented by the ADS.

         This summary is for general information purposes only. It does not
purport to be a comprehensive description of all of the tax considerations that
may be relevant to each U.S. Holder. This discussion is based on current
provisions of the U.S. Internal Revenue Code of 1986, as amended, or the "Code",
current and proposed Treasury Department regulations promulgated thereunder,
judicial decisions and published positions of the U.S. Internal Revenue Service,
referred to as the "IRS", and other applicable authorities, all as in effect as
of the date of this annual report, and each of which is subject to change or to
differing interpretations (possibly with retroactive effect). This discussion
does not address all aspects of U.S. federal income taxation that may be
relevant to any particular shareholder based on the shareholder's individual
circumstances. In particular, this discussion considers only U.S. Holders that
own our ADSs or equity shares as capital assets and does not address the
potential application of the alternative minimum tax or the U.S. federal income
tax consequences to U.S. Holders that are subject to special treatment,
including U.S. Holders that:

         .     are broker-dealers or insurance companies;

         .     have elected mark-to-market accounting;

         .     are tax-exempt organizations;

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         .     are financial institutions or "financial services entities";

         .     hold ADSs or equity shares as part of a straddle, "hedge" or
               "conversion transaction" with other investments;

         .     acquired their ADSs or equity shares through the exercise of
               options or similar derivative securities or otherwise as
               compensation;

         .     have a functional currency that is not the U.S. dollar;

         .     are regulated investment companies; or

         .     are persons who actually or constructively own 10% or more of our
               ADSs or equity shares.

         In addition, this discussion does not consider the tax treatment of
persons who hold ADSs or equity shares through a partnership or other
pass-through entity. This discussion does not address any aspect of state, local
or non-U.S. tax laws or any U.S. federal tax laws other than U.S. federal income
tax laws.

         You are advised to consult your own tax adviser with respect to the
specific tax consequences to you of acquiring, holding or disposing of our ADSs
or equity shares.

Taxation of Dividends Paid on ADSs or Equity Shares

         Subject to the rules applicable to passive foreign investment
companies, described below, a U.S. Holder will be required to include in gross
income as ordinary income an amount equal to the U.S. dollar value of any
distribution paid on an ADS or equity share on the date the distribution is
received by the depositary or the U.S. Holder, as the case may be (based on the
exchange rate on that date), to the extent the distribution is paid out of our
current or accumulated earnings and profits as determined for U.S. federal
income tax purposes. Generally, any gain or loss resulting from the conversion
of Indian rupees into U.S. dollars will be ordinary income or loss. A
distribution in excess of earnings and profits will be treated first as a
nontaxable return of capital, reducing the U.S. Holder's basis in the ADS or
equity share and, to the extent in excess of basis, will be treated as gain from
the sale or exchange of the ADS or equity share. The deductibility of expenses
of the depositary, like transfer and registration fees, currency conversion
expenses, communication expenses and transfer taxes and duties, may be subject
to limitations, yet the amount of those expenses would not reduce the gross
amount of a U.S. Holder's distributions on an ADS.

         Our dividends will not qualify for the dividends received deduction
generally available to corporations.

         A U.S. Holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Indian taxes paid by us unless it is a
U.S. corporation owning 10% or more of our voting stock.

         U.S. Holders should be aware that dividends paid by us generally will
constitute "passive income" or, in the case of certain U.S. Holders, "financial
services income" for purposes of the

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foreign tax credit. The Code applies various limitations on the amount of
foreign tax credit that may be available to a U.S. taxpayer. U.S. Holders should
consult their own tax advisers with respect to the potential consequences of
those limitations.

Taxation of the Disposition of ADSs or Equity Shares

         Subject to the rules applicable to passive foreign investment
companies, discussed below, upon the sale, exchange or other disposition of an
ADS or equity share, a U.S. Holder generally will recognize capital gain or loss
in an amount equal to the difference, if any, between the U.S. Holder's basis in
the ADS or equity share and the amount realized on the disposition. Capital gain
or loss from the sale, exchange or other disposition of an ADS or equity share
held more than one year is long-term capital gain or loss. The deductibility of
a capital loss recognized on the sale, exchange or other disposition of an ADS
or equity share is subject to limitations.

         As described in "Indian Taxation" below, gain that a U.S. Holder
recognizes on a sale of an equity share may be subject to Indian tax. In
general, a U.S. Holder will have the option of claiming the amount of any Indian
income tax, along with all of the U.S. Holder's other foreign income taxes for
the year, either as a deduction from gross income or as a dollar-for-dollar
credit against the U.S. Holder's U.S. federal income tax liability. An
individual who does not claim itemized deductions, but instead utilizes the
standard deduction, may not claim a deduction for the amount of any Indian
income tax, but that amount may be claimed as a credit against the individual's
U.S. federal income tax liability. The amount of foreign income tax that may be
claimed as a credit in any year is subject to limitations and restrictions,
which must be determined on an individual basis by each shareholder. The
limitations include, among others, rules that limit foreign tax credits
allowable with respect to specific categories of income to the U.S. federal
income tax otherwise payable with respect to each category of income. Gain or
loss recognized by a U.S. Holder on a sale, exchange or other disposition of an
ADS or equity share generally will be in the passive income category or, in the
case of certain U.S. Holders, the "financial services" or general limitation
category for purposes of the U.S. foreign tax credit limitations and generally
will be U.S. source income or loss. Unless a U.S. Holder whose gain is U.S.
source has sufficient foreign source income in the same category from other
transactions subject to foreign income tax at a rate sufficiently below the U.S.
federal income tax rate applicable to that income, the U.S. foreign tax credit
limitation rules would prevent the U.S. Holder from utilizing a foreign tax
credit for part or all of the Indian tax paid on the gain. Because the U.S.
Holder may not be able to obtain a tax credit in India for the U.S. tax paid on
the gain, the U.S. Holder could be subject to full taxation in India as well as
in the United States on the same gain. The foregoing discussion also applies in
respect of any Indian tax payable on any sale of subscription or other rights
and Indian tax payable on any repurchase by us of our shares.

Tax Consequences if We Are a Passive Foreign Investment Company

         In general, we will be a passive foreign investment company, or PFIC,
for any taxable year if either (1) 75% or more of our gross income in the
taxable year is passive income, or (2) 50% or more of the average value (or, in
certain cases, adjusted basis) of our assets in the taxable year produces, or is
held for the production of, passive income. We do not believe that we are, for
U.S. federal income tax purposes, a passive foreign investment company and
intend to continue our operations in such a manner that we would not become a
PFIC in the future. If we become a PFIC, U.S. Holders could be subject to
additional federal income tax on gain on dispositions of ADSs or equity shares
and on certain distributions. In addition, an interest charge

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may apply to certain taxes treated as having been deferred by the U.S. Holder
under the PFIC rules.

Foreign Personal Holding Company and Personal Holding Company Rules

         Special U.S. federal income tax rules apply to a U.S. Holder in a
"foreign personal holding company," or FPHC, and to the U.S. source income and
income effectively connected with a U.S. trade of business of a foreign
corporation that is a "personal holding company", or PHC. A corporation will not
constitute a FPHC or PHC unless the ownership of its stock satisfies a statutory
test for being closely held. Based upon our current ownership, we believe that
we will not be a FPHC or PHC.

Foreign Investment Company Rules

         Special rules apply to treat as ordinary income any gain recognized on
the sale of shares of a "foreign investment company." We believe that we will
conduct our business and obtain controlling interests in subsidiaries so as not
to be a "foreign investment company."

Tax Consequences for Non-U.S. Holders of ADSs or Equity Shares

         Except as described in the following paragraph or in "Information
Reporting and Backup Withholding" below, a Non-U.S. Holder generally will not be
subject to U.S. federal income or withholding tax on the payment of dividends
on, or gain from a disposition of, an ADS or equity share.

         However, a Non-U.S. Holder generally will be subject to U.S. federal
income tax on dividends on, or gain from the disposition of, an ADS or equity
share provided that:

         .     the gain or income is effectively connected with the conduct by
               the Non-U.S. Holder of trade or business in the United States
               and, in the case of a resident of a country that has an income
               treaty with the United States, the gain or income is attributable
               to a permanent establishment or, in the case of an individual, a
               fixed place of business in the United States, or

         .     in case of gain from a disposition of an ADS or equity share, the
               Non-U.S. Holder is an individual who holds the ADS or equity
               share as a capital asset and is present in the United States for
               183 days or more in the taxable year of the disposition and does
               not qualify for an exemption.

Information Reporting and Backup Withholding

         Under current U.S. federal income tax regulations, dividends on ADSs or
equity shares will be subject to U.S. information reporting and backup
withholding unless the U.S. Holder provides IRS Form W-9 to the depositary or to
us or otherwise establishes an exemption. Backup withholding applies at a rate
of 30% for payments in 2003, and that rate will be reduced periodically to 28%
for payments made in 2006. In addition, U.S. Holders are subject to information
reporting and backup withholding on proceeds from the disposition of ADSs or
equity shares through a broker located in the United States unless the U.S.
Holder provides an IRS Form W-9 or otherwise establishes an exemption.

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         Non-U.S. Holders generally are not subject to information reporting or
backup withholding with respect to dividends paid on, or upon the disposition
of, ADSs or equity shares, provided that the non-U.S. Holder, when required,
provides a taxpayer identification number, certifies to its foreign status or
otherwise establishes an exemption.

         The amount of any backup withholding will be allowed as a credit
against a U.S. or Non-U.S. Holder's U.S. federal income tax liability and may
entitle the holder to a refund, provided certain required information is
furnished to the IRS.

Indian Taxation

         The following is a discussion regarding the principal Indian tax
consequences for holders of ADSs and equity shares received upon withdrawal of
such ADSs by the holders who are non-residents of India, whether of Indian
origin or not. The following summary is based on the law and practice of the
Indian Income-tax Act, 1961, or the Income-tax Act, including the special tax
regime contained in Sections 115AC and 115ACA of the Income-tax Act, read in
conjunction with the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares (through Depositary Receipt Mechanism) Scheme, 1993, as amended from time
to time, or the ADR Guidelines. The Income-tax Act is amended every year by the
Finance Act of the relevant year. Some or all of the tax consequences of
Sections 115AC and 115ACA may be amended or changed by future amendments to the
Income-tax Act. This discussion is not intended to constitute a complete
analysis of the individual tax consequences to non-resident holders under Indian
law for the acquisition, ownership and sale of ADSs and equity shares by
non-resident holders. Personal tax consequences of an investment may vary in
various circumstances and potential investors should consult their own tax
advisers on the tax consequences of such acquisition, ownership and sale,
including specifically the tax consequences under the law of their country of
residence and any tax treaty between India and their country of residence.

Residence

         For purposes of the Income-tax Act, an individual is considered to be a
resident of India during any fiscal year if he or she is in India in that year
for:

         .     a period or periods amounting to 182 days or more; or

         .     60 days or more and, within the four preceding years has been in
               India for a period or periods amounting to 365 days or more; or

         .     182 days or more, in case of a citizen of India or a person of
               Indian origin living abroad who visits India and within the four
               preceding years has been in India for a period or periods
               amounting to 365 days or more.

         A company is a resident of India if it is incorporated in India or the
control and the management of its affairs is situated wholly in India.
Individuals and companies that are not residents of India would be treated as
non-residents for purposes of the Income-tax Act.

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Taxation of Distributions

         Pursuant to the Finance Act, 1997, dividends paid to shareholders,
whether residents of India or not, are not subject to withholding tax. However,
the company paying the dividend is subject to a dividend distribution tax
currently pegged at 10.2% including the presently applicable 2% surcharge, on
the total amount it distributes, declares or pays as a dividend, in addition to
the normal corporate tax.

         Any distributions of additional ADSs or equity shares to the existing
holders will not be subject to Indian tax.

Taxation of Capital Gains

         The following is a brief summary of capital gains taxation of
non-resident and resident holders with respect to the sale of ADSs and equity
shares received upon redemption of ADSs. The relevant provisions are contained
mainly in sections 45, 47(vii)(a), 115AC and 115ACA, of the Income Tax Act, in
conjunction with the ADR Guidelines. Gains realized upon the sale of ADSs or
shares that have been held for a period of more than thirty-six months or twelve
months, respectively, are considered long-term capital gains. Gains realized
upon the sale of ADSs or shares that have been held for a period of thirty-six
months or less or twelve months or less, respectively, are considered short-term
capital gains. Capital gains are taxed as follows:

         .     Gains from the sale of ADSs outside India by a non-resident to
               another non-resident are not taxable in India.

         .     Gains from the sale of ADSs by Indian resident holders such as
               Indian mutual funds and Indian resident employees would be
               subject to long term or short term capital gains tax in India
               depending upon the period of holding of the ADSs.

         .     Redemption of ADSs into the underlying equity shares is not a
               taxable event.

         .     Long-term capital gains realized by a non-resident holder other
               than an individual upon the sale of equity shares within India
               are subject to tax at a rate of 10%.

         .     Long-term capital gains realized by a non-resident individual
               holder upon the sale of equity shares within India are subject to
               tax at a rate not exceeding 10.2%, including the presently
               applicable surcharge on tax.

         .     Long term capital gains realized by a resident employee upon the
               sale of equity shares obtained from the redemption of ADSs are
               subject to tax at a rate of 10.2%, including the presently
               applicable surcharge.

         .     Short-term capital gains realized upon the sale of equity shares
               obtained from the redemption of ADSs will be taxed at variable
               rates with a maximum rate of 48% in case of foreign companies and
               30.6% in case of individuals, including the presently applicable
               surcharge.

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<PAGE>

         The above rates may be reduced by an applicable tax treaty in case of
non-residents. The India-U.S. Treaty does not provide any exemption from or
reduction in the rate of Indian capital gains tax.

         Determination of cost of acquisition: The capital gains tax is computed
by applying the appropriate tax rates to the difference between the sale price
and the purchase price of the equity shares or ADSs. Under the ADR Guidelines,
the purchase price of equity shares of an Indian listed company received in
exchange for ADSs will be the market price of the underlying shares on the date
that the depositary gives notice to the custodian of the delivery of the equity
shares in exchange for the corresponding ADSs. This is also commonly known as a
"stepped up" basis purchase price. The market price will be the price of the
equity shares prevailing on the Stock Exchange, Mumbai or the National Stock
Exchange. There is no corresponding provision under the Income Tax Act in
relation to the "stepped up" basis for the purchase price of equity shares.
However, to our knowledge, the Tax Department has not denied this benefit. In
the event that the Tax Department denies this benefit, the original purchase
price of ADSs would be considered the purchase price for computing the capital
gains tax.

         Determination of holding period: According to the ADR Guidelines, a
non-resident holder's holding period for the purposes of determining the
applicable Indian capital gains tax rate with respect to equity shares received
in exchange for ADSs commences on the date of the notice of the redemption by
the depositary to the custodian.

         Dual fungibility: The Indian Government has recently introduced
provisions whereby the ADSs converted into underlying shares can be reconverted
into ADSs under certain circumstances. Section 115AC of the Income Tax Act would
be applicable to the capital gains arising out of the transfer of ADSs and
shares acquired upon conversion of the ADSs provided the reconversion is in
accordance with a Scheme notified by the Indian central government. However, no
such Scheme has been notified by the Indian central government as yet.

         The ADR Guidelines provide that if the equity shares are sold on a
recognized stock exchange in India against payment in Indian rupees, they will
no longer be eligible for the preferential tax treatment. It is unclear as to
whether section 115AC and the ADR Guidelines are applicable to a non-resident
who acquires equity shares outside India from a non-resident holder of equity
shares who receives the said equity shares upon redemption of the ADSs. If
section 115AC and the ADR Guidelines are not applicable to a non-resident
holder, long term capital gains realized on the sale of such equity shares
listed in India will still be subject to tax at the rate of 10% in the case of a
non-individual non-resident holder and at the rate of 10.2% in the case of an
individual non-resident holder, including the presently applicable surcharge. In
this case, a non-resident holder will also be able to avail himself of the
benefits of exchange rate fluctuations for the computation of capital gains tax
which are not available to a non-resident holder under section 115AC and the ADR
Guidelines.

         Sale of subscription rights: It is unclear as to whether capital gains
derived from the sale of subscription rights or other rights by a non-resident
holder not entitled to an exemption under a tax treaty will be subject to Indian
capital gains tax. If such subscription rights or other rights are deemed by the
Indian tax authorities to be situated within India, the gains realized on the
sale of such subscription rights or other rights will be subject to Indian
taxation. The capital gains realized on the sale of such subscription rights or
other rights, which will generally be in the

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nature of short term capital gains, will be subject to tax at variable rates
with a maximum rate of 48% in the case of a foreign company and 30.6% in case of
non-resident individuals and resident employees including the presently
applicable surcharge.

Withholding Tax on Capital Gains

         Any gain realized by a non-resident of India on the sale of equity
shares is subject to Indian capital gains tax, which is to be withheld at source
by the buyer, whether resident or non-resident.

Buy-back of Securities

         Indian companies are not subject to any tax on the buy-back of their
shares. However, the shareholders will be taxed on any resulting gains. We would
be required to deduct tax at source according to the capital gains tax liability
of a non-resident shareholder.

Stamp Duty and Transfer Tax

         Upon issuance of the equity shares underlying our ADSs, we are
generally required to pay a stamp duty of 0.1% per share of the issuance price
of the underlying equity shares, under the Bombay Stamp Act, 1958. However, if
our equity shares are issued in Chennai which is in the State of Tamil Nadu,
then we will be required to pay a stamp duty of Re. 1/- per share certificate
issued. A transfer of ADSs is not subject to Indian stamp duty. However, upon
the redemption of the ADSs into the underlying equity shares through the
depositary, the non-resident holder will be liable for Indian stamp duty at the
rate of 0.5% of the market value of the equity shares. The depository's holding
is partly in dematerialized form and partly in physical form. Sale of shares
held in dematerialized form are currently not subject to stamp duty. Our shares
must be traded in dematerialized or book entry form.

Wealth Tax

         The holding of the ADSs and the holding of underlying equity shares by
resident and non-resident holders will be exempt from Indian wealth tax.
Non-resident holders are advised to consult their own tax advisers regarding
this issue.

Gift Tax and Estate Duty

         Indian gift tax was abolished with effect from October 1998. Indian
Estate Duty was abolished with effect from March 1985. We cannot assure you that
these taxes and duties will not be restored in the future. Non-resident holders
are advised to consult their own tax advisers regarding this issue.

Service Tax

         Brokerage commissions paid to stock brokers in connection with the sale
or purchase of shares is subject to a service tax of 5%. The stock broker is
responsible for collecting the service tax from the shareholder and paying it to
the relevant authority.

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         Prospective acquirers should consult their own tax advisers with
respect to the Indian and their local tax consequences of acquiring, owning or
disposing of equity shares or ADSs.

H.       Dividend and Paying Agents

         Not applicable.


I.       Statement by Experts

         Not applicable.


J.       Documents on Display

         We are subject to the reporting requirements of the United States
Securities Exchange Act of 1934, as amended, as applicable to "foreign private
issuers" as defined in Rule 3b-4 under the Exchange Act, and in accordance
therewith, we file annual and interim reports and other information with the
Securities and Exchange Commission.

         As a foreign private issuer, we are exempt from certain provisions of
the Exchange Act. Accordingly, our proxy solicitations are not subject to the
disclosure and procedural requirements of Regulation 14A under the Exchange Act,
transactions in our equity securities by our officers and directors are exempt
from reporting and the "short-swing" profit recovery provisions contained in
Section 16 of the Exchange Act. We make our Securities and Exchange Commission
filings electronically, although we are not required to do so. Therefore, such
filings are available on the Securities and Exchange Commission's website. In
addition, we are not required under the Exchange Act to file periodic reports
and financial statements as frequently or as promptly as United States companies
whose securities are registered under the Exchange Act. However, we deliver to
the depositary our annual reports, which include annual audited consolidated
financial statements prepared in accordance with U.S. generally accepted
accounting principles, and quarterly reports, which include unaudited quarterly
consolidated financial information prepared in accordance with U.S. generally
accepted accounting principles. The depositary promptly mails these reports to
all registered holders of our ADSs. We also furnished to the depositary all
notices of shareholders' meetings and other reports and communications that are
made generally available by us to our shareholders. The depositary arranges for
the mailing of these documents to record holders of our ADSs.

         This annual report and the exhibits thereto and any other document we
file pursuant to the Exchange Act may be inspected without charge and copied at
prescribed rates at the following Securities and Exchange Commission public
reference rooms: 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549; Room 3190, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. You may obtain information on the operation of the Securities
and Exchange Commission's public reference room in Washington, D.C. by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Exchange Act file
number for our Securities and Exchange Commission filings is 001-15919.

         The documents concerning our company which are referred to in this
annual report may also be inspected at our offices located at Kolshet Road,
Dhokali, Thane (West), India 400607.

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K.       Subsidiary Information

         Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         We conduct business almost exclusively in U.S. dollars and Indian
rupees. As a result, we are subject to foreign exchange rate risk due to the
effects that foreign exchange rate movements of these currencies have relative
to each other. We believe that currently we have no other material market risk
exposure.

         As a result of our acquisition of SeraNova on March 6, 2001, we became
subject to interest rate risk associated with long term borrowings.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

         Not applicable.

                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

Use of Proceeds

         The registration statement on Form F-1 (Commission File No. 333-11984)
which we filed with the Securities and Exchange Commission in connection with
our initial public offering became effective on June 20, 2000, the offering
date. Our initial public offering commenced on June 20, 2000 and terminated upon
completion of the sale of the registered ADSs. The global coordinator and
bookrunner in our initial public offering was Salomon Smith Barney Inc. The
other underwriters were ABN AMRO Incorporated and Jefferies & Company, Inc.

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     The following table sets forth the number of ADSs, each representing the
right to receive two of our equity shares, registered, the aggregate offering
price of ADSs registered, the number of ADSs sold and the aggregate offering
price of ADSs sold, for the account of our company.

                                                         For the account of
                                                            the company
                                                        --------------------

     Number of ADSs registered ........................        4,350,000
     Aggregate offering price of ADSs registered.......     $108,750,000
     Number of ADSs sold ..............................        4,350,000
     Aggregate offering price of ADSs sold ............     $108,750,000


     Of the total of 4,350,000 ADSs, 3,045,000 ADSs were offered and sold by our
U.S. underwriters in the United States and Canada and 1,305,000 ADSs were
offered and sold by the international underwriters outside the United States and
Canada.

     The following table sets forth the expenses incurred by us in connection
with the initial public offering during the period commencing the effective date
of the registration statement and ending December 31, 2000. None of such
expenses were paid directly or indirectly to directors, officers, persons owning
10% or more of any class of our equity securities or to our affiliates.

                                                           Direct or indirect
                                                          payments to persons
                                                         other than affiliated
                                                                persons
                                                        -----------------------

     Underwriting discounts and commissions ...........       $ 7,612,500
     Finders' fees ....................................                --
     Expenses paid to or for underwriters .............                --
     Other expenses ...................................         2,662,500
     Total Expenses ...................................       $10,275,000

     The net initial public offering proceeds to us, after deducting the total
expenses (set forth in the table above), was $98.475 million.

     As of March 31, 2002, we had used all of the net proceeds from our initial
public offering. The following table sets forth the amount of net initial public
offering proceeds used by us for each of the purposes listed below. None of such
payments were paid directly or indirectly to directors, officers, persons owning
10% or more of any class of our equity securities or to our affiliates.

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                                                           Direct or indirect
                                                          payments to persons
                                                             other than to
                             Purpose                       affiliated persons
     -------------------------------------------------  -----------------------

     Acquisition of other companies and
        business(es) .................................        $58,490,000
     Construction of plant, building and facilities ..         11,000,000
     Purchase and installation of machinery
        and equipment ................................                 --
     Purchase of real estate .........................                 --
     Repayment of indebtedness .......................                 --
     Working capital .................................                 --
     Temporary investments ...........................         24,000,000
     Other purposes ..................................                 --
     Cash and Bank Balance ...........................          4,985,000
     Net proceeds from ADR issuance...................        $98,475,000


ITEM 15. CONTROLS AND PROCEDURES.

Changes in Internal Controls

     There were no significant changes in the Company's internal controls or in
other factors that could significantly affect such controls subsequent to the
date of such controls' last evaluation.


ITEM 16. Reserved.


                                    PART III


ITEM 17. FINANCIAL STATEMENTS

     The company has responded to Item 18 in lieu of responding to this item.

                                       117

<PAGE>

ITEM 18. FINANCIAL STATEMENTS

     The following consolidated financial statements, together with the report
of Ram Associates, are filed as part of this Annual Report.

Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                            Page
     <S>                                                                                    <C>
     Independent Auditors' Reports ......................................................... F-1
     Consolidated Balance Sheets as of December 31, 1999, 2000 and 2001, March 31, 2001
       and 2002, and for the three-month period ended June 30, 2002 (unaudited) ............ F-7
     Consolidated Statements of Income for the years ended December 31, 1999, and 2000,
       and March 31, 2001 and 2002, and for the three-month period ended June 30, 2002 ..... F-8
     Consolidated Statements of Cash Flows for the years ended December 31, 1999 and
       2000, and March 31, 2001 and 2002, and for the three-month period ended June 30,
       2002 ................................................................................ F-9
     Notes to Consolidated Financial Statements ............................................ F-10
</TABLE>

                                       118

<PAGE>

     ITEM 19. EXHIBITS

1.1  Certificate of Incorporation of the Registrant, filed as Exhibit 3.3 to the
     Registrant's Registration Statement on Form F-1, Registration No.
     333-11984, and incorporated herein by reference.
1.2  Memorandum of Association of the Registrant, filed as Exhibit 3.2 to the
     Registrant's Registration Statement on Form F-1, Registration No.
     333-11984, and incorporated herein by reference.
1.3  Articles of Association of the Registrant, filed as Exhibit 3.1 to the
     Registrant's Registration Statement on Form F-1, Registration No.
     333-11984, and incorporated herein by reference.
2    Depositary Agreement among the Registrant and Morgan Guaranty Trust
     Company, and the beneficial owners from time to time of American Depositary
     Receipts issued thereunder, filed as Exhibit to Registrant's Registration
     Statement on Form F-6, Registration No. 333-12000, and incorporated herein
     by reference.
4.1  Amended and Restated Agreement and Plan of Merger dated as of October 27,
     2000, signed and executed on January 17, 2001, with retroactive effect from
     October 27, 2000, by and among the Registrant, Silverline Acquisition
     Corp., Silverline Technologies, Inc. and SeraNova, Inc., filed as Exhibit 2
     to the Registrant's Registration Statement on Form F-4, Registration No.
     333-52724, and incorporated herein by reference.
4.2  Credit Agreement, dated as of September 10, 1997, among the Registrant, The
     Chase Manhattan Bank and The Bank of Baroda, filed as Exhibit 10.2 to the
     Registrant's Registration Statement on Form F-1, Registration No.
     333-11984, and incorporated herein by reference.
4.3  HSBC Bank USA commitment letter date January 5, 2001, filed as Exhibit 4.3
     to the Registrant's Registration Statement on Form F-4, Registration No.
     333-52724, and incorporated herein by reference.
4.4  Intercompany Agreement dated as of January 9, 1997, between the Registrant
     and Silverline Technologies, Inc., filed as Exhibit 10.1 to the
     Registrant's Registration Statement on Form F-1, Registration No.
     333-11984, and incorporated herein by reference.
4.5  Inducement Agreement dated as of October 27, 2000 by and among Silverline
     Acquisition Corp., the Registrant and certain shareholders and option
     holders of SeraNova, Inc., and amendment thereto, filed as Exhibit 99.2 to
     the Registrant's Registration Statement on Form F-4, Registration No.
     333-52724, and incorporated herein by reference.
4.6  Inducement Agreement dated as of October 27, 2000 by and among SeraNova,
     Inc., and certain shareholders of the Registrant and amendment thereto,
     filed as Exhibit 99.3 to the Registrant's Registration Statement on Form
     F-4, Registration No. 333-52724, and incorporated herein by reference.
21.1 List of subsidiaries of the Registrant.*
23.1 Consent of Deloitte, Haskins & Sells*
23.2 Consent of P.H. Tang & Co.
23.3 Consent of Chaitanya C. Dalal & Co.*
23.4 Consent of S.D. Chauhan & Co.*
23.5 Consent of Lakshminiwas & Jain*
99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.3 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
99.4 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

*Filed herewith

                                      119

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Silverline Technologies Limited.

We have audited the accompanying consolidated balance sheets of Silverline
Technologies, Inc. and SeraNova, Inc., as of March 31, 2002 and the related
consolidated statement of income and cash flows for the year ended March 31,
2002. Our audits also included the financial statement schedule listed in the
accompanying index. These consolidated financial statement and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audits.

We have also consolidated the balance sheet of Silverline Technologies Ltd., the
parent of Silverline Technologies, Inc. and SeraNova, Inc. with the various
subsidiaries. We did not audit the financial statements of Silverline
Technologies Ltd, Sky Capital International Ltd, Hong Kong (a consolidated
subsidiary), and eComServer Inc. (a consolidated Subsidiary) which statements
reflect total assets constituting 78.3%, 9.4% and 0.7% of the consolidated
assets as of March 31, 2002 and total revenues constituting 20.5%, 11.6% and
0.4% respectively. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for Silverline Technologies, Ltd, Sky Capital International Ltd, Hong
Kong, and eComServer Inc. is based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 presentations. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Silverline Technologies Limited and
subsidiaries as of March 31, 2002 and the results of their operations and their
cash flows for the year ended March 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, Silverline Technologies, Inc. is in default on its loan
agreements as of March 31, 2002, primarily as a result of the substantial loss
incurred during the year ended March 31, 2002 and March 31, 2001 and other
matters discussed in the subsequent events. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. However,
senior management has represented that it has several plans in progress to raise
financing and to restructure its debt and the debts of its subsidiaries. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

As described in the attached notes to the consolidated financial statements,
these consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United states of America, which
differ in certain material respects from the accounting principles

                                       F-1

<PAGE>

generally accepted in India, which form the basis of the Company's general
purpose financial statements.

/s/ Ram Associates
Ram Associates
Place: Hamilton, New Jersey
Date: February 18, 2003

                                       F-2

<PAGE>

                    (LETTERHEAD OF DELOITTE HASKINS & SELLS)

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Silverline Technologies Limited:

         We have audited the accompanying consolidated balance sheets of
Silverline Technologies Limited and subsidiaries, as of December 31, 2000 and
1999, and the related consolidated statements of income and cash flows for each
of the years in the three-year period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the accompanying index. The
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and financial statement
schedule based on our audits.

         We did not audit the financial statements of Sky Capital International,
Hong Kong (a consolidated subsidiary), which statements reflect total assets
constituting 6.3% and 0%, respectively, of consolidated total assets as of
December 31, 2000 and 1999, and total revenues constituting 7.3% and 0%,
respectively, of consolidated total revenues for the years then ended. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Sky Capital
International, Hong Kong, is based solely on the report of such other auditors.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 and the report of
the other auditors provide a reasonable basis for our opinion.

         In our opinion, based on our audits and the report of the other
auditors, such consolidated financial statements present fairly, in all material
respects, the financial position of Silverline Technologies Limited and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                       F-3

<PAGE>

         As described in Note 1, these consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America, which differ in certain material respects from the
accounting principles generally accepted in India, which form the basis of the
Company's general purpose financial statements.

Place:  Mumbai, India

                                                /s/ DELOITTE HASKINS & SELLS

                                                DELOITTE HASKINS & SELLS

Dated July 6, 2001


                                       F-4

<PAGE>

P.H. Tang & Co.        Main Office                  Corporate Reconstruction &
Certified Public       3/rd/ Floor, Rammon House,   Insolvency Office
Accountants            101 Sai Yaung Choi Street    8/th/ Floor, Gold & Silver
                       South                        Commercial Building
                       Mongkok, Kowloon,            12-18 Mercer Street,
                       Tel: 2398 1138               Central, Hong Kong
                       Fax: 2398 1289               Tel: 2815 5823
                                                    Fax: 2815 5987


AUDITORS' REPORT TO THE MEMBERS OF
SKY CAPITAL INTERNATIONAL LIMITED
(Incorporated in Hong Kong with limited liability)

We have audited the accounts on pages 2 to 11 which have been prepared in
accordance with the accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Companies Ordinance requires the directors to prepare accounts which give a
true and fair view. In preparing the accounts which give a true and fair view,
it is fundamental that appropriate accounting policies are selected and applied
consistently.

It is our responsibility to form an independent opinion, based on our audit, on
those accounts and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants, and the basic principles and
essential procedures as required in International Standards on Auditing which
are substantially similar to Standards generally accepted in the United States
of America. An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the accounts. It also includes as assessment
of the significant estimates and judgments made by the directors in the
preparation of the accounts and of whether the accounting policies are
appropriate to the company's circumstances consistently and adequately
disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the accounts are
free from material misstatement. In forming our opinion, we also evaluated the
overall adequacy of the presentation of information in the accounts. We believe
that our audit provides a reasonable basis for our opinion.

                                       F-5

<PAGE>

OPINION

In our opinion, the accounts give a true and fair view, in all material
respects, of the state of the company's affairs as at 31 December 2000 and of
its profit for the 3 months then ended and have been properly prepared in
accordance with the Companies Ordinance.

/s/ P.H. TANG & CO.

P.H. TANG & CO.
Certified Public Accountants

HONG KONG

                                       F-6

<PAGE>

SILVERLINE TECHNOLOGIES LIMITED AND  SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                       December 31,                 March 31,                    June 30,
                                                 ----------------------------------------------------------------------------------
ASSETS                                              1999         2000           2001         2002           2001          2002
                                                 ----------------------------------------------------------------------------------
                                                                    in U.S. $                             (unaudited)   (unaudited)
<S>                                              <C>           <C>            <C>          <C>            <C>           <C>
Current assets:
     Cash and cash equivalents                   $20,661,829  $ 11,512,232  $  9,150,345  $  1,894,947  $  5,605,616  $  1,357,871
     Short term investments                                -    31,795,670     6,849,750             -     1,642,681             -
     Accounts receivable - net                    22,776,996    64,933,737    58,405,372    41,893,407    44,488,760    28,513,107
     Unbilled project costs                          687,399       554,766     1,431,423       219,736       698,745       416,922
     Deferred revenue                                      -             -             -             -             -             -
     Inventories                                           -     1,898,216     2,470,824             -     2,475,000             -
     Prepaid expenses and other current assets     3,274,459    20,972,591    12,745,567    17,651,286    24,912,315    10,447,769
     Deferred taxes                                  362,743       503,453     4,339,775                   4,622,240       411,770
                                                 ----------------------------------------------------------------------------------
Total current assets                              47,763,426   132,170,665    95,393,056    61,659,376    84,445,357    41,147,439

     Property, plant and equipment - net          34,596,930    49,482,216    53,006,658    55,277,352    53,667,015    54,999,261
     Goodwill - net                                3,853,748    31,754,375    62,907,049    54,280,675    44,061,398    55,590,244
     Intangible assets - net                         519,750       425,250             -    12,545,140    15,591,889    12,545,140
     Deferred taxes                                  109,493     1,629,198             -             -       197,298             -
     Investments                                     115,389    19,273,848    11,154,036    11,339,043    11,316,892    11,339,043
     Other assets                                    686,770             -             -       757,015     1,273,086     5,271,609

                                                 ----------------------------------------------------------------------------------
Total assets                                     $87,645,506  $234,735,552  $222,460,799  $195,858,601  $210,552,935  $180,892,736
                                                 ==================================================================================

LIABILITIES AND STOCKHOLDERS'  EQUITY

Current liabilities:
     Accounts payable and accrued expenses       $ 5,709,568  $ 13,179,183  $ 44,066,179  $ 40,332,646  $ 18,716,982  $ 34,321,477
     Advance from customers                           14,893         5,134         8,538         8,214       786,920
     Current portion of long-term debt             2,150,382     1,573,574       105,075        59,003    13,926,431     4,784,126
     Non-convertible debentures                            -             -             -    11,973,890             -     7,167,725
     Working capital facilities from banks         6,925,504    18,796,454    39,796,308    49,173,266    40,348,960    50,962,764
     Short term debt from banks                            -     4,278,075       402,458       524,181       379,274             -
     Other accrued liabilities                     3,888,085     7,479,136    16,256,144     4,909,399     7,485,852     5,935,239
                                                 ----------------------------------------------------------------------------------
Total current liabilities                         18,688,432    45,311,556   100,634,702   106,980,599    81,644,419   103,171,331

Long-term debt and capital lease obligations         316,732        29,787     6,642,942        63,853    10,340,092        63,853

Stockholders' Equity:
     Equity shares, $0.23 per share par
      value - 135,000,000 authorized as
      of 2002 and 110,000,000 as of 2001.
      85,000,000 authorized as of 2000
      and 1999.
     Issued and outstanding - 107,854,884
      as of 2002 and 85,654,884 as of 2001.

     73,200,000 as of 2000 and 64,500,000
      as of 1999.                                 18,305,532    20,249,666    22,926,984    27,487,741    22,926,984    27,487,741
     Share application money (warrants)                    -             -             -     1,565,693             -     1,565,693
     Additional paid-in capital                   23,156,472   119,954,892   157,978,709   181,598,766   157,964,031   181,598,766
     Accumulated other comprehensive loss         (3,942,243)   (8,286,814)  (13,473,649)  (12,698,724)  (10,817,611)  (20,463,972)
     Deferred, stock-based compensation           (2,164,486)     (198,473)     (165,335)      (36,701)     (125,501)            -
     Retained earnings                            33,285,067    57,674,938   (52,083,554) (109,102,626)  (51,379,479) (112,530,676)

                                                 ----------------------------------------------------------------------------------
Total stockholders' equity                        68,640,342   189,394,209   115,183,155    88,814,149   118,568,424    77,657,552

                                                 ----------------------------------------------------------------------------------
Total liabilities and stockholders' equity       $87,645,506  $234,735,552  $222,460,799  $195,858,601  $210,552,935  $180,892,736
                                                 ==================================================================================
</TABLE>

                                       F-7

<PAGE>

SILVERLINE TECHNOLOGIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                             Three Months Ended
                                                Year ended December 31,       Year ended March 31,                June 30,
                                            ----------------------------------------------------------------------------------------
                                                1999           2000           2001            2002         2001            2002
                                            ----------------------------------------------------------------------------------------
                                                             in U.S. $                                  (unaudited)     (unaudited)

<S>                                         <C>            <C>            <C>             <C>           <C>           <C>
Revenue                                      $87,576,908   $141,956,404   $152,182,839    $142,913,704   $45,565,301    $27,169,387
Cost of revenue                               49,445,513     76,644,464     90,973,771      78,941,234    25,958,368     16,957,397
                                            ---------------------------------------------------------------------------------------
Gross profit                                  38,131,395     65,311,940     61,209,068      63,972,470    19,606,933     10,211,990
                                            ---------------------------------------------------------------------------------------

Operating expenses:
    Selling, general and administrative
      expenses                                13,140,710     31,316,059     52,682,956      57,706,290    11,593,067      8,850,371
    Stock-based compensation                     532,065      1,635,086        803,056          95,287        25,156         36,701
    Depreciation and amortization              4,095,227      6,377,619      4,722,355       5,074,502     5,793,804      3,244,640

                                            ---------------------------------------------------------------------------------------
Total operating expenses                      17,768,002     39,328,764     58,208,367      62,876,079    17,412,027     12,131,712

                                            ---------------------------------------------------------------------------------------
Operating income/ Loss                        20,363,393     25,983,176      3,000,701       1,096,391     2,194,906     (1,919,722)

Other income
    Other income                                 976,279      6,305,698      6,378,859       2,069,961       606,852         67,850
    Interest expenses                         (2,356,042)    (2,489,072)    (2,870,856)     (5,176,066)   (1,612,636)    (1,576,178)
                                            ---------------------------------------------------------------------------------------
    Other income/ (expenses), net             (1,379,763)     3,816,626      3,508,003      (3,106,105)   (1,005,784)    (1,508,328)

                                            ---------------------------------------------------------------------------------------
Income before income taxes and
  non-recurring write offs                    18,983,630     29,799,802      6,508,704      (2,009,714)    1,189,122     (3,428,050)

Provisions for income taxes                    2,808,449      2,675,865      2,085,512          22,212       485,047              -

                                            ---------------------------------------------------------------------------------------
Loss before non-recurring write-offs          16,175,181     27,123,937      4,423,192      (2,031,926)      704,075     (3,428,050)
Non recurring write-offs                         374,624              -     95,674,600      52,576,633             -              -
                                            ---------------------------------------------------------------------------------------
Net loss                                     $15,800,557   $ 27,123,937   ($91,251,408)   ($54,608,559)  $   704,075    ($3,428,050)
                                            =======================================================================================


Earning per equity share before
  extraordinary items
Basic:
Income before extraordinary items                   0.28           0.39           0.06           (0.02)         0.01          (0.04)
Extraordinary items                                (0.01)             -          (1.25)          (0.59)            -              -
Net income                                          0.28           0.39          (1.19)          (0.62)         0.01          (0.04)

Diluted:
Income before extraordinary items                   0.25           0.39           0.06           (0.02)         0.01          (0.04)
Extraordinary items                                (0.01)             -          (1.25)          (0.58)            -              -
Net income                                          0.24           0.39          (1.19)          (0.60)         0.01          (0.04)

Number of equity shares used in
computing earning per share
- Basic (weighted average)                    57,149,990     69,135,246     76,659,690      88,631,322    85,654,884     94,166,117
- Diluted                                     65,596,505     69,793,153     76,659,690      90,876,753    86,393,932     94,166,117
</TABLE>

                                       F-8

<PAGE>

SILVERLINE TECHNOLOGIES LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 1999, 2000, 2001
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,       Year Ended March 31,

                                                                               1999             2000        2001           2002
                                                                           ---------------------------------------------------------
                                                                                      in U.S. $
<S>                                                                        <C>           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                 $ 15,800,557  $  27,123,937  $ (91,251,408) $(54,608,559)

Adjustments to reconcile net income to net cash provided by/(used in)
operating activities:
Stock-based compensation                                                        532,065      1,635,086        803,056        95,287
Extraordinary item                                                              374,624              -     95,674,600    52,576,633
Depreciation and amortization                                                 4,095,227      6,377,619      4,722,355     5,074,502
Deferred Taxes                                                                 (110,336)    (1,660,415)    (3,867,539)    4,339,775
Loss/(gain) on sale of assets                                                   (13,017)        (6,824)             -             -
Changes in assets and liabilities (net of the effect of foreign currency
  translation and acquisition):
  Decrease/(increase) in short-term investments                                       -    (31,795,670)    (6,849,750)    6,849,750
  Decrease/(increase) in accounts receivable                                  1,617,593    (35,912,257)   (24,771,939)   16,511,965
  Decrease/(increase) in unbilled project costs                                (371,727)       132,633       (995,491)    1,211,687
  Decrease/(increase) in inventories                                                  -     (1,898,216)    (2,470,824)    2,470,824
  Decrease/(increase) in prepaid expenses and other current assets            1,467,672    (17,698,132)    (5,892,117)   (4,905,719)
  Decrease/(increase) in other assets                                           566,534        686,770        688,020      (757,015)
  Decrease/(increase) in accounts payable and accrued expenses                1,564,718      2,686,287     36,926,359    (3,733,533)
  Decrease/(increase) in advances from customers                                  7,821         (9,759)         8,538          (324)
  Decrease/(increase) in other accrued liabilities                             (893,760)     2,924,059     13,144,030   (11,346,745)
  Write-off on Receivables                                                            -              -    (32,200,000)  (29,123,637)
  Write-off on other assets                                                           -              -     (4,774,600)   (3,776,607)
  Write-off on Purchase of Software                                                   -              -     (4,700,000)   (3,705,212)

                                                                           ---------------------------------------------------------
      Net cash provided by/(used in) operating activities                    24,637,971    (47,414,882)   (25,806,710)  (22,826,928)
                                                                           ---------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on plant and equipment                                          (16,826,753)   (18,681,657)   (22,093,455)     (966,461)
Purchase of businesses, net of cash acquired                                          -    (31,555,941)   (64,022,913)   (3,918,766)
Purchase of investments                                                               -    (18,589,118)   (11,038,647)     (185,007)
Proceeds from sale of investments                                                42,638              -              -             -
Proceeds from sale of plant and equipment                                        10,688          7,098              -             -
Write-off on Business Purchase/GoodWill                                               -              -    (13,700,000)   (2,508,069)
Write-off on Plant and equipment                                                      -              -     (8,700,000)  (11,863,565)

                                                                           ---------------------------------------------------------
      Net cash (Used in) investing activities                               (16,773,427)   (68,819,618)  (119,555,015)  (19,441,868)
                                                                           ---------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from/(Repayment) of long-term debt(net)                             (4,542,821)      (869,084)     6,313,787    (6,579,089)
Non-convertible Debentures                                                            -              -              -    11,973,890
Line of credit payable                                                       (3,845,011)    11,702,530     26,132,838     9,330,886
Short-term loans from banks                                                           -      4,278,074        402,458       121,723
Net proceeds from issuance of common stock (ADS)                             11,120,441     99,073,483    138,268,750    28,214,161
Share application money-warrents                                                      -              -              -     1,565,693
Write-off on Investments                                                       (374,624)             -    (31,600,000)   (1,599,543)
Payment of dividend                                                          (1,696,613)    (2,734,066)             -    (2,410,513)

                                                                           ---------------------------------------------------------
      Net cash provided by / (used in) financing activities                     661,372    111,450,937    139,517,833    40,617,208
                                                                           ---------------------------------------------------------

Effect of exchange rate changes on cash and cash equivalents                   (392,321)    (4,366,034)    (5,615,099)   (5,603,810)
                                                                           ------------- -------------- -------------- -------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                       8,133,595     (9,149,597)   (11,458,991)   (7,255,398)

Cash and cash equivalents at the beginning of the year                       12,528,234     20,661,829     20,609,336     9,150,345
                                                                           ------------- -------------- -------------- -------------

Cash and cash equivalents at the end of the year                           $ 20,661,829  $  11,512,232  $   9,150,345  $  1,894,947
                                                                           ============= ============== ============== =============


Supplementary information of cash transactions:
Cash paid during the year for:
Interest                                                                   $  2,022,522  $   2,264,055  $   2,870,856  $  5,176,066

Income taxes                                                               $  1,733,478  $   3,861,284  $     157,010             -

Supplementary disclosure of non cash investing and financing activites:
Capital Lease                                                              $    239,649  $      23,992              -             -
Contingent payment-Lorin acquisition                                       $    692,508  $     900,000              -             -

<CAPTION>
                                                                               Three Months Ended
                                                                                    June 30,
                                                                               2001          2002
                                                                           ---------------------------
                                                                            (Unaudited)   (Unaudited)
<S>                                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                 $    704,075    ($3,428,050)

Adjustments to reconcile net income to net cash provided by/(used in)
operating activities:
Stock-based compensation                                                         25,156         36,701
Extraordinary item                                                                    -              -
Depreciation and amortization                                                 5,793,804      3,244,640
Deferred Taxes                                                                 (479,763)      (411,770)
Loss/(gain) on sale of assets
Changes in assets and liabilities (net of the effect of foreign currency
  translation and acquisition):
  Decrease/(increase) in short-term investments                               5,207,069              -
  Decrease/(increase) in accounts receivable                                 13,916,612     13,380,300
  Decrease/(increase) in unbilled project costs                                 732,678       (197,186)
  Decrease/(increase) in inventories                                             (4,176)             -
  Decrease/(increase) in prepaid expenses and other current assets          (12,166,748)     7,203,517
  Decrease/(increase) in other assets                                        (1,273,086)    (4,514,594)
  Decrease/(increase) in accounts payable and accrued expenses              (25,349,197)    (6,011,169)
  Decrease/(increase) in advances from customers                                778,382         (8,214)
  Decrease/(increase) in other accrued liabilities                           (8,770,292)     1,025,840
  Write-off on Receivables                                                            -              -
  Write-off on other assets                                                           -              -
  Write-off on Purchase of Software                                                   -              -

                                                                           ----------------------------
      Net cash provided by/(used in) operating activities                   (20,885,486)    10,320,015
                                                                           ----------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on plant and equipment                                           (6,454,161)    (2,966,549)
Purchase of businesses, net of cash acquired                                  3,253,762     (1,309,569)
Purchase of investments                                                        (162,856)             -
Proceeds from sale of investments                                                     -              -
Proceeds from sale of plant and equipment                                             -              -
Write-off on Business Purchase/GoodWill                                               -              -
Write-off on Plant and equipment                                                      -              -

                                                                           ----------------------------
      Net cash (Used in) investing activities                                (3,363,255)    (4,276,118)
                                                                           ----------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from/(Repayment) of long-term debt(net)                              3,697,150              -
Non-convertible Debentures                                                            -     (4,806,165)
Line of credit payable                                                       14,374,008      6,514,621
Short-term loans from banks                                                     (23,184)      (524,181)
Net proceeds from issuance of common stock (ADS)                                      -              -
Share application money-warrents                                                      -              -
Write-off on Investments                                                              -              -
Payment of dividend                                                                   -              -

                                                                           ----------------------------
      Net cash provided by / (used in) financing activities                  18,047,974      1,184,275
                                                                           ----------------------------

Effect of exchange rate changes on cash and cash equivalents                  2,656,038     (7,765,248)
                                                                           ------------  --------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                      (3,544,729)      (537,076)

Cash and cash equivalents at the beginning of the year                        9,150,345      1,894,947
                                                                           ------------  --------------

Cash and cash equivalents at the end of the year                           $  5,605,616  $   1,357,871
                                                                           ============  ==============


Supplementary information of cash transactions:
Cash paid during the year for:
Interest                                                                   $  1,612,636  $   1,576,178

Income taxes                                                                          -              -

Supplementary disclosure of non cash investing and financing activites:
Capital Lease                                                                         -              -
Contingent payment-Lorin acquisition                                                  -              -
</TABLE>

                                       F-9

<PAGE>

Silverline Technologies Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended March 31, 2001 and 2002 and for three months ended June 30,
2001 and 2002 (in US dollars). Information as of June 30, 2001 and 2002 is
unaudited.

1. Summary of Significant Accounting Policies.

Description of the Company and going concern considerations

Silverline Technologies Limited and subsidiaries, formerly known as Silverline
Industries Limited (hereinafter referred to as the "Company"), is a publicly
traded corporate entity incorporated in India. The Company has wholly owned
foreign subsidiaries, Silverline Technologies Inc. ("STI"), a Delaware
corporation, that operates in the United States, Sky Capital International
("SCI") incorporated in Hong Kong, eComServer Inc., and SeraNova Inc., both US
subsidiaries. SeraNova Inc. has subsidiaries SeraNova India Pvt Ltd., Seranova
UK, and SeraNova Asia Pacific. EcomServer Inc. has a subsidiaries in India. STI
has subsidiaries Silverline Technologies UK Limited and Silverline Technologies
Inc., Canada that operate in the United Kingdom and Canada, respectively. The
Company is an Indian provider of information technology ("IT") services. The
Company's services are delivered either on a fixed-price, fixed time or on a
time and materials basis. The Company's fiscal year end is March 31. The
Company's headquarters is situated at Mumbai in India with three state
of-the-art offshore software facilities located in India, and onshore software
facilities in the United States, Canada, United Kingdom, Egypt and Hong Kong.

The Company incurred substantial consolidated net losses and negative cash flows
from operations in each of the last two twelve-month fiscal years ended March
31, 2001 and 2002, and in the three months ended June 30, 2002. We had
consolidated net losses of approximately $54.61 million and $3.4 million for the
fiscal year ended March 31, 2002, and for the three months ended June 30, 2002,
as compared to a consolidated net loss of $91.25 million and a consolidated net
profit of $0.7 million for the fiscal year ended March 31, 2001, and the three
months ended June 30, 2001. Due to the Company's operating losses and lack of
cash flow from operations, it had a consolidated accumulated deficit of
approximately $109.1 million as of March 31, 2002, as compared to a consolidated
working capital surplus as of December 31, 2000 of $86.8 million.

The accompanying financial statements have been prepared assuming that the
Company continues as a going concern. Management's planned expenditures, net of
revenue, for the next twelve months exceeds current cash, cash equivalents and
short-term investments. Included in Management's plans are efforts to raise
additional capital and restructure the debts of the Company and its
subsidiaries. No assurance can be given that the Company will be able to raise
additional funds, either on terms satisfactory to the Company or otherwise, or
that it will be able to restructure its debts.

The Company's and its subsidiaries bank facilities are substantially utilized,
and there can be no assurance that additional funds will be made available under
these facilities, or that extensions of the time to repay amounts outstanding
will be granted. In addition, the Company's U.S subsidiary, Silverline
Technologies Inc., is as of March 31, 2002 in default of its obligations under a
secured $40.0 million loan facility with HSBC Bank and Bank of Baroda. This
facility is guaranteed by the Company and its other subsidiaries. On May 28,
2002, HSBC USA, the primary lender, withdrew the line of credit due to the
uncured events of default and commenced an action in the United States District
Court for the Southern District of New York, against Silverline Technologies
Inc., the Company, Silverline Technologies, (Canada) Inc., Silverline
Technologies UK Limited, Seranova and Ravi Subramanian, as guarantors, to
recover in excess of approximately $27.3 million , plus interest, under the loan
facility as of January 2002. HSBC holds and has begun enforcing a judgment
against all defendants arising out of this

                                      F-10

<PAGE>

proceedings in the approximate amount of $27.5 million pursuant to a settlement
agreement dated September 18, 2002 approved by the court. Defendants are
entitled to a credit of approximately a little over $7.0 million against the
judgment for payments made.

Substantial doubt exists about the Company's ability to continue as a going
concern and there can be no assurance that the Company will be able to raise any
additional funds, repay amounts it has borrowed, or that its currently available
funding will remain available. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability or
classification of assets or the amounts and classification of liabilities that
might result from the outcome of this uncertainty.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared on a
year-end March 31 basis and are in accordance with the accounting principles
generally accepted in the United States of America. The Company has changed its
fiscal year from December 31 to March 31 beginning in the fiscal year ending
March 31, 2002.

On December 28, 1999, the Company acquired 100% of the stock of STI, an entity
that was then under common control with the Company. As such, the acquisition of
STI by the Company has been reflected in the consolidated balance sheets,
statements of income and cash flows as of the earliest periods presented in a
manner similar to a business combination accounted for as a
"pooling-of-interest".

On September 30, 2000, the Company increased its stockholding in STI by
purchasing 32,681 shares of common stock for a total consideration of
$30,230,141.The Company made additional investments of $24,166,833 in 2001 the
common stock of its wholly owned subsidiary, Silverline Technologies Inc. USA.

On October 1, 2000 the Company acquired the entire common stock of Sky Capital
International, Hong Kong for a total consideration of $ 22,604,045.

All significant inter-company transactions and accounts have been eliminated.
Assets and liabilities and revenue and expenses are recognized on the accrual
basis of accounting.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.

Revenue Recognition

The Company derives its revenues primarily from providing IT services and
developing software solutions. Revenue with respect to time and materials
contracts is recognized as and when related costs are incurred. Revenue with
respect to fixed price, fixed time contracts is recognized upon achievement of
specified milestones identified in the related contracts, which approximate the
percentage of completion method.

                                      F-11

<PAGE>

For the fixed price, fixed time contracts, the Company measures the extent of
project progress based on the ratio of hours performed to date to the estimated
total hours at completion. Throughout the life of the project, the Company
periodically reviews the extent of completion based on past experience and
detailed estimates of the remaining time and materials required. Revisions to
previously recognized revenue, giving effect to new information, are accounted
for in the period of change and subsequent periods. Clients generally consider a
project substantially complete upon delivery of the project report and
acceptance. Revenue associated with customer approved change order claims is
recognized upon completion of the related service.

Selling, general and administration expenses are charged to expense as incurred.
Provisions for estimated losses on incomplete contracts are recorded in the
period in which such losses become probable based on current estimates.

Accounting for Long-Lived Assets

The Company periodically evaluates the recoverability of its long-lived assets
and certain identifiable intangibles. Whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, the assets are written down to their net realizable value. For
recoverability of the assets, the Company estimates the future cash flows
expected to be generated from those assets and their eventual disposition. If
the sum of the expected cash flows (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that the Company expects to hold and use is based on he fair value
of the asset.

Foreign Currency Translation

The functional currency of the Company is the Indian Rupee and that of STI and
SCI is US dollar and Hong Kong dollar, respectively. The accompanying financial
statements are reported in US dollars. The translation of Indian Rupees into US
dollars is performed for balance sheet accounts using exchange rates as of the
balance sheet date and at average monthly rates for revenue and expense accounts
for the respective years.

The gains and losses resulting from such translation are reported in
"accumulated other comprehensive loss" as a separate component of stockholders'
equity.

Earnings Per Equity Share

On January 1, 1997, the Company adopted SFAS No. 128, "Earnings Per Share." In
accordance with SFAS No. 128, basic earnings per equity share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings per equity share is computed using weighted average number of
common and dilutive common equivalent shares outstanding during the period,
using the treasury stock method for options and warrants, except where the
results would be anti-dilutive.

Income Taxes

Income taxes are accounted for using the asset and liability method. 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 and operating
loss carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply

                                      F-12

<PAGE>

to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date. The measurement of deferred tax assets is reduced, if necessary,
by a valuation allowance for any tax benefits of which future realization is
uncertain.

Fair Value of Financial Instruments

The carrying amounts reflected in the consolidated balance sheet for cash, cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximate their respective fair values due to the short maturity of these
instruments. The Company's long-term debt is at a variable rate; therefore the
carrying amounts approximate fair value.

Concentrations of Risks

Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of cash equivalents, short-term investments and
accounts receivable. The Company's cash and cash equivalents and short-term
investments are invested in corporations, banks and Indian mutual funds with
high credit ratings and the Company performs periodic evaluations of the
relative credit standing of these institutions. The Company establishes
limitations on the maximum amount that may be invested in any single entity and
performs credit evaluation of customers to minimize credit risk.

Employee Benefit Plans

Provident and 401 (k) Funds

All Indian employees of the Company receive benefits from a provident fund,
which is a defined contribution plan. Both the employee and the employer each
make monthly contributions to the plan equal to 12% of the covered employee's
basic salary. The Company has no further obligations under the plan beyond its
monthly contributions. STI provides a 401(k) defined contribution plan for all
full time employees in the United States who choose to enroll and are over the
age of twenty-one and have completed six months of service. Employees fully vest
in matching contributions after five years of service. Employees may contribute
up to 15% of their salary to the Plan. STI may match 50% of the employee's
contribution, up to a maximum of 6% of the employee's annual salary or $2,400
per person per annum. The Company has decided not to contribute to the 401k fund
starting from January 1, 2002.

On or about October 4, 2002, the United States Department of Labor Pension and
Welfare Benefits Administration commenced an investigation into the ERISA plans
of Silverline Technologies Inc., SeraNova, Inc. and Megasys, Inc. These entities
face potential liabilities of approximately $900,000 in connection with monies
owed to 401(k) and other ERISA plans. As of the date of this report, the
investigation is still pending.

The provident fund plan has been made mandatory in Hong Kong from December 2000
onwards. Consequent to this, SCI has opted for a mandatory provident fund plan
from January 2001. Under this plan, both the Company and the employee contribute
5% of the employee's monthly income, up to a maximum of HK $2,000 per month

Gratuity

In addition to the above benefits, the Company provides for gratuity, a defined
benefit retirement plan (the Plan or Gratuity Plan), covering all Indian Company
employees. The gratuity plan commenced on March 1, 1998. The Plan provides a
lump sum payment to vested employees at retirement or termination

                                      F-13

<PAGE>

of employment in an amount based on the respective employee's salary and the
years of employment with the Company. The Company contributes each year to a
gratuity fund maintained by the Life Insurance Corporation of India (LIC) based
upon actuarial valuations. No additional contributions are required to be made
by the Company in excess of the unpaid contributions to the Plan. The LIC has no
recourse to the Company in the event of any shortfall in its obligations to
vested employees and is entirely responsible for meeting all unfunded
liabilities. Consequently, all additional liabilities that may arise will be
borne by the LIC. Further, vested employees do not have any recourse to the
Company in the event the LIC does not fulfill its obligations to them. The
Company does not carry any pension liability in its financial statements and has
no further obligations under the Plan beyond its annual contribution. As of
March 31, 2002, the Company had outstanding $17,161 in unpaid contributions to
the fund.

Superannuation

The Company provides for superannuation, a defined contribution retirement plan
(the Superannuation plan) covering specified employees as per the terms of
employment. The plan provides a lump sum payment to vested employees at
retirement or termination of employment. The Company contributes each year to a
superannuation fund maintained by LIC based upon percentage of the employees'
salary. No additional contribution were required to be made by the Company in
excess of the unpaid contributions to the plan. LIC has no recourse to the
Company in the event of any shortfall in its obligations to the vested employees
and is entirely responsible for meeting all unfunded liabilities. Consequently,
all additional liabilities that may arise will be borne by the LIC. Further,
vested employees do not have any recourse to the Company in the event that LIC
does not fulfill its obligations to them. The Company has no further obligations
under the plan beyond its monthly contributions. As of March 31, 2002, the
Company had outstanding $17,117 in unpaid contributions to the plan.

Cash, Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with maturities not
exceeding three months to be cash equivalents. Cash and cash equivalents consist
of cash, cash on deposit with banks and marketable securities.

The Company classifies its short-term investments as "Available for Sale". The
cost of securities sold is based on the specific identification method. Trading
debt securities are carried at fair value based on quoted market prices with
gains or losses included in "Accumulated Other Comprehensive Income".

Unbilled project costs

Unbilled project costs are valued at cost.

Inventories

Inventories are valued at cost. Cost is determined by use of the first in, first
out (FIFO) method. Third party purchased software for resale is valued at lower
of cost or net realizable value. As of March 31, 2002 all inventories have been
written off as these have not been sold.

Long Term Investments

The Company classifies its long-term investments as "Available for Sale" and are
carried at fair value based on quoted market prices with unrealized losses/gains
shown as "Accumulated Other Comprehensive Income". Interest and dividends on
securities classified as available for sale are included in "Other
Income/Expense". Investments where the Company controls between 20% and 50% of
the voting interest are accounted for using the equity method.

Decrease in Value of Investment

Due to the decline in the technology sector, the value of the Company's
investment in TIS Worldwide, Inc., an e-business solutions integrator now known
as Starpoint Solutions, Inc. ("Starpoint"), has significantly diminished since
the time the Company entered into an investment and strategic alliance agreement
with Starpoint in August 2000.

                                      F-14

<PAGE>

Intangibles

Goodwill and other intangibles are amortized on the straight-line method.
Goodwill is amortized principally over a seven-year period. The non-compete
agreement is amortized over the contractual period of 80 months. Technology
based assets and intellectual property rights are amortized over the estimated
useful life of the asset. All goodwill in the U.S. subsidiaries have been
written off since most of the goodwill related to the acquisition of various
companies which have discontinued their operations.

Research and Development

Research and development activities are integrated with the software development
process with the object of devising efficient methods of product development.
The Company has in place a quality assurance team intended to ensure adherence
to stringent quality norms. Research & Development expenditures are expensed as
incurred.

Employee Stock Options

The Company accounts for its employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" under which deferred compensation expense is recorded on the date of
the grant only if the current market price of the stock exceeds the exercise
price of the options.

Dividends

Dividend on common stock and the related dividend tax are recorded as a
liability on declaration.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 133 - Accounting for Derivative Financial Instruments
and Hedging Activities (SFAS-133) in June 1998 effective for the year ending
March 31, 2000. This statement was amended by SFAS No. 138 in June 2000 to
further clarify SFAS No. 133. The Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133 and SFAS 138 are not anticipated to have any significant impact on the
Company's financial position or operation, as the Company is not engaged in
these activities.

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No.141 - Business Combinations, and Statement No.
142 - Goodwill and Other Intangible Assets in July 2001. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interest method will be
prohibited. Statement 142 changes the accounting for goodwill from amortization
method to an impairment-only approach. Thus, amortization of goodwill, including
goodwill recorded in past business combinations, will cease upon adoption of
this Statement, which for companies with calendar year ends, will be January 1,
2002.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting
the Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurrng Events and
Transactions, for the disposal of a segment of a business (as previously defined
in that Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No.
121 for recognizing and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while also resolving
significant implementation issues associated with SFAS No. 121. For example,
SFAS No. 144 provides guidance on how a long-lived asset that is used as part of
a group should be evaluated for impairment, establishes criteria for when a
long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. SFAS No. 144
retains the basic provisions of APB No. 30 on how to present discontinued
operations in the statement of operations but broadens that presentation to
include a component of an entity (rather than a segment of a business). Unlike
SFAS No. 121, an impairment assessment under SFAS No. 144 will never result in a
write-down of goodwill. Rather, goodwill is evaluated for impairment under SFAS
No. 142, Goodwill and Other Intangible Assets. The Company is required to adopt
SFAS No. 144 no later than the fiscal year beginning after December 15, 2001,
and plans to adopt its provisions for the quarter ending March 31, 2002.
Management wrote-off entire Goodwill and Intangible of Silverline Technologies
Inc. and SeraNova Inc. in early adoption of SFAS No. 144.

2. Cash and Cash Equivalents

Cash and cash equivalents are as follows:

                                      F-15

<PAGE>

                        Year ended Mar 31,   Qtr. ended June 30,
                                                 (unaudited)
                         2001       2002       2001       2002
Balance with banks
Current account       $3,329,296 $1,884,472            $1,347,396
Term Deposit           5,821,049     10,475                10,475
                      -------------------------------------------
Total                 $9,150,345 $1,894,947 $5,605,616 $1,357,871
                      -------------------------------------------

3. Accounts Receivable

Account receivables are as follows:

<TABLE>
<CAPTION>
                                    Year ended March 31,      Qtr. ended June 30, (unaudited)
                                    2001            2002            2001            2002
<S>                             <C>             <C>             <C>             <C>
Accounts Receivable             $58,466,737     $42,903,047     $44,550,125     $29,522,747
Allowance for doubtful accounts     (61,365)     (1,009,640)        (61,365)     (1,009,640)
                                -----------------------------------------------------------
Accounts Receivable (Net)       $58,405,372     $41,893,407     $44,488,760     $28,513,107
                                -----------------------------------------------------------
</TABLE>

4. Inventories

Inventories are as follows:

                            Year ended March 31, Qtr ended June 30,
                            2001           2002  2001         2002

                            ---------------------------------------
Software in transit         $2,470,824        -  $2,475,000      -
                            ---------------------------------------

5. Prepaid expenses and other current assets

                         Year ended March 31,         Qtr ended June 30,
                           2001        2002           2001         2002

Deposits               $ 1,567,303 $   519,976   $   560,504  $   519,976
Loan to employees           46,572       2,841         3,900        2,641
Prepaid Expenses         2,178,356     403,559       245,271      245,600
Other receivables        8,844,462  16,149,808    23,891,579    9,104,450
Taxes receivable           108,874     575,102       211,061      575,102
                       --------------------------------------------------
Total                  $12,745,567 $17,651,286   $24,912,315  $10,447,769
                       --------------------------------------------------

Deposits represent advances to the Indian government departments and others
agencies for electricity and other utility services as of March 31, 2001 and
2002.

Other receivables include accrued interest on deposits, and advances to vendors
of services. It also includes an advance of $7,305,963 as at March 31, 2002 and
$4,920,443 as at March 31, 2001 given to Silverline Holdings Corp, a related
party.

Taxes receivable represent withholding tax deducted by various authorities in
India on the income received by the Company. These amounts are recoverable from
the revenue authorities.

                                      F-16

<PAGE>

For the US subsidiary, the benefit of deferred taxes is not reflected in the
financial statements, as it is not clear if the US subsidiary will be able to
use the benefits due to the going concern issue.

6. Income Taxes

Provision for tax is based on computations considering rebates and relief's
under the Indian Income Tax Act and relevant Finance Act. The company claims
exemptions available under the provisions of section 10A of the Income Tax Act
1961 in respect of income derived export of software development and related
services.

Deferred tax is recognized subject to the consideration of prudence, on timing
differences between the taxable income and accounting income that originate in
one period and are capable of reversals in one or more subsequent periods.
Deferred tax assets are not recognized on un-absorbed depreciation and carry
forward of losses unless there is reasonable certainty that sufficient future
taxable income will be available against which such deferred taxes can be
realized.

The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No.109, Accounting for Income Taxes, whereby
deferred income taxes result from temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
No provision for income taxes has been made for the three months ended March 31,
2001. Deferred tax benefits are not reflected because it is deemed that the net
operating losses will not be utilized. The net operating losses incurred
subsequent to December 31, 2000 are expected to be carried back initially. No
asset has been reflected at this time.

                                      F-17

<PAGE>

7. Property, Plant and Equipment

                              Year ended March 31,   Three Months ended June 30,
                              2001          2002         2001         2002
Owned assets:
Land                        $   741,554 $   741,554   $   741,554 $   741,554
Buildings                    19,122,193  22,320,034    19,122,193  22,320,034
Furniture and Fixtures        9,669,717   8,801,269     9,669,717   8,801,269
Office equipment              4,340,186   3,845,716     4,340,186   3,845,716
Computer equipment           18,800,245  17,861,470    20,590,002  20,808,018
Vehicles                        243,039     280,307       243,039     280,307
Construction in process      17,570,961  17,604,006    17,570,961  17,604,007
Leased Assets:
Land                            956,801     956,801       956,801     956,801
Vehicles                        190,579     190,579       190,579     190,579
Computer Equipment              393,517     393,517       393,517     393,517
Office Equipment                 80,099      80,099        80,099      80,099

Total                        72,108,891  73,075,352    73,898,648  76,021,901

Accumulated Depreciation     19,102,233  17,798,000    20,231,633  21,022,640
                            -------------------------------------------------
Net property, plant and
equipment                   $53,006,658 $55,277,352   $53,667,015 $54,999,261
                            -------------------------------------------------
Property, plant and equipment are as follows:

Depreciation expense for the years ended March 31, 2001, 2002 and for three
months ended June 30, 2001 and June 30, 2002 aggregate to $4,722,355, 5,074,502,
5,793,804 and 3,244,640, respectively.


Property, plant and equipment are stated at cost less accumulated depreciation.
As of March 31, 2001 the fixed assets of Silverline Technologies Inc, USA were
written down to fair market value of $200,000 since the company closed several
of their offices and the assets located at these offices could not be properly
identified. The Company computes depreciation for all property, plant and
equipment using the straight-line method over the estimated useful lives of
assets, as follows:

Owned assets
------------
Buildings                              40 years
Furniture and fixtures                  7 years
Computer equipment                      3 years
Office equipment                       10 years
Vehicles                                5 years

Leased assets
-------------
Land                            :      amortized over the life of the lease
Computer equipment              :      amortized over the life of the lease
Vehicles                        :      amortized over the life of the lease

9. Sale of buildings and other assets and sale/lease back

On December 31, 1997, STI sold its New Jersey office building to International
Real Estate Ventures, LLC ("IREV"). Under the terms of the sale agreements, IREV
obtained a $4,000,000 mortgage from

                                      F-18

<PAGE>

Chase Manhattan Bank to finance the purchase price of $4,000,000. IREV is a
startup corporation, which will receive rents from STI and other tenants. STI
has entered into a sale and lease back of half its New Jersey office building on
December 31, 1997. The lease is classified as an operating lease. The annual
lease payment over the life of the lease is $480,000. In January 2000, IREV sold
the building to Silverline Holdings, Corp., the Company's major shareholder. See
"Note 22 - Subsequent Events - Sovereign Bank v. Silverline Holdings Corp., Ravi
Subramanian and Silverline Technologies, Inc." for information relating to
litigation involving the office building.

10. Acquisitions and intangible assets

Since October 1998 Silverline Technologies has made several acquisitions as
follows:

On October 23, 1998, the Company purchased substantially all the assets of Lorin
Management Services, Inc., Lorimar Services, Inc., and Nova Technical Services,
Inc. for $2,257,467. The Company entered into an eighty-month noncompete
agreement with the former owner of those businesses. This acquisition has been
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The asset purchase agreement provided for contingent payments to
the sellers upon the achievement of certain financial performance measures. As
of March 31, 2001, $401,625, the unamortized balance of not-to-compete is
charged off.

During the years ended December 31, 2000 and 1999, the Company accrued an
additional $1,250,000 and $692,508, respectively, relating to the achievements
of these measures.

Effective April 19, 2000, Silverline Technologies, Canada Inc. acquired directly
and indirectly all of the issued and outstanding common shares of CIT, Canada
Inc. and its subsidiary, CIT Egypt Inc for $3,900,288. In April 2002, the
company closed the operations in Canada and sold off its interest in CIT Egypt.

On September 30, 2000, the Company purchased substantially all the assets of
Megasys Software Services, Inc. from Aris Staffing Corporation for $6,225,000.

All the Investments are written off since these operations do not exist as of
the balance sheet date.

On October 4, 2000, the Company acquired the entire common stock of Sky Capital
International Limited (SCI), a Hong Kong based IT consultancy company and the
Company's second largest client, comprising of 20 million shares in common stock
of Hong Kong $1 each for a total price of U.S. $22,000,000. This acqusisiton has
been accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The functional currency of SCI is Hong Kong Dollar. Results of
operations since the acquisition date have been included in the statement of
income. The translation of Hong Kong dollars into US $ is performed for balance
sheet accounts using exchange rates as of the balance sheet date and at the
average montly rates for revenue and expense accounts.

The following table represents the allocation of the acquisition amount:

Property, plant, and equipment                            $    690,617
Current and other assets                                    18,482,304
Intellectual property rights                                    64,267
Goodwill                                                    18,166,613
Current liabilities                                        (14,799,756)
                                                          ------------
                                                          $ 22,604,045
                                                          ============

The following unaudited proforma financial information for the years ended
December 31, 1999 and 2000, assumes the CIT Canada, Inc., Megasys Software
Services, Inc. and Sky Capital International acquisition occurred as of the
beginning of the respective periods, after giving effect to certain adjustments,
including the amortization of intangible assets, depreciation based on the
adjustments to the fair market value of the property, plant and equipment
acquired. The proforma results have been prepared for comparative purposes
only and are not necessarily indicative of the results of operations that may
occur in the future or that would have occurred had the acquisition of CIT
Canada, Inc., Megasys Software Services, Inc. and Sky Capital International been
affected on the dates indicated.

                                                  Pro forma
(Millions except for per share data)       Year ended December 31
                                           ----------------------
                                             1999           2000
                                           -------        -------
Net Sales                                  $102.95        $157.47
Net income                                   13.84          25.03
Net income per share
  Basic:                                      0.24           0.36
  Diluted:                                 $  0.21        $  0.36

On March 6, 2001 STL acquired the entire issued share capital of SeraNova in
exchange for issuing 6,227,442 ADS ( each ADS representing 2 underlying shares)
to the shareholders of Sera Nova at a ratio of 0.35 ADS per share in SeraNova.

In addition, STL has issued 4.3 million ADSs in discharge of the liability $10.0
million of SeraNova to its creditors. SeraNova has further given a bank
guarantee of Rupees 265.5 million to Andra Bank, Hyderabad for banking
facilities given to SeraNova India Pvt. Ltd., a subsidiary of SeraNova, Inc.

On February 12, 2002, Silverline Technologies Limited acquired the entire share
capital of eCom Server Inc. by issuing 6.8 million share of ADSs ( each ADS
representing 2 underlying shares) to the shareholders of eCom Server Inc.

Intangibles are as follows:

                     Year ended Mar 31,     Qtr. Ended June 30,
                      2001       2002        2001        2002

Goodwill         $62,907,049 $54,280,675 $44,061,398 $55,590,244

                                      F-19

<PAGE>

Accumulated amortization

                          ------------------------------------------------------
Total                        $62,907,049  $54,280,675  $44,061,398   $55,590,244
                          ------------------------------------------------------

Amortization expense for the years ended March 31, 2001, 2002 and for three
months ended June 30, 2001 and June 30, 2002 were $Nil, $Nil, $Nil, $Nil and
$Nil respectively.

11. Related Parties

Related party transactions are transfer of resources or obligations between
related parties, regardless of whether a price is charged. Parties are
considered to be related, if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other
party in making financial or operating decisions. Parties are considered to be
related if they are subject to common control or common significant influence.

STI made advances, in the form of payments to Mr. Ravi Subramanian, the
chairman, totaling $75,000 during 2002. The outstanding as at March 31, 2002 is
$15,000.

STI made advances, in the form of payments made on behalf of Mr. Ravi
Subramanian, the chairman, totaling $787,640 and $1,855,000 during 1999 and 2000
respectively. The amount has been repaid as of the end of 1999 and 2000.

During 2000, STI made advances to KS Software International, Inc., amounting to
$1,000,000. The entire amount advanced has been repaid as of December 31, 2000.

During 2002, STI has paid rent of $732,248 to Silverline Holdings Corp. STI made
advances of $3,558,991 and $10,530,529, during December 31, 1999 and 2000
respectively, to Silverline Holdings Corp. As of March 31, 2002, $7,305,963
remained outstanding and is included in prepaid expenses and other current
assets.

12. Investments

Investments as at March 31, 2002 and 2001 are $11,339,043 and $11,154,036
respectively. These include investment in Star Point Solutions Inc, USA
(formerly, TIS Worldwide Inc) $766,824 Series B convertible preferred stock at a
price of $ 8.1505 per share amounting to $ 10,000,000.

13. Other Current Liabilities

                                  Year ended March 31,    Qtr. ended June 30,
                                   2001         2002       2001        2002

Taxes Payable                  $ 4,961,628  $4,909,399 $5,219,376   $5,935,239
Other current liabilities       11,294,516           -  2,266,475            -
                               -----------------------------------------------
Total                          $16,256,144  $4,909,399 $7,485,851   $5,935,239
                               -----------------------------------------------

14. Lines of credit, long-term debt and capital lease obligations

                                Year ended Mar 31,
                                 2001        2002

Colombia Savings            $   100,000 $    24,598
Bank of Baroda (NY)           8,591,250   9,642,750
HSBC                         26,783,750  29,753,250

                                      F-20

<PAGE>

Andhra Bank (India)                         6,086,594     5,923,017
Fleet Bank                                  4,230,824
Zion Bank                                      70,813
Capital Lease obligations                     175,223        16,883
Bank Loan- UK subsidiary                                    120,550
Bank Loan- Asia Pacific                       505,871       524,181
Bank Loan- Sky Capital
Bank Loan- Silverline India                               3,751,221
Total                                      46,544,325    49,756,450
Less: Current portion                      39,901,383    49,692,597
                                        ----------------------------
Long term debt and capital lease           $6,642,942       $63,853
                                        ----------------------------


1. Loan payable to Columbia Savings Bank is collateralized by equipment and is
payable in 60 equal monthly installments of $12,500 plus interest calculated at
a rate of prime plus 3/4%. Final payment was due December 31, 2001. Silverline
Technologies, Inc. has defaulted on the note, which as of March 31, 2002, had a
balance due of $24,598. Silverline Technologies, Inc. is involved in litigation
with the bank for the said amount.

2. On May 28, 2002, HSBC USA, the primary lender, withdrew a secured line of
credit made available to Silverline Inc. due to uncured events of default
committed by Silverline under the loan facility and commenced an action in the
United States District Court for the Southern District of New York, against
Silverline Inc. and Silverline Ltd., Silverline Technologies, (Canada) Inc.,
Silverline Technologies UK Limited, Seranova and Ravi Subramanian, as guarantors
to recover in excess of approximately $ 27.3 million , plus interest , in
connection with the loans made by HSBC to Silverline Inc under the loan facility
as of January 2002. HSBC holds and has begun enforcing a judgment against all
defendants arising out of this proceedings in the approximate amount of $27.5
million pursuant to a settlement agreement dated Sept 18, 2002 approved by the
court. Defendants are entitled to a credit of approximately a little over $7.0
million against the judgment for payments made. The credit facility for $40
million was jointly shared by HSBC and Bank of Baroda in the ratio of 75% and
25% respectively. Bank of Baroda has threatened its own lawsuit.

16. Stockholders' equity

The Company has only one class of equity share denominated in Indian Rupees. The
changes in equity shares during the years 2001 and 2002 are as follows:

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED MARCH 31, 2001 AND 2002


<TABLE>
<CAPTION>
                                                        Equity Shares           Additional Paid-in  Share Application    Retained
                                               --------------------------------
                                                    Number       Par Value           Capital         Money - Warrant     Earnings
                                               -------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>             <C>               <C>
BALANCE, MARCH 31, 2000                              64,500,000     $18,305,532    $ 24,665,866     $        -        $ 39,167,854


Cash dividends declared
Common stock - issue of ADS                          21,154,884       4,621,452     133,647,298
Deferred Stock Based Compensation                                                      (334,455)
Currency Translation Adjustments/gains and
 losses on sale of investments
Amortization of stock based compensation
Net income / (Loss)                                                                                                    -91,251,408
                                               -------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2001                              85,654,884     $22,926,984    $157,978,709     $        0        ($52,083,554)
                                               =====================================================================================

Cash dividends declared                                                                                                 (2,410,513)
Common stock - issue of ADS                          22,200,000       4,560,757      23,653,404
Share application money-warrants                                                                     1,565,693
Deferred Stock Based Compensation                                                       (33,347)
Currency Translation Adjustments/gains and
 losses on sale of investments
Amortization of stock based compensation
Net income / (Loss)                                                                                                    (54,608,559)
                                               -------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2002                             107,854,884     $27,487,741    $181,598,766     $1,565,693       ($109,102,626)
                                               =====================================================================================

Cash dividends declared
Common stock - issue of ADS
Share application money-warrents
Deferred Stock Based Compensation
Currency Translation Adjustments/gains and
 losses on sale of investments
Amortization of stock based compensation
Net income / (Loss)                                                                                                     (3,428,050)
                                               -------------------------------------------------------------------------------------
BALANCE, JUNE 30, 2003 (unaudited)                  107,854,884     $27,487,741    $181,598,766     $1,565,693       ($112,530,676)
                                               =====================================================================================
<CAPTION>

                                                      Accumulated Other          Deferred StockBased    Total Shareholders

                                                  Comprehensive Income/ Loss        Compensation               Equity
                                               ----------------------------------------------------------------------------
<S>                                                          <C>                     <C>                   <C>
BALANCE, MARCH 31, 2000                                          ($4,061,122)            ($1,302,846)         $ 76,775,284
                                                                                                              $          0
Cash dividends declared                                                                                       $          0
Common stock - issue of ADS                                                                                   $138,268,750
Deferred Stock Based Compensation                                                            334,455          $          0
Currency Translation Adjustments/gains and
    losses on sale of investments                                 (9,412,527)                                  ($9,412,527)
Amortization of stock based compensation                                                     803,056          $    803,056
Net income / (Loss)                                                                                           ($91,251,408)
                                               ----------------------------------------------------------------------------
BALANCE, MARCH 31, 2001                                         ($13,473,649)              ($165,335)         $115,183,155
                                               ============================================================================

Cash dividends declared                                                                                        ($2,410,513)
Common stock - issue of ADS                                                                                   $ 28,214,161
Share application money-warrants                                                                              $  1,565,693
Deferred Stock Based Compensation                                                             33,347          $          0
Currency Translation Adjustments/gains and
    losses on sale of investments                                    774,925                                  $    774,925
Amortization of stock based compensation                                                      95,287          $     95,287
Net income / (Loss)                                                                                           ($54,608,559)
                                               ----------------------------------------------------------------------------
BALANCE, MARCH 31, 2002                                         ($12,698,724)               ($36,701)         $ 88,814,149
                                               ============================================================================

Cash dividends declared                                                                                       $          0
Common stock - issue of ADS                                                                                   $          0
Share application money-warrents                                                                              $          0
Deferred Stock Based Compensation                                                                             $          0
Currency Translation Adjustments/gains and
    losses on sale of investments                                 (7,765,248)                                  ($7,765,248)
Amortization of stock based compensation                                                      36,701          $     36,701
Net income / (Loss)                                                                                            ($3,428,050)
                                               ----------------------------------------------------------------------------
BALANCE, JUNE 30, 2003 (unaudited)                              ($20,463,972)          $           0          $ 77,657,552
                                               ===============================================================================
</TABLE>

As of March 31, 2001, the Company has utilized $4,621,452 towards purchase of
additional common stock in STI (Subsidiary company in the United States of
America). As of March 2002, the Company has utilized $4,560,757 towards purchase
of additional common stock in STI.

Authorized Share Capital

The authorized equity shares of the Company for the years 2001 and 2002 were
110,000,000 and 135,000,000.

                                      F-21

<PAGE>

17. Extraordinary item

During the year ended March 2001 and March 2002, the Company wrote off
$95,674,600 and $52,576,633 respectively as follows:

--------------------------------------------------------------------------------
                                     2001                  2002
--------------------------------------------------------------------------------
Accounts Receivable                  $ 32,200,000          $ 29,123,637

--------------------------------------------------------------------------------
Investments                            31,600,000             1,599,543
--------------------------------------------------------------------------------
Goodwill                               13,700,000             2,508,069
--------------------------------------------------------------------------------
Property, Plant & Equipment             8,700,000            11,863,565
--------------------------------------------------------------------------------
Purchased Software                      4,700,000             3,705,212
--------------------------------------------------------------------------------
Others                                  4,774,600             3,776,607
--------------------------------------------------------------------------------
Total                                $ 95,674,600          $ 52,576,633
--------------------------------------------------------------------------------

        These write-offs are from Silverline Technologies, Inc. and Seranova,
Inc., U.S. subsidiaries of Silverline Technologies, Limited.

18. Employee benefit plans

Gratuity

The entire liability on this account is accrued based on actuarial valuation as
of March 31 each year and funded with Life Insurance Corporation Of India (LIC).
On funding with LIC, the Company does not have any further liability.

As of December 31, 1999, the Company had obtained an actuarial valuation of the
liability and has accrued the same. The amount accrued is $11,100, shown in
other accrued liabilities. As of December 31, 2000 and 2001, the liability has
been estimated and accrued and shown in other accrued liabilities at $18,462 and
$17,161, respectively.

Superannuation

The entire liability on this account is accrued based on actuarial valuation as
of March 31 each year and funded with Life Insurance Corporation Of India (LIC).
On funding with LIC, the Company does not have any further liability.

As of December 31, 1999, 2000 and 2001, the Company has estimated the liability
and accrued the same at $15,762, $10,867 and $17,117, respectively and shown in
other accrued liabilities.

19. Commitment and Contingencies

Bank guarantees, Letters of Credits and Other guarantees

The details of bank guarantees, Letters of Credits and other Guarantees
outstanding as of March 31, 2001 and March 31, 2002 are $103,789 and $92,832
respectively.

Capital commitments

The outstanding capital commitments provided for March 31, 2001 and March 31,
2002 are $17,992,290 and $10,479,187 respectively

                                      F-22

<PAGE>

Total rent and lease expense for the years ended March 31, 2001 and 2002 were
$2,022,515 and $1,127,091 respectively.

STI has long-term operating leases for its office facilities in Illinois. STI
also leases other office facilities under short-term (one year or less) leases.
In conjunction with the sale of the STI's NJ office building, it has entered
into a long-term operating lease for that facility expiring December 30, 2012
with two optional five-year extensions. Many of the leases have been prematurely
cancelled or arrangements made with the lessor for early termination. There are
claims for unpaid rents due to early cancellation of lease, which are not in the
commitments quantified.

As of March 31, 2001 future minimum lease payments are as follows:

  2001          $  639,648
  2002             827,148
  2003             750,000
  2004             750,000
  2005             750,000
Thereafter       5,250,000

It is not clear if the company will be allowed to operate in the New Jersey
facility by the lenders of the lessee who are in the process of foreclosing the
property.

20. Litigation

The Company is subject to the legal proceedings and claims described below. For
a description of additional legal proceedings and claims to which the Company is
a party or subject, see "Note 22-Subsequent Events-Litigation".

CIT Canada Inc and Net Objects Inc v. Gaming Lottery Corporation

Our wholly-owned subsidiary CIT Canada Inc. commenced a lawsuit on June 17,
1998, in the Superior Court of the Province of Ontario, Court File No.
98-CV-149817 against the Gaming Lottery Corporation for the improper repudiation
of a Software Development Agreement, claiming Cdn.$21.0 million in damages. The
Gaming Lottery Corporation has asserted counterclaims against CIT Canada and has
claimed damages in the amount of Cdn.$10.0 million. We believe that the
counterclaims have no merit. A hearing is scheduled for April 11, 2003, at which
time it is expected that a court order setting a timetable to complete discovery
will be established.

NSA Investments II LLC v. SeraNova Inc., Rajkumar Koneru, Ravi Singh,
Intelligroup Inc., and Silverline Technologies Limited

On February 7, 2001, NSA Investments II LLC, ("NSA"), filed a lawsuit in the
United States District Court for the District of Massachusetts, Case No.
01-10223 (PBS), against our company and its subsidiary, SeraNova, and two of its
officers, Rajkumar Koneru and Ravi Singh, and Intelligroup, Inc.,
("Intelligroup"), the former parent company of SeraNova. In or about May, 2001,
NSA agreed to dismiss Silverline from the action without prejudice. This action
arises from a $4.0 million investment made by NSA in SeraNova in March 2000
(when SeraNova was owned by Intelligroup), as part of a private placement of
SeraNova's securities. NSA alleges, among other things, that SeraNova breached
the terms of the stock purchase agreement pursuant to which

                                      F-23

<PAGE>

NSA made its investment in SeraNova. The complaint alleges: (i) negligent
misrepresentation, fraudulent misrepresentation, and securities law violations
against SeraNova, Mr. Koneru and Mr. Singh; (ii) breach of contract and unfair
trade practices against SeraNova; and (iii) securities law violations against
Intelligroup. NSA also seeks unspecified damages and unspecified multiple
damages and attorneys' fees from SeraNova, Intelligroup and the two individual
defendants. SeraNova and Messrs. Koneru and Singh answered NSA's complaint and
intend to vigorously contest and deny the allegations of wrongdoing set forth
therein. By Memorandum and Order dated September 30, 2002, the court granted, in
part, NSA's motion for partial summary judgment, in connection with NSA's claim
for breach of contract arising out of express representations made in the stock
purchase agreement concerning Intelligroup's spinoff of SeraNova in July 2000.
The court scheduled a pre-trial conference for October 31, 2002. At the
pre-trial conference, the court set a final pre-trial conference for February
11, 2003, and a trial date of February 24, 2003. On January 20, 2003, the
defendants agreed to settle the matter. On January 24, 2003, counsel for NSA
notified the court that the case was settled. On January 28, 2003, the court
issued an order dismissing the action without prejudice to any party reopening
the action within 30 days if the settlement is not consummated. On February 13,
2003, NSA's counsel advised defendant's counsel that NSA would reopen the matter
if the settlement is not consummated by February 14, 2003. As of February 14,
2003, the settlement had not been consummated.

Intelligroup Inc. v. SeraNova Inc., Silverline Technologies Limited and
Silverline Technologies Inc.

In August 2001, Intelligroup commenced litigation against SeraNova, Silverline
Technologies, Ltd. (Silverline Ltd.) and Silverline Technologies, Inc.
(Silverline Inc.) in the Superior Court of the State of New Jersey, Middlesex
County, Case No. L-007991-01, to recover approximately $10.5 million alleged to
be due and owing to Intelligroup on a promissory note issued by SeraNova and
approximately $500,000 alleged to be owed by SeraNova to Intelligroup under a
consulting contract under which Intelligroup provided consulting services to
SeraNova. SeraNova has asserted a counterclaim for reformation of the promissory
note on the grounds that the note was supposed to reflect certain cost
allocations to the divisions of Intelligroup, which were spun off to form
SeraNova, but in fact did not properly reflect such costs. In addition, SeraNova
asserted a series of counterclaims seeking damages in excess of $5.0 million as
a result of breaches by Intelligroup of various contracts, including an alleged
improper termination by Intelligroup of SeraNova's access to a satellite link
for computer data transmission that Intelligroup had procured for the benefit of
both Intelligroup and SeraNova. The parties have exchanged interrogatories,
produced documents and taken depositions. A trial date of February 27, 2003, has
been scheduled.

Intelligroup, Inc. v. SeraNova, Inc., Silverline Technologies Limited, and
Silverline Technologies Inc.

In March 2002, Intelligroup commenced arbitration proceedings against SeraNova,
Silverline Ltd. and Silverline Inc. with the American Arbitration Association
seeking damages arising from alleged breaches by SeraNova, Silverline Ltd. and
Silverline Inc. of their obligation to pay rent for four facilities located in
Edison, New Jersey, Foster City, California and Phoenix, Arizona, under a space
sharing agreement and a contribution agreement between Intelligroup and
SeraNova. Intelligroup also sought to terminate the various leases and
accelerate all of the payments due, seeking over $4.5 million in damages.

                                      F-24

<PAGE>

Silverline Inc. and Silverline Ltd. objected to the arbitration award covering
them on the grounds that they had not agreed to arbitrate and that only a court
could determine otherwise. The arbitration panel overruled that objection and
conducted an arbitration proceeding in late June 2002. On or about August 9,
2002, the arbitration panel issued an award in favor of Intelligroup and against
SeraNova, Silverline Inc. and Silverline Ltd. in the sum of approximately
$625,000, and reserved the right to issue additional awards with respect to each
subsequent quarter-year's worth of future lease obligations, which the panel
determined would not form the subject of a current accelerated award.

On August 12, 2002, Intelligroup commenced an action in the Superior Court of
the State of New Jersey, County of Middlesex, Case No. 0222-02, to confirm the
arbitration award. Judgment was entered by the court against SeraNova on the
award. Silverline Inc. and Silverline Ltd. renewed their objection to the
arbitration award being confirmed as to them on the grounds that they had not
agreed to arbitrate and that only a court could determine otherwise. On October
3, 2002, the court entered a judgment against Silverline Inc. and Silverline
Ltd. confirming the award granted by the arbitration panel.

SeraNova, Silverline Ltd. and Silverline Inc. negotiated a partial settlement in
connection with a transition of a portion of their employees providing certain
information technology services that involve a release from liability to
Intelligroup with respect to one of the four properties at issue in the
arbitration that reduced the amount of the judgment against SeraNova, Silverline
Ltd. and Silverline Inc. by approximately $97,000. For more information about
the contemplated employee transition which has since been completed, please see
"Note 22-Subsequent Events-Certain Transactions."
The judgment (subject to reduction as described in the preceding paragraph)
remains outstanding and could be increased if future lease payments are not made
and the arbitration panel issues a subsequent award against SeraNova, Silverline
Inc. and Silverline Ltd.

In addition, Intelligroup has commenced a subsequent action, docket number
C-350-02 in the same court, seeking to enforce subsequent payment defaults in
court rather than pursue arbitration. A judgment of approximately $219,000 has
been entered against SeraNova, Silverline Inc. and Silverline Ltd. on account of
subsequent rent defaults. Intelligroup also has sought a judgment of
approximately $236,000 against SeraNova, Silverline Inc. and Silverline Ltd. for
legal fees arising out of the lease breaches. It is anticipated that a judgment
for that amount will be entered shortly.

Starpoint Solutions Inc. v. Silverline Technologies Limited

On January 4, 2002, Starpoint Solutions Inc., a Delaware corporation, filed a
complaint with the United States District Court for the Southern District of New
York, Civil Action No. 02 CV 0083 (PKL), against Silverline Ltd. The complaint
alleged: (i) breach of the terms of a securities purchase agreement and a
memorandum of understanding relating to the obligation of Silverline Ltd. to
purchase certain securities from Starpoint; and (ii) breach of implied covenant
of good faith and fair dealing. On March 18, 2002 Silverline Ltd. filed an
answer disputing the allegations and asserting counterclaims against Starpoint.
On September 26, 2002, Starpoint and Silverline reached an agreement in
principle to settle the dispute and filed a stipulation of dismissal with the
court. Under the proposed settlement agreement: (i) the lawsuit will be
dismissed; (ii) Silverline Ltd. will provide Starpoint with credit in the amount
of $250,000 to be applied against any software development work to be provided
to Starpoint outside North America by Silverline Ltd.

                                      F-25

<PAGE>

from its development centers in India through August 3, 2003; and (iii)
Silverline Ltd. will provide Starpoint with credit in the amount of $100,000 to
be applied against any IT consulting or staffing services to be provided by
Silverline Ltd. to Starpoint in North America through August 3, 2003.

If the settlement is not consummated, then either party may withdraw the
stipulation of dismissal provided such withdrawal was prior to September 26,
2002. As of September 26, 2002, the stipulation of dismissal had not been
withdrawn and the parties entered into a settlement agreement in accordance with
terms described above.

21.  Employees' Stock Option Plan (ESOP):

i)   In terms of the approval granted by the members at the Extra Ordinary
     General Meeting held on November 5, 1999, the Company granted 1,000,000
     stock options to the resident Indian employees on November 12, 1999, under
     an Indian Stock Option Plan I. All options under the plan are exercisable
     for equity shares, on a one to one basis at an exercise price of Rs.425/-,
     being the market price of the company's equity shares on the date of the
     grant of the option. The options have been granted with a vesting period as
     below:

           Date of Vesting                No of Options
              01/04/2001                      237,037
              01/04/2002                      312,960
              01/04/2003                      450,003
              Total                         1,000,000

     The employees have one year to exercise the options from the date of
     vesting. No vested option has been exercised till date. As the exercise
     price and the market price on the date of the grant were the same, no
     compensation cost has been recognized in the accounts.

ii)  Consequent to the ADS issue of June 20, 2000 and in terms of approval
     granted by the members at the Extra Ordinary General Meeting held on March
     21, 2000, the company granted 1,000,000 stock options to the employees of
     its wholly owned subsidiaries, under an ADR Linked Stock Option Plan. All
     options under the plan will be exercisable for ADS's, on a one to one basis
     (each ADS equals 2 underlying equity shares), at a price of USD 25 per ADS
     being the price at which the company has made the initial ADS issue. The
     options have been granted with a vesting period as below:

           Date of Vesting                   No of Options
              01/07/2002                        673,107
              01/01/2002                        167,234
              01/07/2002                          2,729
              01/01/2003                        154,430
              01/07/2003                          2,500
              Total                           1,000,000

     The employees have three years to exercise the options from the date of
     vesting. As the exercise price and the market price on the date of the
     grant were the same, no compensation cost has been recognized in the
     accounts.

iii) In terms of the approval granted by the members at the Annual General
     Meeting held on September 28, 2000, the Company granted 700,000 stock
     options to the resident Indian employees on April 16, 2002, under an Indian
     Stock Option Plan II. All options under the plan will be exercisable for
     equity shares, on a one to one basis at an exercise price of Rs.61/-, being
     the market price of the

                                      F-26

<PAGE>

company's equity shares on the date of the grant of the option. The options have
been granted with a vesting period as below:

           Date of Vesting                       No of Options
              30/06/2002                             175,000
              30/06/2003                             175,000
              30/06/2004                             350,000
              Total                                  700,000

     The employees have one year to exercise the options from the date of
     vesting. No vested options have been exercised. As the exercise price and
     the market price on the date of the grant were the same, no compensation
     cost has been recognized in the accounts.

iv)  Pursuant to the acquisition of SeraNova Inc. U.S.A. and in terms of the
     approval granted by the members at the Extra Ordinary General Meeting held
     on February 20, 2002, the Company granted 2,000,000 stock options on April
     16, 2002, to the employees of SeraNova Inc, USA and its subsidiary, in
     exchange for options held by them in SeraNova Inc. U.S.A., under an ADR
     linked stock option plan II. All options under the plan will be exercisable
     for ADS's, on a one to one basis (each ADS equals 2 underlying equity
     shares), at a price of US $ 2.95 per ADS being the market price of the
     company's ADS on the date of grant of the option. The options have been
     granted with a vesting period as below:

           Date of Vesting                       No of Options
              16/04/2002                             551,630
              16/04/2002                             289,674
              16/10/2002                             289,674
              16/04/2003                             289,674
              16/10/2003                             289,674
              16/04/2004                             289,674
              Total                                2,000,000

     The employees have five years to exercise the options from the date of
     vesting. No vested options have been exercised. As the exercise price and
     the market price on the date of the grant were the same, no compensation
     cost has been recognized in the accounts.

     In terms of the approval granted by the members at the Extra Ordinary
     General Meeting held on February 20, 2002, the Company issued 1,000,000
     stock options on April 16, 2002 to the employees of its subsidiaries under
     an ADR linked Indian Stock Option Plan III. All options under the plan will
     be exercisable for ADS's on a one to one basis (each ADS equals 2
     underlying equity shares), at an exercises price of US $ 2.95 per ADS,
     being the market price of the company's ADS on the date of grant of the
     option. The options have been issued with a vesting period as below:

                Date of Vesting             No of Options
                  16/04/2002                    500,000
                  16/10/2002                    200,000
                  16/04/2003                    100,000
                  16/10/2003                    100,000
                  16/04/2004                    100,000
                  Total                       1,000,000

                                      F-27

<PAGE>

     The employees have five years to exercise the options from the date of
     vesting. No vested options have been exercised. As the exercise price and
     the market price on the date of the grant were the same, no compensation
     cost has been recognized in the accounts.

22. Subsequent Events

Siverline Technologies (Canada) and Silverline (Egypt)

The operations of Silverline Technologies (Canada) was discontinued from April
15, 2002 and and Silverline (Egypt) was sold on February 28, 2002 for a proceeds
of $ NIL to the company.

Silverline Technologies, Inc. and Seranova, Inc.

As of December 2002, the Companies have substantially discontinued their
activities in the U.S. Silverline Technologies Limited has not adjusted its
investments or receivables balances in accordance with accounting principles
generally accepted in India, which differ in certain material respects from
generally accepted accounting principles in the United States of America.

Litigation

U.S.-Based Litigation

HSBC USA Litigation

On May 28, 2002, HSBC USA, the primary lender, withdrew a secured line of credit
made available to Silverline Inc. due to uncured events of default committed by
Silverline under the loan facility and commenced an action in the United States
District Court for the Southern District of New York, against Silverline Inc.
and Silverline Ltd., Silverline Technologies, (Canada) Inc., Silverline
Technologies UK Limited, SeraNova and Ravi Subramanian, as guarantors to recover
in excess of approximately $ 27.3 million , plus interest , in connection with
the loans made by HSBC to Silverline Inc under the loan facility as of January
2002 and as collateral agent of Bank of Baroda. HSBC holds and has begun
enforcing a judgment against all defendants arising out of this proceedings in
the approximate amount of $27.5 million pursuant to a settlement agreement dated
Sept 18, 2002 approved by the court. Defendants are entitled to a credit of
approximately a little over $7.0 million against the judgment for payments made.
The credit facility for $40 million was jointly shared by HSBC and Bank of
Baroda in the ratio of 75% and 25% respectively. Bank of Baroda has threatened
its own litigation.

Intelligroup, Inc. v. Silverline Technologies, Inc., Silverline Technologies,
Ltd., SeraNova, Inc. and HSBC Bank

On October 4, 2002, Intelligroup filed a complaint in the Superior Court for the
State of New Jersey, County of Middlesex, Case No.L-9094-02, against Silverline
Technologies, Inc., Silverline Technologies, Ltd., SeraNova, Inc. and HSBC Bank.
As previously disclosed above in this annual report on Form 20-F, HSBC Bank
holds a judgment against Silverline in the approximate amount of $27.5 million
pursuant to the Settlement Agreement. In this action, Intelligroup is alleging,
among other things, that it is entitled to recover from HSBC and the Silverline
defendants certain monies that HSBC has received from the Silverline parties and
others in connection with the claims brought by HSBC in its action against the
Company and its subsidiaries.

                                      F-28

<PAGE>

Sovereign Bank v. Silverline Holdings Corp., Ravi Subramanian and Silverline
Technologies Inc.

In June 2002, Sovereign Bank (Sovereign) commenced two separate actions in the
Superior Court of New Jersey, Middlesex County, Docket Nos. L-5092-02 and
F-10240-02, against Silverline Holdings, Inc. (Holdings), Ravi Subramanian and
Silverline Technologies, Inc. (collectively, the Silverline Parties) relating to
what Sovereign claims are defaulted construction and term loans which were not
repaid according to their terms. Sovereign claims to be owed approximately $6.5
million.

The collateral for the loan is the office building owned by Holdings located in
Piscataway, New Jersey (Property). In the first action, Sovereign seeks to
foreclose its mortgage interest (the Foreclosure Action). In the second action,
Sovereign sought and obtained a money judgment against Holdings as the borrower
under the loan instruments, and as against Ravi Subramanian, individually, as
the guarantor of the loan (the Money Judgment Action). Silverline Inc. is a
tenant at the property and is obligated to pay rent to Holdings pursuant to a
lease between the parties.

In the Foreclosure Action, the Silverline Parties entered into a partial
settlement with respect to Silverline Inc.'s continued tenancy and the
appointment of a receiver for the Property. Under the settlement, Silverline
Inc. is obligated to pay $75,000 per month to Sovereign, representing its rent
payments otherwise due to Holdings, and must pay real estate taxes accruing on
the Property. Silverline Inc. may continue this arrangement without the
appointment of a receiver as long as the rent payments continue to be made.
Payments were made until November 2002. Real estate taxes, however, remain in
arrears. In early December 2002, the court presiding over the Foreclosure Action
appointed a receiver for the Property. The receiver has made a demand for
payment and commenced an eviction action for non-payment of rent and Silverline
Inc.'s breach of the lease. The eviction action is scheduled to be heard on
February 19, 2003. Sovereign has joined certain junior lienholders in the
Foreclosure Action for the purposes of extinguishing their interest in the
Property. These lienholders include Bank of India, Countywide Architectural, and
Dellanno Construction.

Sovereign has scheduled a judicial sale of the Property for March 5, 2003 unless
the debt is otherwise paid or refinanced.

In October 2002, the court presiding over the Money Judgment Action issued a
judgment against Holdings and Subramanian in the approximate amount of $6.4
million, but not against Silverline Inc. since it is not an obligor of the loan.
Neither Holdings nor Subramanian have appealed the court's judgment.

On November 27, 2002, Sovereign moved for an order permitting it to sell the
Property at a judicial sale. The court decided the motion on or about December
30, 2002, and issued a final judgment. The foreclosure sale will take on March
5, 2003, although Holdings has the right to adjourn it for four weeks until
early April 2003.

Information Leasing Corporation, Inc.  v. Silverline Technologies Inc.

On August 5, 2002, Information Leasing Corporation commenced litigation in the
Superior Court of New Jersey, Middlesex County, Case No. L-7259-02, against
Silverline Inc., relating to Silverline's failure to make lease payments on
certain equipment leased from Information Leasing Corporation. Information
Leasing Corporation is demanding the payment of $204,244 (as of June 7, 2002),
plus interest and late fees. This litigation is currently in the discovery
phase, and at this time, the Company is not able to express any view as to
whether it will prevail in this action.

                                      F-29

<PAGE>

Gajanan Vengurlekar and Umesh Pachpande v. Silverline Technologies, Ltd.,
SeraNova, Inc., Silverline Technologies, Inc. Dr. Nirmal Jain, Ravi Subramanian,
Kulathu Subramanian and Doe Corporation 1-20.

On September 25, 2002, Gajanan Vengurlekar and Umesh Pachpande commenced
litigation against our company, certain of its officers, and other parties in
the United States District Court for the Southern District of New York, Case No.
02-CV-7724. Plaintiffs purport to represent a class of all current and former
U.S. employees of Silverline Technologies, Inc. and SeraNova, Inc. Plaintiffs
have not sought or obtained class certification. The Amended and Supplemental
Class Action Complaint alleges that the class was not paid wages, salaries and
other compensation, that withheld taxes were not paid, and that pension plan
contributions were wrongfully retained by defendants. Silverline served its
answer and defenses on the plaintiffs on January 29, 2003. Plaintiffs have made
a settlement demand for $889,486.38. This action is currently pending. We are
considering all of our options, including exploring an out-of-court settlement
with plaintiffs and vigorously contesting defendants' liability in the action.

New Jersey Department of Labor v. Ravi Subramanian and Silverline Technologies,
Inc.

The New Jersey Department of Labor brought an administrative action against
Silverline Inc., Case #GE-2009-0702-STO. On December 17, 2002, the New Jersey
Department of Labor issued a Final Order requiring the payment of $4,583,265 in
unpaid employee wages, $100,000 in administrative penalties, and $528,786.77 in
administrative fees. The New Jersey Department of Labor has threatened to file
its order as a judgment, but Silverline Inc. has objected to the Department of
Labor's attempt to enter judgment without affording an opportunity for a
hearing. The Department of Labor has rejected Silverline Inc.'s request for a
hearing. Silverline Inc. is exploring all of its options, including an
out-of-court settlement and vigorously contesting liability in this
administrative matter.

eWork Services (f/k/a Tristep Inc., f/k/a Brava Services) v. Silverline
Technologies Inc. (f/k/a SeraNova)

eWork Services filed suit on April 15, 2002 in the Superior Court of California,
County of San Joaquin, Docket Number TY 06040, alleging non-payment pursuant to
a temporary services agreement dated May 3, 2000, between SeraNova and Brava
Services, Inc., eWork's predecessor-in-interest. eWork seeks judgment in the
amount of $17,891.49. On August 26, 2002, eWork filed an Entry of Default
against defendant. Silverline Inc. is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

Northwest Business Center, LLC v. Silverline Technologies Inc.

On July 12, 2002, Northwest Business Center, as landlord, filed claims against
Silverline Inc. in Arizona Superior Court, Maricopa County, Case No. CV
2002-013434, for failure to pay rent at a commercial site and failure to pay a
dishonored check. Northwest Business Center seeks approximately $200,000 in
damages and attorneys fees. On August 22, 2002, Northwest Business Center filed
an application for entry of default in this proceeding. Management is
considering all of its options, including exploring an out-of-court settlement
with plaintiff and vigorously contesting defendant's liability in the action.

PR Newswire Association, Inc. v. Silverline Technologies Inc. and Silverline
Technologies, Ltd.

On September 10, 2002, PR Newswire filed a complaint against Silverline Ltd. and
Silverline Inc. in the Superior Court of New Jersey, Middlesex County, Special
Civil Part, Docket No. DC-10881-02, for failure to pay invoices for information
services rendered in the amount of $12,845.00. Silverline Ltd. and Silverline
Inc. filed an answer on November 26, 2002. PR Newswire has moved to strike the
answer on the ground that we have not replied to their discovery request. The
matter is pending and the parties are currently engaged in settlement
discussions.

                                      F-30

<PAGE>

Parker Interior Plantscape, Inc. v. Silverline Technologies, Inc.

On August 13, 2002, Parker Interior filed a complaint in the Superior Court of
New Jersey, Middlesex County, Special Civil Part, Docket No. DC-11021-02,
against Silverline Inc. for failure to pay invoices for horticultural services
rendered in the amount of $8,922.83, and Silverline Inc. filed an answer on
November 26, 2002. The matter is currently pending. Silverline Inc. is
considering all of its options, including exploring an out-of-court settlement
with plaintiff and vigorously contesting defendant's liability in the action.

Simonik Moving & Storage, Inc. v. Silverline Technologies

Simonik Moving filed a complaint on August 15, 2002 in the Superior Court of New
Jersey, Middlesex County, Docket No. 10063-02, against Silverline for failure to
pay invoices for moving services rendered in the amount of $5,702.34. Management
is considering all of its options, including exploring an out-of-court
settlement with plaintiff and vigorously contesting defendant's liability in the
action.

Oak Brook International Associates Limited Partnership v. Silverline
Technologies Inc.

On August 22, 2002, Oak Brook International Associates brought this action in
New York City Civil Court, Index No. 2002-08210, to enforce a judgment that it
had obtained against Silverline Inc. on March 11, 2002 in the State of Illinois
in the amount of $22,270.34. On August 20, 2002, Oak Brook served a copy of the
summons and complaint upon Silverline Inc. through the Secretary of State of the
State of New York. Silverline Inc. is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

Colonial Pacific Leasing Corporation d/b/a GE Capital, Colonial Pacific Leasing
Corporation Assignee of Jules and Associates, Inc. v. Silverline Technologies,
Inc.

In a letter dated September 24, 2002, purported plaintiff threatened a lawsuit
in the Superior Court of New Jersey, Middlesex County for default under an
equipment lease in the amount of $169,478.91. Silverline Inc. is considering all
of its options, including exploring an out-of-court settlement with purported
plaintiff and vigorously contesting liability in the action.

Dow Jones Reuters Business Interactive, LLC d/b/a Factiva  v. SeraNova

Dow Jones Reuters Business Interactive filed a complaint against SeraNova on
September 11, 2002, in the Superior Court of New Jersey, Middlesex County,
Docket No. 7835-02 for failure to pay invoices for information technology
services rendered in the amount of $16,841.75. SeraNova filed an answer on
November 13, 2002. The matter is currently pending. Management is considering
all of its options, including exploring an out-of-court settlement with
plaintiff and vigorously contesting defendant's liability in the action.

Republic Bank, Inc.  v. Silverline Technologies, Inc.

Republic Bank filed a complaint against Silverline Inc. on July 16, 2002 in the
Third Judicial District Court of Salt Lake County, State of Utah, Docket No.
020906661, for breach of a lease agreement in the amount of $332,861.00.
Management is considering all of its options, including exploring an
out-of-court settlement with plaintiff and vigorously contesting defendant's
liability in the action.

                                      F-31

<PAGE>

Sivaraman Anbarasan and CTC Corp. v. Ravi Subramanian, Silverline Technologies,
Inc., Silverline Technologies Limited and Software Solutions, Inc.

On July 2, 2002, plaintiffs instituted a lawsuit in the Superior Court of New
Jersey, Middlesex County, Docket No. MID-L-006401-02, suing corporate and
individual defendants for breach of contract, misrepresentation, tortuous
interference, unjust enrichment and breach of covenant of good faith and fair
dealing based on alleged breaches of a stock purchase agreement and other oral
promises. Plaintiffs seek in excess of $250,000 in damages. On January 10, 2003,
the Court granted the defendants' motion to dismiss with leave to amend within
20 days. On January 21, 2003, plaintiffs filed an amended complaint re-alleging
the same causes of action against the same defendants with more specific facts.
Defendants' filed their answer to the amended complaint on February 10, 2003.
Simultaneously, defendants asserted counterclaims for misrepresentation and
securities fraud against plaintiff Anbarasan and filed a third-party complaint
alleging misrepresentation, securities fraud, breach of contract, and breach of
the covenant of good faith and fair dealing against E-COMMIT, Inc. This action
is currently pending. Management is considering all of its options, including
exploring an out-of-court settlement with plaintiff and vigorously contesting
defendant's liability in the action.

Columbia Bank, a Federal Savings Bank, formerly Columbia Bank, v. Silverline
Technologies Inc.

Columbia Bank filed a complaint against Silverline Inc. on November 27, 2002, in
the Superior Court of New Jersey, Bergen County, Docket No. BER-L-9670-02,
alleging that Silverline Inc. had defaulted on its obligations under a bank note
in the amount of $26,756.09. Silverline Inc.'s answer to the complaint is due on
March 3, 2003, and the matter is currently pending. Management is considering
all of its options, including exploring an out-of-court settlement with
plaintiff and vigorously contesting defendant's liability in the action.

Montrose Investments, Ltd. and Strong River Investments, Inc. v. Silverline
Holdings, Silverline Technologies, Inc., SeraNova and Ravi Subramanian

In or about April 2002, Montrose Investments, Ltd., or Montrose, and Strong
River Investments, Inc., or Strong River, commenced action in the Supreme Court
of the State of New York, County of New York, by filing motions for summary
judgment in lieu of a complaint, against Silverline Holdings, Silverline
Technologies, Inc., SeraNova and Ravi Subramanian seeking approximately
$2,395,146 in each action for alleged defaults on promissory notes. The
defendants opposed the motions. In or about July 2002, judgments were entered in
favor of Montrose and Strong River against the defendants, jointly and severally
in the amount of $2,395,146 in each case.

On July 17, 2002, Strong River and Montrose took steps to enforce the judgments,
including serving restraining notices against the corporate defendants pursuant
to New York Civil Practice Law and Rules, restraining the corporate defendants
from the sale, assignment, transfer or interference with their property. On or
about August 28, 2002, the defendants entered into settlement agreements under
which they agreed to pay $1.5 million to Strong River and $1.5 million to
Montrose. Under the terms of the settlement, each plaintiff was to be paid
$500,000 on or before August 28, 2002 and $1.0 million on or before October 5,
2002. The plaintiffs agreed to vacate the restraining notices served on the
corporate defendants, and the parties agreed to exchange releases. We were not
able to pay the settlement amounts in time although approximately $1.5 million
was paid to Montrose and Strong River. Because of our inability to pay
settlement amounts in time, Montrose and Strong River claim that the entire
amount of their judgments less amounts received by them are still due to them.

Other U.S.-Based Matters

Investigation by the United States Department of Labor Pension and Welfare
Benefits Administration

On or about October 4, 2002, the United States Department of Labor Pension and
Welfare Benefits Administration commenced an investigation into the ERISA plans
of Silverline Technologies Inc., SeraNova, Inc. and Megasys, Inc. These entities
face potential liabilities of approximately $900,000 in

                                      F-32

<PAGE>

connection with monies owed to 401(k) and other ERISA plans. As of the date of
this report, the investigation is still pending.

Demand Letter from RMR Systems, Inc.

On or about January 3, 2003, Silverline Inc. received a demand letter from RMR
Systems, Inc. claiming that Silverline owed RMR Systems $85,525, pursuant to the
terms of a Master Consulting Agreement between Silverline and RMR Systems. To
date, no legal proceedings had been instituted by RMR Systems against Silverline
Inc. in connection with this matter.

There are various other claims against Silverline Technologies, Inc. Management
is considering out-of-court settlement in some cases and others are being
contested. The outcome of these claims are not clear in many cases.

International Litigation, Including India-Based Matters

Andhra Bank Litigation

         In December 2002, Andhra Bank commenced legal proceedings in India
against our company and its subsidiaries seeking the recovery of approximately
$5.65 million, plus interest, which was owed by our subsidiary SeraNova India
Pvt. Ltd., and which had been guaranteed by our company. We are currently
negotiating with the bank to extend the time period over which these payments
must be made. No assurance can be given that we will receive any extension. The
next hearing in the case is scheduled for March 26, 2003.

Punjab National Bank Litigation

         In December 2002, Punjab National Bank commenced legal proceedings in
India against our company seeking the recovery of approximately $1.01 million,
plus interest, which we had borrowed from the bank. In connection with the
filing of this lawsuit, the bank has served a notice to us for taking possession
of the assets granted as collateral for the facility. We are currently
negotiating with the bank to extend the time period over which these payments
must be made. No assurance can be given that we will receive any extension. No
hearings have yet been held in this matter, and none are currently scheduled.

Lazard India Ltd. Litigation

         In January 2003, Lazard India Ltd. initiated legal proceedings against
our company in India for the recovery of approximately $40,000, plus interest.
No date has been set for a hearing in this matter.

Intelligroup Litigation

         In July 2002, Intelligroup initiated legal proceedings against our
subsidiary SeraNova India Pvt. Ltd. for the recovery of approximately $160,000,
of which SeraNova India has paid approximately $90,000. We expect the court to
issue schedules for the repayment of the balance owed in the near future.

Legal Proceedings with Landlord

         In December 2002, the landlord of the premises of our SeraNova India
Pvt. Ltd. subsidiary, located in Hyderabad, India, commenced legal proceedings
in India to recover back rent of approximately $3.53 million, plus interest. No
trial date has been set.

Litigation with Aims Communications Ltd. and Tata Finance Ltd.

         In November 2002, Aims Communications and Tata Finance commenced legal
proceedings in India against our company for the recovery of approximately
$60,000, plus interest. We have reached a settlement with these two plaintiffs
pursuant to which we are obligated to pay approximately $500,000, to be paid in
installments. The last installment is due on April 17, 2003.

Certain Transactions

Transactions with Cognizant Technology Solutions, US Corporation

The Company and its Subsidiaries transitioned effective October 23, 2002 certain
of their employees to Cognizant Technology Solutions, a U.S. Corporation. Under
the transaction, the Company terminated and Cognizant hired employees and
subcontractors based in the US, India and the UK who were engaged in providing
information technology services to American Express. The fee paid by Cognizant
was $9,786,023 of which approximately $4,603,000 was paid to HSBC Bank to repay
certain borrowings made by the Company, $ 388,134 was paid to the Company's
Subcontractors, $331,732 was paid to certain vendors and $497,000 paid to a
judgment creditor. The remaining portions of the fee were used to pay certain
employee liabilities of the Company, including salaries and related expenses.

In addition, Cognizant entered into a three month renewable services agreement
pursuant to which the Company will provide to Cognizant certain hardware,
software and associated information infrastructure utilized by the Company in
the AMEX business. In exchange, Cognizant will reimburse the Company for certain
of its operating costs for providing such services.

Transaction with Logic Soft, Inc

On November 20, 2002, the Company transitioned effective October 15, 2002
certain of its information technology professionals to Logic Soft Inc. In
exchange Logic Soft paid, for the benefit of the Company, a fee of approximately
$ 195,952 to certain vendors and creditors of the Company.

Transactions with Flex Solutions Inc

On December 10, 2002 the Company and its subsidiaries transitioned effective
December 4, 2002, their employees engaged in providing certain information
technology services to Citicorp and Greenpoint Mortgage to I-flex Solutions,
Inc. In exchange, I-flex paid for the benefit of the Company, a fee of
approximately $425,621 and assumed certain obligations of the Company totaling
approximately $415,688 consisting primarily of certain employee liabilities
including salaries and related expenses. Of the total fee paid $250,000 was paid
to HSBC Bank to repay certain borrowings made by the Company and its
subsidiaries.

                                      F-33

<PAGE>

The Company has also entered in to a three one month renewable service
agreements with I-flex, pursuant to which the Company will provide I-flex
certain software, interfaces and other infrastructure necessary to operate and
service Citicorp and Greenpoint Mortgage accounts. In exchange for such
services, I-flex will reimburse the company for certain of its operating costs
for providing such services.

Authorized capital

The authorized share capital of the company has been increased by Rs.
550,000,000 by creation of 55,000,000 equity shares of Rs.10 each. The
authorized capital of the company stands at Rs. 1,900,000,000 comprising of
190,000,000 equity shares of face value of Rs. 10 each.

Corporate guarantee

The company has issued a corporate guarantee to Indian Overseas Bank, the
bankers to its wholly owned subsidiary, Sky Capital International Limited, Hong
Kong for HK Dollars 2,000,000 (approximately Rs. 12,500,000) for credit
facilities extended to the subsidiary company.

International offering of  equity capital

In terms of the approval obtained at the Extra ordinary General Meeting of the
shareholders held on July 17, 2002, the company has filed with the Luxembourg
Stock Exchange (The Exchange) an offer document to issue Global Depository
Receipts (GDRs) represented by the underlying equity shares for an amount up to
US $ 35,000,000.

23. Segment Data

The Company operates in one segment as one of India's providers of information
technology services. The following geographic area data include sales based on
customer location and total assets based on physical location.

<TABLE>
<CAPTION>
                                        Year ended March 31,            Qtr ended June 30,
                                         2001          2002             2001         2002
<S>                                <C>              <C>             <C>           <C>
USA and Europe                      $116,197,711    $109,072,266    $23,667,924   $16,990,588
Far East and Japan                    21,093,946      24,413,742     10,062,977     4,180,070
India and Other Countries             14,891,182       9,427,696     11,834,400     5,998,729
                                   -----------------------------------------------------------
Total                               $152,182,839    $142,913,704    $45,565,301   $27,169,387
                                   -----------------------------------------------------------
</TABLE>


List of Subsidiaries

Subsidiary Name
   1.  Silverline Technologies, Inc.
   2.  Silverline Technologies U.K. Limited (1).
   3.  Silverline Technologies (Canada), Inc (1).
   4.  SeraNova, Inc.
   5.  SeraNova India Pvt Ltd (2)
   6.  10. Sky Capital International Ltd
   7.  11. CIT Canada Inc.(1).
   8.  12. CIT Egypt Inc.(1).
   9.  16. eComServer Inc.

--------------------------------------
(1) A subsidiary of Silverline Technologies, Inc.
(2) A subsidiary of SeraNova, Inc.

                                      F-34

<PAGE>

                                 EXHIBIT INDEX

21.1 List of subsidiaries of the Registrant.*
23.1 Consent of Deloitte, Haskins & Sells*
23.2 Consent of P.H. Tang & Co.
23.3 Consent of Chaitanya C. Dalal & Co.*
23.4 Consent of S.D. Chauhan & Co.*
23.5 Consent of Lakshminiwas & Jain*
99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.3 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
99.4 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section
     1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

*Filed herewith

<PAGE>

                               S I G N A T U R E S

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                      SILVERLINE TECHNOLOGIES LIMITED

Dated:  February 15, 2003             By:  /s/ Ravi Subramanian
                                         ------------------------------------
                                         Name:  Ravi Subramanian
                                         Title: President and Chief Executive
                                                Officer

Dated:  February 15, 2003             By:  /s/ Krishna K. Subramanian
                                         ------------------------------------
                                         Name:  Krishna K. Subramanian
                                         Title: Acting Chief Financial Officer
                                                and Executive for International
                                                Initiatives