<PAGE>
================================================================================


             AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
                               September 27, 2002

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from        to
                                                         ------    --------

COMMISSION FILE NUMBER 001-15118

                          VIDESH SANCHAR NIGAM LIMITED
             (Exact name of Registrant as specified in its charter)

                                 NOT APPLICABLE
                 (Translation of Registrant's name into English)

                              THE REPUBLIC OF INDIA
                 (Jurisdiction of incorporation or organization)

                              VIDESH SANCHAR BHAVAN
                               MAHATMA GANDHI ROAD
                                 MUMBAI 400 001
                                      INDIA
                                 +91-22 262 4020
                    (Address of principal executive offices)

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

<TABLE>
<S>                                              <C>
Title of Each Class                              Name of Each Exchange on Which
                                                 Registered
American Depositary Shares*                      New York Stock Exchange
Equity Shares, par value Rs.10 per share**       New York Stock Exchange
</TABLE>

 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 last fiscal year covered by this
Annual Report.

285,000,000 EQUITY SHARES.

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]

*    American Depositary Shares evidenced by American Depositary Receipts. Each
     American Depositary Share represents two Equity Shares.
**   Not for trading, but only in connection with the listing of American
     Depositary Shares pursuant to the requirements of the New York Stock
     Exchange.


================================================================================
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                          <C>
CERTAIN DEFINED TERMS                                                                             3
CURRENCY OF PRESENTATION                                                                          3
EXCHANGE RATES                                                                                    3
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS                                   3
PART-I
  ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                                   4
  ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                                 4
  ITEM 3. KEY INFORMATION                                                                         4
  ITEM 4. INFORMATION ON THE COMPANY                                                             19
  ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                           51
  ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                             67
  ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                      76
  ITEM 8. FINANCIAL INFORMATION CONSOLIDATED FINANCIAL INFORMATION                               78
  ITEM 9. THE OFFER AND LISTING                                                                  78
  ITEM 10. ADDITIONAL INFORMATION                                                                82
  ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                           99
  ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                               100
PART-II
  ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                      100
  ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS         100
  ITEM 15. RESERVED                                                                             100
  ITEM 16. RESERVED                                                                             100
PART-III
  ITEM 17. FINANCIAL STATEMENTS                                                                 100
  ITEM 18. FINANCIAL STATEMENTS                                                                 100
  ITEM 19. EXHIBITS                                                                             100
SIGNATURES                                                                                      102
</TABLE>

                                       2
<PAGE>
CERTAIN DEFINED TERMS

     Unless the context otherwise requires, references herein to "we," "us,"
"our," the "Company" and "VSNL" are to Videsh Sanchar Nigam Limited, a limited
liability company organized under the laws of the Republic of India. References
to "Equity Shares" or "Shares" are to the equity shares, par value Rupees 10 per
share of the Company. References to the American Depositary Shares or "ADSs" are
to American Depositary Shares, each representing two Shares. The ADSs are
evidenced by American Depositary Receipts ("ADRs"). References to the
"Department of Telecommunications" or "DOT" are to the Department of
Telecommunications/Telecom Commission/Department of Telecom Operations and to
the Department of Telecom Services of the Government of India, collectively. The
Government of India is sometimes referred to herein as the "Government."
Effective October 1, 2000, the operations of the Department of Telecom Services
and Department of Telecom Operations have been transferred to Bharat Sanchar
Nigam Limited, sometimes referred to herein as "BSNL", a company wholly owned by
the Government. References to "MTNL" are to Mahanagar Telephone Nigam Limited.
References to the "Shareholders' Agreement" or the "SHA" are to the
Shareholders' Agreement dated February 13, 2002, among the President of India,
Panatone Finvest Limited, Tata Sons Limited, Tata Power Company Limited, Tata
Iron and Steel Company Limited, and Tata Industries Limited. References to the
"Share Purchase Agreement" or the "SPA" are to the Share Purchase Agreement
dated February 6, 2002 among the Government of India, Panatone Finvest Limited,
Tata Sons Limited, Tata Power Company Limited, Tata Iron and Steel Company
Limited, Tata Industries Limited, and the Company. References to the "TRAI" are
to the Telecom Regulatory Authority of India of the Government of India.
References to "NLD" are to national long distance services/domestic long
distance services. References to "ILD" are to international long distance
services/international telephony services. References to "PSU" are to public
sector undertakings of the Government of India.


CURRENCY OF PRESENTATION

     In this annual report, references to "$" or "Dollars" or "US Dollars" are
to the legal currency of the United States and references to "Rs" or "Rupees" or
"Indian Rupees" are to the legal currency of India. The Company's financial
statements included in this annual report are presented in Indian Rupees and are
prepared in accordance with United States generally accepted accounting
principles ("US GAAP"). For the convenience of the reader, this annual report
contains translations of certain Indian Rupee amounts into US Dollars, which
should not be construed as a representation that such Indian Rupee or US Dollar
amounts referred to herein could have been, or could be, converted to US Dollars
or Indian Rupees, as the case may be, at any particular rate, the rates stated,
or at all. References to "Indian GAAP" are to Indian generally accepted
accounting principles. References to a particular "fiscal" year are to the
Company's fiscal year ended March 31 of such year. References to years not
specified as being fiscal years are to calendar years.


EXCHANGE RATES

     The noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York (the "Noon Buying Rate") was Rs.48.83 per $1.00 on March 29, 2002 for the
conversion of Rupees into US Dollars.

     Unless otherwise specified herein, financial information has been converted
into US Dollars at such Noon Buying Rate. Any discrepancies in any table between
totals and sums of the amounts listed are due to rounding. For more information
regarding rates of exchange between Indian Rupees and US Dollars, see "Item 3.
Key Information -- Selected Financial Data -- Exchange Rates."


CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

     IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS
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. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH
A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTION
ENTITLED "ITEM 3. KEY INFORMATION-RISK FACTORS," "ITEM 5. OPERATING AND
FINANCIAL REVIEW AND PROSPECTS" AND ELSEWHERE IN THIS ANNUAL REPORT. READERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE

                                       3
<PAGE>
FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE
DATE OF THIS ANNUAL REPORT. IN ADDITION, READERS SHOULD CAREFULLY REVIEW THE
OTHER INFORMATION IN THIS ANNUAL REPORT AND IN THE COMPANY'S PERIODIC REPORTS
AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC")
FROM TIME TO TIME.


                                     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

     SELECTED FINANCIAL DATA

     The following table sets forth our selected financial data. The financial
data have been derived from our financial statements prepared in accordance with
US GAAP. Our selected income statement data for the fiscal years ended March 31,
2000, 2001 and 2002 and the selected balance sheet data as of March 31, 2001 and
2002 are derived from our audited financial statements included in this annual
report, together with the report of Deloitte Haskins & Sells, independent
accountants. Our selected income statement data for the fiscal year ended March
31, 1999 and our selected balance sheet data as of March 31, 2000 are derived
from our audited US GAAP financial statements not included in this annual
report. Our selected financial data and our financial statements are prepared in
Indian rupees. Financial data as of and for the year ended March 31, 2002 have
been translated into US dollars for your convenience.

     The balance sheets for the Company as of March 31, 1998 and 1999 and the
related statements of income, cash flows and shareholders' equity for the years
ended March 31, 1998 were prepared under International Accounting Standards. It
is not practicable, without unreasonable effort or expense, to convert the data
for these years from International Accounting Standards to US GAAP.

     The Company has no subsidiaries.

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                          YEARS ENDED MARCH 31
                                             ------------------------------------------------------------------------------
                                                1999            2000            2001            2002                2002
                                             ---------       ---------       ----------      ----------          ----------
                                                                (millions of Rs.)(1)                        (millions of US$)(1)
<S>                                          <C>             <C>             <C>             <C>                 <C>
INCOME STATEMENT DATA(6)
Total operating revenue                         67,938          70,377           73,076          65,050             1332.17
Total cost of revenue                           49,296          50,333           50,172          44,970              920.95
Gross Margin                                    18,642          20,044           22,904          20,080              411.22
Total other operating costs                      2,894           4,156            4,752           6,701              137.23
                                            ----------       ---------       ----------
Operating profit                                15,748          15,888           18,152          13,379              273.99
Total other income (expense), net                 (746)          3,443            7,021           5,751              117.78
                                            ----------       ---------       ----------
Income before income tax                        15,002          19,331           25,173          19,130              391.77
Income tax expense                              (6,298)         (6,156)          (9,646)         (5,959)            (122.04)
Dividend tax                                       (38)            (84)            (105)         (3,634)             (74.42)
                                            ----------       ---------       ----------
Net income                                       8,666          13,091           15,422           9,537              195.31
                                            ==========       =========       ==========
Earnings per equity share-
 basic and diluted(2)&(5)                    Rs. 30.41       Rs. 45.93       Rs.  54.11      Rs.  33.46          US$   0.69
Weighted average number of
 Equity Shares outstanding(3)                      285             285              285             285                 285
Earnings per ADS-basic and
 diluted (where each ADS
 represents two equity shares)               Rs. 60.82       Rs. 91.86       Rs. 108.22      Rs.  66.92          US$   1.38
Dividends per share                          Rs.     4       Rs.     8       Rs.      8      Rs.    125          US$   2.55

OTHER FINANCIAL DATA(6)
Net cash provided by
 operating activities                            6,679           7,947           23,121           9,485              194.25
Net cash used by investing
 activities(4)                                  (6,601)         (3,898)         (41,416)         26,068              533.85
Dividends                                         (380)           (760)            (760)        (35,625)            (729.57)
Net cash used by financing
 Activities                                     (1,916)           (740)            (806)        (29,874)            (611.80)
</TABLE>


<TABLE>
<CAPTION>
                                                                                       AS AT MARCH 31,
                                                                -----------------------------------------------------------
                                                                 2000            2001             2002                2002
                                                                ------          -------          ------             -------
<S>                                                             <C>             <C>              <C>                <C>
BALANCE SHEET DATA(6)
Total assets                                                    83,211          100,425          74,846             1532.79
Short Term Borrowings                                                                             5,751              117.78
Trade payables                                                  13,535           11,309           5,728              117.30
Accrued expenses and other liabilities                           6,365           10,731          10,325              211.45
                                                                ------          -------
Total liabilities                                               19,900           22,040          21,804              446.53
Total shareholders' equity                                      63,311           78,385          53,042             1086.26
</TABLE>

----------
Note
(1)  Except per share data.
(2)  Calculated on a weighted average basis giving retroactive effect to stock
     dividends issued during November 2000.
(3)  In millions.
(4)  Comprise purchases of property, plant and equipment, capital work in
     progress and expenditure on investments, including net investments in
     various satellite consortia.
(5)  On September 26, 2000, the shareholders of the Company approved a stock
     dividend of Equity Shares in the ratio of two Equity Shares for every one
     Equity Share held, which was distributed on November 24, 2000 to
     shareholders on record as on November 16, 2000. The Company has capitalized
     the legally required face value of the Equity Shares issued.
(6)  The above data should be read along with the Notes included with the
     financial statements.

                                       5
<PAGE>
     DIVIDENDS

     Although the amount varies, it is customary for public companies in India
to pay cash dividends. Under Indian law, a corporation pays dividends upon a
recommendation by the Board of Directors and approval by a majority of the
shareholders attending the annual general meeting of shareholders, who have the
right to decrease but not increase the amount of the dividend recommended by the
Board of Directors. In addition, the Board of Directors is empowered to approve
interim dividends. Under the Indian Companies Act, dividends may be paid out of
profits of a company in the year in which the dividend is declared or out of the
undistributed profits of previous fiscal years. In 1996, the Ministry of Finance
adopted non-binding guidelines regarding the payment of dividends by "public
sector undertakings" ("PSUs"), including the Company which was a PSU during the
time the payments of dividend were made (except the final dividend of Rs.12.50
per share for the financial year 2001-02). According to such guidelines,
profit-making PSUs which are commercial enterprises should generally declare a
minimum dividend each fiscal year of 20 percent of the higher of paid-up share
capital as of year-end and profit after tax for such year. These guidelines have
not been complied with by a substantial number of PSUs, including the Company.
The Ministry of Finance has requested that PSUs that have not complied with the
guidelines for the fiscal year ended March 31, 1996 declare an interim dividend
for the year ending March 31, 1997, and 1998, which would be adjusted against
the final dividend payable for such year. During the time it was a PSU, the
Company requested the Department of Telecommunications to inform the Ministry of
Finance that the Company prefers to retain its earnings instead of paying
substantial dividends in accordance with such request or the guidelines, since
the former serves to enhance shareholder value in the Company. The Company,
which is no longer a PSU, will not be subject to these guidelines in the future.

     Owners of ADRs are entitled to receive dividends payable in respect of the
Equity Shares represented by their ADSs. The Equity Shares represented by ADSs
rank pari passu with existing Equity Shares of the Company in respect of
dividends. Cash dividends in respect of the Equity Shares represented by the
ADSs will be paid to the Company's depositary for the ADSs, The Bank of New York
(the "Depositary") in Rupees and except as otherwise described in the Deposit
Agreement will be converted by the Depositary into US Dollars and distributed,
net of Depositary fees and expenses, to the holders of such ADRs.

     With respect to Shares issued by the Company during a particular fiscal
year, dividends declared and paid for such fiscal year generally would be
prorated from the date of issuance to the end of such fiscal year. Holders of
ADRs would only receive dividends prorated from the date of issuance of the
underlying Equity Shares to the end of the fiscal year for which such dividends
are declared and paid.

     The following table sets forth the annual dividends paid per Share for each
of the fiscal years indicated.

<TABLE>
<CAPTION>
                                                      DIVIDEND PER SHARE
                            ACTUAL DIVIDEND            BASED ON INCREASE
                           PAID PER SHARE(1)          IN SHARE CAPITAL(3)
FOR THE FISCAL         ------------------------     -----------------------
YEAR ENDED MARCH 31,   INDIAN RUPEES     US$(2)     INDIAN RUPEES    US$(2)
--------------------   -------------     ------     -------------    ------
<S>                    <C>               <C>        <C>              <C>
2002                       87.50          1.79          87.50         1.79
2001                       50.00          1.04          50.00         1.04
2000                        8.00          0.17           2.67         0.06
1999                        8.00          0.18           2.67         0.06
1998                        4.00          0.09           1.33         0.03
</TABLE>

----------

(1)  Dividends are payable pro rata from the date of allotment. Based on the
     recommendation of the Board of Directors at a Shareholders meeting held on
     August 20, 2002, the shareholders approved a final dividend of Rs.87.50 per
     share for fiscal year 2002, of which Rs.75 per share was already paid as
     Interim dividend during February 2002 and the final dividend of Rs.12.50
     paid in August, 2002.

(2)  The conversion of the dividends paid per Share from Indian Rupees to US
     Dollars is based on the Noon Buying Rate at each respective dividend
     payment date. For fiscal year 2002, the figure in the chart is based on the
     Noon Buying Rate for March 29, 2002. However, the actual dividends paid per
     share will be based on the Noon Buying Rate on the date of payment of the
     dividends.

(3)  On September 26, 2000, the shareholders of the Company approved the
     distribution of bonus shares to shareholders. Consequently, each
     shareholder received two shares for every share held by such shareholder.
     Accordingly the dividend per share information presented here has been
     computed retroactively to reflect the distribution of bonus shares and the
     consequent increase in the share capital of the Company.

                                       6
<PAGE>
     Although the Company has no current intention to discontinue dividend
payments, there can be no assurance that any future dividends will be declared
or paid or that the amount thereof will not be decreased.


EXCHANGE RATES

     Fluctuations in the exchange rate between the Indian Rupee and the US
Dollar will affect the US Dollar equivalent of the Indian Rupee price of the
Company's Equity Shares on the Indian stock exchanges and, as a result, will
likely affect the market price of the Company's ADSs, listed on the New York
Stock Exchange, and vice versa. Such fluctuations will also affect the US Dollar
conversion by Depositary of any cash dividends paid in Indian Rupees on the
Company's Equity Shares represented by the ADSs.

     The following table sets forth, for the fiscal years indicated, information
concerning the number of Indian Rupees for which one US Dollar could be
exchanged based on the average of the Noon Buying Rate in the City of New York
on the last business day of each month during the period for cable transfers in
Indian Rupees as certified for customs purchases by the Federal Reserve Bank of
New York. The column titled "Average" in the table below is the average of the
daily Noon Buying Rate on the last business day of each month during the year.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,        PERIOD END        AVERAGE         HIGH       LOW
---------------------------        ----------        -------        -----      -----
<S>                                <C>               <C>            <C>        <C>
1998                                  39.53           37.36         39.55      35.72
1999                                  42.50           42.27         42.83      39.75
2000                                  43.65           43.46         43.65      42.84
2001                                  46.85           45.88         46.90      43.70
2002                                  48.83           47.81         48.83      46.88
</TABLE>

     The following table sets forth the high and low exchange rates for the
previous six months and are based on the average of the noon buying rate in the
City of New York on the last business day of each month during the period for
cable transfers in Indian Rupees as certified for customs purposes by the
Federal Reserve Bank of New York.

<TABLE>
<CAPTION>
MONTH                                       HIGH (RS.)       LOW (RS.)
-----                                       ----------       ---------
<S>                                         <C>              <C>
March 2002                                    48.83           48.71
April 2002                                    49.01           48.83
May 2002                                      49.07           48.97
June 2002                                     49.07           48.86
July 2002                                     48.87           48.69
August 2002                                   48.73           48.52
September 2002 (through September 24)         48.57           48.42
</TABLE>


     CAPITALIZATION AND INDEBTEDNESS

     Not applicable.


     REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.


     RISK FACTORS

     In addition to the other information contained in this annual report,
prospective investors should carefully consider the risks described below.
Additional risks not currently known to the Company or that the Company now
deems immaterial may also impair the Company's business operations. This annual
report also contains forward-looking information that involves risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks the Company faces as described below and elsewhere in this
annual report.

                                       7
<PAGE>
THE NEW TELECOMMUNICATIONS POLICY AND OTHER REGULATORY CHANGES WITH RESPECT TO
THE TELECOMMUNICATIONS INDUSTRY HAVE EXPOSED US TO INCREASED COMPETITION WHICH
MIGHT ADVERSELY AFFECT OUR REVENUES AND MARKET SHARE AND THE PRICE OF OUR EQUITY
SHARES AND ADSS.

     The New Telecom Policy 1999 (the "Policy") came into effect on April 1,
1999.

     The Policy sets forth a new policy framework for telecommunications
regulations in India. One of the stated goals of the Policy is to foster greater
competition in the telecommunications industry and it addresses a broad range of
matters, including cellular mobile services, fixed line service, domestic long
distance, global mobile personal communications, the Department of
Telecommunications restructuring, spectrum management, the role of the Telecom
Regulatory Authority of India (the "TRAI") and Internet telephony. The Policy
states, among other things, that the opening up of international telephony
service to competition will be reviewed by the year 2004. The Department of
Telecommunications retains the right to modify the terms and conditions of the
Company's licenses at any time if in its opinion it is necessary or expedient to
do so in the interest of the general public or for the proper operation of the
telecommunications sector. In September 2000, the Government announced the early
termination of the Company's monopoly in international telephony services.
Instead of ending on March 31, 2004, the Company's monopoly ended on March 31,
2002. To offset the likely loss to the Company due to the early termination of
its monopoly, the Government announced the following compensation package:

     (1)  Grant of a license to offer domestic long distance services with the
          following terms:

          (a)  the Government would pay to the Company a sum equal to the amount
               paid by the Company as entry fee and license fee for a period of
               5 years commencing from April, 2001, net of taxes, and

          (b)  a performance bank guarantee of Rs.4 billion for the prescribed
               roll out would be waived;

     (2)  the Company would be granted a Category 'A' All India Internet Service
          Provider ("ISP") license which would enable it to provide Internet
          access at locations across the country; and

     (3)  The Government would also consider additional compensation if found to
          be necessary based on a detailed review when undertaken.

     In an Extraordinary General Meeting requisitioned by the Government of
India, the shareholders passed a resolution accepting the above compensation
package. Prior to such meeting, the Company had represented to the Government
that the compensation package should be arrived at through an objective process.
The Company had appointed external consultants for this purpose and had
submitted their reports to the Government for due consideration.

     Thereafter, the Government initially directed BSNL and MTNL to route their
ILD calls, which would be at market rates, through the Company for a period of 2
years after the transfer of management control to Panatone Finvest Limited as a
'Most Favoured Customer'. Subsequently, the Government announced that this
routing arrangement was to be in satisfaction of any and all claims that the
Company may have had regarding the advancement of ILD de-monopolisation by two
years.

     The Company has been granted a license to provide domestic long distance
telephone services and the Government has refunded the Company the amount paid
towards the entry fee during the fiscal year 2001-02 amounting to Rs.1000
million (US$20.48 million). The Company was subsequently required to provide
the performance bank guarantee, since the Government took the position that the
exemption applied only as long as the Company remained a Public Sector
Undertaking ("PSU"). Accordingly, the Company has provided the required bank
guarantees for Rs.4000 million (US$81.92 million) under protest. The Company
has been granted a Category "A" All India ISP license to provide Internet access
at locations across the country.

     The Government has issued a standard licence agreement to International
Long Distance Operators ("ILDOs"), which stipulates terms and conditions of the
license to operate International Long Distance Services. The Company has
requested the Government to agree to certain modifications to the standard
license agreement incorporating certain services which the Company is already
providing. The Company is awaiting a response

                                       8
<PAGE>
from the Government before the new license agreement is to be signed, which is
then expected to be valid for twenty years.

     The Government has legalized the provision of Internet telephony in India
with effect from April 1, 2002, for which detailed guidelines were released by
the Government on March 21, 2002. Only licensed ISPs are permitted to provide
Internet telephony as per these guidelines. The opening up of this sector might
adversely affect the telephony revenues of the Company.

     Since April 1, 2002 when international telephony was opened up to
competition, operating licences have been issued by the Government to at least
three operators. These operators have since also announced steep rate cuts which
might affect the Company's revenues and market share and the price of the shares
and ADSs.


THE GOVERNMENT OF INDIA'S DIRECTION TO THE LARGEST BASIC OPERATORS WITHIN THE
COUNTRY, BSNL AND MTNL, TO ROUTE THEIR INTERNATIONAL CALLS AT MARKET RATES
THROUGH THE COMPANY FOR A PERIOD OF TWO YEARS AFTER THE TRANSFER OF MANAGEMENT
CONTROL TO PANATONE FINVEST LIMITED AS A 'MOST FAVOURED CUSTOMER', MAY NOT DETER
THE GOVERNMENT OF INDIA FROM GRANTING AN INTERNATIONAL TELEPHONY OPERATING
LICENSE TO BSNL AND MTNL.

     It is understood that BSNL and MTNL have applied for an operating license
for international telephony and their applications are under review by the
Government. MTNL and BSNL are separate entities, though under the control of the
Government to the extent their Articles of Associations provide for such
control. Such directive of the Government does not create a contractual
relationship between the Company and BSNL/MTNL, and to that extent the Company
may not have any contractual claim directly against them should BSNL and MTNL
cease to route calls through the Company or attempt to renegotiate for rates
that are less favorable to the Company. There can be no assurance that BSNL and
MTNL would not be provided with an operating license for international telephony
or that they would continue to route their international traffic through the
Company. Furthermore, there can be no assurance that in the event that they are
not granted the international telephony operating license, they would continue
to pay to the Company rates that are as favourable as in the past.

     In addition, the Company is engaged in ongoing negotiations with BSNL and
MTNL regarding new revenue sharing agreements. The Minister of Communications
has recently stated that if the Company and BSNL and MTNL do not reach an
agreement by October 1, 2002, BSNL and MTNL will be directed by the Government
to route their international long distance calls through other international
long distance operators, which could adversely affect the Company's revenues.
See "-- New revenue sharing arrangements between the Company and BSNL and MTNL
are being negotiated."


THE COMPANY'S BUSINESS MAY BE ADVERSELY AFFECTED BY ANY SLOWDOWN IN ECONOMIC
GROWTH IN INDIA OR THE UNITED STATES.

     Since mid-1997, the economies of a number of Asian countries have
experienced significant downturns. Most Asian economies currently are facing
contractions in real economic activity. The Gross Domestic Product growth of
India for the year 2001-02 was 5.4 percent as per the Reserve Bank of India
Report. According to the Reserve Bank of India's annual report for 2000-01,
India experienced an estimated real Gross Domestic Product growth of 5.2 percent
during the year ended March 31, 2001, compared with 6.4 percent growth during
the year ended March 31, 2000. The general slowdown in regional economies and in
India has resulted in slower growth in the Company's traffic.

     Similarly, since approximately 45 percent of the Company's traffic is
between India and the United States, any economic slowdown in economic activity
in the United States, particularly in the information technology-related sector,
could adversely affect the Company's business.


A SUBSTANTIAL PORTION OF THE COMPANY'S ASSETS AND OPERATIONS ARE LOCATED IN
INDIA AND THE OUTSTANDING SHARES ARE LISTED ON THE INDIAN STOCK EXCHANGES.
ACCORDINGLY, THE COMPANY'S PERFORMANCE AND THE MARKET PRICE AND LIQUIDITY OF THE
SHARES AND OF THE ADSS MAY BE AFFECTED BY CHANGES IN EXCHANGE RATES AND
CONTROLS, INTEREST RATES, GOVERNMENT POLICY AND TAXATION AND OTHER POLITICAL,
ECONOMIC OR SOCIAL DEVELOPMENTS IN OR AFFECTING INDIA.

     Since achieving independence in 1947, India has had a mixed economy with a
large public sector and extensive regulation of the private sector. Indian
central and state governments have in the past, among other things, imposed
controls on prices of a broad range of goods and services, restricted the
ability of private sector enterprises to expand capacity, increase production,
reduce employment or enter new businesses and imposed

                                       9
<PAGE>
controls on the allocation of raw materials and foreign exchange. Since 1991,
the Government has significantly relaxed restrictions on the private sector and
introduced policies to liberalize the economy. Nevertheless, the role of the
Indian central and state governments in the Indian economy as producers,
consumers and regulators remains significant in ways which affect all Indian
companies, including the Company.

     India held elections for a new Government in October 1999 and the
Government changed for the fifth time since 1996. No party won a majority of the
seats in the Lok Sabha (the lower house of Parliament) in the elections. The
present Government is made up of a multiparty coalition led by the Bharatiya
Janata Party ("BJP") with Mr. A. B. Vajpayee as Prime Minister. There can be no
assurance that the BJP-led government, which is presently supported by political
parties from outside the Government, will continue to receive such support.

     The budget and the policies for the fiscal year ending March 31, 2003
presented by the Government proposed the continuation of policies designed to
promote economic deregulation and liberalization.

     In May 1998 India tested five nuclear devices at Pokhran in the State of
Rajasthan. In response to the nuclear tests, certain countries, including the
United States, announced economic sanctions against India. The United States
economic sanctions, among other things, prohibited US banks from extending any
loan or providing any credit to the Government, other than for the purchase of
food or humanitarian aid, and further prohibited the export from the United
States to India (directly or indirectly) of specified goods and technology which
are subject to the export licensing requirements of the US Commerce Department.
These sanctions have since been lifted. No assurance can be given, however, that
these sanctions would not be reactivated or that additional economic sanctions
of this nature will not be imposed by the United States or any other country, or
that such sanctions if reimposed, would not have a material adverse effect on
the Company's business or the price of the Shares and the ADSs. Although the
Company is not listed as a company to which the sanctions would apply, export
prohibitions and controls may have an adverse effect on the ability of the
Company to import (directly or indirectly) certain types of computer equipment
and software from the United States.


TERRORIST ATTACKS AND OTHER ACTS OF VIOLENCE OR WAR INVOLVING INDIA, THE UNITED
STATES AND OTHER COUNTRIES COULD ADVERSELY AFFECT THE FINANCIAL MARKETS AND THE
COMPANY'S BUSINESS.

     Terrorist attacks, such as the ones that occurred in New York and
Washington, D.C. on September 11, 2001 and New Delhi on December 13, 2001, and
other acts of violence or war may negatively affect the Indian markets where the
Company's equity shares trade and also adversely affect the world-wide financial
markets. These acts may also result in a loss of business confidence, make
travel and other services more difficult and ultimately adversely affect the
Company's business, financial conditions and results of operations. There can be
no assurance that there will not be any further terrorist attacks against India,
the United States or any other country.

     Also as a result of such events, India, the United States or certain other
countries may enter into armed conflict with other countries. In October 2001,
the United States and certain other countries commenced military operations
against various targets located in Afghanistan. After the December 13, 2001
attack in New Delhi and a recent terrorist attack on May 14, 2002 in Jammu,
India, diplomatic relations between India and Pakistan became strained and there
has been significant tension between these two countries. Tensions have recently
risen to serious levels and the risk of intensified military hostilities between
India and Pakistan cannot be ruled out. Military movements continue along both
the Line of Control in Kashmir and the border between India and Pakistan, with
artillery firing along the Line of Control. The hostilities between India and
Pakistan are particularly threatening because both India and Pakistan are
nuclear powers. The consequences of any potential armed conflicts are
unpredictable. In addition, India has from time to time experienced unrest
relating to religious and political differences within India's population, such
as the riots in Gujarat in early 2002.

     Any increase in regional or international hostilities, terrorist attacks or
other acts of violence or war could have a significant adverse impact on
international or Indian financial markets or economic conditions or on Indian
Government policy, and could have an adverse impact on the Company's business or
the market price for the Company's ADSs and Equity Shares.


WE DO NOT CONTROL EITHER THE DOMESTIC TELEPHONE NETWORK ON WHICH ALL CALLS
CARRIED BY US EITHER ORIGINATE OR TERMINATE NOR DO WE CONTROL THE RATES CHARGED
TO END USERS OF SUCH SERVICES. CONSEQUENTLY, WE CANNOT ENSURE THE QUALITY OF, OR
RATES FOR, THE DOMESTIC TELEPHONE NETWORK USED BY OUR CUSTOMERS.

                                       10
<PAGE>
     The Company's principal business is providing international telephone
services to and from India. All calls carried by the Company either originate or
terminate on India's domestic telephone network, which the Company does not own
or control. Growth in demand for the Company's international services will
depend, to a significant degree, on the development and maintenance of India's
domestic telephone network. Demand for the Company's services also will depend
on the rates charged to end users of such services, which rates are not
controlled by the Company. See "Item 4. Information on the Company - Industry
Overview" and "Government Regulation."


THE NEW TARIFF REGIME AND COMPETITION COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     The TRAI has authority, among other things, to set the limits on tariffs
charged by telecommunications service providers in India, including the Company.
Effective May 1999, the TRAI implemented the Telecommunications Tariff Order
1999 (the "Tariff Order"), which is intended to take account of a shift to a
more competitive environment through cost-based, transparent tariffs. The Tariff
Order envisaged reductions of up to 50 percent in peak international call
tariffs, phased over three years ending March 31, 2002. In response to these
changes, the Department of Telecommunications has issued its tariff orders
effective from May 1999 pursuant to which international long distance tariffs
have been reduced by approximately 27 percent and further tariff orders
effective from October 1, 2000. The Tariff Order implements similar reductions
for domestic long distance charges. In addition, the Tariff Order sets maximum
tariffs for other services provided by the Company, including Internet services
and leased lines. The revised tariff to be applicable from April 1, 2002 has
been announced by the TRAI. The tariff has been reduced between 16% to 20%,
approximately, as compared to the October, 2000 revision.

     Effective April 2002, the international long distance sector was opened up
for competition. The Government has also directed BSNL and MTNL to route their
ILD calls through the Company for a period of 2 years after the transfer of
management control to Panatone Finvest Limited as a 'Most Favoured Customer',
which would be at market rates. The market rate is already below the stipulated
TRAI norms, and the Company has announced lowering tariffs to those levels. The
Company's last revenue sharing arrangement with Bharat Sanchar Nigam Limited
remained in force until March 31, 2002. The arrangement beyond that date is
being negotiated. There can be no assurance that the new tariff regime or any
unfavorable revenue sharing arrangement with the country's largest basic
operators, BSNL and MTNL, would not have a material adverse effect on the
Company's results of operations and financial condition. See "-- New revenue
sharing arrangements between the Company and BSNL and MTNL are being
negotiated."


NEW REVENUE SHARING ARRANGEMENTS BETWEEN THE COMPANY AND BSNL AND MTNL ARE BEING
NEGOTIATED, AND COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, AND COULD CAUSE THE PRICE OF OUR EQUITY SHARES AND ADSS TO GO DOWN.

     The Company derived a significant percentage of its revenues in fiscal 2002
and prior years from BSNL, MTNL and other national long distance and last mile
operators pursuant to a revenue sharing agreement between the Company and BSNL.
Under the agreement, the Company shared with these operators revenues received
by the Company from foreign telecommunications administrations and carriers on
incoming international calls terminating on India's domestic network, and also
shared revenue received by these operators from Indian domestic subscribers on
outgoing international calls initiated on India's domestic network. In fiscal
2002, net payments from BSNL accounted for approximately 25 percent of the total
revenues of the Company. The prior arrangement began on April 1, 1997 and
expired on March 31, 2002. The Company is currently in negotiations with BSNL
and MTNL for new agreements, which would be effective from April 1, 2002, and is
also in negotiations with a few other local operators as well. See "Item 4.
Information on the Company -- Traffic Revenue and Revenue Sharing Arrangement."
While any revision would not affect the results declared for fiscal 2002, there
can be no assurance that an unfavorable revision of the terms of the revenue
sharing arrangement with BSNL and/or MTNL would not have a significantly adverse
impact on the Company's future results of operations and financial condition.
See "Item 4. Information on the Company -- Traffic and Revenue Sharing
Agreement."

     On July 29, 2002, the Company reported unaudited results for the fiscal
quarter ended June 30, 2002, which reflected a Profit before Tax of Rs.3,961
million (US$81.12 million) and Net Profit of Rs.2,612 million (US$53.49
million), both in accordance with Indian GAAP. The Company stated that it was
"in the process of negotiating arrangements with major domestic telecom
operators for revenue sharing. Pending final agreements income from operations
as well as transmission costs included under "Network Costs" have been accounted

                                       11
<PAGE>
based on the same ratio of revenue sharing as at the end of financial year
2001-02. On the conclusion of the negotiations, the figures would be adjusted
accordingly and may have significant adverse impact on the results."

     At a conference to discuss its results, the Company estimated that in a
"worst case scenario" resulting from the negotiations, the Net Profit for the
quarter ended June 2002, might be reduced to around Rs.900 million (US$18.43
million).

     The negotiations concerning the revenue sharing arrangements continue, and
no agreement has been reached. In the event that BSNL, MTNL and the Company are
unable to reach an agreement, the Telecom Regulatory Authority of India ("TRAI")
may be called upon by either party to arbitrate for a settlement of the dispute.
On September 23, 2002, the Company requested that the TRAI step in to help
facilitate an equitable resolution to the negotiations. In addition, in the
event that BSNL and the Company are unable to reach an agreement, the Company
may not be able to continue to recognize revenues for outbound traffic from BSNL
and MTNL. The Minister of Communications, Government of India, has recently
stated that if the Company does not reach an agreement with BSNL and MTNL by
October 1, 2002, BSNL and MTNL will be directed by the Government to route their
international long distance calls through another international long distance
operator. See "Item 4. Information on the Company -- Traffic Revenue and Revenue
Sharing Arrangement -- Revenue Sharing Arrangement."


WE ARE SUBJECT TO EXTENSIVE REGULATION AND SUPERVISION BY THE GOVERNMENT AND
THIS COULD PREVENT US FROM OPERATING OUR BUSINESS OR ENTERING INTO TRANSACTIONS
THAT ARE IN THE BEST INTERESTS OF OUR SHAREHOLDERS.

     The Company and its business are subject to extensive regulation and
supervision by the Government of India and its departments, including the
Department of Telecommunications and the TRAI. As noted above, the TRAI sets
limits for the tariffs for telecommunication services. The Company's licenses
provide that disputes relating to the terms of the Company's licenses are
required to be submitted for compulsory and binding arbitration before the
Government of India's Director General of Telecommunications.

     The TRAI has primary responsibility for, among other things, facilitating
competition and promoting efficiency, protecting the interests of consumers,
regulating revenue sharing among service providers and ensuring compliance with
license conditions and to set the rates at which domestic and international
telecommunication services are provided in India. The TRAI also has the power to
(1) call upon service providers to furnish information relating to their
operations, (2) appoint persons to make official inquiries, (3) inspect the
books of service providers and (4) issue directives to service providers to
ensure their proper functioning. Failure to follow the TRAI directives may lead
to the imposition of fines.


THE GOVERNMENT CONTROLS OUR LICENSES TO PROVIDE INTERNATIONAL TELEPHONY SERVICES
AND ANY MATERIAL MODIFICATIONS OF THE TERMS AND CONDITIONS OF THE LICENSES COULD
DISRUPT OUR BUSINESS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR PROSPECTS.

     The Company operates substantially all of the ILD services it provides,
including basic international telephony services to and from India, pursuant to
a license from the DOT that is valid until March 31, 2004. With the opening of
the telecommunications sector to private operators, the Company is negotiating
for a new license agreement with the DOT. See "-- The New Telecommunications
Policy and other regulatory changes with respect to the telecommunications
industry have exposed us to increased competition." In addition, the Company has
also been granted an NLD license and a Category "A" All India ISP license. The
DOT retains the right to modify the terms and conditions of the Company's
licenses at any time if in its opinion it is necessary or expedient to do so in
the interest of the general public or for the proper operation of the
telecommunication sector. A change in certain significant terms of any of the
licenses, such as their duration, the range of services permitted or the scope
of exclusivity, could have a material adverse effect on the Company's business
and prospects. See "Item 4. Information on the Company - Government
Regulations."


THE COMPANY IS CONTROLLED BY THE TATA GROUP AND THE GOVERNMENT.

     Panatone Finvest Limited, a wholly owned subsidiary of companies affiliated
with the Tata Group, owns approximately 45 percent, and the Government of India
owns approximately 26 percent, of our total outstanding equity. Panatone Finvest
Limited acquired a 25 percent stake from the Government in February, 2002 as a
result of the Government's decision to privatize the Company. Panatone Finvest
Limited subsequently acquired an additional 20 percent of the Company's Shares
through an open/tender offer to other shareholders.

                                       12
<PAGE>
     Panatone Finvest Limited and the Government are also parties to a
Shareholders' Agreement dated February 13, 2002 (the "Shareholders' Agreement")
pursuant to which they have agreed on certain matters with respect to the
governance and operation of the Company, including the composition and election
of the board of directors. As of August 27, 2002, the board of directors
consisted of 11 members, five of whom were nominated by Panatone Finvest Limited
and two of whom were nominated by the Government. As a result of their equity
holdings and the Shareholders' Agreement, Panatone Finvest Limited and the
Government control the Company, and have the power to elect all the directors
and control all matters submitted to shareholders. The interests of Panatone
Finvest Limited and the Government could differ from the interests of other
shareholders of the Company.


THE COMPANY MAY FACE POTENTIAL CONFLICTS OF INTEREST RELATING TO ITS PRINCIPAL
SHAREHOLDER, THE TATA GROUP.

     The Tata Group companies which own Panatone Finvest Limited exert
significant control over the Company. The Tata Group has diverse business
activities and interests, and some of its affiliates could engage in activities,
or seek opportunities, that are or could be in competition with the activities
or interests of the Company. While these Tata Group companies and Panatone
Finvest Limited have agreed in a Shareholders Agreement to act in the best
interests of the Company in the event that they become engaged in activities in
competition with the Company, any conflicts of interest between these Tata Group
companies and/or Panatone Finvest Limited and the Company could adversely affect
the Company's business.


A DISAGREEMENT BETWEEN THE TATA GROUP AND THE GOVERNMENT CONCERNING ACTIVITIES
OF THE COMPANY COULD RESULT IN A DEADLOCK, WHICH COULD ADVERSELY AFFECT THE
COMPANY'S BUSINESS.

     Panatone Finvest Limited and the Government are parties to the
Shareholders' Agreement, pursuant to which, among other things, they have agreed
on the composition of the Company's board of directors, which comprise a certain
number of persons nominated by each of them as well as a certain number of
independent directors. Panatone Finvest Limited and the Government have also
agreed that the Company shall not undertake certain major corporate actions
unless at least one director nominated by each of them (in the case of a Board
meeting) or at least one authorized representative nominated by each of them (in
the case of a shareholder meeting) consents to such action. These actions
include any change in the Memorandum of Association and Articles of Association,
the granting of any security or incurring of indebtedness in excess of the net
worth of the Company, winding-up the Company, the making of loans in excess of
Rs.500 million other than in the ordinary course of business, and the entering
into of an amalgamation, merger, or consolidation. Panatone Finvest Limited and
the Government have also agreed not to transfer their Shares in the Company
without giving the other certain rights of first refusal and tag along rights.

     In the event that Panatone Finvest Limited and the Government fail to agree
on any such matter, their disagreement could result in the Company not taking
action or not taking advantage of a potential opportunity, which could in turn
adversely affect the Company's business or the value of the Company's ADSs or
Equity Shares.

     See "Item 10. Additional Information -- Rights of the Government of India
under the Shareholders' Agreement to be exercised through its nominee directors
on the Board -- Approval of Matters."


THE PRIVATIZATION OF THE COMPANY COULD RESULT IN DIFFICULTIES.

     As a result of the acquisition by Panatone Finvest Limited of 45 percent of
the Equity Shares of the Company and the Shareholder Agreement, the Company is
no longer a Government-owned entity. The Company's transition to a company that
is primarily owned by private sector entities entails changes in management and
may also mean changes in operating procedures, strategy and culture. In
addition, the Company could be adversely affected by labor issues and compliance
issues arising from the privatization process and obligations assumed by
Panatone Finvest Limited. Under the terms of the Shareholders' Agreement between
Panatone Finvest Limited and the Government, the parties have agreed, among
other things, that Panatone Finvest Limited will not cause the Company to
retrench employees for two years or to make certain other changes in employee
benefit matters. The Company cannot assure you that it will not encounter
difficulties in the transition to becoming a private sector company.

                                       13
<PAGE>
THE COMPANY MAY BE REQUIRED TO PAY ROYALTIES AND OTHER FEES WHICH AROSE IN PRIOR
PERIODS.

     Until recently, the Company has not had to pay the Government certain
royalties and other fees which arose in prior periods. The Company has made
payments for certain royalties and fees already. However, there can be no
assurance that the Company will not be required to make additional payments in
the future, particularly since the Company is no longer majority-controlled by
the Government and is no longer a PSU.


THE INDIAN TAX AUTHORITIES CLAIM THAT WE OWE CERTAIN TAX PAYMENTS. WE HAVE NOT
MADE PROVISION IN OUR FINANCIAL STATEMENTS FOR SUCH CLAIMS AND IN THE EVENT THAT
THE TAX AUTHORITIES PREVAIL ON THEIR CLAIMS THERE COULD BE A SIGNIFICANT
NEGATIVE IMPACT ON OUR FINANCIALS AND OPERATIONS.

     The Indian tax authorities have taken the position that the Company is not
entitled to a tax deduction it took in the fiscal year ended March 31, 1995 for
license fees paid by it to the DOT. The Indian tax authorities claim that the
Company owes approximately Rs.2.68 billion, Rs.3.51 billion, Rs.2.74 billion,
Rs.3.39 billion and Rs.2.40 billion in respect of taxes due (including interest,
but excluding penalties) in connection with the license fees for the fiscal
years ended March 31, 1994, 1995, 1996, 1997 and 1998, respectively. Tax refunds
otherwise due to the Company for subsequent years, amounting to approximately
Rs. 8.42 billion, have been applied by the Indian income tax authorities to a
portion of this disputed claim. In addition, the Company has paid the tax
authorities Rs.1.74 billion with respect to this claim. However, the outstanding
amount continues to accrue interest at a rate of one and one fourth percent per
month. The Company disputed this claim and lodged an appeal with the
Commissioner of Income-tax (Appeals) - I, Mumbai for each of the relevant years.
The Company subsequently appealed to the Income-tax Appellate Tribunal, Mumbai
as the Commissioner of Income-tax (Appeals) - I, Mumbai denied the Company's
claim with respect to the year ended March 31, 1995. The appeals with respect to
the other years are still pending with the Commissioner of Income-tax (Appeals)
- I, Mumbai. On September 14, 2000, the Income-tax Appellate Tribunal, Mumbai
issued an order in the Company's favor and held that the license fee paid by the
Company to the DOT is an allowable tax deductible expenditure under the Income
Tax Act. Consequent to this order, the refund due to the Company was adjusted
against the demand due for the subsequent years. In addition, the Company can
request the Commissioner of Income-tax (Appeals) - I, Mumbai to expedite the
orders for the other years.

     The Income Tax Department has the right to appeal against the order of the
Income Tax Appellate Tribunal in the High Court within a period of 120 days from
the date of the order. The Company has received communications from the High
Court to the effect that the department has disputed this claim of the Company
in the High Court. If the Company loses that case, the tax authorities may make
the Company liable for similar claims for subsequent years and this could result
in an aggregate potential liability of approximately Rs.21.62 billion (US$442.76
million) including interest, but excluding penalties, thereon as of March 31,
2002 and additional amounts for the periods thereafter. The Company has been
advised by independent Indian counsel that it believes that the Company has a
strong case with respect to this claim. The tax authorities have allowed license
fees paid by the Company to the DOT as an allowable expenditure for the year
ended March 31, 1999. The Company believes that license fees may be allowed as a
deductible expenditure in the assessments of the pending years as well.

     The Indian tax authorities have also taken the position that the Company is
not entitled to a tax benefit claimed by it in the fiscal years ended March 31,
1996, 1997, 1998 and 1999 with respect to certain of its profits which the
Company claims were generated by an enterprise engaged in infrastructure
development. The Indian tax authorities claim that the Company owes
approximately Rs.0.23 billion, Rs.0.58 billion, Rs.1.13 billion and Rs.1.49
billion in respect of taxes due in connection with such profits for the fiscal
years ended March 31, 1996, 1997, 1998 and 1999, respectively. The Company
disputes this claim and has lodged an appeal with the Commissioner of Income-tax
(Appeals) - I, Mumbai. The outstanding amount of the claim continues to accrue
interest at a rate of one and one fourth percent per month. If the Company loses
its case, the tax authorities may make similar claims for subsequent years,
resulting in an aggregate potential liability of approximately Rs.6.71 billion
(US$137.42 million) including interest, but excluding penalties thereon as of
March 31, 2002 and additional amounts for periods thereafter. The Company
believes that it has a reasonable basis for its claim and that its appeal may
succeed.

     Furthermore, the Indian tax authorities have taken the position that the
Company has not offered for tax certain reimbursements it received from the
Government during the year ended March 31, 1994. The Indian tax authorities
claim that the Company owes approximately Rs.2.55 billion including interest but
excluding penalties in respect of taxes due in connection with such
reimbursements for the year ended March 31, 1994. The Company has paid to the
tax authorities Rs.1.90 billion with respect to this claim. The Company disputes

                                       14
<PAGE>
this claim and has lodged an appeal with the Commissioner of Income Tax
(Appeals) - I, Mumbai. If the Company loses its case, the Company's aggregate
potential liability would be approximately Rs.2.55 billion (US$52.22 million)
including interest, but excluding penalties, thereon as of March 31, 2002. The
Company believes that it has a reasonable basis for its claim and that its
appeal may succeed.

     Consequently, the Company has not made provision for the potential
liability arising from these claims and there could be a significant negative
impact on the Company's financial condition and operations if the Company does
not prevail.

     In addition, under the Indian taxation laws, the Company is subjected to
wealth tax on the net wealth of the Company since fiscal 1996 onwards. The
Company is in the process of getting its assets valued under Indian tax laws.
Pending such valuation the Company is not in a position to determine the
potential wealth tax liability and has not made any payment toward such
liability as of this date.

WE INTEND TO MAKE SUBSTANTIAL CAPITAL INVESTMENTS IN NEW TELECOMMUNICATIONS
PROJECTS WHICH MAY BE SUBJECT TO EXECUTION RISK AND, IF NOT OFFSET BY ADDITIONAL
REVENUE, WILL ADVERSELY AFFECT OUR OPERATING RESULTS.

     The Company intends to make substantial additional investments in new
telecommunications projects, which require significant capital expenditures. See
"Item 5. Operating and Financial Review and Prospects." Such projects entail
engineering, construction and other normal commercial risks, and there can be no
assurance that the projects currently contemplated by the Company will not
encounter cost overruns or project delays or will be completed or will operate
as planned. Furthermore, there can be no assurance that future financing for
additional facilities, whether within India or elsewhere, would be available on
attractive terms or at all. In addition, the Company's procedures for preparing
budgets and appraising and monitoring capital expenditure projects are less
precise than those used by comparable private sector companies. Some currently
ongoing projects were initiated under the approval of the DOT, when the Company
was still a PSU, and certain technical studies remain to be completed and actual
terms have not yet been finalized. See "Item 5. Operating and Financial Review
and Prospects - Financial and Management Accounting and Reporting Systems." Most
of the specific projects contemplated by the Company remain subject to further
review and approval by the Board of Directors of the Company. In addition, some
of such projects may not be possible without further liberalization of or other
changes to the regulatory regime. There can be no assurance such regulatory
changes will be made or that such projects will be implemented as currently
planned. Furthermore, there can be no assurance that currently contemplated
capital expenditures will be incurred as described herein or that if the
projects are completed the capital investments made in such projects will be
offset by additional revenue.


DELAYS IN REACHING AGREEMENT WITH OTHER MAJOR CARRIERS REGARDING RATES COULD
CAUSE A SIGNIFICANT INCREASE IN OUR WORKING CAPITAL NEEDS WHICH IN TURN COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

     A substantial portion of the Company's revenue consists of amounts received
from foreign telecommunications administrations and carriers for connection to
the Indian telecommunications network. As with most developing countries, the
volume of incoming calls to India exceeds the volume of outgoing calls from
India by a significant margin, which continues to increase, resulting in larger
net settlement payments being made to the Company from foreign administrations
and carriers. The amounts of the settlement payments required to be made are
determined by the accounting rates under the Company's agreements with the
foreign administrations and carriers, which are subject to periodic
renegotiation.

     In recent years, international organizations such as the International
Telecommunications Union and the Organization for Economic Cooperation and
Development ("OECD") have expressed the need for revision of the international
accounting rate system, and certain foreign telecommunications administrations
and carriers have sought to reduce applicable accounting rates in bilateral
negotiations with the Company. In August 1997, the United States Federal
Communications Commission (the "FCC") issued an order (the "Order") establishing
FCC Benchmarks that US carriers must comply with in establishing settlement
rates for international calls with non-US telecommunications administrations and
carriers. The Order requires, effective as of January 1, 1998, the accounting
rate between US carriers and the Company to be reduced substantially over a four
year transition period. See "Item 4. Information on the Company -- Traffic
Revenue and Revenue Sharing Arrangement -- Payments to and from Foreign
Administrations or Carriers." Any such reduction in the accounting rates in
effect between the Company and US or other foreign administrations or carriers
may reduce the amount of net settlement payments received by the Company. The
Company believes that, under the new revenue sharing arrangements to be
finalized between the Company and BSNL and other last mile operators, any such
reductions in net settlement payments received by the Company will result in
substantially corresponding reductions in net payments made by the Company to
BSNL and/or other last mile operators. The authority of the FCC to issue the
Order and the Order itself have been upheld by a United States federal court of
appeals. In upholding the Order, the United States federal court of appeals held
that the Order was a valid exercise of the FCC's regulatory authority under the
United States Communications Act and rejected the argument that the FCC's
unilateral

                                       15
<PAGE>
establishment of benchmark settlement rates constituted an unlawful assertion of
extraterritorial jurisdiction over foreign carriers and foreign
telecommunication services. However, the United States federal court of appeals
also stated that the Order does not apply to foreign carriers, and only permits
the FCC to contact responsible foreign government authorities to seek their
support in lowering settlement rates. The FCC, acting pursuant to the Order, has
forced the US carriers to agree to the benchmark rates, which are lower than the
rates previously in effect between the Company and some of its correspondent US
carriers.

     Substantial delays in reaching final agreement with US carriers or other
major carriers regarding rates could cause a significant decrease in the
Company's working capital (net of cash) needs and ability to recognize revenues
which in turn could have a material adverse effect on the Company's financial
condition and results of operations. There can be no assurance that such delays
will not occur in the future. See "Item 5. Operating and Financial Review and
Prospects."


MANY TELECOMMUNICATIONS CARRIERS HAVE SUFFERED DECREASING MARGINS AND FINANCIAL
DISTRESS, WHICH MAY NEGATIVELY IMPACT THE COMPANY'S BUSINESS.

     As an international telecommunications service provider, the Company does
significant business with foreign carriers all over the world. Several
telecommunications carriers have suffered reduced profit margins and financial
pressures, especially carriers located in the United States. Some companies,
including some of those with whom we do business, have filed for protection from
creditors under the Bankruptcy Code. The Company has a significant amount of
exposure to carriers in the United States, with around 30 percent of its
revenues generated through US based carriers.

     On July 21, 2002, WorldCom announced that it and substantially all of its
direct and indirect United States subsidiaries (the "Debtors") had filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The
Debtors continue to operate their businesses and manage their properties as
debtors in possession pursuant to the Bankruptcy Code.

     WorldCom is one of the Company's major carrier partners, with whom the
Company exchanges traffic. For the year ended March 31, 2002, gross revenues
from WorldCom represented 14.6% of the Company's total operating revenues.

     As at March 31, 2002, balances due from WorldCom amounted to Rs.5,612
million (US$115). Of the amounts outstanding from WorldCom as of March 31, 2002,
the Company has recovered substantial amounts during the period commencing from
April 1, 2002 through September 24, 2002.

     Of the revenues earned during the period commencing from April 1, 2002
through July 21, 2002, the date of voluntary petition for relief to the
Bankruptcy Court, the Company has recovered Rs.1,512 million through September
24, 2002. In the event the Company is unable to recover any further outstanding
balances due, the estimated exposure of the Company is Rs.950 million.

     Of the revenues earned during the period commencing from July 22, 2002
through August 31, 2002, the Company has not recovered any outstanding balances,
as the same has not fallen due in view of the settlement cycle.

     While the Company remains optimistic that WorldCom will continue to operate
and be able to pay amounts due to the Company, there can be no assurance that
all the Company's receivables can be collected or that the Company will not be
adversely affected by the financial difficulties of WorldCom and any other
carriers that are in financial distress.


ANY SERIOUS DAMAGE TO THE UNDERSEA TELECOMMUNICATIONS CABLE SYSTEMS UTILIZED BY
THE COMPANY MIGHT ADVERSELY AFFECT THE COMPANY'S TRAFFIC AND THEREBY THE
COMPANY'S REVENUES.

     A major part of the Company's international traffic is routed through
undersea cable systems landing in India as well as cable systems between
different countries. These cables are prone to damages which are normally not
serious in nature and during such interruptions the traffic is routed through
the other remaining cable systems and satellites. However, serious damage to
major cables landing in India could seriously disrupt traffic, leading to loss
of revenues.

                                       16
<PAGE>
THE USE OF ILLEGAL CALL BACK SERVICES HAS THE EFFECT OF LOWERING OUR REVENUE.

     The relative levels of incoming call volume from different countries is
affected by the practice of "refile" and by "call-back" services. Refile
involves the re-routing of calls to India through a third country by carriers in
the country of origination of such calls. Refile seeks to take advantage of a
lower accounting rate applicable to calls between India and the third country
compared to the rate between India and the country of origination. Due to such
lower applicable accounting rate, refile has the effect of lowering the revenue
of the Company with respect to an incoming call. Call-back services involve
access to an international dial tone in a foreign country, usually in the United
States, from which a caller in India can originate calls. These calls are billed
in foreign exchange in the foreign country and are therefore treated as incoming
calls. Call-back services were officially declared illegal by the Ministry of
Communications in July 1995. Nevertheless, the volume of international calls
made from India through call-back services has continued to grow and has
contributed to the increase in recent years in the Company's ratio of incoming
to outgoing calls. It is believed that refile and call-back have contributed in
particular to the significant increase in recent years in incoming traffic from
the United States.


WEAKNESSES IN OUR FINANCIAL AND MANAGEMENT ACCOUNTING AND REPORTING SYSTEMS AND
PROCEDURES COULD LEAD TO DIFFICULTIES IN OUR GENERATING TIMELY AND ACCURATE
INFORMATION WHICH IS NECESSARY TO MANAGE AND CONTROL OUR BUSINESS EFFICIENTLY.

     The Company was established in 1986 by a transfer of all of the assets and
employees of the Overseas Communications Service, a department of the Ministry
of Communications of the Government of India, to the Company, and the Company
remained a PSU until government divestment last year. Consequently, the
financial and management accounting and reporting systems of the Company are not
as developed as those of certain comparable companies outside India. The Company
believes that, due to weaknesses in its financial and management accounting and
reporting systems and procedures, it has experienced in the past and continues
to experience difficulties in generating timely and accurate information to
manage and control its business efficiently. There can be no assurance that the
Company will be able to remedy the deficiencies in its current systems and
procedures. See "Item 5. Operating and Financial Review and Prospects --
Financial and Management Accounting and Reporting Systems."


YOU WILL NOT BE ABLE TO VOTE ON YOUR ADSS.

     Investors in ADSs will have no voting rights unlike holders of the Equity
Shares who will have voting rights. It is contemplated that the Depositary will
exercise its right to vote on the Equity Shares represented by the ADSs as
directed by the Company's Board of Directors. If you wish, you may withdraw the
Equity Shares underlying the ADSs and seek to vote the Equity Shares you obtain
from the withdrawal. However, for foreign investors, this withdrawal process may
be subject to delays.


THERE IS A LIMITED MARKET FOR THE ADSS.

     Even though the ADSs are listed on the New York Stock Exchange, there is no
assurance that any trading market for the ADSs will be sustained. Subsequent to
the open/ tender offer by Panatone Finvest Limited, the number of shares
represented by ADSs declined from approximately 60 million at March 31, 2002, to
approximately 31 million at June 30, 2002, or from 21 percent of outstanding
equity to 11 percent, respectively. This may affect the liquidity of the market
for the Company's ADSs and the price at which they trade.


INDIAN LAW IMPOSES FOREIGN INVESTMENT RESTRICTIONS THAT LIMIT A HOLDER'S ABILITY
TO CONVERT EQUITY SHARES INTO ADSS, WHICH MAY CAUSE THE COMPANY'S EQUITY SHARES
TO TRADE AT A DISCOUNT OR PREMIUM RELATIVE TO THE MARKET PRICE OF ITS ADSS.

     Until recently, under Indian law it was not permitted for a depositary to
accept deposits of outstanding equity shares and issue ADSs evidencing such
shares. Thus, an investor in ADSs who surrendered an ADS and withdrew equity
shares would not be permitted to redeposit those equity shares to obtain ADSs,
nor would an investor who purchased equity shares on the Indian market have been
permitted to deposit them in the ADS program. The Government of India has
recently permitted two-way fungibility of ADRs. However, this is still subject
to sectoral caps and certain conditions, including compliance with the
provisions of the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depositary Receipt Mechanism) Scheme 1993 and the periodic
guidelines issued by the Government and also registration requirements in the
United States. Such

                                       17
<PAGE>
restrictions on foreign ownership of the underlying equity shares may cause the
Company's Equity Shares to trade at a discount or premium to its ADSs. See "Item
10. Additional Information -- Exchange Controls and Other Limitations Affecting
Security Holders."


CONDITIONS IN THE INDIAN SECURITIES MARKET MAY AFFECT THE PRICE OR LIQUIDITY OF
THE SHARES AND THE ADSS.

     The Indian securities markets are smaller in terms of trading volume and
more volatile than the securities markets in the United States and certain
European and other countries. The Indian stock exchanges have in the past
experienced substantial fluctuations in the prices of listed securities. There
is a lower level of regulation and monitoring of the Indian securities markets
and the activities of investors, brokers and other participants than in
securities markets in the United States and certain European and other
countries.

     The Indian stock exchanges have experienced problems, including temporary
exchange closures, disputes between listed companies and exchanges, broker
defaults, settlement delays, custody problems and strikes by brokers. Such
problems or similar problems, if they were to recur or continue, could affect
the market price and liquidity of the securities of Indian companies, including
the Shares and ADSs, in both domestic and international markets. In addition,
the governing bodies of the Indian stock exchanges have from time to time
imposed restrictions on trading in certain securities, limitations on price
movements and margin requirements. Similar problems could occur in the future
and, if they did, they could affect the market price and liquidity of the Shares
and the ADSs.


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 the United States and other developed
economies.

     The Securities and Exchange Board of India ("SEBI") received statutory
powers in 1992 to improve disclosure and other regulatory standards for the
Indian securities markets. SEBI has prescribed certain regulations and
guidelines in relation to disclosure requirements, insider trading and other
matters relevant to the Indian securities market. There may, however, be less
publicly available information about Indian companies than is regularly made
available by public companies in the United States and certain European and
other countries.


YOU AND THE COMPANY MAY BE SUBJECT TO POTENTIAL LOSSES ARISING OUT OF EXCHANGE
RATE RISK ON THE INDIAN RUPEE AND RISKS ASSOCIATED WITH THE CONVERSION OF RUPEE
PROCEEDS INTO FOREIGN CURRENCY.

     Fluctuations in the exchange rate between the Rupee and the Dollar will
affect, among other things, the Dollar equivalents of the price of the Shares in
Rupees as quoted on the Indian stock exchanges and, as a result, may affect the
market price of the ADSs. Such fluctuations will also affect the Dollar
equivalent of any cash dividends in Rupees received on the Shares represented by
the ADSs and the Dollar equivalent of the proceeds in Rupees of a sale of Shares
in India.

     Fluctuations in the exchange rate between the Rupee and other currencies
also affect the Rupee amount of foreign currency settlement payments received by
the Company from, and paid by the Company to, foreign telecommunications
administrations and therefore the revenue and operating costs of the Company.
The Company may as a result be exposed to the risk of fluctuations in the
exchange rate between the Rupee and foreign currencies, which has effectively
increased the cost in Rupee terms of foreign exchange payments required to be
made by the Company, including payments to foreign telecommunications
administrations and payments for imported equipment and technology.


YOUR ABILITY TO SELL IN INDIA ANY EQUITY SHARES WITHDRAWN FROM THE DEPOSITARY
FACILITY MAY BE SUBJECT TO DELAYS IF SPECIFIC GOVERNMENT APPROVAL IS REQUIRED.

     Holders who seek to sell in India any Equity Shares received upon surrender
of any ADS, and to convert the Rupee proceeds of such sale into foreign currency
and remit such foreign currency outside of India, will require the approval of
the Reserve Bank of India for each such transaction. Although such approvals are
generally forthcoming, there can be no assurance that any such approval can be
obtained in a timely manner or at all.

                                       18
<PAGE>
YOU MAY NOT BE ABLE TO ENFORCE A JUDGMENT OF A FOREIGN COURT AGAINST THE
COMPANY.

     The Company is a limited liability company organized under the laws of
India. All of the directors and officers of the Company and certain other
persons named herein are residents of India, and all or a significant portion of
the assets of all of the directors and officers and a substantial portion of the
assets of the Company are located in India. As a result, it may be difficult for
investors to effect service of process upon the Company or such directors or
officers outside India or to enforce against them judgments obtained from courts
outside India, including judgments predicated on the civil liability provisions
of the United States federal securities laws. The statutory basis for
recognition and enforcement of foreign judgments in India is provided in Section
13 of the Code of Civil Procedure 1908 (the "Code") of India, which provides
that a foreign judgment shall be conclusive as to any matter thereby directly
adjudicated upon except (1) where the judgment has not been pronounced by a
court of competent jurisdiction, (2) where the judgment has not been given on
the merits of the case, (3) where the judgment appears on the face of the
proceedings to be founded on an incorrect view of international law or a refusal
to recognize the law of India in cases where such law is applicable, (4) where
the proceedings in which the judgment was obtained were opposed to natural
justice, (5) where the judgment has been obtained by fraud and (6) where the
judgment sustains a claim founded on a breach of any law in force in India.
Section 44A of the Code provides that where a foreign judgment has been
rendered by a court in any country or territory outside India which the
Government of India has by notification declared to be a reciprocating
territory, it may be enforced in India by proceedings in execution as if the
judgment had been rendered by the relevant court in India. The United Kingdom,
but not the United States, has been declared by the Government of India to be a
reciprocating territory for the purposes of Section 44A. Accordingly, a
judgement of a court in the United States may be enforced only by a suit upon
the judgment and not by proceedings in execution. The suit must be brought in
India within three years from the date of the judgment in the same manner as any
other suit filed to enforce a civil liability claim in India. It is unlikely
that a court in India would award damages on the same basis as a foreign court
if an action is brought in India. Furthermore, it is unlikely that an Indian
court would enforce foreign judgments if it viewed the amount of damages awarded
as excessive or inconsistent with Indian practice. A party seeking to enforce a
foreign judgment in India is required to obtain approval under the Foreign
Exchange Management Act, 1999 from the Reserve Bank of India to execute such a
judgment or to repatriate any amount recovered. The date of passing of the
judgment would be the date for fixing the rate of exchange at which the foreign
currency amount should be converted to Rupees.


ITEM 4. INFORMATION ON THE COMPANY

     BUSINESS OVERVIEW

     The Company is the principal provider of public international
telecommunication services in India, directly and indirectly linking the
domestic telecommunications network to approximately 237 territories worldwide.
The Company provides international telephone, telex and telegraph services and
as of March 31, 2002 operated twelve international switching and transmission
facilities at eight ("gateways") locations - Mumbai, Kolkata, Delhi, Chennai,
Ernakulam, Gandhinagar, Jalandhar and Kanpur which route international traffic
to and from the domestic telecommunications network using a combination of
satellite and undersea cable links.

     The Company derives the bulk of its revenue from payments from foreign
telecommunications administrations and private carriers for the delivery of
international calls to India and from payments from Bharat Sanchar Nigam Limited
and other last mile operators in India for the delivery of international calls
abroad. The Company shares with Bharat Sanchar Nigam Limited and private fixed
line or cellular network operators revenue received by the Company from foreign
telecommunications administrations and carriers on incoming international calls
terminating on India's domestic network, and also revenue received by Bharat
Sanchar Nigam Limited and by private fixed line or cellular network operators
from Indian domestic subscribers on outgoing international calls initiated on
such network, pursuant to the terms of a revenue sharing arrangement between the
Company, the private fixed line or cellular network operators and Bharat Sanchar
Nigam Limited. The Company's most recent revenue sharing arrangement expired on
March 31, 2002, and new arrangements are currently being negotiated. See
"-- Traffic Revenue and Revenue Sharing Arrangement" and "Item 3. Key
Information -- Risk Factors -- New revenue sharing arrangements between the
Company and BSNL and MTNL are being negotiated."

                                       19
<PAGE>
     The Company's services have grown rapidly in recent years reflecting both
the overall economic growth of India and the increasing emphasis placed by the
Government on improving the domestic telecommunications network. The total
volume of telephone traffic transmitted over the Company's network has risen
from 1,385 million paid minutes for the year ended March 31, 1997 to 3,120
million paid minutes for the year ended March 31, 2002, a compound annual growth
rate of approximately 23 percent. The total number of effective telephone
circuits operated by the Company increased from 14,184 at March 31, 1997 to
22,708 circuits at March 31, 2002. In addition, the Company has made significant
enhancements to the efficiency of its transmission and switching capabilities,
particularly through investment in digital equipment.

     The Company believes that there remains significant unsatisfied demand for
telecommunication services in India. As per a report of BSNL, as of March 31,
2002 the penetration of telephone lines in India was approximately 4.4 lines per
100 inhabitants. This penetration is significantly below that in the
Organization for Economic Cooperation and Development ("OECD") member countries
and many other developing countries. The Company expects that continued
expansion of the domestic network, movement towards cost-based tariffs and
private sector participation in local fixed line and mobile telecommunications
will significantly increase the level of telephone line penetration and quality
of service in India in the future, resulting in growth in demand for its
international telecommunication services.

     The Company also provides a number of specialized value-added services such
as international leased lines, Inmarsat satellite mobile telecommunications,
Internet dial-up access in 22 cities, Internet leased lines access throughout
India, transmission of standard business information ("electronic data
interchange"), connections to business information and applications ("managed
data network services"), video conferencing, the transmission of television
signals (both video and audio), transmission of data over public data network
for customers ("packet switched data transmission"), E-mail services and
television uplinking.

     Demand for the Company's specialized and value-added services, particularly
international leased lines and Internet access, has grown significantly in the
past few years. The total leased lines (64 KBP equivalent) capacity has grown
from 520 as of March 31, 1997, to 10,912 as of March 31, 2002. The Company's
subscriber base for Internet access has increased from 28,042 (including BSNL
customers) as of March 31, 1997 to 586,638 (excluding BSNL customers) as of
March 31, 2002. The Company believes that this growth is consistent with
increasing demand for data services worldwide and in India. The Company expects
continued growth in its specialized and value-added services so as to build and
maintain a base of direct retail customers.

     Seasonality does not materially affect the Company's business.


     HISTORY AND DEVELOPMENT OF THE COMPANY

     The Company, Videsh Sanchar Nigam Limited, was incorporated as a limited
liability company under the laws of the Republic of India pursuant to the
provisions of the Companies Act on March 19, 1986 and was, at that time,
wholly-owned by the Government. On April 1, 1986, the Company assumed control
and management of all of the assets and employees of the Overseas Communications
Service, a department of the Ministry of Communications of the Government. In
1992 and 1999, as part of its general policy of gradually reducing its holdings
in public sector enterprises, the Government divested a portion of the equity of
the Company to certain funds, banks and financial institutions controlled by the
Government and the general public. In 1997 and 1999, the Government also sold
some of its equity holdings through the issuance of global depositary receipts.
The divested shares were initially traded on The Stock Exchange, Mumbai
(formerly the Bombay Stock Exchange, the "BSE") in December 1992.

     On February 1, 2001, the Government of India announced its intention to
sell from its holding shares equivalent to 25 percent of the outstanding equity
of the Company to a strategic partner through the competitive bidding route. As
per the announcement made on February 5, 2002 by the Government of India,
Panatone Finvest Limited was selected by the Government of India as the
strategic partner for the sale of 71,250,000 fully paid-up Equity Shares
representing 25 percent of the voting capital of the Company at a price of
Rs.202 (US$4.14) per share. The aggregate purchase price was Rs.14,392.50
million (US$294.75 million) in cash. A share purchase agreement (the "Share
Purchase Agreement") giving effect to the above arrangement was entered into
between the Government of India and Panatone Finvest Limited on February 6,
2002. The shareholders in Panatone Finvest Limited -- Tata Sons, Tata Power,
Tata Steel and Tata Industries -- are also signatories to the Share Purchase
Agreement though they did not directly purchase any of the Government of India's
holding in the Company. The Company is also a party to the Share Purchase
Agreement. In connection with the purchase of the Shares from the Government of
India, Panatone Finvest Limited was required by the

                                       20
<PAGE>
Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 and subsequent amendments thereto to launch a
tender/open offer for an additional 20 percent of the Equity Shares from other
shareholders of the Company. Subsequently, Panatone Finvest Limited purchased an
additional 20 percent on June 8, 2002, increasing its stake to 45 percent.

     A shareholders' agreement (the "Shareholders' Agreement") was entered into
between the Government of India and Panatone Finvest Limited and its
shareholders on February 13, 2002. Among other things, the Shareholders'
Agreement: provides for the nomination of directors by the Government and by
Panatone Finvest Limited, places limitations upon the restructuring or
retrenchment of employees, specifies certain actions upon which both the
Government and Panatone Finvest Limited must agree before such actions can take
place, places restrictions upon the transfer of shares, grants tag along rights
and rights of first refusal to the Government and Panatone Finvest Limited, and
obligates Panatone Finvest Limited and its affiliates to act in the best
interests of the Company in the event that Panatone Finvest Limited or its
affiliates engages in any activity in competition with the Company.

     The Government also simultaneously divested 1.85 percent of the Shares of
the Company to its employees, out of a total offer of 1.97 percent. The balance
of Shares, constituting 0.12 percent of the outstanding equity of the Company,
may be distributed to certain categories of the Company's employees. As a result
of the sale of Panatone Finvest Limited and this divestment, the Government now
owns approximately 26 percent of the Company's Equity Shares.

     The Company, which had been the exclusive provider of public international
telecommunications services in India, had its monopoly terminated on March 31,
2002, pursuant to a Government notice of early termination. In September 2000,
the Government had announced the early termination of the Company's monopoly in
international telephony services, ending the Company's monopoly on March 31,
2002 instead of on March 31, 2004, as originally intended. With effect from
April 2002, the Government has licensed new operators to provide international
telephone services, who now compete against the Company. To offset the likely
loss to the Company due to the early termination of its monopoly, the Government
announced a compensation package including a license to offer domestic long
distance services, a Category `A' all India ISP license which would enable it to
provide Internet access at locations across the country, and additional
compensation if found to be necessary based on the Government's review. See
"Item 3. Key Information -- Risk Factors -- The New Telecommunications Policy
and other regulatory changes with respect to the telecommunications industry
have exposed us to increased competition."

     The Company's Internet website address is http://www.vsnl.com. The
                                               -------------------
information on the Company's website is not incorporated into this document. The
Company's registered office is located at Mahatma Gandhi Road, Mumbai 400 001
India (+91-22-262-4020). The Company's process agent for the Company's ADR
facility is State Bank of India, New York office, 460 Park Avenue, New York, New
York 10022.

     The Company has no subsidiaries as of the date hereof.


     BUSINESS STRATEGY

     The Company's objectives are to remain the foremost provider of
international telecommunication services in India, to diversify its products and
services by entering into related areas and offering specialized, value-added
and Internet related services, and to take advantage of new technologies to
support and enhance its position as a leading telecommunications and Internet
service provider in India. To meet these objectives, the Company plans to
continue developing its international telecommunication services in a manner
that

     -    meets the demand of users for such services,

     -    optimizes the utilization of its facilities and, as a result, the
          revenue derived from such facilities and

     -    positions the Company for significant participation in an increasingly
          liberalized Indian telecommunications industry.

     The Company intends to implement this strategy as follows:

                                       21
<PAGE>
     Business Restructuring. Following the acquisition of a strategic stake in
the Company by the Tata Group, a joint team from the Company and the Tata Group
is restructuring parts of the business of the Company so as to maximize
competitiveness in the new market environment, as well as to take advantage of
synergies with other Tata Group companies. Accordingly, the Company is:

     -    substantially increasing its emphasis on sales and marketing by
          creating dedicated teams of trained people to proactively address the
          corporate and retail markets;

     -    significantly strengthening its customer services functions by
          creating dedicated call centres and back office infrastructure to
          support both corporate and retail customers;

     -    restructuring some of its technical and service capabilities at both
          headquarters and in regional offices so as to provide an improved
          focus, greater role clarity and overall better performance; and

     -    upgrading its information technology (IT) systems to adequately
          support its initiatives in other areas through emphasis on systems for
          customer relationship management (CRM), billing systems for all
          services, and integrated network management systems.

     Synergies with Group Telecom Companies. The association with the Tata Group
offers the Company significant benefits. The Company now intends to leverage its
synergy with other Tata Group telecom companies to jointly offer world-class,
end-to-end telecom services to its customers. The Company is currently India's
foremost provider of international telecom services, internet related services
and other value-added services and plans to launch national long distance
services. The Company believes its strengths complement those of the Tata Group.
Synergies with Tata Group companies include access to their existing subscriber
bases and the opportunity to share their ready infrastructure.

     Improving the Capacity and Quality of its International Telecommunication
Services and Facilities. In addition to increasing the number of international
circuits to meet increasing demand, the Company seeks to improve the efficient
use of its international telecommunication services and capacity by increasing
its capacity to connect digital circuits to switches and by improving
transmission capacity through the use of advanced technologies. The Company
continues to invest in state-of-the art infrastructure to support all its
businesses and ensure a strong platform for on-going leadership. The Company is
expanding its bandwidth capability, in particular to support data services. The
Company is also seeking to upgrade its switching facilities through the
installation of technologically superior switches which enable more efficient
transmission of voice and broadband data traffic. See "Item 5. Operating and
Financial Review and Prospects -- Capital Expenditures -- Planned Capital
Expenditures."

     Leveraging Existing Infrastructure to Provide Specialized and Value-added
Services. The Company has introduced several international specialized and
value-added services in recent years and seeks to increase the portion of its
revenues derived from such services. These services typically involve the
transmission of data rather than only voice traffic. To meet increasing demand,
the Company is expanding and upgrading its infrastructure so as to be in a
position to provide bandwidth for such services. The Company currently provides
Internet dial-up access in 22 cities and Internet leased line access throughout
India. The Company also provides other services including Inmarsat satellite
mobile telecommunications, electronic data interchange, managed data network
services, video conferencing, transmission of television signals, packet
switched data transmission and E-mail services. See "-- Services of the Company
-- Specialized and Value-Added Services."

     Value added services, especially data services, are a fast growing segment
worldwide, and the Company believes they offer significant growth potential. The
Company intends to strengthen its position in this market by offering a range of
improved and new products and services, including virtual private networks and
other network services, collocation and other managed services based on internet
data centers, application support services and the like.

     As the ILD market leader, the Company now intends to introduce new products
and services such as prepaid calling cards and toll-free services, and further
build the Company's brand through a retail marketing program, while continuing
to renegotiate contracts with international carriers to ensure competitive
rates. Given lower tariffs, improving telecom penetration and increased
globalisation in India, the Company believes that ILD telephony will remain an
important business area for the Company.

     In November 2000, the Government permitted direct-to-home ("DTH") TV
service in Ku band in India, allowing satellite distribution of TV channels
directly to subscribers. After studying the opportunity carefully, the Company
decided not to enter the business at this time because it is believed that
initial equipment

                                       22
<PAGE>
and market building costs will be very high, since this is a nascent market.
However, the Company has the capability to enter this business quickly, if
deemed appropriate in the future.

     Enhancing Internet Opportunities. The Company has taken initiative in
developing the Internet market in India and will continue to strive to be the
market leader in promoting and facilitating growth of the Internet in India. The
Company believes that its strategy of focusing on market leadership in Internet
access will position it to lead the development and introduction of higher-value
Internet services for its consumers and corporate customers. The Company is
focusing on the corporate segment. The Company intends to move up the value
chain in this business by providing security back-up and database management
services. The Company expects to benefit from the growing corporate and retail
demand for Internet services, from consolidation among other ISPs and from the
expected demand for value-added services including web hosting, virtual private
networks, video conferencing and numerous broadband applications.

     Positioning for Opportunities in a Liberalized Environment. As part of the
multilateral agreement on basic telecommunication services agreed to by member
governments of the World Trade Organization in February 1997, the Government of
India has substantially deregulated the Indian telecom market. The substantially
deregulated Indian telecom market offers new opportunities for the Company to
diversify into related areas and broaden its range of offerings. Accordingly,
the Company is entering the high potential National Long Distance ("NLD") and
Internet telephony businesses to leverage its existing infrastructure and
expertise and maintain its leadership in the Indian telecom market.

     The Company believes the NLD business is a significant growth opportunity
and a logical backward integration with its ILD business. It will reduce the
Company's dependence on other NLD operators for domestic connectivity and allow
it to retain a greater share of revenue from international calls. The Company's
new association with the Tata Group offers synergies with these companies,
including access to their existing captive subscriber bases, the opportunity to
share their ready infrastructure including backbone, space and power, and the
opportunity to optimise capital and operating expenditure. See "Item 4. Capital
Expenditures -- Planned Capital Expenditure."

     From April 2002, the Government has permitted Internet Service Providers to
offer voice telephony over the Internet. The Company intends to leverage its
extensive infrastructure and expertise in international telephony services to
offer high quality Internet telephony as a complement to its main business. It
is anticipated that the low tariffs in Internet telephony will encourage usage
and result in an increase in international call volumes. The Company plans to
deploy a fully owned Internet telephony infrastructure. It will target
individual dialup Internet users with retail offerings and is considering
strategic tie-ups with global players for this segment. Corporate offerings will
provide value-added customised solutions for companies that operate across
multiple locations. The Company plans to deploy the latest VOIP switches as
International Gateway switches, which are international gateway switches based
on IP technology, and which will be connected with international carriers and
global clearing houses on managed lines. Thus, the Company will be able to take
advantage of IP technology and provide toll-quality voice and value-added
services at competitive tariffs.

     Positioning for New International Opportunities. The Company seeks to enter
into joint ventures with domestic and foreign companies to develop
telecommunications projects both inside and outside India. The Company's
participation in these ventures will be designed to permit the Company to
utilize its existing expertise and to enable the Company to gain additional
experience with potential strategic partners. For example, the Company has
entered into bilateral arrangements with foreign telecommunications carriers for
the provision of private data transmission services. The Company, along with two
other Indian telecom companies, has set up a joint venture with a Nepalese
company to provide basic telecom services in Nepal. See "Item 5. Operating and
Financial Review and Prospects -- Capital Expenditure -- Investments."


     SERVICES OF THE COMPANY

     The Company's primary business is the provision of public international
switched telecommunication services (telephone, telex and telegraph). The
Company also provides a variety of specialized and value-added services, such as
international leased lines, Inmarsat satellite mobile telecommunications,
Internet dial-up access in 22 cities, Internet leased line access throughout
India, electronic data interchange, managed data network services, video
conferencing, the transmission of television signals, packet switched data
transmission and E-mail services. These types of services typically involve
greater bandwidth use for the transmission of data rather than voice traffic.

                                       23
<PAGE>
     The following table sets forth certain operating data with respect to the
Company's international services as of the dates and for the periods indicated.

<TABLE>
<CAPTION>

                                                                                      YEAR ENDED MARCH 31,
                                                               ----------------------------------------------------------------
                                                                1998           1999           2000          2001          2002
                                                               ------         ------         ------        ------        ------
<S>                                                            <C>            <C>            <C>           <C>           <C>
BASIC SERVICES
--------------
TELEPHONE(1)
Incoming paid minutes(2) (millions)                             1,257          1,499          1,773         2,161         2,545
Outgoing paid minutes (millions)                                  428            436            473           527           575
Total paid minutes (millions)                                   1,685          1,935          2,246         2,688         3,120
Change from previous period (%)                                  21.7          14.84          16.07         19.68         16.07
Ratio of incoming to outgoing                                    2.94x          3.44x          3.75x         4.10x         4.43x
Effective circuits (as of period end)                          15,431         17,922         19,722        20,495        22,708
Change from previous period end (%)                               8.8          16.14          10.04          3.92         10.80

TELEX
Paid minutes (millions)                                            14             11             10             9             7
Change from previous period (%)                                 (17.6)         (21.0)        (10.58)        (8.80)       (21.51)
Effective circuits (as of period end)                           1,012            787            682           658           358
Change from previous period end (%)                              (6.4)        (22.23)        (13.34)        (3.52)       (45.59)

TELEGRAPH
Paid words (millions)                                              16             15              9             7             5
Change from previous period (%)                                (15.79)         (6.67)        (40.00)       (22.22)       (26.87)
Effective circuits (as of period end)                              35             34             25            24            22
Change from previous period end (%)                               0.0          (2.86)        (26.47)           (4)        (8.33)

SPECIALIZED AND VALUE-ADDED SERVICES
------------------------------------
LEASED LINES (CAPACITY)
Number of lines (as of period end)                                913          1,098          1,654         4,913        10,912
Change from previous period (%)                                 61.88          20.26          50.64        197.04         122.1

PACKET SWITCHED DATA TRANSMISSION
Segments (millions)(3)                                            613            469            267           194           119
Change from previous period (%)                                (17.70)        (23.49)        (43.07)       (27.34)       (38.66)

INTERNET ACCESS(4)
Subscribers (as of period end) (in thousands)                   90.04         213.05         366.43        630.97        586.64(5)
Change from previous period (%)                                 221.1         136.61          72.00         72.19         (7.03)
</TABLE>

------------
(1)  Telephone paid minutes comprise voice, facsimile and public switched
     telephone network (PSTN) data traffic sent through the telephone network.

(2)  Includes calls placed in India but billed in another country, such as
     operator-assisted collect and home-country direct calls.

(3)  One segment equals 64 characters, with each character representing eight
     bits of data.

(4)  Internet access services were first offered in August 1995. The total
     subscribers until 2001 are inclusive of BSNL subscribers.

(5)  Excluding BSNL subscribers


Basic Services

     The Company operates the necessary switching and transmission
infrastructure to connect the Indian domestic telecommunications network with
foreign networks and, in coordination with foreign telecommunications
administrations and carriers, to ensure the smooth flow of international traffic
between these networks. An outgoing international telephone call from India
originates on one of the local Indian telephone exchanges operated by Bharat
Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited (in Mumbai and Delhi),
or by private fixed line or cellular network operators, and is transferred to
one of the Company's gateways. The call is then switched by the Company's system
to the desired international destination via satellite, undersea cable or both
based on a pre-determined routing plan developed by the Company in coordination
with the foreign telecommunications administration or carrier. The foreign
administration or carrier receiving the call through the international circuit
is then responsible for final delivery

                                       24
<PAGE>
of the call to the recipient. Similarly, when an international call is received
at one of the Company's gateways, the call is switched from the gateway via the
Indian domestic network to one of the local exchanges, from which it is
transmitted to the recipient. See "-- Industry Overview." This process is
illustrated in the following chart:


                                   [ CHART ]


     International Telephone Services. The Company provides public basic
international switched telephone services, including voice, facsimile and data
transmission services. Approximately 91.23, 90.41 and 88.63 percent of the
traffic revenue of the Company for the years ended March 31, 2000, 2001 and 2002
respectively was attributable to international telephone services. The volume of
international telephone traffic to and from India has grown rapidly in recent
years. The increase reflects the growth in the number of private and public
telephone lines in India, an improvement in the quality of the domestic
telephone network (which has resulted in a higher percentage of completed calls)
and an increase in the quality and capacity of the Company's facilities.

     The Company offers International Direct Dialing and Home Country Direct
Services and also provides operator assisted international calls. International
Direct Dialing permits telephone subscribers to dial international calls
directly without operator assistance. Rates for International Direct Dialing
calls are lower than for operator-assisted calls and are charged based on the
duration of the call. The availability and use of International Direct Dialing
in India has increased steadily. For the year ended March 31, 2002,
approximately 99 percent of international calls from India were made using
International Direct Dialing.

     Home country direct services, which permit a caller to reach an operator in
his home country directly and place a collect or charge call, was available to
32 countries as of March 31, 2002. These calls are treated as incoming calls, as
they are billed in the country being called. Home country direct services permit
a user to speak in his native language to an operator in his own country and
facilitates payment for the call since it is billed to the user at home in his
own currency.

     Other Basic Services. The Company provides international telex services,
including automatic direct dial telex service, to approximately 237 territories
worldwide and handles on average more than 4,000 international telex calls each
day. This service is mainly used by the business community. Advanced telex
services offered by the Company include forwarding facsimiles to telex mail
boxes, telex to fax transmission (T-Fax) and transmission from telex to E-mail
services.

     International telegram service is the oldest of the international
telecommunication services provided by the Company. Each day the Company handles
on average approximately 500 telegrams.

     The volume of telex and telegraph traffic has been declining significantly
in recent years, consistent with global trends, as users switch to facsimile and
other methods of data transmission. The Company expects this trend to continue,
but without any adverse impact on the Company since such methods of data
transmission generate limited revenue for the Company.

                                       25
<PAGE>
Specialized and Value-Added Services

     The Company provides a variety of specialized and value-added services,
such as international leased lines, Inmarsat satellite mobile
telecommunications, Internet dial-up access, Internet leased line access,
electronic data interchange, managed data network services, video conferencing,
the transmission of television signals and other value-added services which
typically involve the transmission of data or video rather than voice traffic.
By offering such value-added services, the Company believes it can benefit from
the increasing migration of traffic to these modes and build a direct retail
customer base from which it may more effectively compete in a liberalized
environment. The Company expects aggregate demand for these services to continue
to rise with the continued growth and increasing sophistication of the Indian
economy and its increasing integration with the world economy.

     International Leased Lines. The Company arranges dedicated point-to-point
international leased lines for those customers who need reliable, 24-hour
communications from a fixed point in India to a fixed point abroad.
International leased lines, the speeds of which range from 50 bits per second
("bps") to 155 megabits per second ("mbps"), are provided through the Company's
international gateways, earth stations and cable stations. The Company's earth
stations/cable stations communicate with satellites and submarine cable systems
respectively for data traffic. The demand for high speed leased lines (64 kbps
and above) has increased significantly in recent years, with the number of such
lines (64 kbps equivalent) increasing from 913 circuits as of March 31, 1997 to
10,912 as of March 31, 2002. In connection with providing high speed leased
lines, the Company makes all arrangements, in coordination with Bharat Sanchar
Nigam Limited, Mahanagar Telephone Nigam Limited, other basic service operators
and foreign telecommunications administrations or carriers, for connecting the
customer through one of the Company's international gateways to the foreign
destination via satellite or undersea cable.

     As part of its international leased line services, the Company offers the
Intermediate Data Rates Service and the Intelsat Business Service, which are
dedicated satellite-based services that provide high speed, high quality data
circuits on a point-to-point basis through earth stations strategically located
near the customer's premises. These services utilized a total of 281 satellite
circuits as of March 31, 2002 leased by subscribers such as software and other
high technology companies.

     Inmarsat Mobile Services. The Company commenced offering satellite mobile
telecommunication services via the Inmarsat A system (which carries telephone,
telex, Duplex High Speed Data on a channel that carries 64 kbps of data, and
facsimile traffic) through a land earth station located near Pune, which was
commissioned in May 1992. This earth station currently handles on average
approximately 735 call minutes of Inmarsat A traffic per day. In November 1993,
the Company introduced Inmarsat C service, which permits transmission of
messages via small portable terminals. In November 1995, the Company also
introduced Inmarsat B services for voice and data transmissions and Inmarsat M
services for voice transmissions, both in digital format. The Company's latest
Inmarsat service, Inmarsat Mini M, was introduced in May 1997. The Company's
land earth station located near Pune currently handles on average approximately
777, 168 and 42,747 holding time in minutes per day of Inmarsat B, M and Mini M
traffic, respectively, and approximately 357.74 kilobits per day of Inmarsat C
traffic.

     Gateway Internet Access Services. The Company commenced providing Internet
access services in August 1995. The Company is one of the leading Internet
service providers in India. Private Internet service providers were not
permitted until November 1998 after which they were also permitted to provide
such services with the liberalization of the Government's Internet policies. See
"-- Industry Overview -- Recent Developments." Demand for the Company's
Internet services has increased rapidly with the number of subscribers growing
from about 200 (inclusive of BSNL subscribers) as of September 30, 1995 to
586,638 (excluding BSNL subscribers) as of March 31, 2002. The Company's main
access nodes for the Internet are situated in 22 cities, including Mumbai, Pune,
Kolkata, Delhi, Bangalore and Chennai. In addition, the Company currently
provides Internet backbone access services to approximately 105 private Internet
service providers and leased line access to its corporate customers. The Company
has also opened state-of-the-art data centers for co-location services in 6
cities.

     Managed Data Network Services. The Company introduced managed data network
services in January 1997, and now offers such services through the global
alliance networks of global partners -- British Telecommunications, Cable &
Wireless, EQUANT, Global One, IBM Global Services, and Tele Media International.
The Company's managed data network services utilize global frame relay and X.25
access

                                       26
<PAGE>
protocols and data transmission speeds of up to 64 kbps, providing managed
private data communications services to corporate customers in India.

     Gateway Electronic Data Interchange Service. First offered by the Company
in November 1993, this service acts as a clearinghouse between the computer
systems of a subscriber and its trading partners for the electronic transmission
and processing of trade documents, such as purchase orders, invoices and other
inquiries. The service operates domestically between major metropolitan areas in
India and offers connections to major international electronic data interchange
networks. These services offer efficient data packaging and transfer through the
use of higher bandwidths.

     Video Conferencing, Transmission of Television Signals and Other Services.
The Company introduced a video conferencing service in 1993 (both domestic and
international) through studios located at the Company's international gateways
at Mumbai, Delhi, Kolkata and Chennai. The Company also provides international
relay of television programs and news services via satellite on a contractual
basis and leases satellite transponder capacity owned by the Company to
television broadcast companies in India. The Company transmitted approximately
106,900 minutes of television traffic to and from India during the year ended
March 31, 2002, including principally broadcasts of news, sports and
entertainment events. News media services provided by the Company include
sending and receiving radio photos to and from locations outside India and
direct transmission of recorded and live programming abroad, including the
transmission of newscasts by Indian national news agencies.

     Television Uplinking. The Company started providing television uplinking
facilities in October 1998. The Company provides TV uplinking facilities to
Asianet, Mavis Satcom (JAYA TV), VijayTV, Dikssat Transworld (WIN TV), MAA TV,
Intelevision (SPLASH TV), Sky Bangla, Malyalam Communications. The Company's
satellite broadcast operations on the INSAT-2E (APR) satellite are provided
through its Standard-A earth station located in Chennai and also through its
earth stations located in Delhi and Ernakulam. The Company is in the process of
starting this service from its facilities in Mumbai, New Delhi & Kolkata.

     Gateway Packet Switched Service. The Company began operation of a packet
switched data transmission service in 1988. Subscribers to the service may
exchange data with users of other public packet switched data. Primary packet
switching exchanges and access points are located at Mumbai and Delhi, which are
connected with international networks and with each other by high speed (64
kbps) data lines. The primary exchanges are linked to packet switching access
points of the Company located at four other sites within India and to
approximately 45 additional such access points operated by Bharat Sanchar Nigam
Limited via dedicated domestic long-distance lines. Subscribers may access this
service via dial-up lines or dedicated lines to any of the access points at
transmission speeds up to 9,600 bps or 64 kbps, respectively. This service is
also linked to Indian domestic packet switched data networks and carries all
international traffic generated by these networks. The Company handled
approximately 118.99 million segments of data in the year ended March 31, 2002,
a decline of 39 percent over the period ended March 31, 2001. No growth in this
service is anticipated as its advantages have eroded due to increased Internet
access.

     Gateway Electronic Mail Service. The Company introduced GEMS.400, an
international E-mail and fax forwarding service, in 1991, which was subsequently
expanded to cover the domestic market. This E-mail service, permits subscribers
to send E-mail both to other subscribers within India and to approximately 242
public E-mail systems in about 74 countries. This service had approximately
4,567 subscribers as of March 31, 2002. No growth in E-mail service is
anticipated as its advantages have eroded due to increased Internet access.

     Inmarsat Value Added Services. The Company has, in line with its commitment
of providing value-for-money telecommunication services to users, begun to offer
Inmarsat Value Added Services such as E-mail, Internet browsing, Telex to
E-mail, Telex-to-Fax and Voice mail services to its Inmarsat customers. Now,
Inmarsat-A/B/M/Mini-M customers using code 28 can send E-mail via an internet
domain to E-mail addresses, PSTN fax numbers and Telex numbers simultaneously.
Inmarsat-C users can send messages to destination Telex numbers, fax numbers and
E-mail addresses as well. Further, Inmarsat-A/B/M/Mini-M users can leave voice
mail in a voice mail box created exclusively in their name and save crucial time
and money when the called party is not available.


     TRAFFIC REVENUE AND REVENUE SHARING ARRANGEMENT

     The Company's principal source of revenue is traffic revenue from its
public international telecommunication services (telephone and telex), which
accounted for 91.23 percent, 90.41 percent and 88.63


                                       27
<PAGE>
percent of the Company's traffic revenues for the fiscal years ended March 31,
2000, March 31, 2001 and March 31, 2002, respectively. The Company's traffic
revenue has the following sources: foreign telecommunications carriers, Bharat
Sanchar Nigam Limited ("BSNL"), Mahanagar Telephone Nigam Limited ("MTNL") (in
the cities of Mumbai and Delhi) and private fixed line or cellular network
operators. The Company does not receive any payments directly from the end users
of its public international telecommunication services. For the two years ending
March 31, 2001, approximately 65 percent of the Company's traffic revenue was
derived from payments by foreign administrations or carriers for incoming calls
and approximately 26 percent of such traffic revenue was derived from amounts
payable by the Bharat Sanchar Nigam Limited under a revenue sharing arrangement
for calls originating in India. During the year ended March 31, 2002 the above
was approximately 63.80 percent and 24.83 percent respectively.


Payments to and from Foreign Administrations or Carriers

     Arrangements for the provision of international telecommunication services
between two countries are normally established between two telecommunications
administrations or recognized private operating carriers on a bilateral basis.
The Company has operating arrangements with approximately 83 foreign
telecommunications administrations or private carriers that govern the rates of
payment by the Company to the foreign administrations or carriers for use of
their facilities in connecting international calls billed in India, and by the
foreign administrations or carriers to the Company for use of its facilities
(and the local Indian networks) in connecting international calls billed abroad.
Among other factors, the rates negotiated take into account the technical and
operating costs for providing such telecommunication services and the volume of
incoming and outgoing telecommunications traffic. Such operating arrangements
are generally reviewed every year, and any resulting revision of accounting
rates or change in settlement arrangements also is agreed upon through bilateral
negotiations.

     The practice among carriers is for charges due in respect of the use of
overseas networks to be recorded, collected and forwarded by the carrier from
the country in which the call is billed. Based on the accounting rate negotiated
with each foreign telecommunications administration or carrier, the Company
makes payments to the administration or carrier for outgoing traffic billed in
India and receives payments from such administration or carrier for incoming
traffic billed outside India. Settlements between the Company and the major
carriers, including US carriers, are made monthly. Settlements between the
Company and other carriers are normally made quarterly. Settlements are made on
a net basis at the applicable settlement rate, which represents each carrier's
portion of the accounting rate. The accounting rates under the Company's
agreements may vary for incoming and outgoing calls from or to a particular
country. The Company has in the recent past sought to rationalize its accounting
rates by moving towards a system of rates linked to volume commitment. The
settlement rates applicable to the Company currently range from approximately
US$0.175 to US$0.96 per minute.

     Accounting rates are periodically negotiated, and negotiations may in some
cases take several months to conclude. During the negotiations, foreign
administrations and carriers may reduce their payments to the Company to a level
at or near the rates they expect to achieve. In other cases, new rates are
applied retroactively from the date on which they are agreed, which in the case
of a reduction in rates requires the Company to make a payment representing the
difference between the prior rate and the newly negotiated accounting rate,
calculated at the applicable settlement rate.

     The Company's largest correspondent carriers are those in the United
States, the United Arab Emirates, the Kingdom of Saudi Arabia and the United
Kingdom which together represented approximately 71.06 percent, 74.26 percent
and 73.56 percent of the Company's paid telephone minutes during the years ended
March 31, 2000, March 31, 2001 and March 31, 2002 respectively. The Company
believes that the level of traffic with a particular country is determined
primarily by the level of international business between such country and India
and the number of Indian expatriates living in such country. In addition, the
relative levels of incoming call volume from different countries is affected by
the practice of "refile." Refile involves the re-routing of calls to India
through a third country by carriers in the country of origination of such calls.
Refile seeks to take advantage of a lower accounting rate applicable to calls
between India and the third country compared to the rate between India and the
country of origination. Due to such lower applicable accounting rate, refile has
the effect of lowering the revenue of the Company with respect to an incoming
call. Refile has contributed in particular to the significant increase in recent
years in incoming traffic from the United States.

     The following table sets forth the number of paid minutes of international
telephone calls for the Company for certain countries for the periods indicated.

                                       28
<PAGE>
<TABLE>
<CAPTION>

                                                                          YEARS
                           ---------------------------------------------------------------------------------------------------
                                       2000                              2001                              2002
                           ---------------------------------------------------------------------------------------------------
                           INCOMING  OUTGOING  DIFFERENCE   INCOMING   OUTGOING   DIFFERENCE   INCOMING  OUTGOING   DIFFERENCE
                           --------  --------  ----------   --------   --------   ----------   --------  --------   ----------
                                                              (MINUTES IN MILLIONS)
<S>                        <C>       <C>       <C>          <C>        <C>        <C>          <C>       <C>        <C>
United States                907       60         847        1,182        75        1,107       1,354       89        1,265
United Arab Emirates         233       42         191          286        48          238         365       55          310
United Kingdom                94       42          52           94        48           46         101       54           47
Saudi Arabia                 127       91          36          173        90           83         187       90           97
Canada                        14        9           5           22        11           11         122       11          111
Singapore                     42       21          21           42        24           18          41       26           15
Germany                       14       14           0           40        14           26          16       14            2
Hong Kong                      5        8          (3)          15        11            4          10       11           (1)
Bahrain                       26        4          22           26         6           20          30        6           24
Oman                          31       16          15           34        17           17          49       16           33
Others                       280      166         114          247       183           64         270      203           67
                           -----      ---       -----        -----       ---        -----       -----      ---        -----
    Total                  1,773      473       1,300        2,161       527        1,634       2,545      575        1,970
                           =====      ===       =====        =====       ===        =====       =====      ===        =====
</TABLE>

     As is typical in developing countries, the volume of incoming calls to
India has historically exceeded the volume of outgoing calls, and as a result
the Company has received net settlement payments from foreign administrations
and carriers. The Company expects this situation to continue. In 1994, various
unlicensed private agencies in India commenced offering "call-back" services as
a low-cost alternative for making international calls from India. A caller using
this service is provided with access to an international dial tone in a foreign
country, usually in the United States, from which the caller can originate
calls. These calls are billed in foreign exchange in the foreign country and are
therefore treated as incoming calls. Call-back services were officially declared
illegal by the Ministry of Communications in July 1995. Nevertheless, the volume
of international calls made from India through call-back services appears to
have grown and has contributed to the increase in recent years in the Company's
ratio of incoming to outgoing calls, particularly in the case of traffic between
India and the United States.

     In recent years, international organizations such as the International
Telecommunications Union and the OECD countries have expressed the need for
revision of the international accounting rate system, and certain foreign
telecommunications administrations and carriers have sought to reduce applicable
accounting rates in bilateral negotiations with the Company. In August 1997, the
FCC issued an order (the "Order") establishing FCC benchmarks that US carriers
generally must comply with in establishing settlement rates for international
calls with non-US telecommunications administrations and carriers. The Order
became effective as of January 1, 1998. Pursuant to the Order, the FCC
categorizes countries by level of economic development and establishes
cost-based benchmark ranges and transition periods for each country category,
whereby higher benchmark ranges and longer transition periods would apply to
less developed countries. The FCC requires US carriers to negotiate settlement
rates falling within the applicable benchmark range with each country during the
transition period. As a result, the effective settlement rate between US
carriers and the Company for calendar year 1998 of US$0.64 per minute, which
already represented a 10.5 percent decrease of the settlement rate from the
prior calendar year, was required to be reduced to no more than US$0.23 per
minute by 2002.

     The authority of the FCC to issue the Order and the Order itself has been
upheld by a United States federal court of appeals. In upholding the Order, the
United States federal court of appeals held that the Order was a valid exercise
of the FCC's regulatory authority under the United States Communications Act and
rejected the argument that the FCC's unilateral establishment of benchmark
settlement rates constituted an unlawful assertion of extraterritorial
jurisdiction over foreign carriers and foreign telecommunication services.
However, the United States federal court of appeals also stated that the Order
does not apply to foreign carriers and only permits the FCC to contact
responsible foreign government authorities to seek their support in lowering
settlement rates. The FCC, acting pursuant to the Order, has forced the US
carriers to agree to the benchmark rates, which are lower than the rates
previously in effect between the Company and some of its correspondent US
carriers. See "Item 3. Key Information -- Risk Factors -- Delays in reaching
agreement with other major carriers regarding rates."

     The Company was unable to conclude its annual negotiations with its four
correspondent US carriers as to accounting rates for calendar year 1998 until
early January 1999. The calendar year 1998 accounting rate with one of its four
US carriers was approved by the FCC in late November 1998, and shortly
thereafter the three remaining US carriers agreed to the same rate. The Company
has concluded since then accounting rates agreements for fiscal 2000 with US
carriers and other major foreign correspondent carriers and administrations

                                       29
<PAGE>
     with a gradual reduction of settlement rates. Moving towards FCC's
benchmark settlement rate, the Company has also concluded settlement rate
agreements of US$0.54 per minute, US$0.425 per minute, US$0.34 and US$0.23 per
minute for fiscal 2000, 2001, 2002 and initial period of 2003, respectively,
with US carriers. The Company and the US carriers agreed to a settlement rate of
US$0.34 per minute up to March 31, 2002. However, the FCC only approved the
filings of US carriers for a settlement rate of US$0.34 per minute up to
December 2001 and suspended the agreement between the US carriers and the
Company for the period from January 2002 till March 2002. The Company, through
the Ministry of Communications (Government of India), appealed to the FCC on the
suspension of the agreement for the period from January 2002 till March 2002.
Subsequently, the US carriers have made payments to the Company from January
2002 up to March 2002 as per the FCC directives. Effective April 2002, the
settlement rate between the Company and the US carriers has been agreed to at
US$0.23 per minute or less.


Revenue Sharing Arrangement

     Although the Company provides international gateway access out of and into
India, all calls must either initiate or terminate on or pass through the
domestic networks of Mahanagar Telephone Nigam Limited, Bharat Sanchar Nigam
Limited or any private fixed line or cellular network operator. The Company and
Bharat Sanchar Nigam Limited have shared revenues received by each entity from
international calls pursuant to a revenue sharing arrangement between the two
entities. Prior to March 31, 2002 and the expiration of the last revenue sharing
arrangement, the Company had a revenue sharing arrangement with only BSNL. Under
this arrangement, BSNL (formerly the DOT) received payments from the Company and
other operators and redistributed those payments to the Company or the other
operators as appropriate. Subsequent to March 31, 2002, the Company is required
to have revenue sharing agreements (also called "Interconnect Agreements") with
every domestic fixed line or mobile operator, including BSNL and MTNL. The last
revenue sharing agreement expired on March 31, 2002, and negotiations with BSNL
and MTNL are currently underway to arrive at new arrangements. The new
agreements with most other private fixed line and mobile operators have already
been finalized. See "Item 3. Key Information -- Risk Factors -- New revenue
sharing arrangements between the Company and BSNL and MTNL are being
negotiated."

     Revenue Sharing Arrangement (April 1, 1993 to March 31, 1997). Under this
previous revenue sharing arrangement the Company paid the DOT a terminal charge
of Rs.21.60 per minute for use of the DOT's domestic network on all incoming
international calls. In turn, the DOT paid the Company a carrying charge of
Rs.41.60 per minute for all outgoing international calls. The revenue sharing
arrangement was intended to result in average gross earnings per call minute of
Rs.10 for the Company, based on the following parameters and base values: an
average settlement rate between the Company and foreign telecommunications
administrations and carriers of US$1.00 per minute, a Rupee/Dollar exchange rate
of Rs.31.60 per US$1.00 and a ratio of incoming to outgoing call minutes of
1.4x.

     The following chart illustrates payment flows under the previous revenue
sharing arrangement assuming the base value for these parameters.

                                       30
<PAGE>
                                   [ CHART ]


     Under this revenue sharing arrangement, the Company also paid to the DOT a
license fee of Rs.3 million (US$0.06 million) for each one million paid minutes
(or portion thereof) of the Company's total annual international traffic. In
addition, the Company paid to the DOT a surcharge of 15 percent on charges for
lines leased from the DOT as an additional charge for using Department of
Telecommunication's domestic network.

     Revenue Sharing Arrangement (April 1, 1997 to March 31, 2002). From April
1, 1997 to March 31, 2002, the Company and Bharat Sanchar Nigam Limited
(formerly, the Department of Telecommunications) were parties to a revenue
sharing arrangement, under which the Company paid to Bharat Sanchar Nigam
Limited a charge per minute equal to the "weighted average incoming settlement
rate" minus Rs.10 on all incoming international calls, and Bharat Sanchar Nigam
Limited in turn paid to the Company a charge per minute equal to the "weighted
average outgoing settlement rate" plus Rs.10 on all outgoing international
calls, in each of the fiscal years covered by the arrangement. The "weighted
average incoming settlement rate" and the "weighted average outgoing settlement
rate" for a fiscal year was the average of the various settlement rates in
effect as of the beginning of the fiscal year between the Company and foreign
administrations and carriers (converted into Rupees at the exchange rates
prevailing as of the beginning of the fiscal year), weighted to reflect the
volume of total incoming traffic and total outgoing traffic, respectively,
accounted for by each foreign administration or carrier during the immediately
preceding fiscal year. This arrangement was intended to result in average gross
earnings to the Company of Rs.10 per call minute in each fiscal year (assuming
that applicable settlement rates and exchange rates and the composition of
incoming and outgoing traffic from and to particular destinations remained
constant during the year). In the years ended March 31, 2000, March 31, 2001 and
March 31, 2002 the Company's actual average gross profit per telephone minute
were Rs.9.43, Rs.9.39 and Rs.8.39, respectively.

     Under this revenue sharing arrangement, any increase or decrease in the
combined international traffic revenue per call minute of the Company and Bharat
Sanchar Nigam Limited (net of payments by the Company to foreign administrations
and carriers and by the Company and Bharat Sanchar Nigam Limited to each other
in respect of delivery of incoming and outgoing calls) for each fiscal year,
compared to the fiscal year ended March 31, 1997, was shared between the Company
and Bharat Sanchar Nigam Limited according to the following percentages:

                                       31
<PAGE>
<TABLE>
<CAPTION>
     YEAR ENDING                                             BHARAT SANCHAR
      MARCH 31                  COMPANY'S SHARE           NIGAM LIMITED'S SHARE
     -----------                ---------------           ---------------------
     <S>                        <C>                       <C>
        1999                            0%                        100%
        2000                           15%                         85%
        2001                           20%                         80%
        2002                           25%                         75%
</TABLE>

     In computing the international traffic revenue of Bharat Sanchar Nigam
Limited for purposes of calculating the combined international traffic revenue
per call minute of the Company and Bharat Sanchar Nigam Limited, the tariff
charged by Bharat Sanchar Nigam Limited to subscribers for outgoing
international calls was assumed to remain constant at Rs.62.35 (US$1.33) per
minute, which was the weighted average tariff rate for the year ended March 31,
1997. It was therefore intended that the Company's average gross profit per call
minute under this revenue sharing arrangement was not to be affected directly by
any decrease or increase in the actual tariffs charged by Bharat Sanchar Nigam
Limited for outgoing international calls.

     The following chart illustrates payment flows under this revenue sharing
arrangement.


                                   [ CHART ]


     This revenue sharing arrangement was subject to review (with the objective
of correcting the imbalance caused) in the event that the Rupee/Dollar exchange
rate fluctuates by more than ten percent from the rate at the base year (January
4, 1997), or the Company's actual average gross earnings per call minute is less
than Rs.9 or more than Rs.11, in any fiscal year covered by the arrangement. No
such review occurred while this revenue sharing arrangement was in effect.

     Under this revenue sharing arrangement, the Company was required to pay to
the Department of Telecommunications an annual license fee based on the number
of its commissioned circuits, instead of on the volume of its international
traffic. The license fee amounted to Rs.250,000 (US$5,119.80) per commissioned
circuit, and the number of circuits was calculated as an average of the number
of commissioned circuits at the beginning and end of the applicable fiscal year.
For the years ended March 31, 2000, March 31, 2001 and March 31, 2002, the
Company paid annual license fees of approximately Rs.4,712 million, Rs.5,022
million and Rs.5,393 million (US$110.44 million), respectively.

                                       32
<PAGE>
     The international telecommunications sector has been liberalised in India
from April 1, 2002. Besides the Company, there are other International Long
Distance (ILD) operators licensed by the Government as per the recommendations
of Telecom Regulatory Authority of India (the "TRAI"). Prior to March 31, 2002
and the expiration of the last revenue sharing arrangement, the Company had a
revenue sharing arrangement with only BSNL. Under this arrangement, BSNL
received payments from the Company and other operators, and redistributed those
payments to the Company or the other domestic carriers as appropriate.
Subsequent to March 31, 2002, the Company is required to have revenue sharing
agreements (also called "Interconnect Agreements") with every domestic fixed
line or mobile operator, including BSNL and MTNL. The Company is in the process
of negotiating new agreements with BSNL and MTNL. The new agreements with most
other private fixed line and mobile operators have already been completed.

     Upon the expiration of the most recent revenue sharing agreement on March
31, 2002, the Company, BSNL and MTNL commenced negotiations on a new revenue
sharing agreement. In the course of the negotiations so far, BSNL and MTNL have
offered to the Company terms of interconnection charges and revenue sharing to
which the Company has not been able to agree. The negotiations are in progress.
In the event that BSNL, MTNL and the Company are unable to reach an agreement,
the TRAI may be called upon by either party to arbitrate a settlement of the
dispute. The Board of Directors of the Company has taken the matter under
consultation, and may take action as it deems in the best interests of the
Company. On September 23, 2002, the Company requested that the TRAI step in to
help facilitate an equitable resolution to the negotiations. The Minister of
Communications has recently stated that if the Company does not reach an
agreement with BSNL and MTNL by October 1, 2002, BSNL and MTNL will be directed
by the Government to route their international long distance calls through other
international long distance operators.

     See "Item 3. Key Information -- Risk Factors -- New revenue sharing
arrangements between the Company and BSNL and MTNL are being negotiated."


     BREAKDOWN OF SALES AND REVENUES

     The following table breaks down the Company's revenue by type of service
for each of the years in the three year period ended March 31, 2002.

<TABLE>
<CAPTION>

                                                                      YEAR ENDED MARCH 31,
                                               ---------------------------------------------------------------
                                                  2000             2001              2002              2002
                                               ---------         ---------         ---------       -----------
                                                                        (IN MILLIONS)
<S>                                            <C>               <C>               <C>             <C>
Revenues from incoming traffic
Telephone                                      Rs.45,161         Rs.46,674         Rs.41,503       US$  849.95
Telex                                                128               112                70              1.43
Revenues from outgoing traffic
Telephone                                         18,375            18,345            16,153            330.80
Telex                                                175               112                88              1.80
Leased circuits                                    2,986             3,140             3,584             73.40
Internet access services                           2,095             2,980             2,305             47.20
Television relay                                      72               184               168              3.44
Telegraph                                             37                29                23              0.47
Other revenue                                        611               340             1,156             23.68

Total revenue                                     69,640            71,916            65,050          1,332.17
                                               =========         =========         =========       ===========
</TABLE>

     Since the Company only provides services in India there is no breakdown of
the Company's revenues by geographical market.

     Trends and events affecting the Company's operating revenue are discussed
under "Item 5. Operating and Financial Review and Prospects."


     INDUSTRY OVERVIEW

The Indian Domestic Telecommunications Network

     The Indian domestic telecommunications network has grown rapidly in recent
years. As of December 31, 2001, the Indian telephone system comprised 40.21
million lines in service. In the fiscal year ended March 31, 2001, Bharat
Sanchar Nigam Limited installed approximately 7.65 million new local lines and
7.15 million switching terminations, increases of 26.91 percent and 21.81
percent, respectively, over the levels as of March

                                       33
<PAGE>
31, 2000. All subscribers have access to international telecommunication
services. Subscribers in approximately 25,700 cities and towns in India had
direct dial access as of March 31, 2001.

     Despite this growth, the registered waiting list for telephone lines has
remained high. For example, in the fiscal year ended March 31, 2001, while
approximately 7.65 million new lines were added, the registered waiting list for
new lines decreased from 3.68 million to 2.916 million. Bharat Sanchar Nigam
Limited and the Company believe that the registered waiting list understates
actual demand because a potential subscriber must deposit at least Rs.3,000
(US$61.43) over a period of the first three months with Bharat Sanchar Nigam
Limited or Mahanagar Telephone Nigam Limited in order to be placed on the
waiting list and, depending on the subscriber's location, may then have to wait
up to three years before receiving a telephone line. Moreover, the penetration
of India's domestic telephone network of 4.4 lines in service per 100
inhabitants as of March 31, 2002 remained significantly lower than in OECD
countries and many other developing countries. The following table presents, for
selected countries, lines in service as of the latest year for which such
information is currently available.

<TABLE>
<CAPTION>

                                           LINES IN SERVICE PER
                                             100 INHABITANTS
                                           --------------------
<S>                                        <C>
India(1)                                         4.4(2002)
Pakistan                                        2.35(2001)
Indonesia                                       3.70(2001)
China                                          13.81(2001)
Philippines                                     4.02(2001)
Thailand                                        9.39(2001)
Turkey                                         28.52(2001)
Malaysia                                       19.91(2001)
Mexico                                         13.72(2001)
South Korea                                    47.60(2001)
United Kingdom                                 58.80(2001)
United States                                  66.45(2001)
Japan                                          59.69(2001)
</TABLE>

------------
Sources: International Telecommunications Union.

(1)  As of March 31, 2002, lines in service for India.

     The existing lines in service in India are concentrated in large urban
areas. Of all lines in service, approximately 23.76 percent are in the four
major metropolitan areas of Mumbai, Kolkata, Delhi and Chennai; in these and
other major cities, the density of lines in service is considerably higher than
in India as a whole.

     Cellular mobile service has experienced substantial growth since it was
introduced in the end of 1995. By July 2002, there were approximately 7.69
million cellular subscribers, representing a compound annual growth rate of 115
percent since March 31, 1996 when the number of cellular subscribers was
approximately 77,000.

     The efficiency of the domestic telecommunications network, as reflected by
the ratio of seizure attempts (calls) made on a telephone circuit that result in
successful complete calls to the total number of seizure attempts, has been low
in India principally because of restricted capacity on the network. However,
improvements have recently been made in the quality of the domestic
telecommunications network. Improving this ratio permits the Company's network
to operate more efficiently as it results in a decrease in the number of
circuits used by subscribers attempting to re-dial failed calls. In turn, this
reduces the need to invest in additional facilities and infrastructure. As of
March 31, 2002, the average answer to seizure ratio for incoming and outgoing
international calls in all of India was 39.42 percent and 40.19 percent,
respectively, compared to 27.63 percent and 43.99 percent as of March 31, 1995.
However, the average such ratio for calls to and from India remains much lower
than that for calls between two countries with well developed and high quality
domestic telecommunications networks, which would be at least 60 percent to 65
percent.


History

     Until the mid-1980's, the telecommunications sector in India was a monopoly
managed by the public sector, and virtually all telecommunication services, both
domestic and international, were controlled by the

                                       34
<PAGE>
Government of India through the Department of Posts and Telegraphs of the
Ministry of Communications. The Indian Telegraph Act, 1885 established the
Government's monopoly in the sector and, together with the Indian Wireless
Telegraphy Act of 1933, provided the legal framework for the regulation of the
telecommunications industry. Development of the telecommunications sector
historically was seen as a relatively low priority and received limited
budgetary support from the Government. As a result, the telecommunications
infrastructure in India grew at a relatively slow rate.

     In the mid-1980s, faced with rapidly increasing demands for
telecommunication services and equipment, the Government of India commenced a
reorganization of the sector designed to facilitate the rapid introduction of
new technology, to stimulate the growth of the telecommunications industry and
to tap the resources of the private sector in facilitating such technological
innovation and growth. The reorganization included the division of the
department of Posts and Telegraphs into the Department of Telecommunications and
the Department of Posts and the establishment of public sector entities for the
manufacture of certain telecommunications equipment.

     As part of the reorganization, the Company was incorporated on March 19,
1986 as a wholly-owned Government company and on April 1, 1986 assumed control
and management of international telecommunication services from the Overseas
Communications Service, a department of the Ministry of Communications.
Mahanagar Telephone Nigam Limited was established at the same time to operate
local telephone and telex services in Mumbai and Delhi, two of the largest
metropolitan areas in India. Bharat Sanchar Nigam Limited, formerly part of the
DOT, retained responsibility for providing all other telecommunication services
throughout India. The Department of Telecommunications also assumed regulatory
authority over the Company, Mahanagar Telephone Nigam Limited and other public
sector enterprises established through the reorganization and was given
responsibility for acting on behalf of the Government of India as the sole
shareholder of such entities. The Telecom Commission was established in 1986 as
an executive body under the Ministry of Communications to make policy decisions
and to accelerate the development of all aspects of the telecommunications
sector and the implementation of new telecommunications policies.

     On February 1, 2001, the Government of India announced its intention to
sell from its holding Equity Shares equivalent to 25 percent of the outstanding
equity of the Company to a strategic partner through competitive bidding. As per
the announcement made on February 5, 2002 by the Government of India, Panatone
Finvest Limited was selected as the strategic partner for the sale of 71,250,000
fully paid-up Equity Shares representing 25 percent of the voting capital of the
Company at a price of Rs.202 (US$4.14) per share. The aggregate purchase price
was Rs.14,392.50 million (US$ 294.75 million) in cash. A share purchase
agreement (the "Share Purchase Agreement ") giving effect to the above
arrangement was entered into between the Government of India and Panatone
Finvest Limited on February 6, 2002. The shareholders in Panatone Finvest
Limited - Tata Sons, Tata Power, Tata Steel and Tata Industries - are also
signatories to the Share Purchase Agreement though they did not directly
purchase any of the Government of India's holding in the Company. The Company is
also a party to the Share Purchase Agreement. In connection with the purchase of
the shares from the Government of India, Panatone Finvest Limited was required
by the Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997 and subsequent amendments thereto to launch a
open/ tender offer for an additional 20 percent of the Equity Shares from other
shareholders of the Company. Subsequently, Panatone Finvest Limited purchased an
additional 20 percent on June 8, 2002, increasing its stake to 45 percent.


Liberalization Initiatives

     Background. In May 1994, the Government of India announced a National
Telecommunications Policy (the "1994 Telecom Policy") which included as its
objectives ensuring the availability of telephones on demand as soon as
possible, providing basic telecommunication services at affordable prices and
introducing value-added services to raise the range and quality of
telecommunication services available in India to international levels. The 1994
Telecom Policy recognized that Government financial resources would be
insufficient to meet these objectives.

     Basic Services. Accordingly, in September 1994, the Government of India
announced Guidelines for Private Sector Entry into Basic Telecom Services, which
provide for the grant of a license for the provision of local fixed line
services to one new licensee (a "New Licensee") in each of the 21
telecommunications "circles" into which the country has been divided for such
purposes. Within each circle, the New Licensee will compete with Bharat Sanchar
Nigam Limited (or Mahanagar Telephone Nigam Limited, in the case of circles that
include Delhi or Mumbai). Foreign ownership of each New Licensee is restricted
under the guidelines to a

                                       35
<PAGE>
maximum of 49 percent. The Government initially invited tenders for new licenses
in January 1995, in response to which bids were submitted by numerous Indian
companies in combination with major global telecommunications companies.
Initially, licenses for six states of the Indian union were issued to successful
bidders. Recently, another 20 licenses have been issued.

     As part of the bidding process, the bidders for the licenses were required
to make certain commitments on the build-out of their respective networks by the
end of each of the first three years after the issue of the licenses for which
they were bidding. The license conditions require the New Licensees to meet
these commitments. The 13 successful bidders referred to above have in the
aggregate committed to provide over 3.9 million new lines by the end of the
third year following the issue of their licenses. In addition, under the terms
of the bid, if by the end of such third year telephone lines are not available
on demand in its respective circle, the New Licensee will be required to expand
the number of lines in its network by at least 15 percent per year until such
time as telephone lines become available on demand. A separate license condition
also requires New Licensees to allocate at least 10 percent of the lines
installed in each calendar quarter as village public telephones until there is
at least one such telephone in every village within its circle.

     Cellular Services. In December 1991, the Department of Telecommunications
invited bids from Indian companies with no more than 49 percent foreign
ownership for non-exclusive digital cellular mobile licenses in Mumbai, Delhi,
Kolkata and Chennai. After protracted litigation arising from the selection
process, the Department of Telecommunications finally settled upon two licensees
for each of the four metropolitan areas. In January 1995, the Department of
Telecommunications invited tenders from Indian companies with no more than 49
percent foreign ownership for non-exclusive licenses to provide digital cellular
mobile services in 20 telecommunications circles, excluding those that include
the four cities with existing licensees. Two licenses were to be awarded per
circle. Subsequently 34 licenses for 18 telecommunications circles were also
issued to 14 companies during 1995 to 1998. MTNL and BSNL were issued licenses
for operation of cellular mobile telephone services as a third operator in
various parts of the country. In terms of the National Telecom Policy 1999, 17
fresh licenses have been issued to private companies as a fourth cellular
operator in September/October, 2001, one in each of 4 metropolitan areas and 13
telecommunications circles. Cellular licensees earlier had access to the
Company's international network only through Bharat Sanchar Nigam Limited but
now the licensees can have direct access with the Company's network.

     In February 1997, a multilateral agreement on basic telecommunication
services was agreed to among member governments of the World Trade Organization.
As part of this agreement, the Government of India has reaffirmed its commitment
to further liberalize the Indian telecommunications sector through the licensing
of new local fixed line and cellular service providers. The Government of India
has also agreed to allow competition in the area of domestic long-distance
telephone services and international telephone services.

     International Long Distance Services. The Company, until March 31, 2002,
was the exclusive provider of public international telecommunication services in
India. In September 2000, the Government announced that the Company's monopoly
on international long distance services would terminate on March 31, 2002 rather
than on March 31, 2004. Subsequent to the opening up of the international
telecommunications to competition with effect from April 2002, new operators
have been licensed to provide international telephony services. To offset the
likely loss to the Company due to the early termination of its monopoly, the
Government announced a compensation package including a license to offer
domestic long distance services, a Category `A' all India ISP license which
would enable it to provide Internet access at locations across the country, and
additional compensation if found to be necessary based on the Government's
review. See "Item 3. Key Information -- Risk Factors -- The New
Telecommunications Policy and other regulatory changes with respect to the
telecommunications industry have exposed us to increased competition."

     On February 1, 2001, the Government of India announced its intention to
sell from its holding shares equivalent to 25 percent of the outstanding equity
of the Company to a strategic partner along with the right to management through
the competitive bidding route. As per the announcement made on February 5, 2002
by the Government of India, Panatone Finvest Limited was selected by the
Government of India as the strategic partner. Pursuant to a Share Purchase
Agreement, Panatone Finvest Limited purchased 25 percent of the outstanding
equity of the Company from the Government, and subsequently purchased an
additional 20 percent of the Company's equity pursuant to an open/ tender offer.

     Effective April 2002, the international long distance sector has been
opened up for competition.

                                       36
<PAGE>
     Other Services. The Government allowed private sector participation in
value-added services such as paging services in 1992. The Government has also
announced the opening up of global mobile personal communications by satellite
("GMPCS") and has issued one provisional license. The issuance of licenses to
other prospective GMPCS operators is currently under consideration.


Developments

     TRAI. In furtherance of the 1994 Telecom Policy, the Government of India in
1994 announced its intention to establish an independent regulatory authority to
resolve disputes between service providers, to ensure technical compatibility
and effective interconnection between service providers, to regulate tariffs and
protect consumer interests, to facilitate competition and to promote efficiency
in the operation of telecommunication services so as to facilitate the growth of
such services in India. In January 1997, the President of India issued an
ordinance providing for the establishment of the TRAI, an autonomous body with
quasi-judicial powers to regulate telecommunication services in India. The TRAI
was established and became functional in March 1997. See "-- Government
Regulations -- Supervision".

     In September 1998, the TRAI initiated a series of nation-wide consultations
as part of a process to, among other things, formulate telecommunications
pricing policies and set tariffs for a wide variety of telecommunication
services. See "-- Government Regulations -- Rates." One of TRAI's notifications
envisages a reduction of approximately 50 percent in STD and ISD charges over
the three year period ending March 31, 2002. In conformance with this
notification Department of Telecommunications issued a tariff order for fiscal
2000 that reduces international long distance rates by approximately 27 percent
and further tariff orders effective between October 1, 2000 and March 31, 2002
pursuant to which international long distance tariffs have been further reduced
by 16 to 20 percent. The TRAI has also announced its intention to review a
number of other policy and regulatory matters, including the quality standards
for service provision generally.

     Internet Policy. In November 1998, the Government announced a new Internet
policy, which aims to increase the usage of the Internet by allowing private
ISPs to provide Internet access services in India. Under the policy, private
ISPs will be allowed (1) foreign ownership not exceeding 49 percent, (2) a
license fee moratorium for the first five years, and a token fee of Rs.1, (3)
the autonomy to fix tariffs, (4) direct interconnectivity between any two
separate ISPs, (5) to set up international gateways after obtaining the
necessary security clearances and (vi) to offer "last mile" linkages within
local areas by optical fiber cable communications after obtaining the necessary
approvals. The policy has enabled the Company to add a new revenue stream by
providing gateway connectivity and bandwidth provisioning to private Internet
service providers. The Company has already invested in upgrading its existing
infrastructure with a strong Internet backbone. As of March 31, 2002, there were
approximately 442 Internet service providers who were licensed to provide
Internet services throughout India of which around 150 had started providing
services as on December 31, 2001. With international gateways being opened up to
the private sector, as of March 31, 2002, around 20 Internet service providers
were granted provisional commissioning licenses.

     New Telecom Policy. The New Telecom Policy came into effect on April 1,
1999. Under this policy, the subject of opening up international telephone
services to competition will be reviewed by the year 2004. The policy also
provides for direct inter-connectivity between telecom services providers.

     New TRAI. In January 2000, the Government amended the TRAI Act and
established two independent authorities: the New TRAI and the Appellate
Tribunal. See "-- Government Regulations -- Supervision."

     TRAI Directives on implementation of Carrier Selection. In July 2002, the
TRAI provided directives to all access providers -- basic service operators,
cellular mobile service operators, and the national and international long
distance operators -- regarding implementation of carrier selection by callers.
According to the TRAI directive, the customer will have the choice to route his
long distance calls through long distance carriers as chosen by him, for both
the domestic long distance ("NLD") and international long distance ("ILD")
carrier. The TRAI is of the view that, barring certain areas of exception, in
almost all Circles and in most parts of the country, the facility shall be made
available by the end of calendar year 2003.

                                       37
<PAGE>
     GOVERNMENT REGULATIONS

     GENERAL

     The business of the Company is subject to comprehensive regulation by the
Ministry of Communications through the Telecom Commission and the Department of
Telecommunications pursuant to the provisions of the Indian Telegraph Act of
1885 (the "Telegraph Act") and the terms of the licenses from the Department of
Telecommunications under which the Company operates. While the Telegraph Act
sets the legal framework for regulation of the telecommunications sector, much
of the supervision and regulation of the Company is implemented more informally
through the general administrative powers of the Department of
Telecommunications, including those reserved to the Department of
Telecommunications under the Company's licenses and of other Government
agencies.

     In October 1999 the Department of Telecommunications, which had performed
the role of licensor and policy maker for the Ministry of Communications and
operated as India's domestic long distance service provider and fixed-line
service provider, except for the areas of Delhi and Mumbai, was bifurcated into
two departments: (1) the Department of Telecommunications/Telecom Commission to
perform the role of licensor and policy maker and control the Company's Equity
Shares held by the Government and (2) the Department of Telecom Services to
function as the service provider. With effect from October 1, 2000, the
Department of Telecom Services was incorporated and renamed Bharat Sanchar Nigam
Limited. The Government has also established an independent Information
Technology Ministry to promote the Internet, e-commerce and knowledge-based
industries. Licensing functions, however, continue to be with the Department of
Telecommunications/Telecom Commission.

     The Communication Convergence Bill 2001 was placed in the Parliament in
August 2001. If the Communication Convergence Bill 2001 is converted into an Act
of the Parliament, the existing Acts, namely, The Indian Telegraph Act, 1885;
The Indian Wireless Telegraphy Act, 1933; Telegraph Wire Unlawful Possession
Act, 1950; Cable Television Networks (Regulation) Act 1995 and The Telecom
Regulatory Authority of India Act, 1997 would stand repealed. The Communication
Convergence Bill provides for the formation of an independent authority -- The
Communications Commission of India ("CCI") -- to regulate the converging sectors
of broadcasting, information and telecommunications.

     When the Government's shareholding in the Company equaled or exceeded 51
percent, the Company was deemed to be an Indian Government company and subject
to laws and regulations generally applicable to public sector enterprises in
India. These laws and regulations concern personnel matters, including
appointment of key management personnel and the hiring, dismissal and
compensation of employees, as well as budgeting and capital expenditures and the
generation of funds through the issuance of securities. For example, all persons
appointed to the Company's Board of Directors had to first be recommended by the
Public Enterprises Selection Board. Disputes between Government enterprises
(such as the Company) and Government departments generally had to be referred to
a Committee of Secretaries of the Government for mediation before either party
could bring a claim in a court of law or tribunal. A single Government ministry
or department is designated as the primary supervisor of each public sector
enterprise: the Department of Telecommunications had been so designated for the
Company. The Company's activities also were subject to scrutiny by India's
Parliament, and the Department of Telecommunications had to submit an annual
report to Parliament regarding the Company's activities. Since February 13,
2002, the Company is no longer an Indian Government company and a PSU. For most
of fiscal 2002, the Company was subject to the rules governing Indian Government
companies and PSUs during that time.

     The Government had granted "Navratna" status to selected public sector
enterprises. The Company was one of such selected "Navratna" public sector
enterprises. "Navratna" status gave the Company, among other things, enhanced
autonomy, a greater degree of administrative efficiency regarding capital
expenditures and the ability to make joint venture investments (subject to
certain limits). Subsequent to the Government of India's transfer of 25 percent
of its stake in the Company to a strategic partner, the Company no longer is a
PSU.


Supervision

     In March 1997, the Government first established the Telecom Regulatory
Authority of India ("TRAI"), an independent regulatory authority under the
provisions of the TRAI Act.

                                       38
<PAGE>
     The TRAI Act was amended in 2000. The amended Act established two
independent authorities: the TRAI to regulate telecommunication services and the
Telecom Disputes Settlement and Appellate Tribunal (the "TDSAT") to adjudicate
disputes, disposal of appeals and to protect the interest of telecommunication
service providers and consumers. The regulatory functions of the TRAI fall
within two broad categories -- (1) recommendatory and (2) mandatory.

     The recommendatory functions may be exercised either suo moto or on request
from the licensor on the following matters: (1) need and timing for introduction
of new service providers; (2) terms and conditions of licenses to service
providers; (3) revocation of licenses for non-compliance with the terms and
conditions of the license; (4) measures to facilitate competition and promote
efficiency in the operation of telecommunication services; (5) technological
improvements in the services provided by the service providers; (6) type of
equipment to be used by the service providers; (7) measures for the development
of telecommunication technology and any other matter related to the
telecommunication industry in general; (8) efficient management of the available
spectrum.

     The mandatory functions of TRAI include the following: (1) ensure
compliance of terms and conditions of licenses; (2) fix the terms and conditions
of inter-connectivity arrangements between service providers; (3) ensure
technical compatibility and effective inter-connection between different service
providers; (4) regulate revenue sharing arrangements among service providers;
(5) lay down standards of quality of service to be provided by service providers
and ensure the quality of service and conduct and periodically survey such
service in order to protect the interest of the consumers; (6) lay down and
ensure the time period for providing local and long distance circuits between
different service providers; (7) maintain register of interconnect agreements
and of all such other matters as may be provided in the regulations; (8) keep
such register open for inspection; and (9) ensure effective compliance of
universal service obligations.

     The TRAI also has the authority to levy fees and other charges at such
rates and in respect of such services as may be determined by regulations and to
perform such other functions including such administrative and financial
functions as may be entrusted to it by the Government or as may be necessary to
carry out the provisions of the TRAI Act.

     The recommendations of the TRAI with respect to the matters referred to
above are not binding upon the Government. However, the Government must seek the
recommendations of the TRAI in relation to the following matters: (1) need and
timing for introduction of new service providers; and (2) terms and conditions
of new licences given to a service provider. The TRAI is required to forward its
recommendations with respect to these matters to the Government within a period
of 60 days from the date on which such recommendations are sought or such
extended time as may be mutually agreed to between the Government and the TRAI.

     The TRAI has the authority to request the Government to furnish such
information or documents as may be necessary for the purpose of making
recommendations and the Government is obliged to furnish such information within
seven days of such request from TRAI. In the event that the Government comes to
a prima facie conclusion that the recommendations of TRAI with respect to these
matters cannot be accepted or need modification, the Government is required to
refer the recommendations back to the TRAI for its reconsideration and the TRAI
may, within 15 days from the date of receipt of such reference, forward to the
Government its recommendations after considering the reference made by the
Government and the Government shall make its final decision after receipt of
such recommendation from the TRAI.

     The TDSAT has jurisdiction to adjudicate any dispute between a licensor and
a licensee, between two or more service providers, or between a service provider
and a group of consumers. The TDSAT also has the jurisdiction to hear and
dispose of appeals against any direction, decision or order of the TRAI.

     The Communication Convergence Bill 2001, introduced in the Parliament in
August 2001, envisages the creation of the Communications Commission of India
("CCI") which would be an all-encompassing umbrella body to look into licensing,
spectrum management, dispute resolution and determination of regulation codes,
technical standards, tariffs, rates for licensed services as well as determine
the conditions for fair, equitable and non-discriminatory access to network
facility and service. It would also have the powers of a civil court under the
Code of Civil Procedure, 1908.

                                       39
<PAGE>
Licenses

     Pursuant to the Telegraph Act, the provision of any telecommunication
services in India requires a license from the Government, obtained through the
Department of Telecommunications. The Company currently holds an International
Long Distance ("ILD") Operations license issued on 12 January 1999, which is
valid until 31 March 2004; a National Long Distance ("NLD") license issued on 8
February 2002, which is valid until 2022; and a Category 'A' all India Internet
service license issued on 3 May 2002, which is valid until 2007. With the
opening of the telecommunications sector to private operators, the Company is
negotiating for a new ILD license agreement with the DOT. See " Item 3. Key
Information -- Risk Factors -- The New Telecommunications Policy and other
regulatory changes with respect to the telecommunications industry have exposed
us to increased competition."

     The Company operates substantially all its international telecommunications
services under a license (the "ILD License") initially granted by the Department
of Telecommunications to the Company upon its establishment in 1986. The ILD
License identifies specific services that the Company is permitted to provide,
which encompass all of the services currently provided by the Company other than
Internet services and NLD services. The ILD License initially granted to the
Company was effective for a five-year period ended March 31, 1991. The term of
the ILD License was subsequently extended from time to time, first until March
31, 1993, then until March 31, 1994, then until March 31, 1999, and most
recently, until March 31, 2004, each time with minor expansions to the scope of
services which the Company was permitted to offer. In January 1999 the Company
received a letter from the Department of Telecommunications stating that the
Company was to be the only entity authorized by Government of India to provide
basic international telephony services to and from India until 2004. However, in
September 2000, the Government announced the early termination of the Company's
monopoly in international telephony services. Thus, instead of ending on March
31, 2004, the Company's monopoly ended on March 31, 2002.

     To offset the likely loss to the Company due to the early termination of
its monopoly, the Government announced a compensation package including a
license to offer domestic long distance services, a Category 'A' all India ISP
license which would enable it to provide Internet access at locations across the
country, and additional compensation if found to be necessary based on the
Government's review. See "Item 3. Key Information -- Risk Factors -- The New
Telecommunications Policy and other regulatory changes with respect to the
telecommunications industry have exposed us to increased competition."

     The ILD License requires the Company to share with DOT revenues from
international telecommunication services in the manner specified by the
Department of Telecommunications from time to time. In February 1997, the
Company and the Department of Telecommunications agreed to a revenue sharing
arrangement, which covered the period from April 1, 1997 to March 31, 2002. The
revenue sharing arrangement provided for the retention or receipt by the Company
of a fixed amount per call minute, and provided the Company with a degree of
protection from adverse changes in settlement rates and exchange rate
fluctuations. Starting in the year ended March 31, 2000, decreases in combined
international call revenue, were shared by the Company and Bharat Sanchar Nigam
Limited with effect from October 1, 2000. New revenue sharing arrangements are
under negotiation with BSNL and MTNL. See "-- Traffic Revenue and Revenue
Sharing Arrangement -- Revenue Sharing Arrangement" and "Item 3. Key Information
-- Risk Factors -- New revenue sharing arrangements between the Company and BSNL
and MTNL are being negotiated."

     The Company began offering Internet access services in August 1995, and the
Company operates 22 Internet access nodes. In November 1998, the Government
opened the Internet service provider market to private competition, and the
Department of Telecommunications instituted a mandatory license requirement for
the provision of Internet services. The Company entered into a license agreement
with the Department of Telecommunications on January 25, 1999 with effect from
the same day, under which the Company was granted a license to provide Internet
services in Delhi, Mumbai, Kolkata, Chennai, Bangalore and Pune on a
non-exclusive basis.

     The Company has been granted a license from the Department of
Telecommunications to provide Internet services on an All-India basis by a
communication dated November 22, 2000. The terms of the Company's Internet
license are generally consistent with the policy for licensing Internet service
providers. The term of the license is 15 years. The Company is not allowed to
assign or transfer its rights under the Internet license without the prior
written consent of the Department of Telecommunications. Although under the
terms of the Internet license the Company is free to fix the tariff charged to
its subscribers, the TRAI as a practice sets the upper ceiling of the tariff for
the provision of Internet access services generally. See "-- Government

                                       40
<PAGE>
Regulations -- Rates." License fees are waived through October 31, 2003, and a
nominal license fee of Rs.1 per annum is payable from November 1, 2003.

     The Department of Telecommunications retains the right to modify the terms
and conditions of the Company's licenses at any time if in its opinion it is
necessary or expedient to do so in the interest of the general public or for the
proper operation of the telecommunications sector. The Department of
Telecommunications may also terminate the licenses before their scheduled
expiration upon breach by the Company of any of its terms. In addition, the
Department of Telecommunications retains certain rights under the licenses to
receive telecommunication services on a priority or emergency basis. Under the
Telegraph Act, the Government and state governments also have the right to take
possession and/or control of the Company's facilities and business in cases of
public emergency or in the interest of public safety. The Government also has
the power to intercept communications carried by the Company, subject to certain
constitutional safeguards.

Rates

     The Company did not control the rates charged to end users of its
international telecommunication services up to March 31, 2002. The rates for
such services were established and collected by the relevant foreign
telecommunications administration or carrier for international calls originating
(and billed) outside of India and by the Bharat Sanchar Nigam Limited for
international calls originating (and billed) in India. The Company and BSNL
shared revenues received by each entity from international calls pursuant to a
revenue sharing arrangement between the two entities, and the Company received
settlement payments with respect to international calls from, or made such
payments to, foreign telecommunications administrations and carriers based on
applicable accounting rates. See "-- Traffic Revenue and Revenue Sharing
Arrangement." With effect from April 1, 2002, ILD operators are authorised to
prescribe and introduce rates for their international telecommunication services
with clearance from the TRAI.

     After the opening up of the international long distance services market to
competition on April 1, 2002, the Company can set the rates to be charged for
international calls, subject to ceilings prescribed by the TRAI. In accordance
with the ceiling tariff announced by the TRAI with effect from April 1, 2002,
there has been a fall of around 16 to 20 percent in the peak tariff. Further, in
response to the tariff announced by other private ILD operators in India, the
Company further reduced tariffs for international calls from July 20, 2002 by
around 41 percent.

     The rates for its specialized services, such as leased lines, Inmarsat
mobile services, Internet access services, electronic mail and facsimile
forwarding services, services through which subscribers may exchange data with
users of other data networks and video conferencing can be prescribed by the
Company, subject to filing with TRAI.

The Tariff Order 1999

     Effective May 1, 1999, the TRAI implemented the telecommunication tariff
Order 1999 ("TTO"), which reduced the tariffs that telecommunications service
providers may charge with the intended effect of protecting consumers by
aligning tariffs that the telecommunications providers may charge with the cost
of the applicable service provided while ensuring the commercial viability of
the various service providers so as to encourage the expansion of the Indian
telecommunications industries. The tariff order reduced the maximum charge per
pulse (or metered unit) from Rs.1.40 to Rs.1.20, increased monthly line rental
rates for high use subscribers, decreased local call pulse durations (thereby
effectively increasing the local call charges) and increased domestic and
international call pulse durations (thereby effectively reducing long distance
and international call charges). The tariff order allows providers the
flexibility to set tariffs below the maximum levels. The tariff order also
specifies further reductions in domestic and international long distance and
internal call tariffs and other tariff adjustments implemented in the year
2000-2001. Accordingly, the TRAI, for the second phase of tariff re-balancing,
has reduced tariffs by 9 to 20 percent for international long distance calls
effective from October 1, 2000 to March 31, 2002. Based on the TRAI order,
Bharat Sanchar Nigam Limited had revised tariffs for long distance and
international call charges effective from October 1, 2000.

ORGANIZATIONAL STRUCTURE

     As of the date hereof, approximately 45 percent of the outstanding equity
of the Company is held by Panatone Finvest Limited, and 26.12 percent is held by
the Government. Panatone Finvest Limited is in turn affiliated with the Tata
Group of companies. Panatone recently acquired this stake as a result of the

                                       41
<PAGE>
Government's decision to sell to a strategic partner through a competitive
bidding process. See "Item 4. Information on the Company -- History and
Development of the Company."

     The current shareholding of Tata Sons and Tata Power in Panatone Finvest
Limited is 59.955% and 40%, respectively, with Tata Steel and Tata Industries
holding the remainder equally.

     The Company has no subsidiaries as of the date of this annual report.

PROPERTY, PLANTS AND EQUIPMENT

Description of Property

     The following table sets forth the principal real properties owned or
leased by the Company that were used in its operations as of March 31, 2002.

<TABLE>
<CAPTION>
LOCATION                   FUNCTION                      AREA (ACRES)    OWNED/LEASED
--------                   --------                      ------------    ------------
<S>                        <C>                           <C>             <C>
MUMBAI
Fort VSB                   Company's registered office        0.3        Owned
                           Mumbai gateway
Prabhadevi LVSB            Undersea cable station             1.8        Owned
                           Switching facilities
Vashi                      International data center         0.51        Leased


NEW DELHI
VSB Connaught Place        Delhi gateway                     1.03        Owned
Greater Kailash            Satellite earth station         126.33        Owned
Chattarpur                 Satellite access node (under    161.93        Owned
                           construction)
Dasghara                   Repeater station                 0.101        Leased
Meerut                     Repeater station                  2.13        Owned

JALANDHAR
JP Nagar                   Jalandhar gateway                0.576        Owned

KOLKATA
Hallisahar                 Kolkata earth station            82.19        Owned
Ultadanga                  Switching facilities              1.67        Owned
SDF Salt Lake              Switching facilities              1.01        Sub-leased

CHENNAI
Adams Road                 Chennai gateway                    2.0        Owned
Korathur                   Earth station                    21.69        Owned

ERNAKULAM
Shive                      Ernakulam gateway                 1.53        Owned


PUNE
Dighi                      Pune gateway                     774.5        Owned
Arvi                       Satellite earth station        228.275        Owned

BANGALORE                  Satellite earth station           0.45        Leased
ITPL                       IT Park                           0.12        Leased

DEHRADUN
Ahmed                      Satellite earth station           75.4        Owned
Purkaji                    Repeater station                 1.138        Owned
Daurala                    Repeater station                 1.784        Owned
Muzaffarnagar              Repeater station                   1.5        Owned
Roorkee                    Repeater station                   1.5        Leased
Mussoorie                  Repeater station                 2.487        Owned
Guldhar                    Repeater station                  4.41        Owned

KANPUR                     Kanpur gateway                     2.0        Leased

PATNA                      Earth Station                     0.18        Leased
</TABLE>

                                       42
<PAGE>
<TABLE>
<CAPTION>
LOCATION                   FUNCTION                      AREA (ACRES)    OWNED/LEASED
--------                   --------                      ------------    ------------
<S>                        <C>                           <C>             <C>
BHUBANESHWAR               Earth Station                     0.23           Leased

GUWAHATI                   Earth Station                     0.05           Leased

PONDICHERRY
IT Park                    Internet Node                     0.02           Rental
Mission Street             Internet Node                     0.04           Leased

COIMBATORE                 Internet Services                 0.03           Leased

COCHIN
Kokinada                   International Gateway             1.53           Owned
Parampali Nagar            CR Office                         0.08           Leased

THIRUANANTHPURAM           VSAT Station                      0.02           Rented

HYDERABAD
Saifabad                   Gateway Earth Station             0.05           Leased
Hitech City                Gateway Earth Station             0.05           Owned
Seringapaly                Gateway Earth Station             2.00           Owned

GANDHINAGAR                Gateway                           0.32           Leased

GOA                        Internet Node Earth Station       0.05           Leased

INDORE                     Internet Node Earth Station       0.02           Leased
</TABLE>

In addition to the above, the Company has staff quarters at the locations
wherever it has its operations.

     None of the above described properties are subject to a major lien or
encumbrance.

     Upon the establishment of the Company in 1986, all of the assets and
properties of the Overseas Communications Service were transferred to it by an
order of the Government of India which contemplated that details of the transfer
would be set forth in a transfer deed. A formal transfer deed has not been
executed. While the order of the Government was sufficient to transfer to the
Company valid title to all of the non-real estate assets of the Overseas
Communication Service, Indian law generally requires that transfers of real
estate be evidenced by a formal deed of transfer and registered with a central
land registry within a period of four months after the transfer in order to
protect the transferee against subsequent claims by third parties. Since the
transfer of the real estate from the Overseas Communications Service to the
Company has not been executed or registered, the Company has been advised by its
Indian counsel that, even if a transfer deed is registered, the Company's title
to its real property may be subject to potential claims of third parties in
respect of the period prior to the date of registration of the deed. The Company
does not anticipate any such claims. In clarifications from the Government, it
has been conveyed through a letter in October 2001 that vide provisions of
Section 90 of the Registration Act, 1908 there is no need to register any formal
transfer deed or deed of sale for such transfer of assets and the letter can be
considered as authority for transfer of all the fixed assets of Overseas
Communication Services situated in separate states and cities of India to the
Company.

     Indian law requires payment of stamp duty (at rates which vary among
states) on instruments which effect transfer of title to real estate. The formal
transfer deed, if executed, may be subject to stamp duty at rates ranging from
approximately three to 14 percent of the fair market value of the real estate
transferred. Such stamp duty may be payable by the Company.

     As of March 31, 2002, the Company operated from twelve gateway switches
located at Mumbai, Kolkata, Delhi, Chennai, Ernakulam, Gandhinagar, Jalandhar
and Kanpur which provide substantially all the connectivity for the Company's
services to the international telecommunications network. The Company's
international traffic is carried via international satellite links and or by
undersea cables.

     The following table sets forth, as of March 31, 2002, the major facilities,
links and circuits at each main gateway, at the two earth stations at Bangalore
one earth station each located near Pune, Hyderabad, Coimbatore and Patna.

                                       43
<PAGE>
<TABLE>
<CAPTION>
                                                                                NUMBER OF EFFECTIVE CIRCUITS
                                                                               ------------------------------
GATEWAY             FACILITIES         LINK                                    VOICE      DATA*     INTERNET*
-------             ----------         ------------------------------------    -----      -----     ---------
<S>                 <C>                <C>                                     <C>        <C>       <C>
MUMBAI              Vikram-1           Intelsat Atlantic Ocean Region          2,092         30            0
                    Satellite          ("AOR")
                    Earth Station      Satellite
                                       (359 degrees)(1)

                    Vikram-2           Intelsat Indian Ocean Region ("IOR")    1,890         16            0
                    Satellite          Satellite
                    Earth Station      (60 degrees)(1)

                    Vikram-4           Intelsat TOR Satellite                      0          0            0
                    Satellite Earth    (66 degrees)(1)
                    Station

                    Vikram-5           Intelsat IOR Satellite                    208          5          480
                    Satellite          (64 degrees)(1)
                    Earth Station

                    Jawahar Satellite  Intelsat IOR Satellite                      0          0            0
                    Earth Station      (64 degrees)(1)

                    Arvi Land Earth    Immarsat IOR Satellite                    120          0            0
                    Station            (64.5 degrees)(1)

                    India-U.A.E.       Mumbai-Fujairah (U.A.E.)                1,029          0            0
                    Undersea Cable
                    System (Gulf
                    Cable)

                    SEA-ME-WE 2        Singapore, Indonesia, Sri Lanka,        4,355        529            0
                    Undersea Optical   India, Djibouti, Saudi Arabia,
                    Fibre Cable        Egypt, Turkey, Cyprus, Italy,
                    System             Tunisia, Algeria and France

                    Fibre Optic Link   Japan, Korea, China, Hong King,         2,841        906          780
                    Around the Globe   Thailand, Malaysia, India, U.A.E.,
                    Undersea Optical   Egypt, Saudi Arabia, Italy, Spain
                    Fibre Cable        and United Kingdom
                    System

                    SMW-3 Undersea     Japan, S. Korea, China, Taiwan,         1,144      6,065        7,560
                    Optical Fibre      Hong Kong, Philippines, Vietnam,
                    Cable System       Brunei, Malaysia, Singapore,
                                       Thailand, Indonesia, Australia, Sri
                                       Lanka, India, Pakistan, UAE, Oman,
                                       Saudi Arabia, Egypt, Djibouti,
                                       Cyprus, Turkey, Greece, Italy,
                                       Portugal, France, UK, Belgium,
                                       Germany



HYDERABAD                              Intelsat IOR Satellite                      0        126           60
                                       (66 degrees)(1)
KOLKATA             Kolkata            Intelsat IOR Satellite                      0          4            0
                    Satellite Earth    (62 degrees)(1)
                    Station
</TABLE>

                                       44
<PAGE>
<TABLE>
<CAPTION>
                                                                                NUMBER OF EFFECTIVE CIRCUITS
                                                                               ------------------------------
GATEWAY             FACILITIES         LINK                                    VOICE      DATA*     INTERNET*
-------             ----------         -------------------------------------   -----      -----     ---------
<S>                 <C>                <C>                                     <C>        <C>       <C>

                    Bose-1 Satellite   Intelsat IOR Satellite                    855        101            2
                    Earth Station      (64 degrees)(1)

                    Bose-4 Satellite   Intelsat IOR Satellite                    120          1           60
                    Earth Station      (66 degrees)(1)

DELHI               Ahmed Satellite    Intelsat IOR Satellite                  2,336        311          480
                    Earth Station      (62 degrees)(1)

                    Ahmed Satellite    Intelsat IOR Satellite                      0          0            0
                    Earth Station(2)   (57 degrees)(1)

                    Greater Kailash    Intelsat IOR Satellite                    247         39            0
                    Satellite          (64 degrees)(1)
                    Earth Station

                    New Delhi          Intelsat IOR Satellite                      0          0            0
                    Satellite Earth    (64 degrees)(1)
                    Station

                    New Delhi, VSAT    Intelsat IOR Satellite                      0        281            0
                    Coaxial Cable      The Department of                          30          0            0
                    System             Telecommunications

CHENNAI             Indian Ocean       Chennai-Penang (Malaysia)                 313          0            0
                    Commonwealth
                    Undersea Cable
                    ("IOCOM")

                    Chennai            Intelsat IOR Satellite                      0          0        1,080
                    Satellite Earth    (66 degrees)(1)
                    Station(2)

                    Thiruvalluvar      Intelsat IOR Satellite                  1,127        138            0
                    Satellite Earth    (64 degrees)(1)
                    Station

ERNAKULAM           Ernakulam          Intelsat IOR Satellite                    854        0              0
                    Satellite Earth    (60 degrees)(1)
                    Station

                    SMW-3 Undersea     Japan, S. Korea, China, Taiwan,         1,608      2,063            0
                    Optical Fibre      Hong Kong, Philippines, Vietnam,
                    Cable System       Brunei, Malaysia, Singapore,
                                       Thailand, Indonesia, Australia, Sri
                                       Lanka, India, Pakistan, UAE, Oman,
                                       Saudi Arabia, Egypt, Djibouti,
                                       Cyprus, Turkey, Greece, Italy,
                                       Portugal, France, UK, Belgium,
                                       Germany

COIMBATORE          Coimbatore         Intelsat IOR Satellite                      0          0           60
                    Satellite Earth    (66 degrees)
                    Stattion
</TABLE>
                                       45
<PAGE>
<TABLE>
<CAPTION>
                                                                                NUMBER OF EFFECTIVE CIRCUITS
                                                                               ------------------------------
GATEWAY             FACILITIES         LINK                                    VOICE      DATA*     INTERNET*
-------             ----------         ------------------------------------    -----      -----     ---------
<S>                 <C>                <C>                                     <C>        <C>       <C>
GANDHINAGAR         Gandhinagar        Intelsat IOR Satellite                    210          0            0
                    Satellite          (64 degrees)(1)
                    Earth Station

JALANDHAR           Jalandhar          Intelsat IOR Satellite                  1,061          0            0
                    Satellite Earth    (64 degrees)(1)
                    Station

BANGALORE
                    Sanjay Nagar       Intelsat IOR Satellite                      0        207            0
                    Earth Station      (62 degrees)(1)

                    Information        Intelsat IOR Satellite                      0         80            0
                    Technology Park    (64 degrees)(1)
                    Ltd. Satellite
                    Earth Station

PUNE                Information        Intelsat AOR Satellite                      0          5            0
                    Technology Park    (359 degrees)(1)
                    Ltd. Satellite
                    Earth Station

KANPUR              Kanpur-1           Intelsat IOR Satellite                    268          0           30
                    Satellite Earth    (64 degrees)(1)
                    Station


PATNA               Patna Satellite    Intelsat IOR Satellite                      0          0           30
                    Earth Station      (60 degrees)(1)
TOTAL EFFECTIVE CIRCUITS                                                      22,708     10,907       10,622
                                                                              ======     ======       ======
</TABLE>
----------

*   - Circuits in terms of 64KB (Data & Internet Only)

(1)  The satellite degrees referred to in the table denote the degree at which
     the Company's earth station antenna point at the satellite and at which
     they transmit and receive communications.

(2)  Facilities used exclusively for television broadcasting services.

Circuits

     As of March 31, 2002, the Company operated 22,708 effective international
voice circuits, of which 11,388 were satellite circuits and 11,320 were cable
circuits. The Company operated 10,907 data circuits of which 1,344 were
satellite circuits and 9,563 were cable circuits. The Company also operated
10,622 Internet circuits of which 2,282 were satellite circuits and 8,340 were
cable circuits. As of such date, the Company had an international subscriber
dialing facility with 237 international destinations enabled through 83 foreign
administrations and carriers. From April 1, 2001 to March 31, 2002, the Company
recorded an average of 452 international paid minutes per day per circuit,
compared to an international norm of approximately 250 paid minutes per day per
circuit.

     The Company's policy is to maintain a sufficient number of international
circuits so that no more than one percent of call attempts are blocked due to
lack of an international circuit. The Company, through the acquisition of
additional circuits, is also seeking to reduce the average number of
international paid minutes carried per day per circuit from 452 to levels closer
to the international norm.

     The Company meets periodically with most of its correspondent foreign
telecommunications administrations and carriers, either bilaterally or through
conferences organized by satellite or cable consortia, to project future demand
for international circuits between India and other countries, to allocate
capacity on

                                       46
<PAGE>
existing telecommunications satellites and undersea cables and to plan for
expanding capacity to meet future demand.

     Satellites. As of March 31, 2002, the company operated a total of 11,388
satellite voice circuits and 1,344 satellite data circuits through 13 earth
stations at its eight gateway locations, two earthstations located at Bangalore
and one each located at Pune and Hyderabad. Satellite capacity is obtained from
the International Telecommunications Satellite Organization ("Intelsat") and the
International Mobile Satellite Organization ("Inmarsat"), two satellite
consortia established by national telecommunications administrations for the
purpose of owning and operating satellite communication systems. As of March 31,
2002, the Company had an interest of approximately 5.41 percent in Intelsat.
Telecommunications administrations and carriers from 148 countries have
investment shares in Intelsat. Intelsat charges international telecommunications
administrations and carriers for the use of their satellites in order to meet
its operating expenses and amortization costs. Any surplus then remaining is
distributed annually to consortium members based on their respective ownership
share in Intelsat.

     Intelsat had been privatized with effect from July 18, 2001. The holding
company is known as Intelsat Ltd., incorporated in Bermuda. After conversion,
the Company holds 5.41 percent (9,015,314 shares of par value US$3 each) in
Intelsat. In March 2000, the US Congress passed the ORBIT Act, which addressed
the privatization of intergovernmental satellite organisations, including
Intelsat and its spin-off company, New Skies Satellite ("NSS"). As per the US
ORBIT Act, Intelsat announced an IPO to be conducted before the end of 2002,
with the option to extend beyond that date. The Company has been informed that,
in order to comply with the provisions of the US ORBIT Act, Intelsat has plans
to float an IPO with rights to the existing shareholders to participate in a
secondary offering of shares. The Company has decided to place its holding in
the secondary offering. However, there is no certainty about the timing of the
IPO, the price at which the offer would be sold, or the number of shares that
could be sold in the secondary offering. The Managing Director of the Company is
a member of the Board of Directors of Intelsat Ltd.

     During 1998-99, Intelsat as part of its restructuring process incorporated
New Skies Satellite (NSS) as a corporation with limited liability under the laws
of Netherlands and transferred certain assets and liabilities to NSS accounted
for at historic book values. In return, NSS issued 10,000,000 shares of common
stock of par value Dutch Guilder 1 each to Intelsat. Intelsat distributed
9,000,000 shares of NSS in the year 1998-99 and 1,000,000 shares of NSS in
1999-2000 in proportion to the investment share of its members at the time of
distribution. Consequently, the Company acquired 301,215 shares in 1998-99 and
43,000 shares in 1999-2000. NSS announced a 10:1 stock split prior to its
initial public offer (IPO) in October 2000 and redesignated its shares from
Guilders to Euros. Thus, the Company's total holding in NSS as of March 31, 2002
stands at 3,442,150 ordinary shares of par value 0.05 Euros each. The market
value per share as of March 28, 2002 was US$5.80 per share.

     The intergovernmental organization Inmarsat was privatized on April 15,
1999. The Company's shareholding in Inmarsat Ventures Plc, (formerly Inmarsat
Holdings Limited) is in proportion to its investment share in privatization
which is 2.02%. The Company has been informed that in order to comply with the
provisions of the US ORBIT Act, Inmarsat has plans to float an IPO with rights
to the existing shareholders to participate in a secondary offering of shares.
The Company has decided to place its holding in the secondary offering. However,
there is no certainty about the timing of the IPO, the price at which the offer
would be sold, or the number of shares that could be sold in the secondary
offering.

     Undersea Cables. As of March 31, 2002, the Company operated a total of
11,320 effective voice circuits and 9,563 data circuits on undersea cables
landing in India. The Company has ownership interests and access to capacity in
undersea cables interconnecting the South Asia region, as well as those linking
the region with Europe, North America and Asia/Pacific. The Company holds a 47.5
percent ownership interest in the analog IOCOM cable between Chennai, India and
Penang, Malaysia and as of March 31, 2002 was operating 313 of its total
capacity of 480 circuits. The Company also holds a 50 percent ownership interest
in an analog undersea cable between Mumbai and Fujairah, U.A.E., which has a
total capacity of 1,380 circuits, of which 1,029 were being used as of March 31,
2002.

     The Company also holds an interest of approximately 10 percent in the South
East Asia-Middle East-Western Europe 2 optical fiber cable, which lands in 13
countries between Singapore and France, including India. This cable, which
became fully operational in June 1994, was operating 4,355 voice and 529 data
effective high speed circuits from Mumbai as of March 31, 2002. In addition to
expanding significantly the number of international circuits available to the
Company, this cable has also led to an improvement in the

                                       47
<PAGE>
Company's international services, since fiber optic cables provide relatively
higher quality transmission than satellites and enhance the Company's ability to
offer high quality, high capacity digital data transmission services.

     The Company entered into a Construction and Maintenance Agreement with
other international telecommunications carriers for the construction of the
South East Asia-Middle East-Western Europe 3 (SEA-ME-WE 3), a high capacity
undersea optical fiber cable extending from Germany to Japan and Australia that
lands in a total of 33 countries (including India, with landing points at Mumbai
and Cochin). The Company made an investment of Rs.2.23 billion (US$45.67
million) in this cable and the cable has been commissioned. The Company has
acquired a 3.50 percent interest in the cable. This cable operates at a total of
1,144 effective Voice and 6,065 Data circuits from Mumbai as also 1,608
effective Voice and 2,063 Data circuits respectively from Cochin as of March
2002. The Company also operates 7,560 Internet circuits on this cable system
from Mumbai.

     The Company has in addition purchased 4,650 circuits in the Fibre Optic
Link Around the Globe (FLAG-Europe Asia) cable system, a high capacity fiber
optic cable with 19 landings in 13 countries (including India) linking Asia and
Europe. This cable system was commissioned in December 1997. As of March 31,
2002, the Company operated 2,841 effective voice circuits and 906 data circuits
on this cable system. The Company also utilised 780 Internet circuits on this
cable.

     The company has also invested Rs.2.31 billion (US$47.31 million) in South
African Telephony-S/West-African Submarine Cable/South Asia Far East
(SAT-3/WASC/SAFE) cable. Total length of the link is 27,850 kms with a design
life of 25 years.

     The Company also has ownership interests in various undersea cables that do
not land in India, but which provide connections between various locations
served by the Company. These cables include the Trans-Atlantic 12/13 Cable
(connecting the United Kingdom, France and the United States), the Trans-Pacific
Cable (connecting the United States, Canada and Japan), TAT 14 (connecting
United Kingdom, France, Germany and the United states), Japan-US Cable
(connecting the United States and Japan), the Asia Pacific Cable (Segment S-J)
(connecting Singapore and Japan) and the Columbus 2-America 1 Cable (connecting
Italy and the United States). In addition to its direct ownership interests in
such undersea cables, the Company has purchased indefeasible rights of use
guaranteeing access to other undersea cables in the Atlantic and Pacific Oceans.

Switches

     As of March 31, 2002, the Company had the capacity to connect 37,271
international telephone, 2,386 telex and 64 telegraph circuits or channels to
its switches. Substantially all of the Company's telephone capacity is digital,
provided by 12 digital switches installed at the Company's eight gateway
locations. Each gateway is linked to the other gateways via dedicated digital
lines leased from Bharat Sanchar Nigam Limited, which permits multiple routing
options for each call and provides the system with back-up capability in case of
equipment failure or over-crowding at any gateway. The switches operated by the
Company are supplied by Ericsson and NEC.

     With a view to obtaining secure and competitive supplies, the Company
procures equipment from a wide range of sources, and the Company considers that
in all major areas of procurement there are sufficient alternative suppliers to
make it unlikely that interruption of supply from any one source would cause
more than a temporary delay in the implementation of the Company's plans.

Other Facilities

     In addition to the circuits and switches described above, the Company's
infrastructure includes various facilities used primarily for its specialized
and value-added services. As of March 31, 2002, the Company owned a high
capacity underground fiber optic cable between Mumbai and Arvi via Pune,
approximately 57 earth stations, 4 terrestrial radio communication wires
connecting the Company's international switches with its earth stations and a
variety of hardware used for the Company's 22 Internet access nodes.

Demerger of Surplus Land

                                       48
<PAGE>
     Under the terms of the Share Purchase Agreement and the Shareholders'
Agreement, Panatone Finvest Limited has agreed to cause the Company to hive off
or demerge certain land the Company owns at Pune, Kolkata, New Delhi and Chennai
(the "Surplus Land") into a separate company (the "Resulting Company") pursuant
to a scheme of arrangement. The Surplus Land consists of properties which the
Company was not actively using for any business purpose at the time of the
Government divestment to Panatone Finvest Limited. The Surplus Land, which is
described further in such agreements, consists of the following:

<TABLE>
<CAPTION>
------------------------------------------------------- --------
LOCATION                                                AREA (IN
                                                        ACRES)
------------------------------------------------------- --------
<S>                                                      <C>
Dighi - Pune                                             524.00
------------------------------------------------------- --------
Halishahar - Kolkata                                      35.19
------------------------------------------------------- --------
Chattarpur - Delhi                                        58.00
------------------------------------------------------- --------
Greater Kailash - Delhi                                   70.00
------------------------------------------------------- --------
Padianallur - Chennai                                     85.94
------------------------------------------------------- --------
TOTAL                                                    773.13
------------------------------------------------------- --------
</TABLE>


     Pursuant to a scheme of arrangement, shares of the Resulting Company would
be distributed pro rata to the existing shareholders of the Company. Such a
scheme would have to be approved by three-fourths in value of the creditors and
of the shareholders of the Company present and voting at a meeting of the
creditors and members, respectively. Indian counsel has advised that it
generally takes about 4-6 months from the time such a scheme of arrangement is
filed before the High Court until the time that a decree of demerger passed by
the High Court is filed with the Registrar of Companies.

     As part of the consideration for its purchase of a portion of the
Government's Shares in the Company, Panatone Finvest Limited agreed to transfer
to the Government, without further consideration, a portion of the shares of the
Resulting Company that it receives, such portion to be proportionate to the
number of Shares of the Company purchased by Panatone Finvest Limited from the
Government. In the event that the demerger does not occur or the Company sells
or develops the Surplus Land, Panatone has agreed to pay to the Government a pro
rata portion of any benefit accruing to the Company as a result of such sale or
development, as determined by an appraiser. In its tender/open offer, Panatone
Finvest Limited made similar undertakings to the persons who tendered their
Shares of the Company and whose Shares were accepted for payment.

     It is possible that the Company and the Resulting Company may have to pay
significant capital gains taxes and stamp taxes if the proposed demerger is
found by the Indian courts not to fit within the statutory definition of
"demerger" under The Income Tax Act, 1961. The Company believes these taxes
could be substantial. To avail of favorable income tax treatment, the Company
would have to create a separate realty undertaking comprising the surplus lands.
The realty undertaking would then be transferred to the Resulting Company under
the scheme of arrangement. Because the Surplus Lands are separately situated and
do not generate separate revenues, they may be found not to constitute a "realty
undertaking" under the relevant Indian law, and therefore may be found not to be
a "demerger" as well. However, a statutory demerger may also include a split or
reconstruction according to such conditions as the Government may issue in the
Official Gazette. To date, the Government has not issued such conditions
pertaining to the Surplus Lands, and the Company has not requested that the
Government do so, though it may in the future so request.

     The High Court's decree, if and when passed, will have to be submitted to
the stamp authorities for adjudication to ascertain the amount of stamp duty
which has to be paid by the Company. Under the Bombay Stamp Act, 1958 the stamp
duty shall not exceed an amount equal to 7% of the true market value of the
immovable property located within the State of Maharashtra transferred by the
Company to the Resulting Company or an amount equal to 0.7% of the aggregate of
the market value of the shares issued by the Resulting Company and the amount of
consideration paid for such demerger, whichever is higher. Under the Income-tax
Act, the expenditure incurred by the Company wholly and exclusively for the
purpose of demerger shall be allowed as a deduction equal to 1/5th of such
expenditure for five successive years beginning from the year in which demerger
takes place.

     No time period is specified in the Shareholders' Agreement or the Share
Purchase Agreement for the demerger of the Surplus Lands. The Company cannot
predict if and when the demerger will take place.

                                       49
<PAGE>
     CAPITAL EXPENDITURES

     See "Item 5. Operating and Financial Review and Prospects -- Capital
          expenditures."

     INVESTMENTS

     See "Item 5. Operating and Financial Review and Prospects -- Investments."

     SALES AND MARKETING

     The Company has embarked upon the process of creating a sales and solutions
organization for the corporate market in India. The team is intended to
initially cover the principal cities of India such as Mumbai, Delhi, Bangalore,
Chennai, Hyderabad, Kolkata, Ernakulam, Jalandhar and Kanpur. In all theses
cities the Company intends to have its own sales-force that consists of a direct
team and a channel team. The direct team will cover about 250 prime corporate
accounts across the country. Small and medium businesses will be covered through
channels that will be managed by the channels team. The channel partners will be
those that are currently system integrators or IT vendors who already have a
presence in the small and medium enterprise (SME) market-place. Due to the
convergence of IT and telecommunications and the complexities involved, the
Company is also creating a solutions team which will provide support for complex
projects. These teams will be supported by Customer Relations Mangement. The
Company is also in the process of differentiating its offerings by providing
various service levels among its different offerings.

     LEGAL PROCEEDINGS

     The Indian tax authorities have taken the position that the Company is not
entitled to a tax deduction it took in the year ended March 31, 1995 for license
fees paid by it to the DOT. The Indian tax authorities claim that the Company
owes approximately Rs.2.68 billion, Rs.3.51 billion, Rs.2.74 billion, Rs.3.39
billion and Rs.2.40 billion in respect of taxes due (including interest, but
excluding penalties) in connection with the license fees for the years ended
March 31, 1994, 1995, 1996, 1997 and 1998, respectively. Tax refunds otherwise
due to the Company for subsequent years, amounting to approximately Rs.8.42
billion, have been applied by the Indian income tax authorities to a portion of
this disputed claim. In addition, the Company has paid the tax authorities
Rs.1.74 billion with respect to this claim. However, the outstanding amount
continues to accrue interest at a rate of one and one fourth percent per month.
The Company disputed this claim and lodged an appeal with the Commissioner of
Income-tax (Appeals) - I, Mumbai for each of the relevant years. The Company
subsequently appealed to the Income-tax Appellate Tribunal, Mumbai as the
Commissioner of Income-tax (Appeals) - I. Mumbai denied the Company's claim with
respect to the year ended March 31, 1995. The appeals with respect to the other
years are still pending with the Commissioner of Income-tax (Appeals) - I,
Mumbai. On September 14, 2000, the Income-tax Appellate Tribunal, Mumbai issued
an order in the Company's favor and held that the license fee paid by the
Company to the DOT is an allowable tax deductible expenditure under the Income
Tax Act. Consequent to this order, the refund due to the Company was adjusted
against the demand due for the subsequent years. In addition, the Company can
request the Commissioner of Income-tax (Appeals) - I, Mumbai to expedite the
orders for the other years.

     The Income Tax Department has the right to appeal against the order of the
Income Tax Appellate Tribunal in the High Court within a period of 120 days from
the date of the order. The Company has received communications from the High
Court to the effect that the department has disputed this claim of the Company
in the High Court. If the Company loses that case, the tax authorities may make
the Company liable for similar claims for subsequent years and this could result
in an aggregate potential liability of approximately Rs.21.62 billion (US$442.76
million) including interest, but excluding penalties, thereon as of March 31,
2002 and additional amounts for the periods thereafter. The Company has been
advised by independent Indian counsel that it believes that the Company has a
strong case with respect to this claim. The tax authorities have allowed license
fees paid by the Company to DOT as an allowable expenditure for the year ended
March 31, 1999. The Company believes that the license fees may be allowed as a
deductible expenditure in assessments of the pending years.

     The Indian tax authorities have also taken the position that the Company is
not entitled to a tax benefit claimed by it in the years ended March 31, 1996,
1997, 1998 and 1999 with respect to certain of its profits which the Company
claims were generated by an enterprise engaged in infrastructure development.
The Indian tax authorities claim that the Company owes approximately Rs.0.23
billion, Rs.0.58 billion, Rs.1.13 billion and Rs.1.49 billion in respect of
taxes due in connection with such profits for the years ended March 31, 1996,
1997,

                                       50
<PAGE>
1998 and 1999, respectively. The Company disputes this claim and has lodged an
appeal with the Commissioner of Income-tax (Appeals) - I, Mumbai. The
outstanding amount of the claim continues to accrue interest at a rate of one
and one fourth percent per month. If the Company loses its case, the tax
authorities may make similar claims for subsequent years, resulting in an
aggregate potential liability of approximately Rs.6.71 billion (US$137.42
million) including interest, but excluding penalties thereon as of March 31,
2002 and additional amounts for periods thereafter. The Company believes that it
has a reasonable basis for its claim and that its appeal may succeed.

     Furthermore, the Indian tax authorities have taken the position that the
Company has not offered for tax certain reimbursements it received from the
Government during the year ended March 31, 1994. The Indian tax authorities
claim that the Company owes approximately Rs.2.55 billion including interest but
excluding penalties in respect of taxes due in connection with such
reimbursements for the year ended March 31, 1994. The Company has paid to the
tax authorities Rs.1.90 billion with respect to this claim. The Company disputes
this claim and has lodged an appeal with the Commissioner of Income Tax
(Appeals) - I, Mumbai. If the Company loses its case, the Company's aggregate
potential liability would be approximately Rs.2.55 billion (US$52.22 million)
including interest, but excluding penalties, thereon as of March 31, 2002. The
Company believes that it has a reasonable basis for its claim and that its
appeal may succeed.

     Consequently, the Company has not made provision for the potential
liability arising from these claims.

     In addition, under the Indian taxation laws, the Company is subject to
wealth tax on the net wealth of the Company since fiscal 1996 onwards. The
Company is in the process of getting its assets valued under the Indian tax
laws. Pending such valuation, the Company is not in a position to determine its
potential wealth tax liability and has not made any payment towards such
liability as of this date.

     In addition, the Company is involved in lawsuits, claims, investigations
and proceedings which arise in the normal course of its business. There are no
such matters pending that the Company expects to be material to its business.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion of the results of operations and financial
condition of the Company for the fiscal years ended March 31, 2000, 2001 and
2002 should be read in conjunction with the financial statements of the Company
and the Notes thereto included elsewhere herein. The following discussion is
based on the Company's audited financial statements for the fiscal years ended
2000, 2001 and 2002, which have been prepared by the Company in accordance with
US GAAP.

CRITICAL ACCOUNTING POLICIES ADOPTED IN PREPARING FINANCIAL STATEMENTS


     A.   USE OF ESTIMATES

               Material estimates included in the financial statements that are
          susceptible to change include traffic revenue, allowances for doubtful
          debts with respect to trade and other receivables and valuation of
          investments that are unlisted.

     B.   TRADE AND OTHER RECEIVABLES

               Trade and other receivables are stated at their expected
          realizable values, net of allowance for doubtful debts. Amounts
          payable to, and receivable from, the same carriers and the BSNL are
          shown on net basis, where the legal right of set-off exists and shall
          be settled with the respective carriers and BSNL on net basis.

     C.   INVESTMENTS

               The Company accounts for its investments in respect of listed
          securities at market value while the unlisted securities are listed at
          cost less permanent impairment, if any. Gains and losses on such
          securities, net of applicable taxes, are reported in other
          comprehensive income, a separate component of shareholders' equity.

                                       51
<PAGE>
     D.   PROPERTY, PLANT AND EQUIPMENT

               Property, plant and equipment are reflected at cost, net of
          accumulated depreciation. All costs relating to the acquisition and
          installation of property, plant and equipment are capitalized.
          Depreciation is charged on property, plant and equipment on a
          straight-line basis from the time they are available for use, over
          their estimated economic lives as given below:



<TABLE>
<CAPTION>
                                         YEARS
<S>                                      <C>
Buildings                                61
Plant and machinery:
  Earth stations                         12
  Cables including IRU's                 10-25
  Exchanges                              12
  Other network equipment                 8
  Office equipment                       20
Computers                                 6
Furniture, fittings and vehicles         10-15
</TABLE>


               Depreciation on freehold land is not provided while the land
          acquired on lease is amortized over the period of the lease.

     E.   IMPAIRMENT OF LONG LIVED ASSETS

               The Company evaluates the carrying value of its property and
          equipment. Whenever the estimated future cash flows (undiscounted and
          without interest) expected to result from the use of an asset are less
          than the carrying amount of the asset, an impairment loss is
          recognized. Impairment loss is measured based on fair value of the
          asset computed using discounted cash flows as if the asset is expected
          to be held and used. Measurement of an impairment loss for an asset
          held for sale would be based on fair market value less estimated costs
          to sell.

     F.   REVENUE RECOGNITION

               Revenues for long distance telephone services are recognized at
          the end of each month based upon minutes of incoming or outgoing
          traffic completed in such month. Revenues from leased circuits are
          recognized at agreed tariffs with the customers. Revenues from
          Internet services are recognized based on usage by subscribers.

               Income from Intelsat, Ltd. is accounted as dividend income and
          included as part of non-operating income.

     G.   OPERATING COSTS

               The principal components of the Company's operating costs are
          network and transmission costs, license fees paid to the DoT and other
          operating costs.

               Network and transmission costs include payments to BSNL for
          incoming traffic and to foreign administrations and carriers for
          outgoing traffic, as well as the cost of leasing transmission
          facilities, including lines from BSNL and satellite circuits from
          satellite companies. The Company pays a proportion of the amounts
          received from BNSL to transit and destination foreign administrations.
          Similarly, a proportion of the payments from the foreign
          administrations are paid to BSNL for completing calls within India.

               Under the revenue sharing agreement with DoT/BSNL, which was
          valid upto March 31, 2002, the Company paid to DoT a license fee of
          Rs.0.25 million per annum on average circuits commissioned.

               Other operating costs include general and administrative expenses
          other than network and transmission costs and license fees.

                                       52
<PAGE>
OPERATING RESULTS

     The following table sets forth information regarding the Company's
operating data for the fiscal years ended March 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>
                                                       YEARS ENDED MARCH 31,
                                                    --------------------------
<S>                                                 <C>        <C>        <C>
                                                    2000       2001       2002
Paid telephone minutes (millions)
Incoming                                           1,773      2,161       2545
Outgoing                                             473        527        575
   Total                                           2,246      2,688      3,120

Ratio (incoming/outgoing)                           3.75       4.10       4.43

Average revenue received from Bharat Sanchar
 Nigam Limited for outgoing telephone calls
(Rs./minute)                                       38.85      34.81      28.09
Average settlement rate received from foreign
 administrations for incoming telephone calls
(Rs./minute)                                       25.47      21.60      16.31
(US$/minute)(1)                                     0.58       0.46       0.33
</TABLE>

----------

(1)  Translated at the average of the Market Rates on the last day of each month
     during the period which was Rs.43.65, Rs.46.85 and Rs.48.83 per US$ for
     the fiscal years ended March 31, 2000, 2001 and 2002 respectively.

     The following table sets forth information regarding the Company's
operating revenue for the fiscal years ended March 31, 2000, 2001 and 2002.


<TABLE>
<CAPTION>
                                       YEARS ENDED MARCH 31,
                              --------------------------------------
                              2000        2001      2002       2002
                             ----------------------------    --------
                                                              (US$ IN
                                   (RS. IN MILLIONS)         MILLIONS)
                             ----------------------------    --------
<S>                          <C>         <C>       <C>         <C>
OPERATING REVENUE
Incoming telephone           45,161      46,674    41,503      849.95
Incoming telex                  128         112        70        1.43
Outgoing telephone           18,375      18,345    16,153      330.80
Outgoing telex                  175         112        88        1.80
Leased circuits               2,986       3,140     3,584       73.40
Internet access services      2,095       2,980     2,305       47.20
Other revenue                   720         553     1,347       27.59
                             ------      ------    ------    --------
Total traffic revenue        69,640      71,916    65,050    1,332.17
                             ======      ======    ======    ========
</TABLE>

     Revenue

     The principal components of the Company's revenue are (1) payments from
foreign telecommunications administrations and carriers for incoming traffic
(prior to deducting amounts payable by the Company for outgoing traffic), which
are typically denominated mostly in Special Drawing Rights ("SDRs") or Dollars,
and (2) payments from Bharat Sanchar Nigam Limited for outgoing traffic (prior
to deducting amounts payable by the Company for incoming traffic), which are
denominated in Rupees. The major factors influencing revenue include traffic
volume and its composition in terms of incoming and outgoing calls and country
of origination and destination, the revenue sharing arrangement with Bharat
Sanchar Nigam Limited, accounting rates negotiated with foreign administrations
and the Rupee/SDR and the Rupee/Dollar exchange rates. See "Item 4. Information
on the Company -- Traffic Revenue and Revenue Sharing Arrangement." Our previous
revenue sharing arrangement expired on March 31, 2002, and we are currently in
the process of negotiating new arrangements with BSNL and MTNL. See "Item 3. Key
Information -- Risk Factors -- New revenue sharing arrangements between the
Company and BSNL and MTNL are being negotiated."

     Telephone Revenue. Revenue from telephone traffic historically has
constituted the most substantial component of the Company's revenue, accounting
for 91.23, 90.41 percent and 88.63 percent of revenue for the fiscal years,
2000, 2001 and 2002, respectively. The decline in telephone traffic revenue as a
percentage of total

                                       53
<PAGE>
revenue is due primarily to a significant decline in the settlement rates and to
the increasing revenue contribution from specialized and value-added services
such as Internet access and international leased lines.

     Telephone revenue grew by 2.33 percent during fiscal 2001 and decreased by
11.32 percent during fiscal 2002, in spite of increases in total call volumes
(as measured in paid telephone minutes) of 19.68 percent and 16.07 percent,
respectively. Incoming call revenue increased by 3.35 percent during fiscal 2001
primarily as a result of an increase in incoming call volume of 21.88 percent
and the depreciation of the Rupee against the SDR and the Dollar which increased
in Rupee terms the amount of foreign currency received from foreign
administrations and carriers. Incoming call revenues decreased by 11.08 percent
during fiscal 2002 despite an increase in incoming call volumes of 17.77 percent
due to reductions in accounting rates between the Company and foreign
administrations and carriers. The average settlement rate received from foreign
administrations and carriers in respect of incoming telephone traffic for fiscal
2000, 2001 and 2002 decreased in Dollar terms from US$0.58, to US$0.46 and to
US$0.33 per minute, respectively as a result of decreases in accounting rates
applicable to the Company.

     Outgoing call revenue decreased by 0.16 percent and 11.95 percent in fiscal
2001 and fiscal 2002 despite an increase in call volume of 11.42 percent and
9.11 percent respectively (due primarily to decreases in the applicable
accounting rates.)

     The increases in incoming call volume in fiscal 2001 and fiscal 2002 were
attributable, among other things, to decreases in average tariff rates for
international calls charged by foreign administrations and carriers, including
those in the United States. See "Item 4. Information on the Company -- Traffic
Revenue and Revenue Sharing Arrangement -- Payments to and from Foreign
Administrations or Carriers." Increases in incoming call volume are also
attributable to the increasing volume of calls from India made through call-back
and home country direct services, which calls are billed outside of India and
are therefore treated as incoming calls. The increases in outgoing call volume
in such periods were attributable principally to the expansion and upgrading of
the domestic telephone network which resulted in improved access to the
Company's international telephone services and to the reduction in tariffs for
outgoing international calls.

     The ratio of incoming to outgoing calls increased steadily from 3.75 in
fiscal 2000, to 4.10 in fiscal 2001 and to 4.43 in fiscal 2002. Such increases
in the ratio of incoming to outgoing calls are due, among other things, to
continuing decreases in the average tariff for international calls charged by
foreign administrations and carriers, including those in the United States, as a
result of which it is cheaper to place a long-distance call to India from an
international destination than to place an international long-distance call from
India, and the effect of call-back and home country direct services.

     The Company is facing further declines in international accounting rates,
particularly with US carriers. See "Item 4. Information on the Company --
Traffic Revenue and Revenue Sharing Arrangements -- Payments to and from Foreign
Administrations or Carriers." Declines in tariff rates for telephone services
offered by the Company, including an approximately 27 percent reduction in peak
international call tariffs for fiscal 2000, were mandated by the TRAI. TRAI
mandated a further 23 percent reduction in peak international call tariffs over
the fiscal two year period ended 2002. The TRAI has since mandated a further
reduction in tariffs of 16 to 20 percent for international long distance calls.
Such reduced tariffs were between October 1, 2000 and March 31, 2002. See "Item
3. Key Information -- Risk Factors -- Tariff Reform." While further declines in
tariff rates can be expected to increase traffic volume, there can be no
assurance that lower tariff rates will not lead to unfavorable revisions to the
revenue sharing arrangement with BSNL or MTNL or otherwise adversely affect the
Company's business and prospects.

     Telex Revenue. Total revenue from telex services decreased from Rs.303
million in fiscal 2000, to Rs.224 million in fiscal 2001 and to Rs.158 million
(US$3.24 million) in fiscal 2002. Such decreases are attributable principally to
a decline in telex traffic volume as customers switched from using telex
services to other forms of communication such as facsimile, telephone and
E-mail. Telex revenue accounted for 0.44 percent of total traffic revenues in
fiscal 2000, 0.31 percent in fiscal 2001 and 0.24 percent in fiscal 2002.

     Leased Circuits Revenue. Revenue from leased circuits increased by 5.16
percent during fiscal 2001 and by 14.14 percent during fiscal 2002. Increase in
revenue from leased circuits is lower as compared to the increase in the number
of customers due to the drastic reduction in tariffs over the period.

     Internet Access Services Revenue. Internet access services were first
introduced by the Company in India in August 1995. Revenues from Internet
services were Rs.2,095 million, Rs.2,980 million and Rs.2,305

                                       54
<PAGE>
million (US$47.20 million) during fiscal 2000, fiscal 2001 and fiscal 2002,
respectively, an increase of 42.24 percent and decrease of 22.65 percent during
fiscal 2001 and fiscal 2002, respectively. The Company's Internet subscribers,
exclusive of customers connected across the remote access nodes of Bharat
Sanchar Nigam Limited, have grown from 528,535 as of March 31, 2001 to 586,638
as of March 31, 2002. The decrease in Internet revenues despite an increase in
customers is due to the drastic reduction in tariffs over the period. The
Company was initially the sole provider of Internet services in India. However,
the Government announced a new Internet policy in November 1998 which allows the
entry of private Internet service providers. As of March 31, 2002, there were
approximately 442 licensed Internet service providers in India. See "Item 4.
Information on the Company -- Industry Overview -- Recent Developments."

     In late 1998, the Department of Telecommunications instituted a mandatory
license requirement for the provision of Internet services. The Company and the
Department of Telecommunications entered into a license agreement on January 25,
1999, with effect on the same day, under which the Company was granted a license
to provide Internet access service in six cities on a non-exclusive basis.
Subsequently, as a part of the compensation package for the removal of monopoly
two years ahead of schedule, an all-India licence was provided.

     Other Revenue. Other traffic revenues include revenues from services such
as the transmission of television signals, telegraph services, electronic mail
and facsimile forwarding services, services through which subscribers may
exchange data with users of other data networks, electronic data interchange,
and video conferencing. Revenue from these sources accounted for 1.03 percent of
revenues in fiscal 2000, 0.77 percent in fiscal 2001 and 2.07 percent in fiscal
2002.

     Accounting Rates. The Company has concluded its annual negotiations with
its US correspondent carriers and with other major foreign correspondent
carriers and administrations with respect to accounting rates applicable to
fiscal 2002. The Company recorded revenues on its incoming calls and costs on
its outgoing calls for the year ended March 31, 2002 at the accounting rates at
which final settlement was reached.

     Income from Satellite Consortia. Consequent to the corporatization of
Intelsat during July 2001, any returns would be in the form of dividends and no
such income has been received during fiscal 2002. Prior to its corporatization,
Intelsat used to periodically distribute a portion of the surplus generated to
its shareholders in proportion to their holdings.

Operating Costs

     The principal components of the Company's operating costs are network and
transmission costs, other operating costs and the license fee paid to Department
of Telecommunications.

     The following table sets forth certain information regarding the components
of the Company's operating costs for the fiscal years ended March 31, 2000, 2001
and 2002.

                                       55
<PAGE>
<TABLE>
<CAPTION>
                                                                   YEARS ENDED MARCH 31,
                                                           --------------------------------------
                                                           2000       2001       2002       2002
                                                           -----      -----     ------     ------
                                                                                           (US $)
<S>                                                        <C>        <C>       <C>        <C>
Average revenue sharing rate paid to Bharat Sanchar
 Nigam Limited for incoming telephone calls
(Rs./minute)                                              16.46      12.53      8.53        0.17
Average settlement rate paid to foreign
 administrations for outgoing telephone calls
(Rs./minute)                                               26.33      23.81     16.84
(US$/minute)(1)                                             0.60       0.51      0.34

Network and transmission costs
(in millions)
Transmission costs to Bharat Sanchar Nigam Limited(2)   Rs.29,254     27,341    23,050     472.05
Transmission costs to foreign administrations(3)           13,374     13,866    10,721     219.56
Other transmission costs                                    2,993      3,943     5,806     118.90
                                                           ------     ------    ------    -------
Total                                                      45,621     45,150    39,577     810.51
Other operating costs including depreciation (in
 millions)                                                  4,156      4,752     6,701     137.23
Government levy/license fee                                 4,712      5,022     5,393     110.44
(in millions)
                                                           ------     ------    ------    -------
Total operating costs (in millions)                        54,489     54,924    51,671    1058.18
                                                           ======     ======    ======    =======
</TABLE>

----------

(1)  Translated at the average of the market rates on the last day of each month
     during the period which was Rs.43.65, Rs.46.85 and Rs.43.83 per US$1.00 for
     the fiscal years ended March 31, 2000, 2001 and 2002 respectively.

(2)  Out of such amounts, payments in respect of incoming telephone calls
     amounted to Rs.29,176 million, Rs.27,079 and Rs.21,699 million (US$444.38
     million) for the fiscal years ended March 31, 2000, 2001 and 2002
     respectively.

(3)  Of such amounts, payments in respect of outgoing telephone calls amounted
     to Rs.12,455 million, Rs.12,578 and Rs.9,684 million (US$198.32 million)
     for the fiscal years ended March 31, 2000, 2001 and 2002 respectively.

     Network and Transmission Costs. Network and transmission costs include
transmission costs to Bharat Sanchar Nigam Limited for incoming traffic and to
foreign administrations and carriers for outgoing traffic (See "Item 4.
Information on the Company -- Traffic Revenue and Revenue Sharing Arrangement"),
as well as the cost of leasing certain transmission facilities, including lines
from Bharat Sanchar Nigam Limited and satellite circuits from Intelsat, Inmarsat
and New Skies Satellites, NV.

     Transmission costs to Bharat Sanchar Nigam Limited for incoming traffic
decreased by 6.54 percent and by 15.69 percent during fiscal 2001 and fiscal
2002 respectively, principally due to decrease in settlement rates being higher
than the increase in volume. The average revenue sharing rate paid to Bharat
Sanchar Nigam Limited per minute for incoming traffic decreased over this period
from Rs.12.53 per minute to Rs.8.53 per minute. Payments to foreign
administrations and carriers for outgoing traffic increased by 3.68 percent in
fiscal 2001 due to an increase in call volume being higher than the increase in
settlement rates and decreased by 22.68 percent in fiscal 2002 due to the lower
settlement rates. The average settlement rate paid to foreign administrations
and carriers decreased in US Dollar terms from US$0.60 per minute to US$0.51 per
minute and to US$0.34 per minute, and in Rupee terms from Rs.26.33, to Rs.23.81
and to Rs.16.84 per minute for the fiscal years ending March 31, 2000, 2001 and
2002 respectively. This decrease was primarily as a result of decreases in
accounting rates applicable to the Company.

     The cost of leasing transmission facilities increased by 31.74 percent and
47.25 percent during fiscal 2001 and fiscal 2002 respectively. Such increases
are attributable primarily to increases in both incoming and outgoing call
volume, which necessitated leases of additional lines and satellite circuits.

     Other Operating Costs. Other operating costs consist of staff costs,
depreciation, energy costs and other costs, including for repairs, maintenance
and marketing. During fiscal 2001 other operating costs increased by 14.34
percent and 41.01 percent during fiscal 2002 due principally to greater
expenditures relating to repairs, maintenance, spares, electricity charges,
marketing, increases in staff costs, and other costs.

     License Fee. For fiscal 2000, fiscal 2001 and fiscal 2002 under the
revenue sharing arrangement with the Department of Telecommunications, the
Company paid to the Department of Telecommunications a license fee of Rs.0.25
million per circuit commissioned on average per annum. Under this revenue
sharing arrangement with the Department of Telecommunications, the amount of the
license fee paid by the Company increased by

                                       56
<PAGE>
6.58 percent during fiscal 2001 and by 7.39 percent during fiscal 2002 due to
the addition of commissioned circuits.

Operating Profit

     The following table sets forth certain information regarding the Company's
gross telephone and operating profits for the fiscal years ended March 31, 2000,
2001 and 2002.

<TABLE>
<CAPTION>
                                                             YEARS ENDED MARCH 31,
                                             ------------------------------------------------
                                               2000           2001          2002        2002
                                             --------       --------      --------      -----
                                                                                         US $
<S>                                          <C>            <C>           <C>           <C>
Gross profit on telephone services (in
 millions)(1)                                Rs.21,174      Rs.25,251     Rs.26,273     538.05
Gross profit per telephone minute                 9.43           9.39          8.42       0.17
  Incoming(2)                                     9.02           9.07          7.78       0.16
  Outgoing(2)                                    12.52          10.94         11.25       0.23
  Operating profit (in millions)                15,888         18,152        13,379     273.99

</TABLE>

----------

(1)  Telephone revenue net of revenue sharing payments to Bharat Sanchar Nigam
     Limited for incoming telephone calls and settlement payments to foreign
     administrations and carriers for outgoing telephone calls after prior year
     adjustments.

(2)  The actual gross profit per telephone minute with respect to incoming calls
     from, and outgoing calls to, particular countries varies depending on the
     settlement rates negotiated with the telecommunications administrations or
     carriers of such countries.

     Gross profit on telephone services increased 19.25 percent and 4.05 percent
in fiscal 2001 and fiscal 2002 respectively. These increases are due primarily
to increases in total traffic volume of 19.68 percent and 16.07 percent for the
fiscal year ended March 31, 2001 and fiscal year ended March 31, 2002
respectively. The increase in gross profit on telephone services in fiscal 2001
and fiscal 2002 was despite a 0.42 percent and 10.33 percent decrease in gross
profit per telephone minute due to drastic reductions in settlement rates and
changes in traffic patterns.

     Gross profit per telephone minute is the average of gross profit per
telephone minute for incoming and outgoing traffic, weighted by the ratio of
incoming to outgoing calls. Gross profit per telephone minute for incoming
traffic increased by 0.55 percent during fiscal 2001 and decreased by 14.22
percent during fiscal 2002. In fiscal 1998 under the revenue sharing arrangement
that came into effect, payments between the Company and Bharat Sanchar Nigam
Limited over the course of the fiscal year were based on settlement rates and
exchange rates prevailing at the beginning of the fiscal year. See "Item 4.
Information on the Company -- Traffic Revenue and Revenue Sharing Arrangement."
During fiscal 2001 and fiscal 2002, the fall in the depreciation of the Rupee
against the SDR and the US Dollar exceeded the fall in the average incoming
settlement rates. Consequently, the payments made by the Company in fiscal 2001
and fiscal 2002 were based on lower incoming settlement rates than the Company
actually received from foreign administrations and carriers during the course of
fiscal 2001 and fiscal 2002. Coupled with the larger fall in the value of the
Rupee relative to incoming settlement rates, the Company earned a gross profit
per incoming telephone minute that was higher than the Rs.10 per minute provided
under the revenue sharing agreement.

     Gross profit per telephone minute for outgoing traffic decreased by 12.62
percent in fiscal 2001 and increased by 2.83 percent in fiscal 2002. In fiscal
2000, fiscal 2001 and fiscal 2002, the Company was operating under a revenue
sharing arrangement as per which the payments between the Company and Bharat
Sanchar Nigam Limited were based on settlement rates and exchange rates
prevailing at the beginning of the fiscal year. See "Item 4. Information on the
Company -- Traffic Revenue and Revenue Sharing Arrangement." During fiscal 2001
and fiscal 2002, the depreciation of the Rupee against the SDR and the US Dollar
exceeded the fall in average outgoing settlement rates. Consequently, the
payments received by the Company from Bharat Sanchar Nigam Limited in fiscal
2000, 2001 and fiscal 2002 were based on lower outgoing settlement rates than
the Company actually paid to foreign administrations and carriers during the
course of the year. Coupled with the lesser depreciation of the Rupee against
the SDR and the US Dollar relative to the fall in average outgoing settlement
rates, the Company earned a gross profit per outgoing telephone minute that was
higher than the Rs.10 per minute provided under the prevailing revenue sharing
arrangement.

                                       57
<PAGE>

     Operating profit increased by 14.25 percent during fiscal 2001 due
primarily to an increase in gross profit on telephone services as well as
revenues from leased circuits, and Internet access services, offset by increases
in rent of transmission facilities and other operating costs. Operating profits
decreased by 26.29 percent during fiscal 2002 due to increase in losses borne by
the Company in connection with the revenue sharing arrangement with BSNL and
lower settlement rates during the year.

Investment and Other Income

     The following table sets forth certain information regarding the components
of the Company's investment and other income for the fiscal years ended March
31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>
                                                 YEARS ENDED MARCH 31,
                                          ----------------------------------
                                          2000      2001      2002     2002
                                          -----    -----     -----    ------
                                                                        US$
                                                     (IN MILLIONS)
<S>                                         <C>    <C>       <C>      <C>
Revenue from Intelsat                       737    1,160         -         -
Revenue from Inmarsat                         -        -         -         -
Profit / (loss) on sale of investments       86       (5)       (2)    (0.04)
Forex gains (Net)                         1,449    2,878       939     19.23
Interest Income (Net)                     1,676    3,963     4,380     89.70
Other income                                292      185       434      8.89
                                          -----    -----     -----    ------
Total                                     4,240    8,181     5,751    117.78
                                          =====    =====     =====    ======
</TABLE>

     The principal components of investment and other income are net foreign
exchange gains (comprised mainly of net gains arising from period-end
retranslations of settlement payments owed by foreign administrations and
carriers, as well as net gains realized upon receipt of such settlement
payments, and net gains arising from the retranslation of period-end cash
balances) and revenues from Intelsat and Inmarsat.

     In April 1999, Inmarsat was restructured as a corporate entity and the
Company was allotted shares in lieu of its investment in Inmarsat. Consequently,
any future revenues from this investment will be in the form of dividends.
Investment and other income increased by 64.89 percent in fiscal 2001 primarily
due to an increase of compensation from Intelsat on account of special
distributions and higher foreign exchange gains. However, there was a decrease
of 67.50 percent in fiscal 2002 due primarily to Intelsat paying no dividends
that year. In July 2001 Intelsat was privatized and the Company was allotted a
shareholding of about 5.42 percent in Intelsat Limited.

Net Interest

     Net interest represents the net interest amount receivable or payable by
the Company on its bank and other deposits and borrowings under its overdraft
facilities. Net interest receivable increased to Rs.3,963 million during fiscal
2001 from Rs.1,676 million in fiscal 2000 and again increased to Rs.4,380
million (US$89.70 million) during fiscal 2002 due to an improvement in the
Company's cash position.

Income before Taxation

     Income before taxation increased by 30.22 percent from Rs.19,331 million in
fiscal 2000 to Rs.25,173 million in fiscal 2001. Income before taxation
decreased by 24.01 percent in fiscal 2002 to Rs.19,130 million (US$391.77
million).

Income Tax Expense

     The Company's effective tax rates (including dividend tax of Rs.84 million,
Rs.105 million and Rs.3,634 million respectively) were 32.28 percent, 38.74
percent and 50.15 percent for fiscal 2000, fiscal 2001 and fiscal 2002. The
effective tax rates excluding dividend tax were 31.85 percent, 38.32 percent and
31.15 percent respectively compared to the effective statutory rate of 38.50,
39.55 and 35.70 percent for all such fiscal years. Such differences between the
effective tax rates and the effective statutory rates were attributable to
things such as exchange gains treated as capital receipts for income tax
provision and provision in diminution in the value of investments not allowed
for tax.

     The Indian tax authorities have taken the position that the Company is not
entitled to a tax deduction it took in the year ended March 31, 1995 for license
fees paid by it to the DOT. The Indian tax authorities claim

                                       58
<PAGE>
that the Company owes approximately Rs.2.68 billion, Rs.3.51 billion, Rs.2.74
billion, Rs.3.39 billion and Rs.2.40 billion in respect of taxes due (including
interest, but excluding penalties) in connection with the license fees for the
fiscal years ended March 31, 1994, 1995, 1996, 1997 and 1998, respectively. Tax
refunds otherwise due to the Company for subsequent years, amounting to
approximately Rs.8.42 billion, have been applied by the Indian income tax
authorities to a portion of this disputed claim. In addition, the Company has
paid the tax authorities Rs.1.74 billion with respect to this claim. However,
the outstanding amount continues to accrue interest at a rate of one and one
fourth percent per month. The Company disputed this claim and lodged an appeal
with the Commissioner of Income-tax (Appeals) - I, Mumbai for each of the
relevant years. The Company subsequently appealed to the Income-tax Appellate
Tribunal, Mumbai as the Commissioner of Income-tax (Appeals) - I, Mumbai denied
the Company's claim with respect to the year ended March 31, 1995. The appeals
with respect to the other years are still pending with the Commissioner of
Income-tax (Appeals) - I, Mumbai. On September 14, 2000 the Income-tax Appellate
Tribunal, Mumbai issued an order in the Company's favor and held that the
license fee paid by the Company to the DOT is an allowable tax deductible
expenditure under the Income Tax Act. Consequent to this order, the refund due
to the Company is adjusted against the demand due for the subsequent years. In
addition, the Company can request the Commissioner of Income-tax (Appeals) - I,
Mumbai to expedite the orders for the other years.

     The Income Tax Department has the right to appeal against the order of the
Income Tax Appellate Tribunal in the High Court within a period of 120 days from
the date of the order. The Company has received communications from the High
Court to the effect that the department has disputed this claim of the Company
in the High Court. If the Company loses that case, the tax authorities may make
the Company liable for similar claims for subsequent years and this could result
in an aggregate potential liability of approximately Rs.21.62 billion (US$0.44
billion) including interest, but excluding penalties, thereon as of March 31,
2002 and additional amounts for the periods thereafter. The Company has been
advised by independent Indian counsel that it believes that the Company has a
strong case with respect to this claim. The tax authorities have allowed license
fees paid by the Company to DOT as an allowable expenditure for the year ended
March 31, 1999. The Company believes that the license fee may be allowed as a
deductible expenditure in assessments of subsequent years also.

     The Indian tax authorities have also taken the position that the Company is
not entitled to a tax benefit claimed by it in the fiscal years ended March 31,
1996, 1997, 1998 and 1999 with respect to certain of its profits which the
Company claims were generated by an enterprise engaged in infrastructure
development. The Indian tax authorities claim that the Company owes
approximately Rs.0.23 billion, Rs.0.58 billion, Rs.1.13 billion and Rs.1.49
billion in respect of taxes due in connection with such profits for the fiscal
years ended March 31, 1996, 1997, 1998 and 1999, respectively. The Company
disputes this claim and has lodged an appeal with the Commissioner of Income-tax
(Appeals) - I, Mumbai. The outstanding amount of the claim continues to accrue
interest at a rate of one and one fourth percent per month. If the Company loses
its case, the tax authorities may make similar claims for subsequent years,
resulting in an aggregate potential liability of approximately Rs.6.71 billion
(US$0.14 billion) including interest, but excluding penalties, thereon as of
March 31, 2002 and additional amounts for periods thereafter. The Company
believes that it has a reasonable basis for its claim and that its appeal may
succeed.

     Furthermore, the Indian tax authorities have taken the position that the
Company has not offered for tax certain reimbursements it received from the
Government during the fiscal year ended March 31, 1994. The Indian tax
authorities claim that the Company owes approximately Rs.2.55 billion including
interest but excluding penalties in respect of taxes due in connection with such
reimbursements for the fiscal year ended March 31, 1994. The Company has paid to
the tax authorities Rs.1.90 billion with respect to this claim. The Company
disputes this claim and has lodged an appeal with the Commissioner of Income Tax
(Appeals) - I. Mumbai. If the Company loses its case, the Company's aggregate
potential liability would be approximately Rs.2.55 billion (US$0.05 billion)
including interest, but excluding penalties, thereon as of March 31, 2002. The
Company believes that it has a reasonable basis for its claim and that its
appeal may succeed.

     In addition, under the Indian taxation laws, the Company is subject to
wealth tax on the net wealth of the Company since fiscal 1996 onwards. The
Company is in the process of getting its assets valued under the Indian tax
laws. Pending such valuation, the Company is not in a position to determine its
potential wealth tax liability and has not made any payment towards such
liability as of this date.

     Consequently, the Company has not made provision for the potential
liability arising from these claims.

Net Income

     Net income increased by 17.81 percent in fiscal 2001 from Rs.13,091 million
in fiscal 2000 to Rs.15,422 million in fiscal 2001. Net income decreased by
38.16 percent in fiscal 2002 to Rs.9,537 million (US$195.31 million) from
Rs.15,422 in fiscal 2001.

                                       59
<PAGE>
     RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The principal
difference between this Statement and Issue 94-3 relates to its requirements for
recognition of a liability for a cost associated with an exit or disposal
activity. This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized
at the date of an entity's commitment to an exit plan. This Statement also
establishes that fair value is the objective for initial measurement of the
liability. The provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002. The Company will apply
the provisions of SFAS No. 146 when it incurs a liability for costs associated
with an exit or disposal activity.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal capital resources are generated from internal
accruals which in turn are generated from operations. In addition, the Company
borrows funds for short term requirements from time to time in order to meet
temporary working capital deficits. The Company believes that there will be no
liquidity problem in the near future and that the Company will be able to meet
its liquidity requirements by ploughing back its internal accruals.

     As of March 31, 2002, the Company's cash and cash equivalents were Rs.7,881
million (US$161.40 million) as against Rs.2,200 as at March 31, 2001, reflecting
an increase of Rs.5,681 million (US$116.34 million) mainly due to an increase in
time deposits with maturities ranging from 9 to 90 days.

     The Company's working capital has decreased from Rs.53,733 million as of
March 31, 2001 to Rs.28,056 million (US$574.56 million) as of March 31, 2002.
This decrease is primarily due to the following reasons:

     a)   Decrease in short-term investments from Rs.46,050 million as on March
          31, 2001 to Rs.17,469 million (US$357.75 million) as on March 31,
          2002, due to an additional outflow of Rs.33,508 million (US$686.22
          million) towards dividends (including tax) net of short-term
          borrowings.
     b)   Reduction in trade receivables from Rs.17,347 million as on March 31,
          2001 to Rs.14,380 million (US$294.49 million) as on March 31, 2002,
          due to a reduction in settlement rates with respect to basic services
          and a reduction in tariff in value added services apart from a
          reduction in credit period from 100 days to 91 days.
     c)   During the year, the Company has made short term borrowings of
          Rs.5,751 million (US$117.78 million) to disburse its dividends as the
          funds were kept in short-term investments yielding higher interest
          rates
     d)   Trade payables decreased from Rs.11,309 million as on March 31, 2001
          to Rs.5,728 million (US$117.30 million) as on March 31, 2002 due
          mainly to a reduction in settlement rates with respect to basic
          telephony and a reduction in the credit period from 100 days to 62
          days.

     The Company does not have any off balance sheet financing arrangements.

     CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS:


<TABLE>
<CAPTION>
CONTRACTUAL OBLIGATIONS                             Rs. in millions
-------------------------------------------------------------------
                                  PAYMENT DUE BY PERIOD
-------------------------------------------------------------------
<S>                  <C>       <C>          <C>     <C>     <C>
Particulars           Total    Less than 1    1-3    4-5     After
                                 year        years  years   5 years
-------------------------------------------------------------------
Capital Commitments  2,117.59   1,767.64    238.30  111.65    NIL
-------------------------------------------------------------------
</TABLE>

                                       60
<PAGE>
     OTHER COMMERCIAL COMMITMENTS

<TABLE>
<CAPTION>
                                                         Rs. in millions
------------------------------------------------------------------------
                                           PAYMENT DUE BY PERIOD
------------------------------------------------------------------------
<S>                      <C>      <C>         <C>       <C>      <C>
Particulars              Total    Less than    1-3       4-5      After
                                    1 year    years     years    5 years
------------------------------------------------------------------------
Letters of Credit        41.54      41.54       NIL      NIL       NIL
------------------------------------------------------------------------
Bank Guarantees          36.24      21.38     13.63     1.23       NIL
------------------------------------------------------------------------
Total                    77.78      62.92     13.63     1.23       Nil
------------------------------------------------------------------------
</TABLE>

     The Company is not involved in any trading activities.


CAPITAL EXPENDITURES

Process of the Company's Capital Investment Plans

     Indian government agencies and public sector companies are required to
implement capital expenditure programs through a series of five year plans.
Prior to February 2002, when the Company was a public sector company, its five
year plans were typically subject to mid-term review, which historically led to
material changes in the Company's estimates of both the amount and the types of
capital expenditures on specific projects. The materiality of these changes was
compounded by the Company's weaknesses in preparing budgets and appraising and
monitoring capital expenditure projects. In addition, the aggregate capital
expenditures under any five year plan were often revised upward or downward as
was necessitated by changes in the telecommunications market and the evolving
needs of the Company.

     Subsequent to the privatization of the Company in February 2002, the
Company is no longer required to follow the Governmental system of five year
plans. Hence, the Tenth Five-Year Plan prepared earlier under Government
guidelines has been abandoned.

     As a result of privatization as well as the deregulation of the industry,
the Company's capital expenditure opportunities have also changed. Prior to
privatization, the Company was somewhat hampered in its ability to plan and
undertake capital investments. The Company was unable to obtain licenses, such
as for the provision of national long distance ("NLD") services, which cut it
off from several potential areas of development. The Company was also unable to
tie up or form joint ventures with other companies in the telecom sector - which
would have allowed the Company to take advantage of other potential development
opportunities - because many of these companies were potential bidders for the
Company in its pending privatization. Now that privatization is complete, the
Company's opportunities are expanded, and the Company is in the process of
reviewing and crystalizing its business plan and capital expenditures.

     The Company henceforth intends to prepare and modify as necessary annual
capital expenditure plans to reflect the changing competitive market. The
Company hopes to achieve continuous growth and enhancement in existing telephony
business and Internet dial up services while simultaneously backward integrating
by entering into the NLD market. The Company also expects to introduce newer
technologies like ATM and VoIP in its network. The Company also expects to equip
its infrastructure to provide new value added services like Bandwidth on Demand,
VPN services, and Broadband Services.


Planned Capital Expenditures

     The Company has planned the following projects, which it believes are
ambitious, to increase the revenues from the existing service portfolio and to
generate new revenue streams. These plans are subject to ongoing review and
modification by the Board of Directors in light of changing competitive
conditions and the Company's financial condition and results of operations.

                                       61
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                       PROJECT OUTLAY DURING 2002-03
                                              TOTAL PROJECT COST      -------------------------------
SCHEME                                           RS. MILLION          RS. MILLION         US$ MILLION
-----------------------------------------------------------------------------------------------------
<S>                                           <C>                     <C>                 <C>
International Long Distance (ILD) - Voice            4,109               1,709               35.00
-----------------------------------------------------------------------------------------------------
National Long Distance (NLD) - Voice                20,097               4,770               97.69
-----------------------------------------------------------------------------------------------------
Value Added Service (VAS)                              420                 420                8.60
-----------------------------------------------------------------------------------------------------
Internet Services                                      865                 865               17.71
-----------------------------------------------------------------------------------------------------
TV Uplinking                                           340                  24                4.91
-----------------------------------------------------------------------------------------------------
Information Technology Facilities                    1,368               1,084               22.20
-----------------------------------------------------------------------------------------------------
Network Management System (NMS)                        160                 160                3.28
-----------------------------------------------------------------------------------------------------
Miscellaneous Technical Equipments                     100                 100                2.05
-----------------------------------------------------------------------------------------------------
Capital Contribution                                 4,000                 459                9.40
-----------------------------------------------------------------------------------------------------
Investments                                            183                 183                3.75
-----------------------------------------------------------------------------------------------------
Research, Development & Training                        78                  78                1.60
-----------------------------------------------------------------------------------------------------
Logistics - Utilities                                  882                 793               16.24
-----------------------------------------------------------------------------------------------------
Logistics - Civil                                      715                 715               14.64
-----------------------------------------------------------------------------------------------------
Spill over payments                                  3,710                 746               15.28
-----------------------------------------------------------------------------------------------------
     Total                                          37,027              12,106              252.35
-----------------------------------------------------------------------------------------------------
</TABLE>

     The principal areas of investment envisaged for the year 2002-03 are as
follows:


     International Long Distance: Expansion of Switching Facilities.

     The Company plans to invest Rs.1.7 billion (US$0.03 billion) for the
augmentation of switches in order to enhance the traffic carrying capacity at
Ernakulam, Mumbai, Chennai and Jallandhar. The provision has been made for the
establishment of two additional VOIP international gateway exchanges at
Bangalore and Hyderabad in the annual plan. The Company has made a total
provision of Rs.154.7 million (US$3.17 million) in the annual plan.


     National Long Distance:

     The Company has been given a license to operate NLD services as
compensation for the early ending of its ILD monopoly. The Company has plans to
cover the licensed area with a fiber optic backbone, which shall be used by the
company to provide advanced and flexible voice, video and data services. The
Company was required to provide a performance bank guarantee for Rs.4,000
million (US$81.92 million) against its obligations under the NLD license
agreement. Under the license agreement, the Company is committed to roll out its
network by establishing point of presence in 322 Long Distance Charging Areas
(LDCA) across the country in a phased manner as stipulated below:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                TIME PERIOD (FROM        CUMULATIVE PERCENTAGE OF NATIONAL        CUMULATIVE PERCENTAGE OF
               EFFECTIVE DATE I.E     COVERAGE AT LDCA LEVEL WHERE POINT OF     COVERAGE OF UNECONOMIC AND
PHASE            8TH FEB. 2002)          PRESENCE HAS TO BE ESTABLISHED                REMOTE AREAS
----------------------------------------------------------------------------------------------------------
<S>            <C>                    <C>                                        <C>
I                   2 years                            15                                     2
----------------------------------------------------------------------------------------------------------
II                  3 years                            40                                     4
----------------------------------------------------------------------------------------------------------
III                 4 years                            80                                     7
----------------------------------------------------------------------------------------------------------
IV                  7 years                           100                                All(43)
----------------------------------------------------------------------------------------------------------
</TABLE>

     Each phase as above is taken as an independent obligation and upon
fulfillment of the network roll out obligations by establishment of point of
presence in the requisite LDCAs, Rs.1000 million (US$20.48 million) would be
released from the Company's performance bank guarantee for each phase completed.

     The Company has very recently commenced NLD services from limited cities,
using available resources or leasing capacity from other operators. Besides
this, the Company has plans of building its own NLD fiber optic backbone
infrastructure over the next three years, which would meet the obligations
stipulated under the NLD license.

     Accordingly, the Company has plans to lay a fiber optic backbone connecting
an estimated 141 LDCAs in the next three year time frame. For coverage of all
322 LDCAs in a phased manner over a 10 year time frame, the Company plans to
invest an estimated Rs.20,097 million (US$411.57 million). As part of the
rollout, the Company has already commenced establishment of its fiber optic
backbone work.

     In the current financial year, plans are afoot to invest Rs.4.77 billion
(US$0.10 billion) in bringing up the above network.

                                       62
<PAGE>
     ATM Backbone Project:

     The Company is commissioning a wholly owned, low-cost, fully integrated
Broadband Asynchronous Transfer Mode (ATM) Network, which will enable more
efficient transmission and switching of voice and data traffic. This network
will provide the capability to support guaranteed high quality, flexible,
differentiated voice and data services to Indian consumers. The Company believes
that these switches will enable the Company to integrate and allocate bandwidth
for voice, data and other broadband traffic by improving bandwidth efficiency,
and provide the Company with the ability to keep pace with the convergence of
voice, data and multimedia. The initial expenditure, which was covered under the
erstwhile Ninth Five Year Plan, is Rs.360 Million (US$7.37 million). In the
revised annual capex plan, Rs.266 million (US$5.45 million) has been provisioned
for expansion of this network.


     Information Technology Facilities:

     The Company is gearing up to face competition in providing advanced trouble
free services to its customers by upgrading and implementing state of the art IT
Facilities such as a Billing Mediation System, a Customer Relationship
Management System, and a Centralized Network Management System. Rs.1,528 million
(US$ 31.29 million) has been provisioned for these facilities for the current
financial year.


     Capital Contributions and Acquisition of IRUs.

     The Company has made provisions for investments of Rs.459 million (US$9.40
million) in IRU's, representing cable capacity on systems in which there are no
landing rights in India, during the financial year 2002-03.


Prior Period Capital Expenditures

     The Company's Ninth Five Year Plan (the "Ninth Plan"), covering the period
from April 1997 to March 2002 (the period covered by the Department of
Telecommunications' investment program for India's Ninth Five Year Plan), was
originally adopted by the Board of Directors of the Company (the "Board of
Directors") in November 1996. The original Ninth Plan provided for total capital
expenditures by the Company of approximately Rs.50.3 billion (US$1.03 billion).
In preparation for the mid-term review of the Ninth Plan by the Board of
Directors, the Ninth Plan was revised by management of the Company in January
1999 and an increase was proposed in total capital expenditures from Rs.50.3
billion (US$1.03 billion) to Rs.73.19 billion (US$1.5 billion). The proposed
increase primarily reflected increases resulting from the depreciation of the
Rupee against the US Dollar, substantial changes in the scale and scope of
certain individual projects caused by changes in the telecommunications
industry, the evolving needs of the Company and imprecise estimations and
inaccuracies in the information provided in the original Ninth Plan. See
"-- Financial and Management Accounting and Reporting Systems." The Ninth Plan
was further revised by management and at the mid-term review of the Ninth Plan
in September 2000 the Board of Directors approved the newly revised plan which
provided for total capital expenditures of Rs.59.1 billion (US$1.21 billion).
Upon completion of the Ninth Plan in March 2002, the Company had made actual
capital expenditures of approximately Rs.21.98 billion (US$0.45 billion).

     The following table sets forth the actual capital expenditures of the
Company under the revised Ninth Plan by type of investment for the periods
indicated.

                                       63
<PAGE>

<TABLE>
<CAPTION>
                                                     YEAR ENDED MARCH 31,
                                    ------------------------------------------------------
                                   1998      1999      2000      2001      2002     TOTAL
                                   -----     -----     -----     -----     -----    ------
                                                     (MILLIONS OF RUPEES)
<S>                                <C>       <C>       <C>       <C>       <C>      <C>
Transmission                       1,062     3,513     1,464     1,620     1,279     8,938
Switching                            294       202        50        11       245       802
Specialized and value-added
 services                            323       662       659       609       225     2,478
Satellite mobile services            521        62         6         0         0       589
Restoration/replacement               29        41        36        58        15       179
Technical and office equipment       247       330       153       300       108     1,138
Buildings and civil works            180       163       582       529        42     1,496
Capital contributions to
 Intelsat/Inmarsat and IRUs          786       671       922       309        66     2,754
Other projects and investments     1,135     1,972       442        36        22     3,607
                                   -----     -----     -----     -----     -----    ------
    Total                          4,577     7,616     4,314     3,472     2,002    21,981
                                   =====     =====     =====     =====     =====    ======
</TABLE>


     INVESTMENTS

     United Telecom Limited (UTL)

     The Company, along with Telecommunication Consultants of India Limited
("TCIL"), Mahanagar Telephone Nigam Limited ("MTNL"), and Nepal Ventures Private
Limited has formed a Joint Venture company called "United Telecom Limited" to
provide basic services in Nepal through the use of wireless in local loop
technology (WLL). UTL is expected to start services in this financial year. The
Company has an equity stake of 26.60 percent in UTL. The Company has provisioned
Rs.183.3 million (US$3.75 million) towards contributions to equity to UTL for
fiscal 2003. The total investment of the Company in UTL will be Rs.400 million
(US$8.19 million) for 26.60 percent of the total equity.

     At March 31, 2002, the Company held 266,000 equity shares, par value of
Nepal Rupees ("NR.") 100 each, out of the total paid up capital of NR.100
million. UTL has been formed to bid for a license to operate and invest in basic
telephony services in Nepal utilizing WLL technology. As of the date of this
annual report, UTL is yet to commence commercial operations. The equity shares
of UTL are recorded at cost. On May 15, 2002, UTL called up further equity
capital from all the joint venture partners totaling to NR.1,300 million payable
as per the following schedule:

<TABLE>
<CAPTION>
PARTICULARS OF             EQUITY CAPITAL
EQUITY CALLS                   CALLED               PAYABLE ON OR BEFORE
--------------             --------------           --------------------
                            (IN MILLIONS)
<S>                        <C>                      <C>
2nd call                       NR.200               May 25, 2002
3rd call                          500               July 15, 2002
4th call                          300               September 15, 2002
5th call                          300               December 15, 2002
</TABLE>

The Company on May 25, 2002 paid up its share of the 2nd call, for NR.53
million. Subsequent to the payment of this call, the Company now holds 798,000
equity shares of par value NR. 80 million. On July 15, 2002, the 3rd call became
due for payment by the Company. The Company and the other joint venture partners
have not yet paid the 3rd call as the Company has not yet received the notice to
do so.


     ICO Global Communications (Holdings) Limited

     ICO, a company registered in Bermuda, was incorporated in January 1995 to
provide Global Mobile Personal Communications Services. ICO was listed on NASDAQ
in July 1998. The Company has invested a sum of US$150 million in ICO.

     As of March 31, 1999 the Company's investment in ICO stood at Rs.5,471
million. On August 27, 1999, ICO filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court in the district of Delaware. In May 2000, ICO emerged from
bankruptcy protection with a plan to reduce the equity stake of the existing
investors to 1 percent. The Company had, therefore, made a provision for a loss
of 99 percent of its investment in ICO in its consolidated financial statements
for the fiscal year ended March 31, 1999. The Company recognized a charge of
Rs.5,416 million

                                       64
<PAGE>

and Rs.54 million as permanent impairment in the fiscal years ended 1999 and
2000 respectively. Subsequent to March 31, 2000, the Company has been allotted
180,053 shares of New ICO, representing 0.65 percent of the total equity of New
ICO. In addition, the Company has been allotted 975,398 warrants, each
convertible into two Equity Shares of New ICO upon the payment of US$90 per
warrant. Such warrants are exercisable until May 15, 2006.


     Intelsat, Ltd.

     Intelsat, Ltd. was originally formed as an Inter Government Organisation
("IGO") in 1964 and owns and operates satellite communication systems. It offers
Internet, broadcast, telephony and corporate network solutions to customers in
over 200 countries through its network of 20 geostationary satellites.
Currently, it has a few next-generation satellites under construction. Intelsat
was converted into a private company incorporated in Bermuda effective July 18,
2001. Consequently, the Company now holds 9,015,314 shares of US$3 each
representing 5.4 percent of the paid up capital of Intelsat, Ltd.

     Until the date of corporatization, the Company's ownership share in this
organization was adjusted annually to conform to the respective percentage of
total use of the system or based on the accession or cessation of any party as
per the terms of Intelsat Agreement. Accordingly, on the basis of share
re-determinations, as of March 2001, the Company's investment was at
approximately 5.4 percent of the total shareholding of Intelsat. Net capital
contributions were billed by Intelsat to the Company from time to time in
proportion to the ownership share determined.

     Post corporatization, the investment in Intelsat, Ltd. has been accounted
for in accordance with APB Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock at cost since the fair value of equity shares is not
readily obtainable.

     On March 8, 2002, Intelsat, Ltd. announced its intention to conduct an
initial public offering of its ordinary shares in an amount of approximately
US$500 million. In addition, it is anticipated that Intelsat, Ltd.'s existing
shareholders will be offered the opportunity to sell ordinary shares in the
offering. The Company is in the process of deciding its future course of action
with regard to its holding in Intelsat, Ltd.


     New Skies Satellite NV ("NSS")

     During 1998-99, Intelsat as part of its restructuring process incorporated
NSS as a corporation with limited liability under the laws of Netherlands and
transferred certain assets and liabilities to NSS accounted for at historic book
values. In return, NSS issued 10,000,000 shares of common stock of Dutch Guilder
1 to Intelsat. Intelsat distributed 9,000,000 shares of NSS in the year 1998-99,
and 1,000,000 shares of NSS in 1999-2000 in proportion to the investment shares
of its members at the time of distribution. Consequently, the Company acquired
301,215 shares in 1998-99 and 43,000 shares in 1999-2000 which were recorded as
a reduction in the investment in Intelsat and a new investment in NSS at face
values.

     NSS announced a 10:1 stock split prior to its initial public offering
("IPO") in October 2000 and redesignated its shares from Guilders to Euros.
Thus, the Company's total holding in NSS as of March 31, 2002 stood at 3,442,150
ordinary shares of 0.05 Euros each. The market value per share as of March 28,
2002 was US$5.8 per share.


     International Mobile Satellite Organisation ("Inmarsat")

     Inmarsat was an IGO with membership from 88 countries providing satellite
mobile communications in air, on land and at sea. Inmarsat was converted into a
national law company incorporated in the United Kingdom effective April 15,
1999. The Company's investment in the holding company, Inmarsat Ventures Plc
stood at 202,219 shares representing approximately 2.0 percent of the paid up
capital. Subsequently, there was a 10:1 stock split in March 2001. The Company
now holds 2,022,190 shares of 10 pence each in Inmarsat Ventures Plc.

     During the year Inmarsat announced its intention to conduct an initial
public offering of its ordinary shares. In addition, it is anticipated that
Inmarsat's existing shareholders will be offered the opportunity to sell
ordinary shares in the offering. The Company is in the process of deciding its
future course of action with regard to its holding in Inmarsat Ltd.

                                       65
<PAGE>
     Telstra Vishesh Communications Limited ("TVCL")

     TVCL is a joint venture between the Company, Telstra-Australia and
Infrastructure Leasing & Financial Services Ltd.("ILFS"), initially formed with
investment equity in the ratio of 40:40:20. Currently, the Company holds Rs.92
million out of the total paid up capital of Rs.314 million. TVCL has invested in
a hybrid VSAT project and has diversified into consulting, facility management
services and turnkey VSAT projects for large organizations. The shares of TVCL
are recorded at face value and consequently the Company has applied the
provision for diminution in value of investments and written off these
investments to their current fair value in the year ended March 31, 2000.

     As per the proposed restructuring plan undertaken by TVCL, Essel Shyam
Communications Ltd. ("ESCL"), a company incorporated in India, has been
identified as the strategic partner. Further, Telstra-Australia will exit the
joint venture and the shareholders of TVCL comprising the remaining joint
venture partners, namely the Company and IL&FS and the Employee Welfare Trust of
TVCL will get 15% in the aggregate of the equity share capital of ESCL in
exchange for their holding in TVCL. In addition, ESCL will pay a cash
compensation of Rs.20 million to the Company and IL&FS in the aggregate.


     RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     The Company maintains a level of spending on research and development
activity which enables it to keep abreast of the latest developments in the
industry. The Company conducts its own internal research activity in order to
achieve its strategic goals and to participate in current technological
advancements. The Company plans to continue spending on internal research and
development. The main focus of the Company's internal research and development
activity is software development for communications applications and the
development of telecommunications equipment for specific requirements of the
Company. The research and development of the Company with respect to
communications applications has focused, in recent years, on web based
electronic data interchange, store and forward fax and graphic user interface
terminal for Internet applications.

     In accordance with the accounting policy on research and development
adopted by the Company in fiscal 2000 onwards, all costs incurred on research
and development by the Company are charged to the income statement under the
relevant line items. In addition, costs incurred with respect to the purchase of
capital equipment for research and development are capitalized. The Company is
unable to accurately state its annual research and development expenses from
fiscal 2000.


     TREND INFORMATION

     The Company derives a major part of its revenues through telephony traffic
originating from and terminating in the U.S. An economic slowdown or such other
negative impact on the economy of the U.S. may affect the revenue growth and
operating results for fiscal 2003. The economic slowdown has affected the
information technology sector and there is a likelihood that this sector may cut
their spending. Such cutbacks are likely to affect the revenues of the Company
as a part of its operations are related to this sector. In addition, some
telecommunications carriers with whom we do business, including WorldCom, have
suffered financial distress. Some of these companies that are located in the
United States have filed for protection from creditors under the Bankruptcy
Code, as has WorldCom.

     The opening up of international telephony in India to other operators and
the loss of monopoly of the Company is likely to impact the revenues of the
Company. The Company, however, believes that these other operators may not be
able to put up the infrastructure to cause major share erosions in the immediate
future.

     The Company is also in the process of negotiating new revenue sharing
arrangements with BSNL and MTNL. These arrangements may be less favorable to the
Company than in past years.

     For further information, please see "Item 3. Key Information - Risk
Factors" referenced herein, especially those subsections entitled "New revenue
sharing arrangements between the Company and BSNL and MTNL are being
negotiated", "The New Telecommunications Policy and other regulatory changes
with respect to the telecommunications industry have exposed us to increased
competition," and "Many telecommunications carriers have suffered decreasing
margins and financial distress."

                                       66
<PAGE>
Business Outlook for Fiscal 2003

     Based on currently available information, the Company expects its business
outlook for the fiscal year ending March 31, 2003 to be as follows:

     Gross revenue for the fiscal year ending March 31, 2003 is expected to be
     in the range of Rs.64,506 million (US$1,321.03 million) against which the
     Company has achieved over Rs.14,285 million (US$292.55 million) for the
     first quarter ending June 2002 as measured in accordance with Indian GAAP.

     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.


     FINANCIAL AND MANAGEMENT ACCOUNTING AND REPORTING SYSTEMS

     The Company, which remained wholly owned by the Government until late 1992,
continued to be subject to various laws and Government policies in respect of
public sector enterprises and to follow procedures appropriate for a public
sector entity until the recent privatization. Consequently, the Company's
financial and management accounting and reporting systems are not as developed
as those of certain comparable companies outside India. In addition, the
Company's procedures for preparing budgets and appraising and monitoring capital
expenditure projects are less precise than those used by comparable private
sector companies. In order to address certain of these deficiencies, the Company
continues to improve data input for its traffic accounts, has increased the
number and quality of its financial and accounting personnel, and is in the
process of installing new systems and procedures, including an integrated
financial accounting and budgeting system.


ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

     DIRECTORS AND OFFICERS OF THE COMPANY

     The Company's Articles of Association ("Articles") provide for a Board of
not less than three and not more than twelve Directors. The Company's Board of
Directors has ultimate responsibility for the administration and management of
the affairs of the Company. As of 31st March, 2002, the Articles of Association
of the Company contained provisions reserving certain matters for the approval
of the President of India. However, as per the Shareholders' Agreement and Share
Purchase Agreement, the Government agreed to amendments to those provisions,
removing the reserved items, and in effect until the time the Articles were
amended the Government gave a general approval to all those reserved items. In
the 16th Annual General Meeting held on August 20, 2002, the Articles were
amended extensively. The revised Articles are being finalized, and the
discussion here and in "Item 10. Additional Information -- Memorandum and
Articles of Association" refers to these revised Articles.

     On February 13, 2002 the President of India ("GOI"), Panatone Finvest
Limited ("Strategic Partner"), Tata Sons Limited, Tata Power Company Limited,
Tata Iron and Steel Company Limited and Tata Industries Limited ("Principals")
signed a Shareholders' Agreement ("SHA") as per the provisions of which the GOI
transferred 7,12,50,000 Equity Shares owned by the Government, representing 25
percent of the aggregate number of the issued and outstanding Equity Shares of
the Company which were sold to the Strategic Partner pursuant to the terms and
subject to the conditions set forth in the Share Purchase Agreement ("SPA"). As
per the provisions of the SPA and SHA, the composition of the Board of Directors
of the Company is determined as given below.

     (a)  On the closing the Board shall comprise 12 directors.

     (b)  As long as the Government holds at least 10 percent of the voting
          equity share capital of the Company the composition of the Board shall
          be as follows:

          (i)   Four out of twelve directors shall be permanent or non-retiring
                directors, of which the Government and Panatone Finvest Limited
                shall be entitled to appoint two directors each.

                                       67
<PAGE>
          (ii)  The remaining eight directors shall be liable to retire by
                rotation. Of the retiring directors, four directors shall be
                independent directors on the Board.

          (iii) Of the four independent directors Panatone Finvest Limited and
                the Government shall be entitled to nominate and recommend names
                of two independent directors each.

          (iv)  The composition of the remaining four directors i.e. the
                retiring and non independent directors shall be determined by
                the following:

                i.   As long as Panatone Finvest Limited together with its
                     Affiliates holds 25 percent of the voting equity share
                     capital of the Company, two directors shall be nominated
                     each by the Government and Panatone Finvest Limited.

                ii.  As soon as Panatone Finvest Limited acquires and holds more
                     than 25 percent but less than 30 percent of the voting
                     equity share capital of the Company, Panatone Finvest
                     Limited shall have the right to appoint three directors on
                     the Board and the Government shall have the right to
                     appoint one Director on the Board.

                iii. As soon as Panatone Finvest Limited acquires and holds more
                     than 30 percent of the voting equity share capital of the
                     Company, Panatone Finvest Limited shall have the right to
                     appoint all the four directors.

     (c)  Notwithstanding anything to the contrary contained in the SPA and SHA
          (i) the Government shall have the right to appoint two non retiring
          Directors so long as the Government holds at least 10 percent of the
          voting equity share capital of the Company and (ii) the Government
          shall be entitled to appoint one non retiring director on the Board so
          long as the Government is a shareholder in the Company.

     (d)  Subject to the provisions of sub clauses (c) above and (e) below, if a
          Person, other than a Party to the SHA ("Party"), to whom the
          Government, Panatone Finvest Limited or a party to the SHA
          ("Shareholder") as the party to the SHA has transferred its Shares (or
          any equity rights or interests therein) or renounced the Right
          pursuant to the SHA, requests the right to nominate one or more
          directors, and at the time of such request, such request complies with
          the requirements of the Act, the right to nominate one or more
          directors (depending on the percentage of the equity share holding in
          the Company held by the Shareholder who has transferred the Shares or
          renounced the Right, as the case may be) shall be taken from such
          Shareholder who has transferred the Shares or renounced the Right, as
          the case may be and not from the other Shareholders and such request
          shall not be fulfilled by increasing the total number of directors
          constituting the Board. For the purpose of clarity and removal of
          doubt, if at any time after the expiry of three years from the
          Closing, Panatone Finvest Limited, together with its Affiliates, holds
          less than 25 percent of the voting equity share capital of the
          Company, the composition of the Board shall be suitably changed in
          accordance with the provisions of the Act.

     (e)  Notwithstanding the foregoing, at least three-fourths of the total
          number of directors on the Board shall, at all times, be Indian
          Nationals.

     (f)  For purposes of clarity and avoidance of doubt, the Government and
          Panatone Finvest Limited agree that if additional independent
          directors are required to be appointed to the Board to comply with any
          Laws or regulation or to comply with the provisions of any listing
          agreement, then, by mutual agreement between the Government and
          Panatone Finvest Limited, either the strength of the Board shall be
          increased to the extent required or the number of directors that each
          of the Government and Panatone Finvest Limited shall be entitled to
          appoint under paragraphs (a) and (b) above shall be proportionately
          reduced.

     (g)  The proportion of representation of the Parties to the SHA on any
          committees or sub-committees of the Board shall be the same as that of
          the Parties on the Board.

     (h)  In the event that the Board constitutes a share transfer committee for
          the purpose of effecting the transfer of the Shares, such share
          transfer committee shall include one nominee of Panatone Finvest
          Limited and the Government each.

     (i)  Panatone Finvest Limited, Principal(s) and the Government shall cause
          the Company to take all and any steps as may be required under the Act
          to effect the appointment of the directors. Each of the Government and
          Panatone Finvest Limited shall be entitled to remove and replace its
          nominees

                                       68
<PAGE>
          (except the independent directors) from time to time as provided in
          Article 5.3 of the SHA. Both the Government and Panatone Finvest
          Limited shall vote the Equity Shares held by them to elect the
          directors nominated/appointed in accordance with this Agreement. As
          long as Panatone Finvest Limited holds 25 percent of the
          then-outstanding Equity Shares, one of the directors nominated by
          Panatone Finvest Limited shall be the Managing Director of the
          Company.

     (j)  If any director is reasonably expected to be or is absent for a period
          of not less than three (3) calendar months from India where the
          registered office of the Company is located, the Board may, at a
          meeting of the Board or by circulation of a written resolution of the
          Board in accordance with applicable Law, appoint an alternate
          director. The alternate director shall be an individual nominated by
          the director in whose place such alternate director is being
          appointed, and the Shareholders shall cause their nominees on the
          Board to approve the appointment of such individual as an alternate
          director.

     (k)  Each Shareholder shall be entitled to remove any director appointed by
          it to the Board by Notice to such director and the other Parties. Any
          vacancy occurring on the Board by reason of retirement, death,
          disqualification, resignation, removal or the inability to act of any
          director for any reason whatsoever shall be filled only by another
          nominee of the party whose nominee was so affected so as to maintain a
          Board consisting of the number of nominees specified above. Retirement
          of any director shall also be subject to any applicable provisions in
          the Articles of Association.

     On February 13, 2002 as per the provisions of the SPA and SHA, all the
whole time directors then on the Board (Mr. S.K. Gupta, Chairman and Managing
Director, Mr. Rajneesh Gupta, Director (Network) and Mr. R.S. P. Sinha, Director
(Finance)) resigned and the Board was reconstituted to consist of the following
directors:

<TABLE>
<S>                   <C>
Mr. R.N. Tata         Chairman, nominee of Panatone Finvest Limited

Mr. S. K. Gupta       Managing Director, nominee of Panatone Finvest Limited

Mr. N. Srinath        Director (Operation), nominee of Panatone Finvest Limited

Mr. Rakesh Kumar      Director, nominee of the Government
</TABLE>

     As of August 27, 2002, the Board of Directors of the Company consists of
eleven directors with four independent directors, two directors nominated by the
GOI as non-retiring directors and the remaining five being nominated by Panatone
Finvest Limited. The Managing Director is a non-retiring director so long as he
holds the office as such. At the 16th Annual General Meeting of the Company held
on August 20, 2002, the appointment of Mr. S.K. Gupta and Mr. N. Srinath as the
Managing Director and the Whole time director respectively was approved by the
shareholders. Mr. S.K. Gupta was appointed as the Managing Director of the
Company until the date of his superannuation, September 30, 2002. Mr. Srinath
was appointed as the Whole time director for a period of five years from the
date of his appointment, February 13, 2002.

     Recently, in respect of the re-appointment of Mr. Gupta beyond September
30, 2002, the Board at its meeting held on August 20, 2002 noted that Mr. Gupta
would be employed as a senior executive with Tata Sons Limited with effect from
October 1, 2002 on a five years' contract basis, and will be deputed in the
Company as the Managing Director of the Company for a period of up to two years
with effect from October 1, 2002, and the Board approved the appointment as the
Managing Director of the Company on deputation from Tatas with effect from
October 1, 2002 for a period of up to two years from that date.

     The business address of each of the directors is the registered office of
the Company. The current directors and their positions are as follows:

<TABLE>
<CAPTION>
NAME                      AGE           POSITION                     TERM                DIRECTOR SINCE
----                      ---     --------------------     -------------------------     --------------
<S>                       <C>     <C>                      <C>                           <C>
Ratan N Tata              65      Chairman                 Director Liable to retire     February 2002
                                                           by rotation
</TABLE>

                                       69
<PAGE>
<TABLE>
<CAPTION>
NAME                      AGE           POSITION                      TERM               DIRECTOR SINCE
----                      ---     --------------------     -------------------------     --------------
<S>                       <C>     <C>                      <C>                           <C>
Shailendra Kumar Gupta    60      Managing Director        Expires September 2002        September 2002
                                                           Reappointed by the Board
                                                           for further period of up
                                                           to two years. Not liable
                                                           to retire by rotation so
                                                           long as holds office as
                                                           Managing Director

Srinath Narasimham        40      Director (Operations)    Expires February 2007         February 2002

Rakesh Kumar(1)           55      Government Nominee       Director Liable to retire     January 2002
                                                           by rotation

Y. S Bhave(1)             53      Government Nominee       Director Liable to retire     May 2002
                                                           by rotation

Subodh Bhargava(2)        59      External Director        Director Liable to retire     May 2002
                                                           by rotation

Suresh Krishna(2)         66      External Director        Director Liable to retire     May 2002
                                                           by rotation

Ishaat Hussain            55      External Director        Director Liable to retire     July 2002
                                                           by rotation

Kishor A Chaukar          55      External Director        Director Liable to retire     July 2002
                                                           by rotation

Vivek Singhal(2)          62      External Director        Expires conclusion of next    August 2002
                                                           Annual General Meeting in
                                                           2003

Ashok Jhunjhunwala(2)     49      External Director        Expires conclusion of next    August 2002
                                                           Annual General Meeting in
                                                           2003
</TABLE>

----------
(1)  Government nominee directors are not appointed by the Government for a
     fixed term. They are appointed by the shareholders as directors liable to
     retire by rotation. Typically, nominee directors continue on the Board of
     the Company for so long as the nomination is not changed by the Government.

(2)  Independent directors liable to retire by rotation.


OTHER PRINCIPAL OFFICERS

     The following individuals are the principal executive officers of the
Company in addition to those officers who are members of the Board of Directors:

<TABLE>
<CAPTION>
NAME                     AGE                        POSITION                       OFFICE HELD SINCE
----                     ---     ----------------------------------------------    -----------------
<S>                      <C>     <C>                                               <C>
S.G. Ranade               49     Executive Director (Legal) & Company Secretary    January 2002

Hardev Singh              58     Executive Director (Development)                  January 2002
</TABLE>

                                       70
<PAGE>
<TABLE>
<CAPTION>
NAME                     AGE                        POSITION                       OFFICE HELD SINCE
----                     ---     ----------------------------------------------    -----------------
<S>                      <C>     <C>                                               <C>
K.P. Tiwari               52     Executive Director (Operations)                   January 2002

Arun Gupta                45     Executive Director (Finance) & CFO                January 2002

G.C. Banik                58     Chief General Manager (Public Relations)          April 2000

C. Sudershan Rao          58     Chief General Manager (Finance and Accounts)      May 2000

Debajit Dutta             49     Chief General Manager (Vigilance)                 June, 2000
</TABLE>

     Set forth below is selected biographical information for certain of the
Company's directors and officers:

     Mr. Ratan N. Tata (Chairman) was born in Mumbai on December 28, 1937. He
received a Bachelor of Science degree in architecture from Cornell University in
1962, and completed an Advanced Management Program conducted by Harvard
University in 1974-75. Mr. Tata joined the Tata Group in 1962. He was appointed
director-in-charge of National Radio & Electronics Company Limited (NELCO) in
1971. He was named chairman of Tata Industries Limited in 1981. In 1991, Mr.
Tata was appointed chairman of Tata Sons Limited. He also currently holds the
chairmanship of several major Tata companies including Tata Steel, Tata
Engineering, Tata Power and Indian Hotels. Besides his directorships on the
boards of various Tata companies, Mr. Tata is the chairman of two of the largest
private sector-promoted philanthropic undertakings in India. He serves as a
member of the central board of the Reserve Bank of India (RBI) as well as of the
Prime Minister's Council on Trade and Industry. His foreign affiliations include
memberships of the international advisory boards of J.P. Morgan Chase,
Booz-Allen and Hamilton Inc. and the American International Group; of the board
of governors of the East-WestCenter; and of the board of trustees of the Ford
Foundation. In 1999, he was appointed to serve on the International Investment
Council set up by the President of the Republic of South Africa. Mr. Tata has
recently been appointed a member of the Asia Pacific advisory committee to the
board of directors of the New York Stock Exchange.

     Mr. Shailendra Kumar Gupta (Managing Director) was born on September 9,
1942. He earned a Bachelor of Science degree from Lucknow University and a
degree in electrical engineering from Roorkee University, graduating with a gold
medal in 1964. He thereon became a lecturer in electrical engineering at Roorkee
University. Mr. Gupta joined the Indian Telecom Service in September 1965 and
held various positions in the Department of Telecommunications and Mahanagar
Telephone Nigam Limited. Mr. Gupta became chairman and managing director of the
Company in September 1999. After the Tata Group acquisition of the Company in
February 2002, Mr. Gupta continues as the Company's managing director. During
his career, he was deputed through the United Nations to Malawi, Africa as a
switching telecom expert during 1982-83. He also trained in Japan in C-400 cross
bar systems and at the University of Essex, U.K., in computer software
engineering. In July 2001, he was elected as a director to the board of the
privatised INTELSAT. Mr. Gupta, with effect from September 30, 2002, will also
serve as a senior executive of Tata Sons Limited under a 5 year contract.

     Mr. Srinath Narasimhan (Director -Operations) was born on July 8, 1962. He
received a degree in mechanical engineering from IIT (Madras) and completed his
management degree from IIM (Calcutta), specialising in marketing and systems.
Joining the Tata Administrative Services in 1986, Mr. Srinath has held positions
in the project management, sales and marketing, and corporate functions in
different Tata companies over the last 14 years. He was a project executive in
Tata Honeywell from 1987 to 1988. He then moved to Tata Industries as executive
assistant to the chairman until mid-1992. He was part of the team that set up
Tata Information Systems (later Tata IBM). In June 1992 he moved into that
company full-time for the next six years. In March 1998, he returned to Tata
Industries as general manager (projects) and worked with Tata Teleservices in
this capacity for a year. In April 1999, he moved to Hyderabad as chief
operating officer. In late 2000 he took over as chief executive officer of Tata
Internet Services, a position he held till February 2002, when he moved to the
Company as director (operations).

     Mr. Rakesh Kumar (Director), Senior Deputy Director General (SU), DoT, is a
graduate in science from the University of Allahabad. He also has a degree in
mechanical engineering with honours from Varanasi and holds an MBA (marketing)
from the Faculty of Management Studies, Delhi University. Mr. Rakesh Kumar is a
fellow of the Institute of Engineers; fellow of the Institute of Electronics and
Telecom Engineers; and director, Quality Circle Forum of India, besides being a
board member and trustee of several other

                                       71
<PAGE>
organisations. He is also on the advisory panel of the Union Public Service
Commission (UPSC) and a regular visiting faculty at a training centre of the
Department of Telecommunications at Ghaziabad.

     Mr. Y.S. Bhave (Director) is joint secretary and financial advisor,
Department of Information Technology, as well as of the Ministry of Environment
and Forests. Mr. Bhave completed his M.Sc in electronics in 1970 and joined the
Indian Administrative Services in 1972. Mr. Bhave has held positions including
chief executive officer of the Maharashtra Industrial Development Corporation;
managing director, Maharashtra Small-Scale Industries Development Corporation;
managing director, Maharashtra State Finance Corporation; development
commissioner (industries) and secretary (industries), Government of Maharashtra;
chairman, Maharashtra State Electricity Board; and president and chief executive
officer, Indian Institute of Software Engineering, amongst others. During
1989-90 he obtained a degree of Master in Public Administration from Harvard
University.

     Mr. Subodh Bhargava (Director) was born in Agra in 1942, and holds a degree
in mechanical engineering from the University of Roorkee. He started his career
with Balmer Lawrie & Co., Calcutta before joining the Eicher Group of Companies
in Delhi in 1975. On March 31, 2000, he retired as the group chairman and chief
executive and is currently an advisor to the group. He is the past president of
the Confederation of Indian Industry (CII) and the Association of Indian
Automobile Manufacturers; and the vice president of the Tractor Manufacturers
Association. He is a member of the Insurance Tariff Advisory Committee, the
Economic Development Board of the government of Rajasthan and the board of
governors of the Centre for Policy Research. He is the chairman of the National
Accreditation Board for Certifying Bodies (NABCB) under the aegis of the Quality
Council of India (QCI). He is currently on the board of IIM, Indore; the Indian
Institute of Foreign Trade, New Delhi; and the Entrepreneurship Development
Institute of India, Ahmedabad. He is on the boards of governors of other
institutions for graduate engineering and bachelors and masters degree
programmes in business management.

     Mr. Suresh Krishna, (Director) was born in Madurai, South India, on
December 24, 1936. He received a Bachelor of Science degree from Madras
Christian College in 1955 and an M.A. in literature from the University of
Wisconsin in 1959. He did his post-graduate work in literature at the University
of Munich, Germany. Mr. Krishna is the chairman and managing director of
Sundaram Fasteners Limited. He has been involved in several other public bodies
set up from time to time by the central as well as the state governments. Among
other things, he has been appointed as a director on the central board of the
Reserve Bank of India.

     Mr. Ishaat Hussain, (Director) joined the Board of Tata Sons as an
executive director on July 1, 1999, and became the finance director of Tata Sons
Ltd. with effect from July 28, 2000, a position he continues to hold. Prior to
joining Tata Sons he was the senior vice president and executive director -
finance, in Tata Steel for almost ten years. Mr Hussain completed his schooling
from the Doon School in 1963 and joined St. Stephens College, Delhi to graduate
in economics. A chartered accountant from England and Wales, Mr Hussain joined
the board of The Indian Tube Company (a Tata Steel associate company) in 1979.
He moved to Tata Steel in 1981 after Indian Tube was merged with Tata Steel.
Besides being on the board of Tata Sons Limited, he is the chairman of Tata SSL
Limited and Voltas Limited. He is also on the boards of several Tata companies,
including Tata Steel, Tata Industries, Tata Teleservices, Titan Industries
Limited.

     Mr. Kishor A. Chaukar, (Director) currently the managing director of Tata
Industries Limited (TIL), holds a post-graduate degree in management from IIM,
Ahmedabad. Mr. Chaukar is also a member of the Tata Group executive office,
which is engaged in strategy formulation at the House of Tata. Mr. Chaukar was
previously the managing director of ICICI Securities & Finance Company Limited
(July 1993 to October 1998), and a member of the board of directors of ICICI
Limited from February 1995. His other experiences include stints in Godrej Soaps
Limited and in the Bhartiya Agro Industries Foundation.

     Mr. Vivek Singhal (Director) is the Chairman of the Electronics & Software
Export Corporation and has joined the Company as an Additional Director
(Independent) on the Board of the Company with effect from the conclusion of the
16th Annual General Meeting held on 20 August 2002. Mr. Singhal started his own
company, Computronics India, in 1971. Mr. Singhal is a Member on the Government
Body/Advisory Council of the Department of Science & Technology and Ministry of
Information Technology, Government of India. He is also on the Board of
Directors of Bharat Yantra Nigam Limited, Government of India, Bharat Sanchar
Nigam Limited (BSNL), Indraprastha Mahavidyalaya, Delhi, and the Department of
Electronics Accreditation Computer Courses (DOEACC) Society, under the Ministry
of Information Technology, Government of India. He is the Chairman of
Electronics & Computer Software Export Promotion Council (ESC) and Chairman

                                       72
<PAGE>
(Northern Region) of Federation of Indian Export Organizations (FIEO). He is
President of Computronics International Ltd. and Biotech International Ltd.

     Prof. Ashok Jhunjhunwala (Director) is the Professor & Head of the
Department of Electrical Engineering of the Indian Institute of Technology and
joined the Company as an Additional Director (Independent) on the Board of the
Company with effect from the conclusion of 16th Annual General Meeting held on
20 August 2002.

     Mr. S.G. Ranade, Executive Director (Legal) & Company Secretary, has been
with the Company since 1987. Prior to joining the Company, Mr. Ranade was Deputy
Secretary of Maharashtra Elektrosmelt Limited, Bombay. He is a member of the
institute of Company Secretaries of India. Mr. Ranade holds degrees in commerce
and law from the University of Bombay.

     Mr. Hardev Singh, Executive Director (Development), joined the Overseas
Communications Service in 1964 and has been with the Company since its
establishment. Mr. Singh held positions in the areas of satellite
communications, troposcatter communications, submarine cables, technical
planning and Inmarsat. Mr. Singh holds a Diploma from the Punjab State Board of
Technical Education and a Degree in Electrical Engineering from the Institute of
Engineers, Kolkata.

     Mr. K.P. Tiwari, Executive Director (Operations) joined the Overseas
Communications Services in 1976 and has been employed by the Company since its
establishment. Prior to joining the Overseas Communications Services, Mr. Tiwari
worked for the Indian Post and Telegraph Department for 4 years. Mr. K.P. Tiwari
holds a Master of Science Degree in Electronics from Kanpur University.

     Mr. Arun Gupta, Executive Director (Finance) & CFO, joined the Company in
1998. Prior to joining the Company, Mr. Gupta worked in finance for 18 years in
various capacities at Sikkim Industrial Development & Investment Corporation
Ltd., Pradeshiya Industrial & Investment Corporation of UP Ltd., and Risk
Capital & Technology Finance Corporation Ltd. (a subsidiary of Industrial
Finance Corporation of India Ltd.). He also officiated as Managing Director at
RC&TFC. Mr. Gupta holds a Bachelor of Science degree from University of Delhi, a
Master of Business Administration degree with a concentration on finance from
A.M. University and a Bachelor of law degree from the University of Delhi.

     Dr. G.C. Banik, Chief General Manager (Public Relations), joined the
Company in 1987. Prior to joining the Company, Dr. Banik served in various media
units of the Ministry of Information Service for twenty years. Dr. Banik holds a
post graduate degree in Journalism, a Master of Business Administration degree
and a degree of Doctor of Philosophy in Sociology, all from the University of
Mumbai. Dr. Banik was the National President of the Association of Business
Communicators of India and Chairman of the Public Relations Society of India.

     Mr. C. Sudershan Rao, Chief General Manager (Finance), has been with the
Company since 1989. He is a Fellow Member of the Institute of Chartered
Accountants of India and an Associate Member of the Institute of Costs & Works
Accounts of India. Mr. Rao also holds a post graduate diploma in Public
Enterprise Management from Osmania University. Mr. Rao has over 20 years of
experience in finance related functions and has worked at Siddhartha Oil
Equipments Ltd., R.G. Foundry Forge Ltd., A.P. State Textile Dev. Corporation
Ltd. and A.P. Construction Co. Ltd., and as a practising Chartered Accountant
prior to joining the Company.

     Mr. Debajit Dutta, Chief General Manager (Vigilance) joined the Company in
1992. Mr. Dutta was employed as the Deputy Director (Personnel &
Administration)- Vigilance by Oil and Natural Gas Corporation Limited for a
period of nine years prior to taking up his post with Videsh Sanchar Nigam
Limited. He has served for two years as a gazetted police officer of the rank of
Deputy Superintendent of Police. Mr. Dutta was a practicing lawyer prior to his
employment by the police department. Mr. Dutta holds a law degree and a post
graduate diploma in Personnel Management and Industrial Relations.

     No director or officer of the Company has any family relationship with any
other officer or director of the Company.

     Other than as described above, there are no arrangements or understandings
among any director or any officer and any other person regarding their election
to their post with the Company.

                                       73
<PAGE>
     COMPENSATION OF DIRECTORS AND OFFICERS

     The directors, other than the full-time directors and the Government
nominee directors, of the Company received a sitting fee not exceeding Rs.5,000
(US$102.40) for attending each Board and Committee meeting. In fiscal 2002,
Rs.150,000 (US$3,071.89) was paid towards sitting fees. The directors are also
reimbursed for travel and out-of-pocket expenses in connection with their
attendance at Board and Committee meetings.

     For the fiscal year ended March 31, 2002, the aggregate amount of
compensation paid by the Company to all directors and principal officers of the
Company was approximately Rs.11.57 million (US$0.24 million). No director or
principal officer received remuneration from the Company (salary, bonus, housing
allowance, perks and benefits, etc.) in excess of Rs.1.50 million for fiscal
2002, except for one director, Mr. Rajneesh Gupta, for whom payments were made
towards compensation for loss of office as part of a compensation package in
terms of disclosure requirements as per Schedule VI, Part-II of the Indian
Companies Act, 1956. The amount of all compensation paid to Mr. Gupta was
Rs.2.09 million (US$0.04 million).

     For the fiscal year ended March 31, 2002, the aggregate amount set aside or
accrued by the Company to provide pension, retirement or similar benefits for
principal officers and directors of the Company was approximately Rs.4.49
million (US$0.09 million).

     A performance reward scheme is in place that is applicable to all employees
and functional directors of the Company. This performance reward is based on the
improvement of the Company's overall performance during the financial year under
consideration. The performance of the Company is evaluated in relation to the
previous year's performance based on nine pre-defined parameters. Depending upon
the degree of improvement in the overall performance of the Company all
employees are entitled to receive rewards as per their salary scale. During
fiscal 2001, the overall performance of the company improved by 1 percent on the
prescribed parameters and accordingly the employees received 33.67 percent of
their annual basic pay as a reward, which was paid out during fiscal 2002. The
functional Directors and other principal officers received a total of Rs.1.07
million (US$0.02 million) under this scheme during the year.


OPTIONS TO PURCHASE SECURITIES FROM THE COMPANY.

     EMPLOYEE STOCK PURCHASE SCHEME ("ESPS")

     As part of the process of disinvestments, the Government on various dates
transferred 5,661,546 Equity Shares (approximately 1.85 percent of the Company's
equity capital) to the employees of the Company at a price significantly lower
than the fair value on the date of transfer. The transfer issuance of such
Equity Shares has been accounted for as a charge to compensation cost of Rs.896
(US$18.35) million and an accretion to additional paid in capital. Accordingly,
Rs.896 million (US$18.35) has been charged to compensation cost for the year
ended March 31, 2002.

     In addition to the Equity Shares already transferred, the Government is yet
to transfer 346,860 Equity Shares to employees, which is under consideration of
the Government.

     The Company has elected to use the intrinsic value method specified under
APB Opinion No. 25, Accounting for Stock Issued to Employees to account for the
compensation cost of the employee stock purchase rights plan granted to the
employees of the Company. Pro forma disclosures required by SFAS No. 123,
Accounting for Stock-Based Compensation have been provided in Note 18 to the
financial statements to this annual report.


BOARD COMMITTEES

Audit Committee

     The committee has three members including one full time director and three
non-official, part-time directors. The committee is chaired by independent
director Mr. Subodh Bhargava. Another independent director, Mr. Suresh Krishna,
and Mr. Y.S Bhave, a non-official, part-time director nominated by the
Government, are also members. The broad scope of the committee is as follows:

                                       74
<PAGE>
     (1)  To oversee the Company's financial reporting process and the
disclosure of its financial information to ensure that the financial statements
are correct, sufficient and credible; to recommend the appointment and removal
of external auditors, fix audit fees and approve payment for any other services,
as applicable; to review the annual financial statements with management before
they are submitted to the board, focusing primarily on: changes in accounting
policies and practices, major accounting entries based on exercise of judgement
by management, qualifications in the draft audit report, significant adjustments
arising out of audit, the going concern assumption, compliance with stock
exchange and legal requirements concerning financial statements, and any related
party transactions, that is, company transactions of a material nature with
promoters or the management, their subsidiaries or relatives, that may have a
potential conflict with the interests of the Company; to review external and
internal auditors and the adequacy of internal control systems with the
management; to review the adequacy of the internal audit function, including the
structure of the internal audit department, staffing, reporting structure
coverage and the frequency of internal audits; to discuss any significant
findings with the internal auditors and follow these up; to review and report to
the Board of Directors on the findings of any internal investigations by the
internal auditors concerning suspected frauds or irregularities or a failure of
internal control systems; to discuss the nature and scope of the audit with
external auditors before the audit commences, and to have post-audit discussions
to ascertain any areas of concern; to review the Company's financial and risk
management policies; and to look into the reasons for any substantial defaults
in payments to depositors, debenture holders, shareholders (in case of
non-payment of declared dividends) and creditors.


Remuneration Committee.

     The Board, at its meeting held on July 29, 2002 constituted the
Remuneration Committee of the Board to include Mr. Suresh Krishna, independent
director, as its Chairman, Mr. Ratan N. Tata and Mr. Subodh Bhargava as its
members, and the Secretary of the Company as its convener. The Remuneration
Committee will determine the company's policy on specific remuneration packages
for executive directors including pension rights and any compensation payment.

The scope of work of the Remuneration Committee is as follows:

     i)   To determine on the behalf of the Board and on behalf of the
          shareholders with agreed terms of reference, the Company's policy on
          specific remuneration packages for executive directors including
          pension rights and any compensation payment.

     ii)  To avoid conflicts of interest, the Remuneration Committee, which
          would determine the remuneration packages of the executive directors
          comprises three directors, all of whom are non-executive directors,
          the chairman of committee being an independent director.

     iii) All the members of the Remuneration Committee should be present at the
          meeting.

     iii) The Chairman of the Remuneration Committee should be present at the
          Annual General Meeting, to answer shareholder queries. However, it
          would be up to the Chairman to decide who should answer the queries.


Committee for Inter-corporate Investment.

     For voice services, the Company currently has no direct access to end
customers and is entirely dependent on cellular and basic access providers to
route their international traffic through the Company. Some of these companies
are soon going to be the Company's direct or indirect competitors. In the
fast-changing and competitive scenario resulting from the opening up of the ILD
sector from April 1, 2002, and given the existing near total control of access
to subscribers by the Company's two principal customers, BSNL and MTNL, it is
imperative for the Company to acquire an end-customer base of its own. The
Company had applied for licences in several basic telecom circles. These were
not, however, granted by the Government.

     In view of the above, the Board at its meeting held on May 28, 2002
considered and approved an investment of up to Rs.12 billion (US$245.75
million) in Tata Teleservices Ltd. (TTSL) over the next four years, and
constituted a Committee for Inter-corporate Investment of directors to go into
the modalities of the investment. TTSL has neither an NLD nor an ILD licence and
is therefore not in conflict with the Company's business interests. TTSL already
holds basic licences for Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat and
Delhi, will soon have an equity interest in Maharashtra (including Mumbai) and
is assessing Kerala, Punjab and Haryana. The Company's investment in TTSL is
therefore expected to give the Company access to subscribers in major markets
for telecom services across India that already yield over 65 percent of the
country's telecom revenues.

                                       75
<PAGE>
     Subsequently, the Board passed a resolution by circulation in June, 2002
appointing Mr. Y.S. Bhave, a Government Director, as a member of the Committee
and the Committee then comprised of Mr. Subodh Bhargava, Independent Director,
Mr. S.K. Gupta, Managing Director, Mr. N. Srinath, Director (Operations) and the
newly inducted nominee Mr. Y.S. Bhave, Government Director. The Committee at its
first meeting held on July 29, 2002 elected Mr. Bhargava as its Chairman. The
Board vide the above resolution by circulation also determined the scope and
terms of reference of the above mentioned Committee be specified as under:

     a)   to study and decide the quantum and the valuation/price at which the
          investment will be made by the Company in TTSL at various points of
          time;

     b)   to decide the tranches and periodicity of investment in TTSL;

     c)   to negotiate, finalise and execute shareholders agreements and other
          contractual arrangements with TTSL to best protect the interests of
          the Company in respect of the investment;

     d)   to determine conditions of draw down of the investment to TTSL linked
          to defined milestones to be achieved by TTSL;

     e)   to play a constructive role in the manner in which TTSL utilizes and
          applies the investment;

     f)   to identify and quantify any additional investment opportunities which
          are more attractive and submit the same to the Board for its
          consideration;

     g)   such other functions as may be delegated to it by the Board from time
          to time.

     The Board, vide above referred circular resolution decided that the
Committee would complete its deliberations by August 15, 2002. At the meeting of
the Board held on August 20, 2002, this was extended up to October 15, 2002.


     EMPLOYEES

     As of March 31, 2002, the Company had 2,880 employees, of whom 1,126 were
executive employees (technical employees and other employees with the rank of
officer or higher, including fulltime directors of the Company) and 1,754 were
non-executive employees. As of March 31, 2001, and March 31, 2000, the Company
had 2991 employees and 3,014 employees, respectively. Upon its establishment in
1986, the Company assumed responsibility for all the 3,148 employees of the
Overseas Communications Service (690 executives and 2,458 non-executives). Since
then, the Company has gradually rationalized its work force, both reducing the
total number of employees and increasing the proportion of employees who are
engineers or otherwise highly skilled. The Company seeks to improve employee
productivity through continuing education and training and by emphasizing the
importance of quality of service and customer satisfaction.

     All non-executive employees of the Company are members of local unions
organized at each Company site, which are affiliated as the Federation of the
Videsh Sanchar Nigam Limited Employees Unions (the "Federation"). The Federation
is a Company-wide union and is not affiliated with any larger industry-wide or
national union. Every five years the Company and the Federation negotiate and
enter into a collective bargaining agreement, which governs the terms of
employment of non-executive employees. The most recent agreement, executed in
November 2000, is for the pay revisions effective from January 1, 1997.

     Most executive employees (other than directors) of the Company are members
of a similarly organized Officers' Association, which acts as an informal
consultative mechanism for conveying the officers' views regarding personnel
policies to the Company's management.

     As of June 30, 2002, the members of the Board of Directors and the
executive officers of the Company as a group owned an aggregate of 33,104
Shares, representing 0.012 percent of the Company's Shares issued and
outstanding at such date.


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

     MAJOR SHAREHOLDERS

     As of the date hereof, approximately 45 percent of the outstanding Shares
are held by Panatone Finvest Limited and 26.12 percent of the outstanding Shares
of the Company are held by the Government. Panatone Finvest Limited is in turn a
wholly owned subsidiary of the Tata Group of companies. See "Item 4. Information
on the Company -- History and Development of the Company," "Item 4. Information
on the Company -- Organizational Structure," and "Item 6. Directors, Senior
Management, and Employees -- Directors and Officers of the Company".

                                       76
<PAGE>
     The following table sets forth certain information regarding the beneficial
ownership of the Equity Shares at June 30, 2002, including the beneficial
ownership of Shares of each person or group known by the Company to own
beneficially 5 percent or more of the outstanding Shares, as reported by such
persons.

<TABLE>
<CAPTION>
                                   NUMBER OF SHARES
NAME OF BENEFICIAL OWNER         BENEFICIALLY OWNED(1)          PERCENTAGE
------------------------         ---------------------          ----------
<S>                              <C>                            <C>
Panatone Finvest Limited               128,249,910                 45.00
Government of India (2)                 74,446,885                 26.12
</TABLE>

----------

(1)  Number of shares and percentage ownership is based on 285,000,000 Equity
     Shares outstanding as of June 30, 2002. Beneficial ownership is determined
     in accordance with rules of the SEC and includes voting and investment
     power with respect to such shares. Shares subject to options that are
     currently exercisable or exercisable within 60 days of June 30, 2002 are
     deemed to be outstanding and to be beneficially owned by the person holding
     such options for the purpose of computing the percentage ownership of such
     person, but are not deemed to be outstanding and to be beneficially owned
     for the purpose of computing the percentage ownership of any other person.
     All information with respect to the beneficial ownership of any principal
     shareholder has been furnished by such shareholder and, unless otherwise
     indicated below, the Company believes that persons named in the table have
     sole voting and sole investment power with respect to all the shares shown
     as beneficially owned, subject to community property laws, where
     applicable.

(2)  The Shares owned by the Government are registered in the name of the
     President of India or his nominees in the register of shareholders of the
     Company.

     The Company's ADSs are listed on the New York Stock Exchange. Each ADS
represents two Equity Shares. As of June 30, 2002, approximately 30,898,548
Equity Shares (10.84 percent of the total Equity Shares outstanding as of such
date) were held by the custodian, ICICI Limited (the "Custodian"), for The Bank
of New York, as depositary for the Company's ADSs. The Company is unable to
estimate the percentage of ADSs or Equity Shares held in the United States or
the number of record holders in the United States.


     RELATED PARTY TRANSACTIONS

     The Company routinely enters into transactions with Government entities,
such as the Department of Telecommunications ("DOT"), the Ministry of External
Affairs, as well as other companies which the Government controls or has a
significant interest in such as BSNL and MTNL. The Company has major
transactions with the DOT, BSNL, and MTNL, which are subject to revenue sharing
agreements as discussed in "Item 4. Information on the Company -- Traffic
Revenue and Revenue Sharing Arrangement" and Note 1d of the financials included
in this annual report. Apart from these, the Company has transactions with
various Government entities and departments for activities such as providing
telecommunication services, paying license fees, and subletting premises. The
Company also enters into transactions with Tata Group companies, for the
provision or receiving of services such as IT solutions and telecom services.
Transactions other than with the DOT, BSNL, and MTNL are at arm's length in
accordance with law. The Company's significant related party balances and
transactions with DOT are detailed in the Statement of Income and in Notes 5,
11, 14 and 15 of the financials included in this annual report. In addition,
there are the following significant related party transactions:

<TABLE>
<CAPTION>
                                                                                           AMOUNT OF            OUTSTANDING BALANCES
NAME OF THE PARTY       NATURE OF RELATIONSHIP   DESCRIPTION OF THE TRANSACTION       (RECEIPTS)/PAYMENTS         DEBIT/ (CREDIT)
-----------------       ----------------------   ----------------------------------   --------------------      --------------------
                                                                                                     (IN MILLION)
<S>                     <C>                      <C>                                  <C>           <C>         <C>        <C>
The Government and
its departments         Principal owner          Rendering of services                Rs.   386     US$  8
                                                 Royalty payments                         6,414        131
                                                 Dividend payments                       18,870        386
                                                 Compensation received from GoI
                                                                                           (279)        (6)
                                                                                      ---------     ------      ------          ----
                                                                                      Rs.25,391     US$520      Rs.290          US$6
TVCL                    Joint venture partner    Purchase of VSAT terminals                  26          1         (12)            -
UTL                     Joint venture partner    Investment in equity share capital          16          -           -             -
Employee trusts         Trusts controlled by
                         the management          Loans made                                   8          -          10             -
                                                 Payment towards gratuity                    32          1           -             -
</TABLE>

     Other related party transactions and balances are immaterial individually
and in the aggregate.

                                       77
<PAGE>
     The Company grants loans to employees for acquiring assets such as
computers and vehicles and for purchase of Equity Shares of the Company. The
annual rate of interest at which the loans have been made to employees is 4%.
The loans are secured by the assets acquired by the employees. As of March 31,
2001 and 2002, amounts receivable from employees aggregated to Rs.75 million and
Rs.301 million, respectively, and are included in trade and other receivables.
Interest free short term advances made to employees aggregated Rs.67 million and
Rs.8 million as of March 31, 2001 and 2002, respectively.

     The Company also grants an interest subsidy in excess of 4% of the interest
rate for loans taken by the employees for the purchase of property. The cost of
the interest subsidy of Rs.7 million, Rs.9 million and Rs.11 million for the
years ended March 31, 2000, 2001 and 2002, respectively, is included in staff
costs.


ITEM 8.  FINANCIAL INFORMATION

     CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     We have elected to provide financial statements pursuant to Item 18 of this
Form 20-F. There have not been any significant changes in the Company's
financial condition, other than those stated in the financial statements
attached to this annual report, since the date of the attached annual financial
statements.


ITEM 9.  THE OFFER AND LISTING

TRADING MARKETS

     GENERAL

     The Company's Shares are traded on the stock exchanges of Mumbai, Kolkata,
Delhi and Chennai and the National Stock Exchange of India Ltd. (collectively,
the "Indian Stock Exchanges"). The Company's American Depositary Shares (ADSs)
represented by American Depositary Receipts (ADRs) are listed on the New York
Stock Exchange and on September 24, 2002, the last reported sale price was
US$4.63 per ADS on the New York Stock Exchange. Each ADS represents two Shares.
The ADSs were issued by The Bank of New York (the "Depositary"), pursuant to a
Deposit Agreement.

     The number of outstanding Shares of the Company as of June 30, 2002 was
285,000,000. As of June 30, 2002, there were 94,518 record holders of the Shares
listed and traded on the Indian Stock Exchanges. As of June 30, 2002, there were
approximately 15,449,274 of the Company's ADRs (equivalent to 30,898,548
Shares).


     PRICE HISTORY

     PRINCIPAL MARKET FOR THE COMPANY'S ADSS

     The table below sets forth, for the periods indicated, the high and low
sales prices on the New York Stock Exchange for the ADSs since August 2000, the
original date of listing of the ADSs.

                                       78
<PAGE>
<TABLE>
<CAPTION>
                                                         ADS PRICE
                                                    ------------------
                                                    HIGH          LOW
                                                    -----        -----
                                                      IN US DOLLARS
<S>                                                 <C>          <C>
Yearly Period:
Fiscal 2001 (beginning August 15, 2000)             18.75         9.50
Fiscal 2002                                         15.74         5.55

Quarterly Periods:
Fiscal 2001 Quarterly Periods:
  First Quarter                                       N/A          N/A
  Second Quarter (beginning August 15, 2000)        18.75        10.25
  Third Quarter                                     15.50         9.50(1)
  Fourth Quarter                                    17.88        11.77

Fiscal 2002 Quarterly Periods:
  First Quarter                                     15.74        11.40
  Second Quarter                                    13.87         7.09(2)
  Third Quarter                                     10.50         8.27
  Fourth Quarter                                     9.60         5.55(3)

Fiscal 2002 March                                    7.85         6.90

Fiscal 2003 Monthly Periods:
  April                                              8.00         7.28
  May                                                8.08         7.00
  June                                               7.48         6.00
  July                                               6.19         4.75(4)
  August                                             5.40         4.95
  September (through September 24)                   5.05         4.54
</TABLE>
----------------
(1) - Stock split 3:4 in December 2000
(2) - Cash dividend of US$2.09 paid in September 2001
(3) - Cash dividend US$3.11 paid in January 2002
(4) - Cash Dividend of US$0.51 on July 26, 2002

On September 24, 2002, the closing price of the Company's ADSs on the New York
Stock Exchange was US$4.63.

Source: Yahoo Finance

                                       79
<PAGE>
     The table below sets forth, for the periods indicated, the high, low and
closing sales prices for the Shares on the BSE.

<TABLE>
<CAPTION>
                THE STOCK EXCHANGE, MUMBAI
--------------------------------------------------------------
                                                PRICE PER
                                                SHARE(1)
                                          --------------------
PERIOD                                     HIGH          LOW
------                                    ------        ------
<S>                                       <C>           <C>
Yearly Periods:
  Fiscal 1998                               1300           700
  Fiscal 1999                                970           660
  Fiscal 2000                               3250           565
  Fiscal 2001                             1938.6        198.35(2)
  Fiscal 2002

Quarterly Periods:

Fiscal 2001
  First Quarter                           1938.6        826.05
  Second Quarter                         1240.05           675
  Third Quarter                           355.95(2)     198.35(2)
  Fourth Quarter                             415           280

Fiscal 2002
  First Quarter                              402           272
  Second Quarter                             345(3)     160.75(3)
  Third Quarter                              259           201
  Fourth Quarter                             228(4)     134.65(4)

Fiscal 2002 March                         196.25        168.00

Fiscal 2003 Monthly Periods:
  April                                      202           182
  May                                        200        174.50
  June                                       191        146.65
  July                                    154.90           111(5)
  August                                  128.95        116.05
  September (through September 24)        125.50        107.15
</TABLE>
----------
(1)  On September 24, 2002, the closing price of a Share on the BSE was
     Rs.114.90.

(2)  Post-Bonus price - A bonus of 2:1 was declared and became effective
     during November 2000.

(3)  Stock Price adjustment of Rs.50 per share subsequent to the Company's
     dividend of 500 percent for the year 2001 took place on September 3, 2001

(4)  Stock Price adjustment of Rs.75 per share subsequent to the Company's
     dividend of 750 percent for the year 2002 took place on January 16, 2002

(5)  Stock Price adjustment of Rs.12.50 per share subsequent to the Company's
     final dividend of 125 percent for the year 2002 took place on July 26, 2002

Source: The Stock Exchange, Mumbai

                                       80
<PAGE>
     The table below sets forth, for the periods indicated, the high, low and
closing sales prices and the average daily trading volume for the Shares on the
NSE.

<TABLE>
<CAPTION>
                     NATIONAL STOCK EXCHANGE
----------------------------------------------------------------------
PERIOD                                           PRICE PER SHARE(1)
------                                        ------------------------
                                               HIGH               LOW
                                              ------            ------
<S>                                           <C>               <C>
Yearly Periods:
  Fiscal 1998                                   1300               715
  Fiscal 1999                                    995               640
  Fiscal 2000                                   3298               561
  Fiscal 2001                                   1990               210(2)
  Fiscal 2002                                    400            134.70

Quarterly Periods:

Fiscal 2001
  First Quarter                                 1990               801
  Second Quarter                              1248.9            673.05
  Third Quarter                                355.6(2)            210(2)
  Fourth Quarter                               414.5             279.5

Fiscal 2002
  First Quarter                                  400               270
  Second Quarter                              340.10(3)         160.90(3)
  Third Quarter                               258.95               198
  Fourth Quarter                                 235(4)         134.70(4)

Fiscal 2002 March                             195.05            167.55

2003 Monthly Periods:
  April                                          195            182.75
  May                                         197.40            174.10
  June                                        189.70            146.25
  July                                           156(5)         110.50(5)
  August                                         129               115
  September (through September 24)               127               108
</TABLE>
----------
(1)  On September 24, 2002, the closing price of a Share on the National Stock
     Exchange was Rs.114.85.

(2)  Post-Bonus price -- A bonus of 2:1 was declared and became effective during
     November 2000.

(3)  Stock Price adjustment of Rs.50 per share subsequent to the Company's
     dividend of 500 percent for the year 2001 took place on September 3, 2001

(4)  Stock Price adjustment of Rs.75 per share subsequent to the Company's
     dividend of 750 percent for the year 2002 took place on January 16, 2002

(5)  Stock Price adjustment of Rs.12.50 per share subsequent to the Company's
     final dividend of 125 percent for the year 2002 took place on July 26, 2002


Source:  The National Stock Exchange

     The Company is not aware of trading having taken place at the stock
exchanges in Kolkata, Delhi and Chennai.

     In August 1996, the Indian Parliament enacted the Depositaries Act, 1996
which provides a legal framework for the establishment of depositaries to record
ownership details and effectuate transfers in book-entry form. In May 1996,
Securities and Exchange Board of India ("SEBI") passed the Securities and
Exchange Board of India (Depositories and Participants) Regulations, 1996 which
provides for the formation of such depositaries, the registration of
participants as well as the rights and obligations of the depositaries,
participants and the issuers. Every depositary is required to be registered with
SEBI. The depositary system is expected eventually to improve significantly the
operations of the Indian securities markets. Pursuant to the Depositaries Act,
the National Securities Depositary Limited was established by the Unit Trust of
India, the

                                       81
<PAGE>
Industrial Development Bank of India and the NSE in 1996 to provide electronic
depositary facilities for trading in equity and debt securities. The National
Securities Depositary Limited, which commenced operations in November 1996, was
the first depositary in India. The BSE announced plans to establish another
depositary, and has accordingly incorporated the Central Depositary Services
Limited, which commenced operations on July 15, 1999. The depositary system has
significantly improved the operations of India's securities market.

     Trading of securities in book-entry form commenced in December 1996 and is
available for securities of more than 4,700 companies at August 2002. In order
to encourage "dematerialization" of securities, SEBI has set up a working group
on dematerialization of securities comprising Foreign Institutional Investors,
custodians, stock exchanges, mutual funds and the National Securities Depositary
Limited to review the progress of securities and trading in dematerialized form
and to recommend scrips for compulsory dematerialized trading in a phased
manner. Accordingly, commencing January 1998, SEBI has notified scrips of
various companies for compulsory dematerialized trading by certain categories of
investors such as foreign and other institutional investors and has also
notified compulsory dematerialized trading in specified scrips for all retail
investors. SEBI proposes to increase the number of scrips in which
dematerialized trading is compulsory for all investors significantly in the near
future. SEBI has also provided that the issue and allotment of shares in public,
rights or offer for sale after a specified date (to be notified to SEBI) shall
only be in dematerialized form and an investor shall be compulsorily required to
open a depositary account with a participant.

     However, even in case of scrips notified for compulsory dematerialized
trading, investors, other than institutional investors, are permitted to trade
in physical shares on transactions outside the stock exchange where there are no
requirements of reporting such transactions to the stock exchange and
transactions on the stock exchange involving lots less than 500 securities.

     Under the Takeover Code, upon the acquisition of more than 5 percent of the
outstanding shares of a public Indian Company, a purchaser is required to notify
the Company and all the stock exchanges on which the shares of the Company are
listed. Upon the acquisition of 15 percent or more of such shares 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 percent of all the
outstanding shares of the Company at a minimum offer price as determined
pursuant to the rules of the Takeover Code. Upon conversion of ADSs into Equity
Shares, an ADS holder will be subject to the Takeover Code. Open market
purchases of securities of Indian companies in India by Foreign Direct Investors
or investments by Non-Resident Indians, Overseas Corporate Bodies and Foreign
Institutional Investors above the ownership levels set forth above require
approval of the Government of India on a case-by-case basis.


ITEM 10.  ADDITIONAL INFORMATION

     SHARE CAPITAL

     Not Applicable.


     MEMORANDUM AND ARTICLES OF ASSOCIATION

     Set forth below is information relating to the share capital of the
Company, including certain provisions of its Articles and the Companies Act,
1956 (the "Companies Act"). The Company is registered under the Companies Act
with the Registrar of Companies, Mumbai, India with Company No. 39266. The
following description of the Company's Articles of Association and Memorandum of
Association does purport to be complete and are qualified in their entirety by
the Company's Articles of Association and Memorandum of Association that are
included as exhibits to this Company's Annual Report on Form 20-F, incorporated
herein by reference.

     The Memorandum and Articles of Association of the Company were drafted and
adopted by the company in the year 1986 when the Company was formed as a wholly
owned Government Company, and were designed to provide necessary authority to
The President of India (the then majority shareholder) in terms of appointment
of Directors, powers of the Board and other operational aspects subject to
applicable statutory provisions. The Memorandum and Articles of Association were
amended several times since 1986 to suit the changing business activities and
structure of the Company as it changed from a wholly owned Government Company
due to disinvestments from time to time. Since the Objects Clause contained in
the Memorandum of Association and the Articles of Association were framed in
year 1986 and were largely based on the activities of the erstwhile Overseas
Communications Service at the time of its conversion into a company, as a result
of

                                       82
<PAGE>
privatisation it needed to be suitably amended. Over the years from 1986 to
2002, the shareholding of Government of India was reduced to 52.97 percent, and
the Company continued to be a Government Company, and accordingly the
restrictive provisions appropriate to a Government Company in the Memorandum and
Articles of Association of the Company were implemented.

     On 13 February, 2002, a 25 percent stake of the Company was transferred to
Panatone Finvest Limited by the Government pursuant to the Share Purchase
Agreement ("SPA"), the transfer of 1.85 percent stake to the employees through
Employee Stock Purchase Scheme and thus the stake held by Government of India in
Company stood reduced to 26.12 percent.

The shareholders, by way of postal ballot approved the amendment to the
Memorandum of Association of the Company and by way of a special resolution at
their meeting held on 20th August, 2002 approved the amendments to the Articles
of Association of the company. See "Item 6. Directors, Senior Management and
Employees -- Directors and Officers of the Company."


     GENERAL

     The Company's authorized share capital is Rs.3,000,000,000, divided into
300,000,000 Shares with a face value of Rs.10 each. At the date hereof,
285,000,000 Shares were issued and fully paid. SEBI has recently allowed Indian
companies to split the par value of their Equity Shares into denominations lower
than Rs.10 per share. All Share and per Share amounts appearing in the financial
data presented elsewhere herein have been retroactively restated to reflect this
bonus issue.

     The Shares are in registered form. The Shares are the only class of share
capital of the Company currently in existence. There are no convertible
debentures or warrants of the Company currently in existence.

     Under our Memorandum of Association, the main objects of the Company
include:

     -    Managing, controlling and maintaining the operations of the Overseas
          Communications Service of the Department of Telecommunication,
          Ministry of Communications, Government of India, with all its assets
          and liabilities including contractual rights and obligations on such
          terms and conditions as may be prescribed by the Government of India
          from time to time.

     -    Planning, establishing, developing, providing, operating and
          maintaining all types of international telecommunication networks,
          systems and services including, Telephone, Telex, Message Relay, Data
          transmission, Facsimile, Television, Telematics, value Added Network
          Services, New Business Services, Audio and Video Services, Maritime
          and Aeronautical Communication Services and other international
          telecommunications services as are in use elsewhere or to be developed
          in future.

     -    Planning, establishing, developing, providing, operating and
          maintaining telecommunications systems and networks within India as
          are found necessary for international telecommunications.

     -    Providing and maintaining international leased telecommunication
          services.

     -    Designing, developing, installing, maintaining and operating long
          distance domestic and international basic and value added
          telecommunications, global mobile telecommunications, electronic mail
          services, globally managed data networks, data telecom networks, video
          conferencing, international gateway networks and satellite networks in
          and outside India.


     DIRECTORS

     Pursuant to Article 5.1 of the Shareholders' Agreement, the board of
directors of VSNL has been reconstituted and shall consist of up to twelve
directors. Four of the directors shall be permanent and non-retiring directors,
of which the Government and Panatone Finvest Limited are entitled to nominate
two each. Four of the directors shall be retiring and independent directors, of
which the Government and Panatone Finvest Limited are entitled to nominate and
recommend two each. Four of the directors shall be retiring and non-independent
directors, of which the Government and Panatone Finvest Limited are entitled to
nominate two each, unless Panatone Finvest Limited owns (a) more than 25.0
percent but less than 30.0 percent of the Shares,

                                       83
<PAGE>
in which case Panatone Finvest Limited will be entitled to nominate three of the
four directors and the Government will be entitled to nominate one of the four
directors, or (b) more than 30.0 percent of the Shares, in which case Panatone
Finvest Limited will be entitled to nominate all four directors. In addition,
Panatone Finvest Limited has the right to designate one of the directors
nominated by it as the managing director of the Company so long as it owns at
least 25.0 percent of the Shares.

     The remaining directors of the Company are liable to retire by rotation,
and one-third of such directors are elected by the shareholders each year at the
Company's Annual General Meeting. The directors to retire in every year shall be
those who have been longest in office since their last election, but as between
persons who became directors on the same day shall be determined by lot unless
they otherwise agree between themselves. The retiring directors shall be
eligible for re-election.

     See "Item 6. Directors, Senior Management and Employees--Directors and
Officers of the Company."

     Compensation. The fulltime directors are entitled to receive compensation
for their service to the Company. The external directors are entitled to receive
a sitting fee for each meeting of the Board or a committee thereof that they
attend. The fee for attending any meeting may be determined by the Board from
time to time but must be within the maximum limit prescribed under the Companies
Act. Subject to any provisions of the Companies Act, directors may be entitled
to additional remuneration, if the director is called upon to perform an
extraordinary service in behalf of the Company. In addition, directors may be
reimbursed for reasonable traveling and other related expenses in connection
with attending any meetings of the Board or a committee thereof.

     Borrowing Powers. Subject to the provisions of the Company Act, the Board
may pass a resolution at a meeting of the Board from time to time to borrow
and/or secure the payment of any sum or sums of money for the purposes of the
Company. The Board has the power, in its discretion, to determine the terms and
conditions of such borrowing, including issuing bonds, debentures or any
mortgage, charge or other security on the undertaking of any property of the
Company.

     Qualification; Retirement. A director need not hold any of the Company's
Shares to qualify as a director. There is no age limit requirement for a
director's retirement.


     DIVIDENDS

     The Company's shareholders, acting at the Annual General Meeting, may
declare a dividend upon the recommendation of the Board of Directors. The amount
of the dividend so declared may not exceed the amount recommended by the Board
although a lesser amount may be declared. Dividends are distributed and paid
within 30 days of the declaration by the shareholders. The Company's Board also
is authorized under the Articles to declare and pay interim dividends to
shareholders. It is customary in India to pay to holders of shares issued in any
fiscal year a pro rata portion of the annual dividend for the portion of the
year such shares were issued.

     Dividends are payable only in cash to registered holders on a record date
fixed prior to the relevant General Meeting.

     Dividends may be paid only out of profits of the Company for the relevant
year, after transfer to the reserves of the Company of a percentage of its
profits for that year of not less then 2.5 percent if the dividend is in excess
of 10 percent. The Companies Act further provides that, in the event of
inadequacy or absence of profits in any year, a dividend may be declared for
such year out of the Company's accumulated profits, subject to certain
limitations.

     Under the Companies Act, the dividend amount is required to be maintained
in a separate bank account within five days of declaration of such dividend.

     The Board of Directors of the Company recommended an interim dividend of
Rs.75 on every share of Rs.10 in January 2002 for the full financial year ended
March 31, 2002. The Board of Directors of the Company subsequently recommended a
final dividend of Rs.87.50 (inclusive of Rs.75 on every share paid in earlier
during the year) on every share of Rs.10 for the financial year ended March 31,
2002, and the same has been approved at the Annual General Meeting held on
August 20, 2002. The Company, which was a PSU during the time the payment of
dividends was made (except the final dividend of Rs.12.50 per share for the

                                       84
<PAGE>
financial year 2001-02) remained subject to the nonbinding Ministry of Finance
guidelines regarding the payout of dividends by PSUs until removal of its PSU
status in February 2002. See "Item 3. Key Information -- Dividends."


     VOTING RIGHTS

     At any general meeting, voting is by show of hands (where each shareholder
has one vote) unless a poll is demanded by at least ten percent of those
entitled to vote on the resolution or those holding Shares with a paid-up value
of at least Rs.50,000. Upon a poll, every shareholder entitled to vote and
present in person or by proxy has one vote for every Share held by the
shareholder. The Chairman has a deciding vote in the case of any tie.

     Any shareholder of the Company may appoint a proxy. The instrument
appointing a proxy must be lodged with the Company at least 48 hours before the
time of the meeting. A corporate shareholder may appoint an authorized
representative who may vote in all respects as if a shareholder, both on a show
of hands and upon a poll.

     Ordinary resolutions may be passed by simple majority of those present and
voting at any General Meeting for which the required period of notice has been
given. However, certain resolutions, such as alteration of the Articles,
commencement of a new line of business, issuance of further Shares without
preemptive rights and reduction of share capital, require that the votes cast in
favor of the resolution (whether by show of hands or upon a poll) be not less
than three times the number of votes, if any, cast against the resolution.


     BONUS SHARES

     In addition to permitting dividends to be paid out of current or retained
earnings, the Companies Act permits the Company to distribute bonus Shares to
shareholders. Upon any such distribution an amount equal to the face value of
such bonus Shares is transferred from the general reserve or share premium
account to share capital. Such bonus Shares must be distributed to shareholders
in proportion to the number of Shares owned by them.


     PREEMPTIVE RIGHTS AND ISSUE OF ADDITIONAL SHARES

     The Company may by ordinary resolution increase its share capital by the
issue of new Shares or create a new class of shares. In addition, the rights
attached to the shares of any class may be varied with the consent of
shareholders holding not less than three-fourths of the issued shares of that
class. The Companies Act gives shareholders the right to subscribe for new
Shares in proportion to their existing shareholdings unless otherwise determined
by special resolution to that effect adopted at an Annual General Meeting of
shareholders. Under the Companies Act, in the event of an issuance of
securities, subject to the limitations the Company must first offer such Shares
to existing shareholders by notice specifying (1) the number of Shares offered
and the date, within 30 days from the date of offer, by which the offer must be
accepted and (2) the right, exercisable by the shareholder, to renounce the
shares offered in favor of any other person. The Board is entitled to distribute
the Shares in respect of which preemptive rights have not been exercised in the
manner that it deems most beneficial to the Company in accordance with the
Articles.


     GENERAL MEETING OF SHAREHOLDERS

     The Company is required to convene an Annual General Meeting of its
shareholders within six months after the end of each fiscal year and may convene
an Extraordinary General Meeting of shareholders when necessary or at the
request of a shareholder or shareholders holding not less than ten percent of
the paid-up capital of the Company on the date of the request. The Annual
General Meeting of the shareholders is generally convened by the Company
Secretary in accordance with a resolution of the Board. Written notice setting
out the agenda of the meeting must be given at least 21 days (excluding the day
of service) prior to the date of the General Meeting to the shareholders whose
names are on the register at the record date. Those shareholders who are
registered as shareholders on the date of the General Meeting are entitled to
attend or vote at such meeting.

     The Annual General Meeting of shareholders must be held at the registered
office of the Company or at such other place within the city in which the
registered office is located; meetings other than the Annual General Meeting may
be held at any other place if so determined by the Board.

                                       85
<PAGE>
     The Articles provide that a quorum for a General Meeting is the presence of
at least five shareholders, including a representative of the President of India
and Panatone Finvest Limited.


     REGISTER OF SHAREHOLDERS; RECORD DATES; TRANSFER OF SHARES

     The Company's share transfer agent maintains a register of shareholders of
the Company. For the purpose of determining Shares entitled to annual dividends
the register is closed for a specified period prior to the Annual General
Meeting. The Companies Act and the Company's listing agreement with the BSE (and
the other Indian Stock Exchanges) permit the Company, pursuant to a resolution
of the Board and upon at least 30 days' advance notice to the BSE (and such
stock exchanges), to set the record date and upon seven days' public notice to
close the register of shareholders for not more than 30 days at a time, and not
more than 45 days in a year, in order for the Company to determine which
shareholders are entitled to certain rights pertaining to the Shares. Trading of
Shares may, however, continue while the register of shareholders is closed.

     Following introduction of the Depositories Act, 1996, and the repeal of
Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled
companies to refuse to register transfers of shares in certain circumstances,
the shares of a company are freely transferable, subject only to the provisions
of Section 111A of the Companies Act. Pursuant to Section 111A, if the transfer
of shares is in contravention of any of the provisions of the Securities and
Exchange Board of India Act, 1992, or the regulations issued thereunder or the
Sick Industrial Companies (Special Provisions) Act, 1985, the Company Law Board
(a statutory body which administers various laws affecting companies in India
may, on application made by an investor, SEBI or certain other parties, direct
the rectification of the register of records. The Company Law Board may, in its
discretion, issue an interim order suspending the voting rights attached to the
relevant shares, before making or completing its inquiry into the alleged
contravention. Pending such inquiry, the rights of a holder to transfer the
shares would not be restricted, although the voting rights attached to the
shares may remain suspended if the Company Law Board so orders.

     Transfer of Shares of the Company is effected by an instrument of transfer
in the form prescribed by the Government of India coupled with delivery of the
share certificates. The transfer agent of the Company is M/s. Sharepro Services,
located in Mumbai.

     The above procedure is not applicable where the Shares are dematerialized
and transferred electronically. To encourage "dematerialization" of securities
in India, SEBI has required certain types of securities of certain Indian
companies to be traded and settled in book-entry form. The Shares of the Company
have been designated as one of such securities. To effect transfer of Shares in
book-entry form, the seller and purchaser must establish accounts with a
depositary participant appointed by the National Securities Depositary Limited
or Central Securities Depositary Limited, a depositary established pursuant to
the Depositories Act, 1996. Charges for opening an account with an Securities
Depositary Limited participant, transaction charges for each trade and custodian
charges for securities held in each account vary depending upon the business
practice of each Securities Depositary Limited participant. Upon delivery, the
Shares purchased will be registered in the name of the Securities Depositary
Limited participant and held by such Securities Depositary Limited participant
for the account of the purchaser. So long as the Shares are traded through the
book-entry system of Securities Depositary Limited, ownership of beneficial
interest in the Shares will be shown on, and transfer of such ownership will be
effected only through, records maintained by Securities Depositary Limited
participants.

     The requirement for dematerialization of the Shares may apply to the ADR
holders when the underlying Shares are withdrawn from the depositary facility
upon surrender of the ADRs. In order to trade the underlying Shares in the
Indian market, the withdrawing ADR holder will be required to hold such Shares
in book-entry form and to comply with the Securities Depositary Limited
procedures described above. If dematerialization of any underlying Shares is
requested by an ADR holder, the cost incurred by the Depositary therefor will be
borne by the withdrawing ADR holder. Transfer of Shares in book-entry form is
not subject to any Indian transfer tax. See "Taxation -- Indian Taxation."


     DISCLOSURE OF OWNERSHIP INTEREST

     Section 187C of the Companies Act generally requires beneficial owners of
shares of Indian companies who are not holders of record to declare to the
company details of the holder of record and holders of record to declare details
of the beneficial owner. While it is unclear whether Section 187C applies to
holders of ADRs of a company, investors who exchange ADRs for shares are subject
to this Section. Failure to comply with Section 187C would not affect the
obligation of a company to register a transfer of shares or to pay any dividends
to the

                                       86
<PAGE>
registered holder of any shares in respect of which such declaration has
not been made, but any person who fails to make the required declaration may be
liable for a fine of up to Rs.l,000 for each day such failure continues.
Furthermore, any charge, promissory note or any other collateral agreement
created, executed or entered into by the registered owner of any share in
respect of which a declaration required under Section 187C has not been made is
not enforceable by the beneficial owner or any person claiming through him.


     AUDIT AND ANNUAL REPORT

     At least 21 days before the Annual General Meeting of shareholders, the
Company must circulate a detailed version of the Company's audited balance sheet
and profit and loss account and the reports of the Board of Directors and the
auditors thereon. The Company also is required under the Companies Act to make
available upon request of any shareholder a complete balance sheet and profit
and loss account of the Company in the case of circulation of abridged accounts.

     Under the Companies Act, the Company must file with the Registrar of
Companies the balance sheet and annual profit and loss account presented to the
shareholders within 30 days of the conclusion of the Annual General Meeting and
an annual return within 60 days of the conclusion of the meeting.


     RIGHTS OF THE GOVERNMENT OF INDIA UNDER THE SHAREHOLDERS' AGREEMENT ("SHA")
     TO BE EXERCISED THROUGH ITS NOMINEE DIRECTORS ON THE BOARD

Approval of Matters

(a)  The property, business and affairs of the Company shall be managed
exclusively by and be under the direction of the Board. The Board may exercise
all such powers of the Company and have such authority and do all such lawful
acts and things as are permitted by applicable Law and the Memorandum of
Association and Articles of Association. Subject to (b) below, all decisions,
actions and resolutions of the Board shall be adopted by the affirmative vote of
a simple majority of the members of Board.

(b)  Notwithstanding any other provision of SHA or otherwise permitted or
provided under the Act, no obligation of the Company or any of its subsidiaries
shall be entered into, no decision shall be made and no action shall be taken by
or with respect to the Company or any of its subsidiaries in relation to the
following matters unless such obligation, decision or action as the case may be,
is approved if, at any meeting of the Company's shareholders, duly called for
the purpose of considering such obligation, decision or action, by an
affirmative vote of the one authorised representative of both the Government and
Panatone Finvest Limited, and if at the meeting of the Board by an affirmative
vote of, at least one nominee director of each of the Government and Panatone
Finvest Limited:

     (i) Any change in the Memorandum of Association and Articles of
     Association;

     (ii) The granting of any security or the creation of any Encumbrance on the
     assets of the Company or the incurrence of any indebtedness or guaranteeing
     the debts of any Person which in the aggregate at any time exceeds the net
     worth of the Company;

     (iii) The taking of any steps to wind-up or terminate the corporate
     existence of the Company or any of its Affiliates or entering into any
     arrangement with the creditors of the Company in relation to all or
     substantial part of the assets of the Company;

     (iv) Any one or a series of transactions which causes a sale, lease,
     exchange or disposition of land and building of the Company or its
     subsidiary which are acquired by the Company at any time prior to the
     Closing (as defined in the SHA);

     (v) Subject to (xv) hereunder, any sale, lease, exchange or disposition of
     any property, assets or equipments (other than land and building) of the
     Company or its subsidiary which are acquired by the Company at any time
     prior to the Closing,

     (vi) The making, directly or indirectly, of loans or advances in excess of
     Rs.500 million to any Person other than in the ordinary course of business
     of the Company;

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     (vii) The entering into of an amalgamation, merger or consolidation with
     any other company or body corporate;

     (viii) Any change in the number of directors of the Company from that
     provided in this Agreement;

     (ix) Any agreement with or commitment to any Shareholder or its
     Principal(s) or their respective Affiliates, except where, and to the
     extent, (a) such agreement or commitment between the Company or any of its
     Affiliates on the one hand and the Government or any Government Authority
     on the other is required under applicable Law or (b) such agreement is on
     an arms' length basis and in good faith;

     (x) Establishment of any subsidiary or associated company by Company;

     (xi) Transfer of any rights or interest in Affiliates of the Company
     including, without limitation, Transfer of Relevant Interests in securities
     of such Affiliates held by the Company;

     (xii) Any agreement, license or permission in respect of the use of the
     name and/or logo of the Company (except where such agreement, license or
     permission is for the purpose of, or in connection with, advertising or
     promotional activities only by the Company);

     (xiii) the delegation by the Board to any Person of the Board's authority
     to approve or authorize any matter described in this article (b);

     (xiv) change directly or indirectly in the use of land and building of the
     Company other than for the purposes of the main objects of the Company as
     defined in the Memorandum of Association of the Company;

     (xv) Any one or a series of transactions, which causes a sale, lease,
     exchange or disposition of obsolete equipments or equipments not in use, of
     the Company or its subsidiary having an aggregate value exceeding 25
     percent of the total value of the net fixed assets of the Company as
     specified in the Audited Financial Statement;

     (xvi) Any commitment or agreement to do any of the foregoing.

(c)  Notwithstanding anything to the contrary contained in the SHA in the event
any of the aforesaid items of business mentioned in (b) above is not approved by
the Board or Shareholders at a meeting or otherwise then such non-approved items
shall not be implemented by the Company and the Strategic Partner and the
Government (Parties to SHA) shall not directly or indirectly take any steps to
cause the Company to implement such items of business. The non-approval of the
aforesaid items of business at a meeting or otherwise of the Board or the
Shareholders shall not be considered as subject matter of dispute, difference,
disagreement or the like between the Government and the Strategic Partner and
the non approval of such item of business will not be referred to Arbitration
under SHA.


     ACQUISITION BY THE COMPANY OF ITS OWN SHARES

     Until 1999, the Companies Act did not permit a company to acquire its own
equity shares because of the resulting reduction in the company's capital.
However, the Government amended the Indian Companies Act and consequently this
reduction in capital is now permitted in certain circumstances. The reduction of
capital requires compliance with specific buy-back guidelines specified in the
Indian Companies (Amendment) Act, 1999, and by SEBI.

     ADR holders will not be eligible to participate in a buyback in case of
tender offers, odd lots and open market purchases unless they surrender their
ADSs and receive delivery of the underlying Shares. ADR holders should note that
Shares withdrawn from the depositary facility may not be redeposited into such
depositary facility.

     There can be no assurance that the underlying Shares offered by the ADR
holders in any buyback of Shares by the Company will be accepted by the Company.
The regulations relating to the buyback of securities have only been introduced
recently and there is very limited experience in the interpretation of such
regulations. ADR Holders are advised to consult their Indian legal advisers
prior to participating in any buyback by the Company, including in relation to
any tax issues relating to such buyback.

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     Foreign Institutional Investors should note that in the event of a buyback
by the Company, the prescribed threshold limit for shareholdings by Foreign
Institutional Investors may be exceeded by default regardless of any
participation or non-participation by them in the buyback. The treatment of the
Foreign Institutional Investors threshold limits in the buyback context is
uncertain, and Foreign Institutional Investors are advised to consult their
Indian legal advisers in this regard.


     LIQUIDATION RIGHTS

     Subject to the rights of creditors, employees and of the holders of any
other shares entitled by their terms to preferential repayment over the Shares,
in the event of winding up of the Company, the holders of the Shares are
entitled to be repaid the amounts of capital paid up or credited as paid up on
such Shares. All surplus assets after payments due to the holders of any
preference shares belong to the holders of the Shares in proportion to the
amount paid up or credited as paid up on such Shares, respectively, at the
commencement of the winding up.


     TAKEOVER CODE

     Disclosure and mandatory bid obligations under Indian law are governed by
the Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997 (the "Takeover Code"), which prescribes certain
thresholds or trigger points that give rise to these obligations. The Takeover
Code is under constant review by SEBI and was recently amended.

     The most important features of the Takeover Code, as amended, are as
follows:

     -    Any acquirer (meaning a person who, directly or indirectly, acquires
          or agrees to acquire shares or voting rights in a company, either by
          himself or with any person acting in concert) who acquires shares or
          voting rights that would entitle him to more than 5 percent of the
          shares or voting rights in a company is required to disclose the
          aggregate of his shareholding or voting rights to the company (which
          in turn is required to disclose the same to each of the stock
          exchanges on which the company's shares are listed) within four
          working days of (a) the receipt of allotment information or (b) the
          acquisition of shares or voting rights, as the case may be.

     -    A person who holds more than 15 percent of the shares or voting rights
          in any company is required to make annual disclosure of his holdings
          to that company (which in turn is required to disclose the same to
          each of the stock exchanges on which the company's shares are listed).

     -    Promoters or persons in control of a company are also required to make
          annual disclosure in respect of their holdings in the same manner.

     With respect to takeovers (other than bail-out takeovers) of listed
companies, the Takeover Code, as amended, provides for mandatory bid and open
offer requirements, summarised below:

     -    An acquiror cannot acquire shares or voting rights which (taken
          together with existing shares or voting rights, if any, held by him or
          by persons acting in concert with him) would entitle such acquiror to
          exercise 15 percent or more of the voting rights in a company, unless
          such acquiror makes a public announcement offering to acquire an
          additional 20 percent of the shares of the company.

     -    An acquiror who, together with persons acting in concert with him,
          holds between 15 percent and 75 percent cannot acquire additional
          shares or voting rights that would entitle him to exercise more than 5
          percent of the voting rights in any period of twelve months unless
          such acquiror makes a public announcement offering to acquire an
          additional 20 percent of the shares of the company.

     -    Any further acquisition of shares or voting rights by an acquiror who
          holds 75 percent of the shares or voting rights in a company triggers
          the same public announcement requirements.

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     -    In addition, regardless of whether there has been any acquisition of
          shares or voting rights in a company, an acquiror acting in concert
          cannot directly or indirectly acquire control over a company (for
          example, by way of acquiring the right to appoint a majority of the
          directors or to control the management or the policy decisions of the
          company) unless such acquiror makes a public announcement offering to
          acquire a minimum of 20 percent of the shares of the company.

     The Takeover Code sets out the contents of the required public
announcements as well as the minimum offer price.

     The Takeover Code, as amended, permits conditional offers as well as the
acquisition and subsequent delisting of all shares of a company and provides
specific guidelines for the gradual acquisition of shares or voting rights.
Specific obligations of the acquiror and of the board of directors of the target
company in the offer process have also been set out. Acquirors making a public
offer will be required to deposit in an escrow account 25 percent of the total
consideration (if the total consideration is Rs.1.0 billion (US$0.02 billion) or
less) up to and including Rs.1 billion (US$0.02 billion) and 10 percent for the
excess over Rs.1 billion, which amount will be forfeited in the event that the
acquiror does not fulfill his obligations. In addition, the Takeover Code
introduces the "chain principle" whereby the acquisition of a holding company
will obligate the acquiror to make a public offer to the shareholders of each of
the publicly listed companies acquired through the acquisition of the holding
company.

     The general requirements to make such a public announcement do not,
however, apply entirely to bail-out takeovers when a promoter (i.e., person or
persons in control of the company, persons named in any offer document as
promoters and certain specified corporate bodies and individuals) is taking over
a financially weak company (but not a "sick industrial company") pursuant to a
rehabilitation scheme approved by a public financial institution or a scheduled
bank. A "financially weak company" is a company which has, at the end of the
previous fiscal year, accumulated losses resulting in erosion of more than 50
percent (but less than 100 percent) of the total sum of its paid-up capital and
free reserves at the end of the previous fiscal year. A "sick industrial
company" is a company registered for more than five years which has, at the end
of any fiscal year, accumulated losses equal to or exceeding its entire net
worth.

     The Takeover Code does not apply to certain specified acquisitions
including the acquisition of shares (1) by allotment in a public issue, (2)
pursuant to an underwriting agreement, (3) by registered stockbrokers in the
ordinary course of business on behalf of clients, (4) in unlisted companies, (5)
pursuant to a scheme of reconstruction or amalgamation or (6) pursuant to a
scheme under Section 18 of the Sick Industrial Companies (Special Provisions)
Act, 1985. In addition, the Takeover Code does not apply to shares represented
by ADSs so long as such shares remain in the ADR depositary facility.

     The Company has entered into a listing agreement with each of the other
Indian Stock Exchanges on which the Shares are listed. Clause 40A of the listing
agreements provides that if an acquisition of a listed company's equity shares
results in the acquirer and its associates holding 5 percent or more of the
company's outstanding equity shares, the acquirer must report its holding to the
relevant stock exchange(s). If an acquisition could result in the acquirer and
its associates holding equity shares which carry 10 percent or more of the
voting rights, then the acquirer must notify the relevant stock exchange(s). If
such acquisition is deemed a takeover, the acquirer must, before acquiring such
shares, offer (in accordance with Clause 40B of the listing agreements) on a
uniform basis to all remaining shareholders of the company to acquire a minimum
of a further 20 percent of the total shares of the company at a prescribed
price. The acquisition of shares of a company listed on an Indian stock exchange
beyond certain threshold amounts is subject to regulations governing takeovers
of Indian companies. Clauses 40A and 40B and such regulations will not apply to
shares so long as they are represented by ADRs.


     MATERIAL CONTRACTS

     Not applicable.

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     EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

     RESTRICTION ON CONVERSION OF RUPEES

     There are restrictions on the conversion of Rupees into US Dollars. Before
February 29, 1992, the Reserve Bank of India determined the official value of
the Rupee in relation to a weighted basket of currencies of India's major
trading partners. In the February 1992 budget, a new dual exchange rate
mechanism was introduced by allowing conversion of 60 percent of the foreign
exchange received on the trade or current account at a market-determined rate
and the remaining 40 percent at the official rate. All importers were, however,
required to buy foreign exchange at the market rate except for importers of
certain specified priority imports. In March 1993, the exchange rate was unified
and allowed to float and made convertible on the revenue account. In February
1994 and again in August 1994, the Reserve Bank of India announced relaxations
in payment restrictions for a number of transactions. Since August 1994, the
Government of India has substantially complied with its obligations owed to the
International Monetary Fund, under which India is committed to refrain from
using exchange restrictions on current international transactions as an
instrument in managing the balance of payments. Effective July 1999, the process
of current account convertibility was advanced by relaxing restrictions on
foreign exchange for various purposes, such as foreign travel and medical
treatment.


     RESTRICTIONS ON SALE OF THE EQUITY SHARES UNDERLYING THE COMPANY'S AMERICAN
     DEPOSITARY RECEIPTS AND FOR REPATRIATION OF SALE PROCEEDS

     American Depositary Receipts issued by Indian companies to non-residents
have free transferability outside India. Until recently, under Indian law it was
not permitted for a depositary to accept deposits of outstanding equity shares
and issue ADSs evidencing such shares. Thus, an investor in ADSs who surrendered
an ADS and withdrew equity shares would not be permitted to redeposit those
equity shares to obtain ADSs, nor would an investor who purchased equity shares
on the Indian market have been permitted to deposit them in the ADS program. The
Government of India has recently permitted two-way fungibility of ADRs. However,
this is still subject to sectoral caps and certain conditions, including
compliance with the provisions of the Issue of Foreign Currency Convertible
Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme 1993 and
the periodic guidelines issued by the Government. Such restrictions on foreign
ownership of the underlying equity shares may cause the Company's Equity Shares
to trade at a discount or premium to its ADSs.

     In February 2002, the RBI issued a circular stating that the terms of
Regulations 4A of the Reserve Bank of India Notification FEMA 20/2000-RB dated
May 3, 2000, as amended by Notification No. FEMA 41/2001-RB dated March 2, 2001,
allow a registered broker to purchase shares of an Indian company on behalf of a
person resident outside of India for the purpose of converting those shares into
ADSs/GDSs. However, such conversion is subject to compliance with the provisions
of the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depository Receipt Mechanism) Scheme 1993 and the periodic guidelines issued by
the Central Government. This would mean that ADSs converted into Indian shares
may be converted back into ADSs, subject to the limits of sectoral caps.

     The Operative Guidelines for the limited two-way fungibility under the
Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depository Receipt Mechanism) Scheme 1993 has also been approved by the
Government of India.

     These guidelines provide that a re-issuance of ADSs/GDSs are permitted to
the extent that ADSs/GDSs have been redeemed for underlying shares and sold in
the domestic market. The re-issuance must be within specified limits. The
conditions to be satisfied in this regard are: (i) the shares are purchased on a
recognized stock exchange; (ii) the Indian company has issued ADS/GDS; (iii) the
shares are purchased with the permission of the custodian of the ADSs/GDSs of
the Indian company and are deposited with the custodian; and (iv) the number of
shares so purchased shall not exceed the number of ADSs/GDSs converted into
underlying shares.

     The procedure for conversion of shares into ADSs/GDSs is as follows: (i) on
request by the overseas investor for the acquisition of shares for re-issuance
of ADSs/GDSs, the SEBI registered broker will purchase shares from a stock
exchange after verifying with the custodian as to the availability of "Head
Room" (i.e. the number of ADSs/GDSs originally issued minus the number of
ADSs/GDSs outstanding further adjusted for ADSs/GDSs redeemed into underlying
shares and registered in the name of the non-resident investor(s)); (ii) an
Indian broker purchases the shares in the name of the overseas depositary; (iii)
after the purchase, the Indian broker places the domestic shares with the
Custodian; (iv) the Custodian advises the overseas depositary on the

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custody of domestic shares and to issue corresponding ADSs/GDSs to the investor;
and (v) the overseas depositary issues ADSs/GDSs to the investor.

     Holders who seek to sell in India any Equity Shares received upon surrender
of any ADS, and to convert the Rupee proceeds of such sale into foreign currency
and remit such foreign currency outside of India, will require the approval of
the Reserve Bank of India for each such transaction. Although such approvals are
generally forthcoming, there can be no assurance that any such approval can be
obtained in a timely manner or at all.


     GENERAL

     Shares of Indian companies represented by ADSs may be approved for issuance
to foreign investors by the Government of India under the Issue of Foreign
Currency Convertible Bonds and Equity Shares (through Depositary Receipt
Mechanism) Scheme, 1993 (the "1993 Regulation"), as modified from time to time,
promulgated by the Government. The 1993 Regulation is distinct from other
policies or facilities, as described below, relating to investments in Indian
companies by foreign investors. The issuance of ADSs pursuant to the 1993
Regulation also affords to holders of the ADSs the benefits of Section 115AC of
the Indian Income Tax Act, 1961 for purposes of the application of Indian tax
law.


     FOREIGN DIRECT INVESTMENT

     In July 1991, the Government raised the limit on foreign equity holdings in
Indian companies from 40 percent to 51 percent in certain high priority
industries. The Reserve Bank of India gives automatic approval for such foreign
equity holdings. The Foreign Investment Promotion Board, currently under the
Ministry of Industry, was thereafter formed to negotiate with large foreign
companies wishing to make long-term investments in India. Foreign equity
participation in excess of 51 percent in such high priority industries or in any
other industries up to Rupees six billion is currently allowed only with the
approval of the Foreign Investment Promotion Board. Proposals in excess of
Rupees six billion require the approval of the Cabinet committee on Foreign
Investment. Proposals involving the public sector and other sensitive areas
require the approval of Cabinet Committee on Economic Affairs. These facilities
are designed for direct foreign investments by non-residents of India who do not
qualify as Non-Resident Indians, Overseas Corporate Bodies or Foreign
Institutional Investors (as each term is defined below) ("Foreign Direct
Investors"). The Department of Industrial Policy and Promotion, a part of the
Ministry of Industry, issued detailed guidelines in January 1997 for
consideration of foreign direct investment proposals by the Foreign Investment
Promotion Board (the "Guidelines"). Under the Guidelines, sector specific
guidelines for foreign direct investment and the levels of permitted equity
participation have been established. In January 1998, the Reserve Bank of India
issued a notification that foreign ownership of up to 50 percent, 51 percent, 74
percent or 100 percent depending on the category of industry, would be allowed
without prior permission of the Reserve Bank of India. The issues to be
considered by the Foreign Investment Promotion Board, and the Foreign Investment
Promotion Board's areas of priority in granting approvals are also set out in
the Guidelines. The basic objective of the Guidelines is to improve the
transparency and objectivity of the Foreign Investment Promotion Board's
consideration of proposals. However, because the Guidelines are administrative
guidelines and have not been codified as either law or regulations, they are not
legally binding with respect to any recommendation made by the Foreign
Investment Promotion Board or with respect to any decision taken by the
Government of India in cases involving foreign direct investment.

     In May 1994, the Government announced that purchases by foreign investors
of ADSs as evidenced by ADRs and foreign currency convertible bonds of Indian
companies will be treated as direct foreign investment in the equity issued by
Indian companies for such offerings. Therefore, offerings that involve the
issuance of equity that results in Foreign Direct Investors holding more than
the stipulated percentage of direct foreign investments (which depends on the
category of industry) would require approval from the Foreign Investment
Promotion Board. In addition, in connection with offerings of any such
securities to foreign investors, approval of the Foreign Investment Promotion
Board is required for Indian companies whether or not the stipulated percentage
limit would be reached, if the proceeds therefrom are to be used for investment
in non-high priority industries. With respect to the activities of the Company,
Foreign Investment Promotion Board approval is required for any direct foreign
investment in the Company which exceeds 51 percent of the total issued share
capital of the Company.

     In July 1997, the Government issued guidelines to the effect that foreign
investment in preferred shares will be considered as part of the share capital
of a company and will be processed through the automatic Reserve

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Bank of India route or will require the approval of the Foreign Investment
Promotion Board, as the case may be. Investments in preferred shares are
included as foreign direct investment for the purposes of sectoral caps on
foreign equity, if such preferred shares carry a conversion option. If the
preferred shares are structured without a conversion option, they would fall
outside the foreign direct investment limit but would be treated as debt and
would be subject to special Government of India guidelines and approvals.

     Foreign direct investment is now freely allowed in all sectors including
the services sector, except where the existing and notified sectoral policy does
not permit foreign direct investment beyond a ceiling. Foreign direct investment
for virtually all items/activities can be brought in through the automatic route
under powers delegated to the Reserve Bank of India and for the remaining
items/activities through Government Approval. Government approvals are accorded
on the recommendation of the Foreign Investment Promotion Board.


     INVESTMENT BY NON-RESIDENT INDIANS, PERSONS OF INDIAN ORIGIN AND OVERSEAS
     CORPORATE BODIES

     A variety of special facilities for making investments in India in shares
of Indian companies are available to individuals of Indian nationality or origin
residing outside India, persons of Indian origin and to overseas corporate
bodies ("OCBs"), at least 60 percent owned by such persons. These facilities
permit Non-Resident Indians, Persons of Indian Origin and OCBs to make portfolio
investments in shares and other securities of Indian companies on a basis not
generally available to other foreign investors. These facilities are different
and distinct from investments by Foreign Direct Investors described above.


     INVESTMENT BY FOREIGN INSTITUTIONAL INVESTORS

     In September 1992, the Government issued guidelines which enable Foreign
Institutional Investors, including institutions such as pension funds,
investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers, to invest in all the securities
traded on the primary and secondary markets in India. Under the guidelines,
Foreign Institutional Investors are required to obtain an initial registration
from SEBI and a general permission from the Reserve Bank of India to engage in
transactions regulated under the Foreign Exchange Management Act of 1999.
Foreign Institutional Investors must also comply with the provisions of the SEBI
Foreign Institutional Investors Regulations, 1995. When it receives the initial
registration, Foreign Institutional Investors also obtain general permission
from the Reserve Bank of India to engage in transactions regulated under the
Foreign Exchange Management Act of 1999. Together, the initial registration and
the Reserve Bank of India's general permission enable registered Foreign
Institutional Investors to buy (subject to the ownership restrictions discussed
below) and sell freely securities issued by Indian companies, to realize capital
gains on investments made through the initial amount invested in India, to
subscribe or renounce rights offerings for shares, to appoint a domestic
custodian for custody of investments held and to repatriate the capital, capital
gains, dividends, and income received by way of interest and any compensation
received towards sale or renunciation of rights offerings of shares.


     OWNERSHIP RESTRICTIONS

     SEBI and the Reserve Bank of India regulations restrict investments in
Indian companies by Foreign Direct Investors. Under current SEBI regulations
applicable to the Company, Foreign Direct Investors in aggregate may hold no
more than 40 percent of the Company's Equity Shares, excluding the Equity Shares
underlying the ADSs, and Non-Resident Indians and Overseas Corporate Bodies in
aggregate may hold no more than 10 percent of the Company's Equity Shares,
excluding the Equity Shares underlying the ADSs. Furthermore, SEBI regulations
provide that no single Foreign Institutional Investor may hold more than 10
percent of the Company's total Equity Shares and no single Non-Resident Indian
or OCB may hold more than 5 percent of the Company's total Equity Shares.

     Foreign Institutional Investors may only purchase securities of public
Indian companies (other than ADSs) through a procedure known as a "preferential
allotment of shares," which is subject to certain restrictions. These
restrictions will not apply to Equity Shares issued as stock dividends or in
connection with rights offerings applicable to the Equity Shares underlying
ADSs. There is uncertainty under Indian law about the tax regime applicable to
Foreign Institutional Investors which hold and trade ADSs. Foreign Institutional
Investors are urged to consult with their Indian legal and tax advisers about
the relationship between the Foreign Institutional Investors guidelines and the
ADSs and any Equity Shares withdrawn upon surrender of ADSs.

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<PAGE>
     More detailed provisions relating to Foreign Institutional Investors
investment have been introduced by the SEBI with the introduction of the SEBI
Foreign Institutional Investors Regulations, 1995. These provisions relate to
the registration of Foreign Institutional Investors, their general obligations
and responsibilities, and certain investment conditions and restrictions. One
such restriction is that the total investment in equity and equity-related
instruments should not be less than 70 percent of the aggregate of all
investments of the Foreign Institutional Investors in India. The SEBI has also
permitted private placements of shares by listed companies with Foreign
Institutional Investors, subject to the prior approval of the Reserve Bank of
India under the Foreign Exchange Regulation Act of 1973. Such private placement
must be at the average of the weekly highs and lows of the closing price over
the preceding six months of the preceding two weeks, whichever is higher.


     VOTING RIGHTS

     Holders of the Company's ADSs will not be entitled to instruct the
Depositary how to vote the Shares underlying the ADSs. Rather, each holder, by
accepting an ADR, authorized and directed the Depositary to vote as set forth
below.

     The Depositary will vote the deposited Shares as instructed by the
Company's Board of Directors or give a proxy or power of attorney to vote the
deposited Shares to a person designated by the Board of Directors. However, the
Depositary will only do this upon the Company's legal counsel issuing an opinion
to the Depositary stating that it is legal for the Depositary to do so and that
doing so will not expose the Depositary to legal liability. If the Company does
not provide the legal opinion referred to above, the Depositary will not vote
the deposited Shares or give a proxy or power of attorney to anyone else to vote
the deposited Shares.


     TAXATION

     INDIAN TAXATION

     General.  The following summary is based on the provisions of the Income
Tax Act, 1961 (the "Indian Tax Act"), including the special tax regime contained
in Section 115AC (the "Section 115AC Regime") and the 1993 Regulation. The
Indian Tax Act is amended every year by the Finance Act of the relevant year.
Some or all of the tax consequences of the Section 115 AC Regime may be amended
or changed by future amendments of the Indian Tax Act.

     The summary set forth below 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 for
investors in various circumstances and potential investors should therefore
consult their own tax advisers on the tax consequences of such acquisition,
ownership and sale, including specifically the tax consequences under the law of
the jurisdiction of their residence and any tax treaty between India and their
country of residence.


     RESIDENCE

     For purposes of the Indian 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

     -    is in India in that year for 60 days or more and, in case of a citizen
          of India or a person of Indian origin, who, being outside India, comes
          on a visit to India, is in India for more than 182 days in each case
          within the four preceding years has been in India for a period or
          periods amounting to 365 days or more.

A company is resident in India if it is registered in India or the control and
management of its affairs is situated wholly in India.

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     TAXATION OF DISTRIBUTIONS

     Pursuant to the Finance Act, 2002, withholding tax on dividends is applied
at the rate of 10.50 percent. In case of foreign institutional investors the
applicable withholding is 20.10 percent. Henceforth, no tax is required to be
paid by the Company on dividend distributions.


     TAXATION ON SURRENDER OF ADSS

     The acquisition by a non-resident holder of Shares upon surrender of ADSs
does not constitute a taxable event for Indian income tax purposes. Such
exchange will, however, give rise to stamp duty as described below under "Stamp
Duty and Transfer Tax."


     TAXATION OF CAPITAL GAINS

     Any gain realized on the sale of ADSs or Equity Shares by a non-resident
holder to another non-resident holder outside India is not subject to Indian
capital gains tax. However, as Rights are not expressly covered by the Indian
Tax Act, it is unclear, as to whether capital gain derived from the sale of
Rights by a non-resident holder (not entitled to an exemption under a tax
treaty) to another non-resident holder outside India will be subject to Indian
capital gains tax. If such Rights are deemed by the Indian tax authorities to be
situated within India, the gains realized on the sale of such Rights will be
subject to customary Indian taxation as discussed below.

     Since the issuance of the ADSs has been approved by the Government of India
under the Section 115AC Regime, Non-resident Holders of the ADSs will have the
benefit of tax concessions available under the Section 115AC Regime. The Section
115AC Regime provides that if the Equity Shares are sold on an Indian Stock
Exchange against payment in Indian rupees, they will no longer be eligible for
such concessional tax treatment. However, the Section 115AC Regime is unclear,
as to whether such tax treatment is available to a non-resident who acquires
Equity Shares outside India from a non-resident holder of Equity Shares after
receipt of the Equity Shares upon surrender of the ADSs. If concessional tax
treatment is not available, gains realized on the sale of such Equity Shares
will be subject to customary Indian taxations discussed below.

     Subject to any relief provided pursuant to an applicable tax treaty, any
gain realized on the sale of Equity Shares to an Indian resident or inside India
generally will be subject to Indian capital gains tax. For the purpose of
computing capital gains tax, the cost of acquisition of Equity Shares received
in exchange for ADSs will be determined on the basis of the prevailing price of
the shares on any of the Indian stock exchanges on the date that the Depositary
instructs the custodian to deliver Equity Shares in exchange for ADSs. A
non-resident holder's holding period (for purpose of determining the applicable
Indian capital gains tax rate) in respect of Equity Shares received in exchange
for ADSs commences on the date of the notice of the redemption by the Depositary
to the Custodian. The Indo-US Treaty does not provide an exemption from the
imposition of Indian capital gains tax.

     Taxable gain realized on Equity Shares (calculated in the manner set forth
in the prior paragraph) held for more than 12 months (long-term gain) is subject
to tax at the rate of 10 percent. Taxable gain realized on Equity Shares held
for 12 months for less (short-term gain) is subject to tax at variable rates
with a maximum rate of 48 percent. The actual rate of tax on short-term gain
depends on a number of factors, including the legal status of the Non-resident
and the type of income chargeable in India.


     STAMP DUTY AND TRANSFER TAX

     Upon issuance of the Equity Shares, the Company is required to pay a stamp
duty of 0.1 percent per share of the issue price of the underlying Equity
Shares. A transfer of ADSs is not subject to the Indian stamp duty. However,
upon the acquisition of Equity Shares from the Depositary in exchange for ADSs,
the holder will be liable for Indian stamp duty at the rate of 0.5 percent of
the market value of the ADSs or Equity Shares exchanged. A sale of Equity Shares
by a registered holder will also be subject to Indian stamp duty at the rate of
0.5 percent of the market value of the Equity Shares on the trade date, although
customarily such tax is borne by the transferee. However, in case of Equity
Shares held with the Depositary in electronic mode, there will not be any
incidence of stamp duty.

                                       95
<PAGE>
     GIFT AND WEALTH TAX

     ADSs held by non-resident holders and the underlying Equity Shares held by
the Depositary and the transfer of ADSs between non-resident holders and the
Depositary will be exempt from Indian gift tax and Indian wealth tax.


     ESTATE DUTY

     Under current Indian law, there is no estate duty applicable to a
non-resident holder of ADSs or Equity Shares.


     UNITED STATES FEDERAL TAXATION

     The following summary describes the material United States federal income
tax consequences of ownership of Shares and ADSs as of the date hereof. The
discussion set forth below is applicable to US Holders (as defined below).
Except where noted, it deals only with Shares and ADSs held as capital assets
and does not deal with special situations, such as those of dealers in
securities or currencies, traders in securities that elect to use a
mark-to-market method of accounting for their securities holdings, financial
institutions, tax-exempt entities, life insurance companies, persons holding
Shares or ADSs as part of a hedging, integrated, conversion or constructive sale
transaction or a straddle, corporations that accumulate earnings to avoid US
federal income tax, persons owning 10 percent or more of the voting stock of the
Company, or persons whose "functional currency" is not the United States dollar.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below. In addition, this summary
is based, in part, upon representations made by the Depositary to the Company
and assumes that the Deposit Agreement, and all other related agreements, will
be performed in accordance with their terms. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF SHARES OR ADSS SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.

     As used herein, the term "US Holder" means a beneficial holder of a Share
or ADS that is (1) a citizen or resident of the United States, (2) a corporation
created or organized in or under the laws of the United States or any political
subdivision thereof, (3) an estate the income of which is subject to United
States federal income taxation regardless of its source or (4) a trust (X) which
is subject to the supervision of a court within the United States and the
control of one or more United States persons as described in section 7701(a)(30)
of the Code or (Y) that has a valid election in effect under applicable US
Treasury regulations to be treated as a United States person.

     If a partnership holds our Shares or ADSs, the tax treatment of a partner
will generally depend upon the status of the partner, and the activities of the
partnership. If you are a partner of a partnership holding our Shares or ADSs,
you should consult your tax advisor.


     OWNERSHIP OF ADSS

     In general, for United States federal income tax purposes, US holders of
ADSs will be treated as the owners of the underlying Shares that are represented
by such ADSs. Deposits or withdrawal of Shares by US Holders for ADSs will not
be subject to United States federal income tax.


     TAXATION OF DIVIDENDS

     Dividends (other than certain dividends of Shares or rights to subscribe
for Shares) paid to US Holders of Shares or ADSs will be treated as dividend
income to such holders, to the extent paid out of current or accumulated
earnings and profits, as determined under United States federal income tax
principles. Such income will be includable in the gross income of a US Holder as
ordinary income on the day received by the US Holder, in the case of Shares, or
by the Depositary, in the case of ADSs. Such dividends will not be eligible for
the dividends received deduction allowed to corporations under the Code.

     The amount of any dividend paid in Indian Rupees will equal the United
States dollar value of the Indian Rupees received calculated by reference to the
exchange rate in effect on the date the dividend is received

                                       96
<PAGE>
by the US Holder, in the case of Shares, or by the Depositary, in the case of
ADSs, regardless of whether the Indian Rupees are converted into United States
dollars. If the Indian Rupees received as a dividend are not converted into
United States dollars on the date of receipt, a US Holder will have a basis in
the Indian Rupees equal to their United States dollar value on the date of
receipt. Any gain or loss realized on a subsequent conversion or other
disposition of the Indian Rupees will be treated as ordinary income or loss.

     A US Holder will not be eligible for a foreign tax credit against its
United States federal income tax liability for Indian taxes paid by the Company
and deemed under Indian law to have been paid by the shareholders of the
Company, unless it is a US Company holding at least 10 percent of the Indian
Company paying the dividends. Dividends paid on the Shares or ADSs will be
treated as income from sources outside the United States and will generally
constitute "passive income" or, in the case of certain US Holders, "financial
services income."

     To the extent that the amount of any distribution by the Company exceeds
the Company's current and accumulated earnings and profits as determined under
United States federal income tax principles for a taxable year, the distribution
will first be treated as a tax-free return of capital, causing a reduction in
the adjusted basis of the Shares or ADSs (thereby increasing the amount of gain,
or decreasing the amount of loss, to be recognized by the US Holder on a
subsequent disposition of the Shares or ADSs), and the balance in excess of
adjusted basis will be taxed as capital gain recognized on a sale or exchange.
Consequently, such distributions in excess of the Company's current and
accumulated earnings and profits would not give rise to foreign source income.

     Distributions of Shares or rights to subscribe for Shares that are received
as part of a pro rata distribution to all shareholders of the Company in certain
circumstances should not be subject to United States federal income tax. The
basis of the new Shares or rights so received will be determined by allocating
the US Holder's basis in the old Shares between the old Shares and the new
Shares or rights received, based on their relative fair market values on the
date of distribution. However, the basis of the rights will be zero if (1) the
fair market of the rights is less than 15 percent of the fair market value of
the old Shares at the time of distribution or (2) the rights are not exercised
and thus expire.


     PASSIVE FOREIGN INVESTMENT COMPANY

     Based on the composition of its income and valuation of its assets,
including goodwill, the Company does not expect to be passive foreign investment
company ("PFIC") for fiscal year 2002 and does not expect to become one in the
future, although there can be no assurance in this regard.

     In general, a company is considered a PFIC for any taxable year if either:

     -    at least 75 percent of its gross income is passive income, or

     -    at least 50 percent of the value of its assets is attributable to
          assets that produce or are held for the production of passive income.

     The 50 percent of value test is based on the average of the value of the
Company's assets for each quarter during the taxable year. If the Company owns
at least 25 percent, by value, of another company's stock, it will be treated,
for purposes of the PFIC rules, as owning its proportionate share of the assets
and receiving its proportionate share of the income of that company.

     In determining that the Company is not a PFIC, the Company is relying on
its projected capital expenditure plans for the current year and for future
years. In addition, the determination is based on a current valuation of the
Company's assets, including goodwill. In calculating goodwill, the Company has
valued its total assets based on the market value of its Shares or ADSs, which
is subject to change. In addition, the Company has made a number of assumptions
regarding the amount of this value allocable to goodwill. The Company believes
its valuation approach is reasonable. However, it is possible that the Internal
Revenue Service ("IRS") will challenge the valuation of the Company's goodwill,
which may also result in the Company being classified as a PFIC.

     In addition, the determination of whether the Company is a PFIC is made
annually. Accordingly, it is possible that the Company may be a PFIC in the
current or any future taxable year due to changes in the Company's asset or
income composition or if the Company's projections are not accurate. Because the

                                       97
<PAGE>
Company has valued its goodwill based on the anticipated market value of its
Shares or ADSs immediately following the offering, a decrease in the price of
the Company's Shares or ADSs may also result in its becoming a PFIC.

     If the Company were a PFIC for any taxable year during which a US Holder
holds Shares or ADSs, unless such holder makes the mark-to-market election
discussed below, such holder will be subject to special tax rules with respect
to any "excess distribution" that such holder receives and any gain such holder
realizes from a sale or other disposition (including a pledge) of the Shares or
ADSs. These special tax rules generally will apply even if the Company ceases to
be a PFIC in subsequent years. Distributions a US Holder receives in a taxable
year that are greater than 125 percent of the average annual distributions such
holder received during the shorter of the three preceding taxable years or such
holder's holding period for the Shares or ADSs will be treated as excess
distributions. Under these special tax rules:

     -    the excess distribution or gain will be allocated ratably over such
          holder's holding period for the Shares or ADSs,

     -    the amount allocated to the current taxable year, and any taxable year
          prior to the first taxable year in which the Company was a PFIC, will
          be treated as ordinary income, and

     -    the amount allocated to each other year will be subject to tax at the
          highest tax rate in effect for that year and the interest charge
          generally applicable to underpayments of tax will be imposed on the
          resulting tax attributable to each such year.

     If a US Holder holds Shares or ADSs in any year in which the Company is a
PFIC, such holder will be required to file IRS Form 8621.

     As long as the Shares or ADSs are regularly traded on a national securities
exchange, a US Holder can avoid the special PFIC rules discussed above by making
an election to mark such holder's Shares or ADSs to market. It is intended that
the ADSs will be listed on the New York Stock Exchange which is a national
securities exchange for purposes of the mark-to-market election, although there
can be no assurance that the ADSs will be "regularly traded", and it should be
noted that only the ADSs and not the Shares will be traded on the New York Stock
Exchange. The Shares will not be listed in the United States but will continue
to be listed on the Indian Stock Exchanges.

     If a US Holder makes an effective mark-to-market election, such holder will
include in income each year as ordinary income (rather than capital gain) the
excess, if any, of the fair market value of such holder's PFIC Shares or ADSs at
the end of the taxable year over the adjusted basis in the Shares or ADSs and
will be permitted an ordinary loss in respect of the excess, if any, of the
adjusted basis of such Shares or ADSs over their fair market value at the end of
the taxable year, but only to the extent of the net amount previously included
in income as a result of the mark to market election. A US Holder's basis in the
Shares or ADSs will be adjusted to reflect any such income or loss amounts. Any
gain or loss on the sale of the Shares or ADSs will be ordinary income or loss,
except that such loss will be ordinary loss only to the extent of the previously
included net mark to market gain.

     If a US Holder makes a mark-to-market election it will be effective for the
taxable year for which the election is made and all subsequent taxable years
unless the Shares or ADSs are no longer regularly traded on a national
securities exchange or the IRS consents to the revocation of the election. US
Holders are urged to consult their own tax advisors about the availability of
the mark-to-market election, and the desirability of making such an election
under their particular circumstances.

     Alternatively, a US Holder of Shares or ADSs in a PFIC can sometimes avoid
the rules described above by electing to treat the Company as a "qualified
electing fund" under section 1295 of the Code. This option is not available to
US Holders of the Shares or ADSs because the Company does not intend to comply
with the requirements necessary to permit such holders to make this election.

     Persons considering the purchase, ownership or disposition of Shares or
ADSs should consult their own tax advisors concerning the United States federal
income tax consequences of holding the Shares or ADSs if the Company were
considered a PFIC in any taxable year.

                                       98
<PAGE>
     TAXATION OF CAPITAL GAINS

     For United States federal income tax purposes, a US Holder will recognize
taxable gain or loss on the sale or exchange of a right, Share or ADS in an
amount equal to the difference between the amount realized for the right, Share
or ADS and the US Holder's tax basis in the right, Share or ADS. Such gain or
loss will be capital gain or loss. Capital gains of individuals derived with
respect to capital assets held for more than one year are eligible for reduced
rates of taxation. Any gain or loss recognized by a US holder will generally be
treated as United States source gain or loss.


     ESTATE TAXATION

     An individual shareholder who is a citizen or resident of the United States
for United States federal estate tax purposes will have the value of the equity
Shares or ADSs owned by such holder included in his or her gross estate for
United States federal estate tax purposes.


     INFORMATION REPORTING AND BACKUP WITHHOLDING

     In general, information reporting requirements will apply to dividends in
respect of the Shares or ADSs or the proceeds received on the sale, exchange, or
redemption of the Shares or ADSs paid within the United States (and in certain
cases, outside of the United States) to US Holders other than certain exempt
recipients (such as corporations), and a 30 percent backup withholding may apply
to such amounts if the US Holder fails to provide an accurate taxpayer
identification number to the Company or its payment agent or to report interest
and dividends required to be shown on its federal income tax returns. The amount
of any backup withholding from a payment to a US Holder will be allowed as a
credit against the US Holder's United States federal income tax liability.


     DOCUMENTS ON DISPLAY

     This report and other information filed or to be filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at:

     Judiciary Plaza
     450 Fifth Avenue N.W.
     Room 1024
     Washington, D.C. 20529

     Northwestern Atrium Center
     500 West Madison Street
     Suite 1400
     Chicago, IL 60661-2511

     Copies of these materials can also be obtained from the Public Reference
Section of the SEC, 450th Street, N.W., Washington, DC 20549, at prescribed
rates. The public may obtain information on the operation of the SEC's Public
Reference Room by calling the SEC in the United States at 1-800-SEC-0330.

     The SEC maintains a website at www.sec.gov that contains reports, proxy and
information statements, and other information regarding registrants that make
electronic filings with the SEC using its EDGAR system. We intend to continue to
make our future SEC filings available over the Internet.

     Additionally, documents referred to in this Form 20-F may be inspected at
our corporate offices which are located at Videsh Sanchar Bhavan, Mahatma Gandhi
Road, Mumbai 400001, India.


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     The Company is exposed to market risk from changes in foreign currency
exchange rates because certain of its costs are denominated in currencies
(primarily SDRs and US Dollars) other than those in which it earns revenues
(primarily the Rupee). Fluctuations in the exchange rate between the Rupee and
other currencies affect the Rupee amount of foreign currency settlement payments
received by the Company from, and paid by the Company to, foreign
telecommunications administrations and therefore the revenues and operating
costs of the Company. The Company may as a result be exposed to the risk of
fluctuations in the exchange rate between

                                       99
<PAGE>
the Rupee and foreign currencies, which has effectively increased the cost in
Rupee terms of foreign exchange payments required to be made by it including
payments to foreign telecommunications administrations and payments for imported
equipment and technology. However, the Company does not use derivative
instruments, such as foreign exchange forward contracts, foreign currency
options, interest rate swaps and forward rate agreements, to manage these market
risks, nor does it hold or issue derivative or other financial instruments for
trading purposes.

     The Company does not have any loans denominated in foreign currencies.


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not Applicable.


                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not Applicable.


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

     Not Applicable.


ITEM 15.  RESERVED


ITEM 16.  RESERVED


                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

     The Company has elected to provide financial statements pursuant to Item 18
of Form 20-F.


ITEM 18.  FINANCIAL STATEMENTS

     The following financial statements comprising of balance sheets of the
Company as of March 31, 2001 and March 31, 2002 and the related statements of
income, cash flows and shareholders' equity for the years ended March 31, 2000,
2001 and 2002 have been audited by Deloitte Haskins & Sells, independent
accountants, in accordance with US GAAP. The financial statement pages appear on
pages F-1 through F-29.


ITEM 19.  EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER       DESCRIPTION
-------      ---------------------------------------------------------------------------------------
<S>          <C>
1.1*         Certificate of Incorporation of Videsh Sanchar Nigam Limited, dated March 19, 1986 and
             as currently in effect.

1.2          Memorandum and Articles of Association of Videsh Sanchar Nigam Limited, dated August
             20, 2002 and as currently in effect.

1.3*         Certificate for Commencement of Business, dated March 21, 1986 and as currently in
             effect.

1.4*         Specimen Certificate for Equity Shares of Videsh Sanchar Nigam Limited.

2.1*         Form of Deposit Agreement, among Videsh Sanchar Nigam Limited, The Bank of New York, as
             Depositary and owners and beneficial owners of American Depositary Receipts issued
             thereunder (including as an exhibit, the form of American Depositary Receipt).
</TABLE>

                                      100
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER       DESCRIPTION
-------      ---------------------------------------------------------------------------------------------
<S>          <C>
2.2**        Amendment No. 1 to Deposit Agreement, among Videsh Sanchar Nigam Limited, The Bank of
             New York, as Depositary and owners and beneficial owners of American Depositary Receipts
             issued thereunder (including as an exhibit the form of American Depositary Receipt).

2.3***       Shareholders' Agreement among the President of India, Panatone Finvest Limited, Tata
             Sons Limited, Tata Power Company Limited, Tata Iron and Steel Company Limited, and Tata
             Industries Limited, dated 13 February 2002.

2.4***       Share Purchase Agreement among the Government of India, Panatone Finvest Limited, Tata
             Sons Limited, Tata Power Company Limited, Tata Iron and Steel Company Limited, and Tata
             Industries Limited and the Company dated 6 February 2002.

4.1*         License Agreement for the provision of Internet Service between the President of India
             and Videsh Sanchar Nigam Limited, dated January 25, 1999.

4.2+         Memorandum of Agreement, International Telecommunication Services between Videsh Sanchar
             Nigam Limited and AT&T Corp., Accounting Rate and Division of Revenue, dated April 15,
             2002 (the "AT&T Agreement").

4.3+         Memorandum of Agreement regarding Total Accounting Rates between Videsh Sanchar Nigam
             Limited and British Telecommunication Service Limited, date 5/20/2002 (the "BT Agreement").

4.4+         Minutes of Meeting regarding Total Accounting Rates between Videsh Sanchar Nigam Limited
             and Etisalat UAE, dated April 13, 2002 (the "UAE Agreement").

4.5          License Agreement for national long distance services between the President of India and
             the Company, dated February 8, 2002.

4.6          License Agreement for Provision of Internet Service (Including Internet Telephony) between
             the President of India and the Company, dated May 3, 2002.

10.3*        License granted under the Indian Telegraph Act, 1885 to Videsh Sanchar Nigam Limited, dated
             January 22, 1999 by the Department of Telecommunications.

10.4**       Letter from the Ministry of Communications, Department of Telecommunications regarding
             termination of the monopoly granted to Videsh Sanchar Nigam Limited, dated September 7, 2000.

99.1         Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002.
</TABLE>

------------
+    Registrant has requested confidential treatment pursuant to Rule 406 for a
     portion of the referenced exhibit and has separately filed such exhibit
     with the Commission.

*    Previously filed as an exhibit to the Company's Annual Statement on Form
     20-F (Registration Statement No. 001-15118) filed with the Commission on
     October 13, 2000 and incorporated herein by reference.

**   Previously filed as an exhibit to the Company's Annual Statement on Form
     20-F (Registration No. 001-15118) filed with the Commission on October 1,
     2001 and incorporated herein by reference.

***  Previously filed as an exhibit to the Schedule 13D filed on February 15,
     2002, by Panatone Finvest Limited and Tata Sons Limited relating to the
     purchase of shares of the Company.

                                      101
<PAGE>
                                   SIGNATURES

     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.


September 26, 2002

                                             VIDESH SANCHAR NIGAM LIMITED



                                             By: /s/ S.K. Gupta
                                                --------------------------------
                                             Name:  S.K. Gupta
                                             Title: Managing Director



                                             By: /s/ Arun Gupta
                                                --------------------------------
                                             Name:  Arun Gupta
                                             Title: Executive Director (Finance)

                                      102
<PAGE>
CERTIFICATIONS

I, SHAILENDRA KUMAR GUPTA, certify that:
   ----------------------

1.  I have reviewed this annual report on Form 20-F of VIDESH SANCHAR NIGAM
LIMITED;

2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date: September 26, 2002

                                                  /s/ Shailendra Kumar Gupta
                                                  ------------------------------
                                                          Shailendra Kumar Gupta
                                                               MANAGING DIRECTOR

                                      103
<PAGE>
CERTIFICATIONS

I, ARUN GUPTA, certify that:
   ----------

1.  I have reviewed this annual report on Form 20-F of VIDESH SANCHAR NIGAM
LIMITED;

2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date: September 26, 2002

                                                   /s/ Arun Gupta
                                                   -----------------------------
                                                                      Arun Gupta
                                                         Chief Financial Officer

                                      104
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                          INDEX TO FINANCIAL STATEMENTS


FINANCIAL STATEMENTS OF VIDESH SANCHAR NIGAM LIMITED (PREPARED IN ACCORDANCE
WITH US GAAP)
<TABLE>
<CAPTION>
                                                                                                                 PAGE
                                                                                                                 ----
<S>                                                                                                              <C>
Report of independent auditors                                                                                    F-2
Balance sheets as of March 31, 2001 and 2002                                                                      F-3
Statements of income for the years ended March 31, 2000, 2001 and 2002                                            F-4
Statements of shareholders' equity for the years ended March 31, 2000, 2001 and 2002                              F-5
Statements of cash flows for the years ended March 31, 2000, 2001 and 2002                                        F-6
Notes to financial statements                                                                                     F-7
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Videsh Sanchar Nigam Limited:


     We have audited the accompanying balance sheets of Videsh Sanchar Nigam
Limited (the "Company") as of March 31, 2001 and 2002, and the related
statements of income, cash flows and shareholders' equity for each of the years
in the three year period ended March 31, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with 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 provide a
reasonable basis for our opinion.

     In our opinion, such financial statements present fairly, in all material
respects, the financial position of Videsh Sanchar Nigam Limited as of March 31,
2001 and 2002, and the results of its operations and cash flows for each of the
years in the three year period ended March 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.

     As described in Note 2(a) to the financial statements, these 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 accounting principles generally accepted in India, which form the
basis of the Company's general purpose financial statements.



/s/ Deloitte Haskins & Sells
Mumbai, India
May 28, 2002, except for Note 25, as to which the date is September 24, 2002

                                      F-2
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                                 BALANCE SHEETS
                          AS OF MARCH 31, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                                          AS OF MARCH 31,
                                                                           ----------------------------------------------
                                                                              2001              2002                2002
                                                                           ----------         ---------          --------
                                                                              (IN MILLIONS, EXCEPT PAR VALUE AND NUMBER
                                                                                            OF SHARES)
<S>                                                                        <C>                <C>                <C>
ASSETS:
  Cash and cash equivalents                                                Rs.  2,200         Rs. 7,881          US$  161
  Short term investments                                                       46,050            17,469               358
  Trade and other receivables, net of allowances
   of Rs.979 million and Rs.1,654 million
   (US$34 million),respectively                                                19,745            16,217               332
  Investments                                                                   4,247             3,985                82
  Property, plant and equipment                                                18,077            18,058               370
  Capital work-in-progress                                                      2,328             2,943                60
  Other assets                                                                  7,778             8,293               170
                                                                           ----------         ---------          --------
    TOTAL ASSETS                                                           Rs.100,425         Rs.74,846          US$1,533
                                                                           ==========         =========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY:

LIABILITIES
  Short-term borrowings                                                    Rs.      -         Rs. 5,751          US$  118
  Trade payables                                                               11,309             5,728               117
  Accrued expenses and other liabilities                                       10,731            10,325               212
                                                                           ----------         ---------          --------
    TOTAL LIABILITIES                                                          22,040            21,804               447
                                                                           ----------         ---------          --------

COMMITMENTS AND CONTINGENCIES (SEE NOTE 21)                                         -                 -                 -
                                                                           ----------         ---------          --------
SHAREHOLDERS' EQUITY:
  Equity shares: par value - Rs.10 each;
   authorized: 300,000,000 shares at March 31,
   2001 and 2002; issued and outstanding:
   285,000,000 shares at March 31, 2001 and 2002                                2,850             2,850                58
  Additional paid in capital                                                   14,481            15,377               315
  Retained earnings                                                            60,642            34,554               708
  Accumulated comprehensive income                                                412               261                 5
                                                                           ----------         ---------          --------
     TOTAL SHAREHOLDERS' EQUITY                                                78,385            53,042             1,086
                                                                           ----------         ---------          --------
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          Rs.100,425         Rs.74,846          US$1,533
                                                                           ==========         =========          ========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-3
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                              STATEMENTS OF INCOME
            FOR EACH OF THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                                        YEARS ENDED MARCH 31,
                                                                    -----------------------------------------------------------
                                                                       2000            2001            2002             2002
                                                                    -----------     -----------     -----------     -----------
                                                                         (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                                                 <C>             <C>             <C>             <C>
OPERATING REVENUE:
  Traffic revenues                                                    Rs.69,640       Rs.71,916       Rs.65,050        US$1,332
  Income from satellite consortia                                           737           1,160               -               -
                                                                    -----------     -----------     -----------     -----------
    TOTAL OPERATING REVENUE                                              70,377          73,076          65,050           1,332
                                                                    -----------     -----------     -----------     -----------

COST OF REVENUE:
  Network and transmission costs                                         45,621          45,150          39,577             811
  License fee paid to DoT                                                 4,712           5,022           5,393             110
                                                                    -----------     -----------     -----------     -----------
    TOTAL COST OF REVENUE                                                50,333          50,172          44,970             921
                                                                    -----------     -----------     -----------     -----------
      GROSS MARGIN                                                       20,044          22,904          20,080             411
                                                                    -----------     -----------     -----------     -----------
OTHER OPERATING COSTS
  Depreciation and amortization                                           1,534           1,729           1,898              39
  Other operating costs                                                   2,622           3,023           4,803              98
                                                                    -----------     -----------     -----------     -----------
    TOTAL OTHER OPERATING COSTS                                           4,156           4,752           6,701             137
                                                                    -----------     -----------     -----------     -----------
      OPERATING PROFIT                                                   15,888          18,152          13,379             274
                                                                    -----------     -----------     -----------     -----------
OTHER INCOME (EXPENSE), NET:
  Non-operating income                                                    1,821           3,058           1,371              28
  Interest income                                                         1,683           3,964           4,607              95
  Interest cost                                                              (7)             (1)           (227)             (5)
  Permanent impairment in the value of investment                           (54)              -               -               -
                                                                    -----------     -----------     -----------     -----------
TOTAL OTHER INCOME (EXPENSE), NET                                         3,443           7,021           5,751             118
                                                                    -----------     -----------     -----------     -----------
      INCOME BEFORE INCOME TAX                                           19,331          25,173          19,130             392
 Income tax expense                                                      (6,156)         (9,646)         (5,959)           (122)
 Dividend tax                                                               (84)           (105)         (3,634)            (75)
                                                                    -----------     -----------     -----------     -----------
      NET INCOME                                                      Rs.13,091       Rs.15,422       Rs. 9,537        US$  195
                                                                    -----------     -----------     -----------     -----------
PER SHARE INFORMATION:
  Earnings per equity share - basic and diluted                        Rs.45.93        Rs.54.11        Rs.33.46         US$0.69
  Weighted number of equity shares outstanding                      285,000,000     285,000,000     285,000,000     285,000,000
  Earnings per ADS - basic and diluted (where each ADS
  represents two equity shares)                                        Rs.91.86       Rs.108.22        Rs.66.92         US$1.38
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-4
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                       STATEMENTS OF SHAREHOLDERS' EQUITY
            FOR EACH OF THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                                     ACCUMULATED
                              NUMBER OF      EQUITY     ADDITIONAL                      OTHER           TOTAL
                               EQUITY        SHARE       PAID IN      RETAINED      COMPREHENSIVE    SHAREHOLDERS'   COMPREHENSIVE
                               SHARES       CAPITAL      CAPITAL      EARNINGS          INCOME          EQUITY          INCOME
                             -----------    --------    ----------    --------      -------------    -------------   -------------
                                                        (IN MILLIONS, EXCEPT NUMBER OF EQUITY SHARES)
<S>                          <C>            <C>         <C>           <C>           <C>              <C>             <C>
BALANCE AT APRIL 1, 1999      95,000,000    Rs.  950    Rs.14,481     Rs.35,549              -        Rs.50,980
Net income                                                               13,091                          13,091        Rs.13,091
Dividends                                                                  (760)                           (760)
                                                                                                                       ---------
COMPREHENSIVE INCOME                                                                                                      13,091
                             -----------    --------    ---------     ---------         ------        ---------        ---------
BALANCE AT MARCH 31, 2000     95,000,000         950       14,481        47,880              -           63,311
Issue of stock dividends     190,000,000       1,900                     (1,900)                              -
Net income                                                               15,422                          15,422           15,422
Dividends                                                                  (760)                           (760)
Unrealized gain on
 available for sale
 securities, net                                                              -            412              412              412
                                                                                                                       ---------
COMPREHENSIVE INCOME                                                                                                      15,834
                             -----------    --------    ---------     ---------         ------        ---------        ---------
BALANCE AT MARCH 31, 2001    285,000,000       2,850       14,481        60,642            412           78,385

Stock based compensation
 expense (See Note 18)                                        896                                           896
Net income                                                                9,537                           9,537            9,537
Dividends                                                               (35,625)                        (35,625)
Unrealized loss on
 available for sale
 securities, net                                                                          (151)            (151)            (151)
                                                                                                                       ---------
COMPREHENSIVE INCOME                                                                                                   Rs. 9,386
                                                                                                                       =========
COMPREHENSIVE INCOME                                                                                                      US$192
                             -----------    --------    ---------     ---------         ------        ---------        =========
BALANCE AT MARCH 31, 2002    285,000,000    Rs.2,850    Rs.15,377     Rs.34,554         Rs.261        Rs.53,042
                             ===========    ========    =========     =========         ======        =========
BALANCE AT MARCH 31, 2002    285,000,000       US$58       US$315        US$708           US$5         US$1,086
                             ===========    ========    =========     =========         ======        =========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-5
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                            STATEMENTS OF CASH FLOWS
            FOR EACH OF THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                              YEARS ENDED MARCH 31,
                                                            -------------------------------------------------------
                                                               2000            2001            2002           2002
                                                            ---------      ----------      ----------       -------
                                                                                  (IN MILLIONS)
<S>                                                         <C>            <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME                                                Rs.13,091      Rs. 15,422      Rs.  9,537       US$ 195
  Adjustment to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                               1,534           1,729           1,898            39
    Stock based compensation                                        -               -             896            18
    Impairment of property, plant and equipment                   356               -              30             1
    Allowance for doubtful debts                                   62             112             675            14
    Deferred tax charge/(benefit)                                (219)          1,759            (702)          (14)
    Unrealized exchange gain                                   (1,004)           (526)           (206)           (4)
    Permanent impairment in the value of investment                54               -               -             -
    (Profit)/loss on sale of fixed assets                         (86)              5               2             -
  Net change in:
    Trade and other receivables                                (4,756)          5,865           3,067            63
    Other assets                                               (2,742)         (1,400)           (515)          (11)
    Trade payables                                              1,331          (2,225)         (5,611)         (115)
    Accrued expenses and other liabilities                        326           2,380             414             8
                                                            ---------      ----------      ----------       -------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                   7,947          23,121           9,485           194
                                                            ---------      ----------      ----------       -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property, plant and equipment                      (956)         (2,957)         (1,894)          (39)
  Expenditure on capital work-in-progress                      (2,665)         (1,281)           (615)          (12)
  (Increase)/decrease in investments                             (871)             92              (7)            -
  (Increase)/decrease in short-term investments, net              494         (37,272)         28,581           585
  Sale of property, plant and equipment                           100               2               3             -
                                                            ---------      ----------      ----------       -------
    NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES        (3,898)        (41,416)         26,068           534
                                                            ---------      ----------      ----------       -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  PROCEEDS FROM SHORT-TERM BORROWINGS                               -               -          28,205           578
  REPAYMENT OF SHORT-TERM BORROWINGS                                -               -         (22,454)         (460)
  DIVIDENDS PAID                                                 (760)           (760)        (35,625)         (730)
  Bank overdraft                                                   20             (46)              -             -
                                                            ---------      ----------      ----------       -------
    NET CASH USED IN FINANCING ACTIVITIES                        (740)           (806)        (29,874)         (612)
                                                            ---------      ----------      ----------       -------
Unrealized exchange gain on cash and cash equivalents             879             455               2             -
                                                            ---------      ----------      ----------       -------
NET CHANGE IN CASH FLOWS                                        4,188         (18,646)          5,681           116
Cash and cash equivalents, beginning of year                Rs.16,658      Rs. 20,846      Rs.  2,200       US$  45
                                                            ---------      ----------      ----------       -------
CASH AND CASH EQUIVALENTS, END OF YEAR                      Rs.20,846      Rs.  2,200      Rs.  7,881       US$ 161
                                                            =========      ==========      ==========       =======

SUPPLEMENTARY CASH FLOW INFORMATION:
  Interest paid                                                  Rs.7            Rs.1          Rs.227          US$5
  Income taxes paid                                          Rs.9,316        Rs.9,597       Rs.10,594        US$217
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-6
<PAGE>
                          VIDESH SANCHAR NIGAM LIMITED
                          NOTES TO FINANCIAL STATEMENTS

1.   BACKGROUND


     a.   THE COMPANY

          Videsh Sanchar Nigam Limited ("VSNL" or "the Company") is incorporated
     in India as a limited liability company under the Indian Companies Act,
     1956, with its registered office at Videsh Sanchar Bhavan, M.G. Road,
     Mumbai 400001, India. The Company is listed on major stock exchanges in
     India and on the New York Stock Exchange. During the year, Government of
     India ("GoI") disinvested a portion of its holding to Panatone Finvest
     Limited ("Panatone"), a subsidiary of Tata Sons Limited ("Tata Sons"), the
     parent company of the selected strategic partner, the Tata Group (See Note
     1(b) below).

          The Tata Group operates in a variety of industries and has significant
     telecommunications operations in India. The Tata Group includes amongst
     other companies Panatone, Tata Sons, The Tata Power Company Limited ("Tata
     Power"), The Tata Iron and Steel Company Limited ("Tata Steel") and Tata
     Industries Limited ("Tata Industries").

          As part of the disinvestment process, a shareholders' agreement was
     entered into by GoI and Panatone and its shareholders on February 13, 2002.
     Pursuant to this agreement, Panatone and GoI have the right to appoint
     directors of the Company. As of March 31, 2002 the board of directors
     consisted of four members, of which three were nominated by Panatone and
     one by GoI.

          Following disinvestment by GoI and the Tender Offer (See Note 1(b)
     below), the major shareholders of the Company are Panatone/Tata Sons, who
     own 45% and GoI, who own 26.12%.

          The Company is a provider of international telecommunications services
     in India, directly and indirectly linking the domestic Indian
     telecommunications network to 237 territories worldwide. VSNL operates from
     its corporate office at Mumbai and through its other offices at Mumbai, New
     Delhi, Kolkata, Chennai, Arvi, Bangalore, Bhubhaneshwar, Dehradun,
     Ernakulam, Gandhinagar, Goa, Guhawati, Hyderabad, Indore, Jalandhar, Kanpur
     and Pune.

          VSNL offers basic and specialized services. Basic services include
     telephony, telex and telegraph. Specialized services include gateway packet
     data transmission, electronic data interchange, e-mail, Internet,
     international maritime satellite mobile services, leased channels,
     transmission of signals for international television broadcasts and video
     conferencing.


     b.   DISINVESTMENT

          The Company was a public sector undertaking ("PSU") with GoI holding
     approximately 52.97% in the paid-up equity capital in the Company. As part
     of the its disinvestment program, on February 01, 2001, GoI announced its
     intention to disinvest 25% of its shareholding of the Company to a
     strategic partner with the intention to transfer management control to the
     strategic partner through the competitive bidding route. As per the
     announcement made on February 05, 2002 by GoI, Panatone was selected by GoI
     as the strategic partner for the sale of 71,250,000 equity shares
     representing 25% of the voting capital of the Company at a price of Rs.202
     per share ("GoI Shares"). The aggregate purchase price was Rs.14,393
     million in cash.

          The Share Purchase Agreement ("SPA") giving effect to the above
     arrangement was entered into between GoI and Panatone on February 06, 2002.
     Panatone's shareholders who are Tata Sons, Tata Power, Tata Steel and Tata
     Industries, are also signatories to the SPA though they did not directly
     purchase any of GoI's shareholding in the Company. The Company is also a
     party to the SPA. In connection with the purchase of GoI Shares, Panatone
     was required by Securities and Exchange Board of India (Substantial
     Acquisition of Shares and Takeovers) Regulations, 1997 and subsequent
     amendments thereto, to launch a tender offer to acquire an additional 20%
     of the equity shares from other shareholders of the Company. On February
     12, 2002, Panatone made a public announcement disclosing the proposed
     purchase of the GoI Shares and the proposed tender offer. Payment of

                                      F-7
<PAGE>
     consideration for the GoI Shares and the transfer of such GoI Shares in
     favor of Panatone as well as the appointment of representatives of Panatone
     on the board of directors of the Company occurred on February 13, 2002.

          As part of the tender offer, Panatone offered to purchase upto
     57,000,000 equity shares (including equity shares underlying the American
     Depository Shares), representing 20% of the paid-up and voting equity share
     capital of the Company at a price of Rs.202 (US$4.15) per share payable in
     cash. The current shareholding of Tata Sons and Tata Power in Panatone is
     59.955% and 40%, respectively, with Tata Steel and Tata Industries holding
     the remainder equally. At the close of the tender offer on May 09, 2002,
     approximately 87,600,000 million equity shares were tendered for sale. As
     per the terms of the tender offer, Panatone will accept upto 57,000,000
     equity shares on a pro rata basis. Upon acceptance of shares under the
     tender offer by Panatone, it will hold 45% in the paid-up equity capital of
     the Company.

          Under the terms of the SPA and the shareholders' agreement, Panatone
     is required to take measures to separate out surplus land at Pune, Kolkata,
     New Delhi and Chennai, as identified in the SPA (the "Surplus Land"), from
     the Company and also to subject the use of the Surplus Land to special
     conditions as stated in the SPA. Panatone is required to facilitate the
     transfer of the Surplus Land to a new realty undertaking in the Company.
     Panatone, with GoI, will cause the demerger of the realty undertaking in to
     a separate company ("the Resulting Company"). On the issue of new shares of
     the Resulting Company, Panatone is required to transfer to GoI, without
     consideration, a minimum of 25% of the Resulting Company's issued shares,
     or such higher number of shares of the Resulting Company, which may be on
     account of any further sale of equity shares by GoI to Panatone prior to
     the demerger. If for any reason, the Company cannot transfer the Surplus
     Land into the Resulting Company, then at any time when the Company sells,
     transfers or develops the land, Panatone shall compensate GoI with an
     amount equivalent of 25% of the benefit accruing to the Company subject to
     local tax laws prevailing in India.


     c.   MONOPOLY STATUS

          The Company had an exclusive license to provide international long
     distance ("ILD") services upto March 2004. However, GoI decided to
     terminate the company's monopoly two years ahead of schedule and
     accordingly opened up this service to private operators from April 01,
     2002. GoI has agreed to compensate the Company for this early termination
     with the following package (See Note 17):

          1.   A license to operate national long distance ("NLD") services.

          2.   Re-imbursement by GoI of entry fees and revenue sharing fees, net
               of taxes, that the Company may have to pay with respect to the
               NLD license, for five years with effect from April 01, 2001.

          3.   Exemption from the performance bank guarantee of Rs.4 billion
               with respect to the NLD license, as long as the Company remains a
               PSU.

          4.   A category 'A' Internet Service Provider ("ISP") license, which
               will allow the Company to expand internet access services to the
               entire country.

          On February 13, 2002, the Company ceased to be a PSU. Subsequent to
     the Company ceasing to be a PSU, GoI requested the Company to provide a
     performance bank guarantee of Rs.4 billion. Currently, the Company is in
     the process of negotiating with GoI and is not in a position to predict the
     outcome of such negotiations at this stage. (See Note 25(d))

          The Company has accepted GoI's decision to terminate the Company's
     monopoly before the year 2004. The shareholders of the Company have
     approved the compensation package at the meeting held in May 2001.


     d.   REVENUE SHARING ARRANGEMENT

          The Company operates its business pursuant to a license from
     Department of Telecommunications ("DoT"), GoI. In pursuance of the New
     Telecom Policy 1999, GoI decided to

                                      F-8
<PAGE>
     corporatise the service provision functions of the DoT. Accordingly, GoI
     transferred the business of providing telecom services in the country to a
     newly formed company, Bharat Sanchar Nigam Limited ("BSNL") with effect
     from October 1, 2000. Further, the existing contracts, agreements and MoUs,
     excepting licence fees payable for the usage of circuits, including the
     revenue sharing agreement entered into by DoT for the supply of services
     were transferred and assigned to BSNL with effect from October 1, 2000.

          The Company's license is periodically renewed by DoT subject to
     certain conditions and is currently valid up to March 31, 2004. With the
     opening of the telecommunications sector to private operators, the Company
     is negotiating for a fresh license agreement with DoT. The Company derives
     substantially all its revenue from payments from foreign telecommunication
     administrations and private carriers for the delivery of international
     calls to India and from payments from BSNL for the delivery of
     international calls abroad. Consequently, the Company and BSNL share
     revenues received by each entity from international calls pursuant to a
     revenue sharing arrangement between them.

          Under the revenue sharing arrangement, the Company pays to BSNL, a
     charge per minute equal to the weighted average incoming settlement rate,
     minus Rs.10.00 on all incoming international calls and BSNL pays to the
     Company, a charge per minute equal to the weighted average outgoing
     settlement rate plus Rs.10.00 on all outgoing international calls. The
     weighted average incoming settlement rate and weighted average outgoing
     settlement rate for any financial year is the average of the various
     settlement rates in effect as of the beginning of the financial year
     between the Company and the foreign administrations and carriers (converted
     to Indian rupees at the exchange rate prevailing as of the beginning of the
     financial year), weighted to reflect the volume of total incoming traffic
     and the outgoing traffic respectively, of the immediately preceding
     financial year.

          With effect from April 1, 1999, the revenue sharing arrangement
     provides for a comparison of the combined international traffic revenue per
     call minute of the Company and DoT/BSNL (net of payments by the Company to
     foreign administrations and carriers and by the Company and DoT/BSNL to
     each other in respect of incoming and outgoing calls) for each fiscal year,
     compared to the corresponding amount in the base fiscal year ended March
     31, 1997. Increases or decreases are shared between the Company and
     DoT/BSNL according to the following percentages:


<TABLE>
<CAPTION>
                                INCREASE/DECREASE
                    ----------------------------------------------------
YEARS ENDED                                          DOT'S SHARE
MARCH 31            COMPANY'S SHARE        (BSNL SINCE OCTOBER 01, 2000)
-----------         ---------------        -----------------------------
<S>                 <C>                    <C>
2000                      15%                          85%
2001                      20%                          80%
2002                      25%                          75%
</TABLE>

          In computing the international traffic revenue of DoT/BSNL for
     purposes of calculating the combined international traffic revenue per call
     minute of the Company and DoT/BSNL, the tariff charged by DoT/BSNL to
     subscribers for outgoing international calls is assumed to remain constant
     at Rs.62.35 per minute, which was the weighted average tariff rate for the
     year ended March 31, 1997. It is therefore intended that the Company's
     average gross profit per call minute under the current revenue sharing
     arrangement will not be affected directly by any decrease or increase in
     the actual tariffs charged by DoT/BSNL from its subscribers for outgoing
     international calls.

          For the years ended March 31, 2000, 2001 and 2002, the net retention
     per call minute was Rs.9.43, Rs.9.39 and Rs.8.39 respectively.

          The arrangement was effective from April 1, 1997 and was valid until
     March 31, 2002. Currently, the Company is in the process of negotiating
     terms with various telecommunication operators including BSNL and the
     Company is not in a position to predict the outcome of such negotiations at
     this stage. (See Note 25(b))

                                      F-9
<PAGE>
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     a.   BASIS OF PRESENTATION AND CONSOLIDATION

          The Company does not have any subsidiaries. Entities where the Company
     controls between 20% to 50% of the voting stock of the investee company are
     considered affiliates and are accounted for using the equity method.

          These financial statements have been prepared in accordance with
     accounting principles generally accepted in the United States of America
     ("US GAAP"). US GAAP differs in certain material respects from accounting
     principles generally accepted in India and the requirements of India's
     Companies Act, 1956, which form the basis of the statutory general purpose
     financial statements of the Company in India. Principal differences insofar
     as they relate to the Company include valuation of investments, accounting
     for property, plant and equipment and depreciation thereon, deferred income
     taxes, retirement benefits, stock based compensation, investment in
     affiliates and the presentation and format of the financial statements and
     related notes.


     b.   USE OF ESTIMATES

          The preparation of financial statements in conformity with US GAAP
     requires management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosures of contingent
     liabilities at the date of these financial statements and the reported
     amounts of revenues and expenses for the years presented. Actual results
     could differ from these estimates. Material estimates included in these
     financial statements that are susceptible to change include traffic
     revenue, allowances for trade and other receivables and valuation of
     unlisted investments.


     c.   CASH AND CASH EQUIVALENTS

          The Company considers all highly liquid financial instruments, which
     are readily convertible into cash and have original maturities of three
     months or less on the date of purchase, to be cash equivalents. The
     carrying value of cash equivalents approximates fair value.


     d.   TRADE AND OTHER RECEIVABLES

          Trade and other receivables are stated at their expected realizable
     values, net of allowance for doubtful debts. Amounts payable to, and
     receivable from, the same administration and the BSNL are shown on a net
     basis, where a legal right of set-off exists. These payables and
     receivables are intended to be settled, and are, on a net basis.


     e.   INVESTMENTS

          The Company accounts for its investments in securities of
     telecommunication satellite companies for which readily determinable fair
     values are available in accordance with Statement of Financial Accounting
     Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
     Equity Securities. SFAS No.115 requires that investments that are not
     classified as held to maturity or trading are classified as available for
     sale and recorded at fair value. Unrealized gains and losses on such
     securities, net of applicable taxes, are reported in other comprehensive
     income, a separate component of shareholders' equity.

          Investments in telecommunication satellite corporations which are not
     freely transferable and for which fair values are not readily obtainable
     are accounted for in accordance with APB Opinion No. 18, The Equity Method
     of Accounting for Investments in Common Stock. These investments are
     reflected at cost less permanent impairment, if any. Declines in the value
     of investments that are other than temporary are reflected in earnings as
     realized losses, based on management's best estimate of the value of the
     investment.

                                      F-10
<PAGE>

     f.   PROPERTY, PLANT AND EQUIPMENT

          Property, plant and equipment are stated at cost, net of accumulated
     depreciation. All costs relating to the acquisition and installation of
     property, plant and equipment are capitalized.

          Depreciation is charged on property, plant and equipment on a
     straight-line basis from the time they are available for use, so as to make
     an economic allocation of the cost at which the assets are acquired less
     their estimated residual values, over their remaining estimated economic
     lives. Depreciation on freehold land is not provided. The estimated useful
     lives of various assets are shown below:


<TABLE>
<CAPTION>
                                     YEARS
<S>                                  <C>
Buildings                               61
Plant and machinery:
  Earth stations                        12
  Cables                             10-25
  Exchanges                             12
  Other network equipment                8
  Office equipment                      20
Computers                                6
Furniture, fittings and vehicles     10-15
</TABLE>


          Land acquired on lease is amortized over the period of the lease.

          Assets gifted by unrelated parties have been accounted for in
     accordance with SFAS No. 116, Accounting for Contributions Received and
     Contributions Made at fair value and recognized as revenue and an asset in
     the period received. Such assets are depreciated over their remaining
     useful economic lives.

          Property, plant and equipment includes intangible assets in the nature
     of indefeasible rights of use ("IRU's") for international telecommunication
     circuits in submarine cables, which the Company acquires from time to time.
     These rights extend over specific time periods. The amounts paid according
     to the terms of these transactions are recorded as additions to property,
     plant and equipment, respectively, and amortized over the contracted period
     of use. The Company's current amortization policy complies with SFAS No.
     142 Goodwill and Other Intangible Assets, which is applicable from fiscal
     years beginning after December 15, 2002.

          The Company has not and does not trade in IRU's or bandwidth or enter
     into any swap or other similar agreements relating to IRU's or bandwidth.


     g.   IMPAIRMENT OF LONG LIVED ASSETS

          The Company evaluates the carrying value of its property and equipment
     whenever events or circumstances indicate the carrying value of assets may
     exceed their recoverable amounts. An impairment loss is recognized when the
     estimated future cash flows (undiscounted and without interest) expected to
     result from the use of an asset are less than the carrying amount of the
     asset. Measurement of an impairment loss is based on fair value of the
     asset computed using discounted cash flows as if the asset is expected to
     be held and used. Measurement of an impairment loss for an asset held for
     sale would be based on fair market value less estimated costs to sell.


     h.   OPERATING LEASES

          Costs in respect of operating leases are expensed on a straight-line
     basis over the lease term.


     i.   RETIREMENT BENEFITS


                                      F-11
<PAGE>

               Gratuity


          In accordance with Indian law, the Company provides for gratuity, a
     defined benefit retirement plan covering all eligible employees. The plan
     provides for lump sum payments to vested employees at retirement, death
     while in employment or on termination of employment in an amount equivalent
     to 15 days salary payable for each completed year of service or part
     thereof in excess of six months subject to a maximum of Rs.350,000. Vesting
     occurs upon completion of five years of service. The Company makes annual
     contributions to a fund administered by trustees, based on an external
     actuarial valuation carried out annually. The Company accounts for its
     liability for future gratuity benefits in accordance with SFAS No. 87,
     Employers' Accounting for Pensions.


               Leave encashment


          Leave encashment, a defined benefit plan, comprises of encashment of
     vacation entitlement carried forward by employees. These balances are
     encashable during the tenure of employment, on the employee leaving the
     Company or on retirement. The Company makes a provision towards leave
     encashment liability based on the total unavailed leave credited to each
     employee's account and his respective salary as at the end of each
     reporting date.




               PROVIDENT FUND

          In addition to the above benefits, all employees receive benefits from
     a provident fund, a defined contribution plan. The employee and employer
     each make monthly contributions to the plan equal to 12% of the employee's
     salary (basic and dearness allowance). The contributions are made to the
     provident fund trust established by the Company. The Company is obligated
     to make good any shortfall in the statutorily assured rate of return on the
     assets of the trust, which was 9.5% as of March 31, 2001 and 2002.
     Currently, the Company has no further obligation under the provided fund
     beyond its contribution, which is expensed when incurred.


     j.   REVENUE RECOGNITION

          Revenues for long distance telephone services are recognized at the
     end of each month based upon minutes of incoming or outgoing traffic
     completed in such month. Revenues from leased circuits are recognized based
     upon contracted fee schedules. Revenues from Internet services are
     recognized based on usage by subscribers. The majority of revenues are
     derived from payments by the BSNL for completing outgoing calls made from
     India and from payments by foreign administrations for incoming calls that
     originate outside India.

          Income from Intelsat, Ltd. is accounted as dividend income and
     included as part of non-operating income.


     k.   OPERATING COSTS

          The principal components of the Company's operating costs are network
     and transmission costs, license fees paid to the DoT and other operating
     costs.

          Network and transmission costs include payments to BSNL for incoming
     traffic and to foreign administrations and carriers for outgoing traffic,
     as well as the cost of leasing transmission facilities, including lines
     from BSNL and satellite circuits from satellite companies. As discussed in
     note 1(b), the Company must pay a proportion of the amounts received from
     BNSL to transit and destination foreign administrations. Similarly, a
     proportion of the payments from the foreign administrations is paid to BSNL
     for completing calls within India.

                                      F-12
<PAGE>

          Under the revenue sharing agreement with DoT/BSNL, which was valid
     upto March 31, 2002, the Company paid to DoT a license fee of Rs.0.25
     million per annum on average circuits commissioned.

          Other operating costs include general and administrative expenses
     other than network and transmission costs and license fees.


     l.   FOREIGN CURRENCY TRANSACTIONS

          The Company's functional currency is the Indian rupee. Foreign
     currency transactions are recorded at the exchange rates prevailing on the
     first working day of the month in which the transaction falls. In the case
     of traffic revenue and the charges for use of transmission facilities,
     foreign currency transactions are recorded at the exchange rate prevailing
     on the last day of the prior month. Foreign currency denominated monetary
     assets and liabilities are converted into Indian rupees using exchange
     rates prevailing on the balance sheet dates. Gains and losses arising on
     conversion of foreign currency denominated monetary assets and liabilities
     and on settlement of foreign currency transactions are included in the
     determination of net income.


     m.   EMPLOYEE STOCK PURCHASE SCHEME

          The Company has elected to use the intrinsic value method specified
     under APB Opinion No. 25, Accounting for Stock Issued to Employees to
     account for the compensation cost of stock purchase rights granted to
     employees of the Company. Pro forma disclosures required by SFAS No. 123,
     Accounting for Stock-Based Compensation have been provided in Note 18.


     n.   INCOME TAX

          Income tax comprises the current tax provision and the net change in
     the deferred tax asset or liability in the year. Temporary differences are
     identified and the provision is made using the asset and liability method
     for all such differences. Deferred tax benefits are recognized on assets to
     the extent that it is more likely than not that future taxable profits will
     be available against which the asset can be utilized. Deferred tax assets
     and liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which the temporary differences are expected
     to be received or settled. The effect on deferred tax assets and
     liabilities of a change in tax rates is recognized in the income statement
     in the period of enactment of the change.


     o.   DIVIDENDS

          Any dividends declared by the Company are based on the profit
     available for distribution as reported in the statutory financial
     statements of the Company prepared in accordance with Indian GAAP.
     Accordingly, in certain years, the net income reported in these financial
     statements may not be fully distributable. As of March 31, 2001 and 2002,
     the amounts available for distribution are Rs.16,147 million and Rs.8,338
     million, respectively. Dividends declared for the years ended March 31,
     2000, 2001 and 2002 were Rs.8, Rs.50 and Rs.87.50 per equity share,
     respectively. The Company paid dividends of Rs.760 million, Rs.760 million
     and Rs.35,625 million (including Rs.21,375 million as special dividend)
     during the years ended March 31, 2000, 2001 and 2002, respectively.


     p.   EARNINGS PER SHARE

          The Company reports basic and diluted earnings per equity share in
     accordance with SFAS No. 128, Earnings Per Share. Basic earnings per equity
     share has been computed by dividing net income by the weighted average
     number of equity shares outstanding for the period. For the purposes of
     earnings per share, stock dividends declared by the Company have been given
     retroactive effect for all the years presented.


     q.   COMPREHENSIVE INCOME

                                      F-13
<PAGE>
          The Company reports comprehensive income in accordance with SFAS
     No.130, Reporting Comprehensive Income. Accounting principles generally
     require that recognized revenues, expenses, gains and losses be included in
     net income. Unrealized gains and losses on available for sale securities
     along with net income are components of comprehensive income.


     r.   SEGMENT INFORMATION

          The Company identifies basic telephony, Internet and leased line
     services as its operating segments. Segment-wise information has been
     provided in Note 23.


     s.   NEW ACCOUNTING PRONOUNCEMENTS


          SFAS NO. 144

          In October 2001, the FASB issued SFAS No. 144, Accounting for the
     Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121,
     Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to Be Disposed Of. SFAS No. 144 applies to all long-lived assets,
     including discontinued operations, and consequently amends 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
     Occurring Events and Transactions. SFAS No. 144 develops one accounting
     model for long-lived assets that are to be disposed of by sale, as well as
     addresses the principal implementation issues. SFAS No. 144 requires that
     long-lived assets that are to be disposed of by sale be measured at the
     lower of book value or fair value less cost to sell. Additionally, SFAS No.
     144 expands the scope of discontinued operations to include all components
     of an entity with operations that (1) can be distinguished from the rest of
     the entity and (2) will be eliminated from the ongoing operations of the
     entity in a disposal transaction. SFAS No. 144 also amends Accounting
     Research Bulletin (ARB) No. 51, Consolidated Financial Statements to
     eliminate the exception to consolidation for a subsidiary for which control
     is likely to be temporary. SFAS No. 144 will be applicable to the Company
     from the fiscal year beginning April 01, 2002.


          SFAS NO. 145


          In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
     Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
     Technical Corrections. Among other things, this statement rescinds FASB
     Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt
     which required all gains and losses from extinguishment of debt to be
     aggregated and, if material, classified as an extraordinary item, net of
     related income tax effect. As a result, the criteria in 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
     Occurring Events and Transactions, will now be used to classify those gains
     and losses. SFAS No. 145 will be applicable to the Company from the fiscal
     year beginning April 01, 2002.



     t.   CONVENIENCE TRANSLATION

          The accompanying financial statements have been expressed in Indian
     rupees ("Rs."), the Company's functional currency. For the convenience of
     the reader, the financial statements as at and for the year ended March 31,
     2002 have been translated into US dollars at US$1.00 = Rs.48.83 based on
     the noon buying rate for cable transfers on March 29, 2002 as certified for
     customs purposes by the Federal Reserve Bank of New York. Such convenience
     translation should not be construed as a representation that the Indian
     rupee amounts referred to in these financial statements have been, or could
     be converted into US dollars at this or at any other rate of exchange, or
     at all.


     3.   CASH AND CASH EQUIVALENTS


          Cash and cash equivalents include the following:

                                      F-14
<PAGE>
<TABLE>
<CAPTION>
                                         AS OF MARCH 31,
                            -----------------------------------------
                              2001           2002               2002
                            --------       --------            ------
                                         (IN MILLIONS)
<S>                         <C>            <C>                <C>
Cash in hand                Rs.   15       Rs.    4           US$   -
Bank balances:
  Current accounts               485          1,707                35
  Time deposits                1,700          6,170               126
                            --------       --------            ------
    TOTAL                   Rs.2,200       Rs.7,881            US$161
                            ========       ========            ======
</TABLE>

     Time deposits are interest-bearing deposits with original maturities
ranging from 9 days to 90 days. Interest rates on such time deposits during the
year ended March 31, 2002, ranged from approximately 6.00% to 9.75% on Indian
rupee deposits.


4.   SHORT-TERM INVESTMENTS

          Short-term investments include the following:


<TABLE>
<CAPTION>
                                                               AS OF MARCH 31,
                                                   -----------------------------------
                                                      2001           2002         2002
                                                   ---------      ---------     ------
                                                               (IN MILLIONS)
<S>                                                <C>            <C>           <C>
Restricted cash balances                           Rs. 7,730      Rs. 7,108     US$146
Time deposits with maturity exceeding 90 days         38,320         10,361        212
                                                   ---------      ---------     ------
    TOTAL                                          Rs.46,050      Rs.17,469     US$358
                                                   =========      =========     ======
</TABLE>


          Restricted cash balances include Rs.7,730 million and Rs.7,099 million
     as of March 31, 2001 and 2002, respectively, comprising of time deposits,
     the use of which is restricted to the import of capital equipment.

          Interest rates on deposits placed out of restricted cash balances
     during the year ended March 31, 2002, ranged from approximately 7.50% to
     11.25%. Interest rates on time deposits with maturity exceeding 90 days
     during the year ended March 31, 2002, ranged from approximately 7.50% to
     9.25%.

          Time deposits with maturity exceeding 90 days include Rs.5,730 million
     pledged against short-term borrowings of the Company.


5.   TRADE AND OTHER RECEIVABLES

          Trade and other receivables include the following:

                                      F-15
<PAGE>

<TABLE>
<CAPTION>
                                                             AS OF MARCH 31,
                                                 ------------------------------------
                                                    2001             2002        2002
                                                 ---------        ---------    ------
                                                              (IN MILLIONS)
<S>                                              <C>              <C>          <C>
Trade accounts receivables:
  Amounts due from foreign administrations       Rs.17,347        Rs.14,380    US$294
  Domestic trade debtors                               792              528        11
                                                 ---------        ---------    ------
    Total trade accounts receivables                18,139           14,908       305
Interest receivable on bank deposits                 1,231              700        15
Other sundry deposits                                   56               63         1
Other receivables                                      319              546        11
                                                 ---------        ---------    ------
    TOTAL                                        Rs.19,745        Rs.16,217    US$332
                                                 =========        =========    ======
</TABLE>


          Trade accounts receivables are net of an allowance for doubtful debts
     of Rs.979 million and Rs.1,654 million for the years ended March 31, 2001
     and 2002, respectively.

          Amounts due from BSNL for traffic settlement are netted against
     amounts due to BSNL for traffic settlement and are reported in trade
     payables. The Company has legal right of setoff.


6.   INVESTMENTS

          The portfolio of investments as of March 31, 2001 and 2002 is as
     follows:


<TABLE>
<CAPTION>
                                                   AS OF MARCH 31, 2001                      AS OF MARCH 31, 2002
                                           -------------------------------------     --------------------------------------
                                                          GROSS                                     GROSS
                                           AMORTIZED    UNREALIZED      CARRYING     AMORTIZED    UNREALIZED      CARRYING
                                             COST         GAINS           VALUE        COST         GAINS           VALUE
                                           ---------    ----------      --------     ---------    ----------      ---------
                                                                            (IN MILLIONS)
<S>                                        <C>           <C>            <C>            <C>          <C>            <C>
Investments carried at fair value:
  Satellite companies                       Rs.562       Rs.  681       Rs.1,243       Rs.562       Rs. 412        Rs.  974
                                           ========      ========                      ======       =======
Investment carried at cost:
  Telecommunications companies                                             8,474                                      8,481
  Less: Permanent impairment                                              (5,470)                                    (5,470)
                                                                        --------                                  ---------
    TOTAL                                                               Rs.4,247                                  Rs. 3,985
                                                                        ========                                  =========
    TOTAL                                                                                                         US$    82
                                                                                                                  =========
</TABLE>
          INTELSAT, LTD.

          Intelsat, Ltd. was originally formed as an Inter Government
     Organisation ("IGO") in 1964 and owns and operates satellite communication
     systems. It offers Internet, broadcast, telephony and corporate network
     solutions to customers in over 200 countries through its network of 20
     geostationary satellites. Currently, it has a few next-generation
     satellites under construction. Intelsat was converted into a private
     company incorporated in Bermuda effective July 18, 2001. Consequently, the
     Company now holds 27,045,940 shares of US$1 each representing 5.4% of the
     paid up capital of Intelsat, Ltd.


          Till the date of corporatization, the Company's ownership share in
     this organization was adjusted annually to conform to the respective
     percentage of total use of the system or based on the accession or
     cessation of any party as per the terms of Intelsat Agreement. Accordingly,
     on the basis of share re-determinations, as of March 2001, the Company's
     investment was at approximately 5.4%, of the total shareholding of
     Intelsat. Net capital contributions were billed by Intelsat to the Company
     from time to time in proportion to the ownership share determined.

                                      F-16
<PAGE>
          Post corporatization, the investment in Intelsat, Ltd. has been
     accounted for in accordance with APB Opinion No. 18, The Equity Method of
     Accounting for Investments in Common Stock at cost since the fair value of
     equity shares is not readily obtainable.

          On March 08, 2002, Intelsat, Ltd. announced its intention to conduct
     an initial public offering of its ordinary shares in an amount of
     approximately US$500 million. In addition, it is anticipated that Intelsat,
     Ltd.'s existing shareholders will be offered the opportunity to sell
     ordinary shares in the offering.


          NEW SKIES SATELLITE NV ("NSS")

          During 1998-99, Intelsat as part of its restructuring process
     incorporated NSS as a corporation with limited liability under the laws of
     Netherlands and transferred certain assets and liabilities to NSS accounted
     for at historic book values. In return, NSS issued 10,000,000 shares of
     common stock of Dutch Guilder 1 to Intelsat. Intelsat distributed 9,000,000
     shares of NSS in the year 1998-99, and 1,000,000 shares of NSS in 1999-2000
     in proportion to the investment shares of its members at the time of
     distribution. Consequently, the Company acquired 301,215 shares in 1998-99
     and 43,000 shares in 1999-2000, which were recorded as a reduction in the
     investment in Intelsat and a new investment in NSS at face values.

          NSS announced a 10:1 stock split prior to its initial public offering
     ("IPO") in October 2000 and redesignated its shares from Guilders to Euros.
     Thus, the Company's total holding in NSS as of March 31, 2002 stands at
     3,442,150 ordinary shares of 0.05 Euros each. The market value per share as
     of March 28, 2002 was US$5.8 per share.


          INTERNATIONAL MOBILE SATELLITE ORGANISATION ("INMARSAT")

          Inmarsat was an IGO with membership from 88 countries providing
     satellite mobile communications in air, on land and at sea. Inmarsat was
     converted into a national law company incorporated in the United Kingdom
     effective April 15, 1999. The Company's investment in the holding company,
     Inmarsat Ventures Plc is 202,219 shares representing approximately 2.0% of
     the paid up capital. Further, there had been a 10:1 stock split in March
     2001. Consequently, the Company now holds 2,022,190 shares of 10 pence each
     in Inmarsat Ventures Plc.

          During the year Inmarsat announced its intention to conduct an initial
     public offering of its ordinary shares. In addition, it is anticipated that
     Inmarsat's existing shareholders will be offered the opportunity to sell
     ordinary shares in the offering.

          ICO  GLOBAL COMMUNICATIONS HOLDINGS LTD. ("ICO")

          ICO, a company registered in Bermuda, was incorporated in January 1995
     to provide global mobile personal communication services. ICO was listed on
     the NASDAQ in July 1998. The Company had invested a sum of Rs.5,471 million
     (US$150 million) in ICO.

          ICO filed a voluntary petition for re-organization under Chapter 11 of
     the United States Bankruptcy Code on August 27, 1999 in the United States
     Bankruptcy Court in the district of Delaware as the additional financial
     resources required to complete the system and begin commercial operations
     could not be raised as per schedule.

          In May 2000, the court confirmed the plans of re-organization of ICO,
     which became effective on May 17, 2000. By virtue of the re-organization,
     the Company received 180,053 shares of class A common stock of US$0.01,
     amounting to Rs.0.06 million and 975,398 warrants, with an option to
     purchase shares of class A common stock exercisable in New ICO by May 15,
     2006. The Company recognized a charge of Rs.5,416 million and Rs.54 million
     as permanent impairment in the years ended March 31, 1999 and 2000,
     respectively.

          TELSTRA VISHESH COMMUNICATIONS LIMITED ("TVCL")

                                      F-17
<PAGE>

          TVCL is a joint venture between the Company, Telstra-Australia and
     Infrastructure Leasing & Financial Services Ltd.("ILFS"), initially formed
     with an investment equity in the ratio of 40:40:20. Currently, the Company
     holds Rs.92 million out of the total paid up capital of Rs.314 million.
     TVCL has invested in a hybrid VSAT project and has diversified into
     consulting, facility management services and turnkey VSAT projects for
     large organizations. The shares of TVCL are recorded at face value and
     consequently the Company has applied the provision for diminution in value
     of investments and written off these investments to their current fair
     value in the year ended March 31, 2000.



          As per the proposed restructuring plan undertaken by TVCL, Essel Shyam
     Communications Ltd. ("ESCL"), a company incorporated in India, has been
     identified as the strategic partner. Further, Telstra-Australia will exit
     the joint venture and the shareholders of TVCL comprising the remaining
     joint venture partners, namely the Company and IL&FS and the Employee
     Welfare Trust will get 15% in the aggregate of the equity share capital of
     ESCL in exchange for their holding in TVCL. In addition, ESCL will pay a
     cash compensation of Rs.20 million to the Company and IL&FS in the
     aggregate.



          UNITED TELECOM LIMITED ("UTL")

          UTL is a joint venture between the Company, Mahanagar Telephone Nigam
     Limited ("MTNL"), Telecommunications Consultants India Limited ("TCIL") and
     Nepal Ventures Private Limited ("NVPL"), with an investment equity in the
     ratio of 26.6:26.8:26.6:20. MTNL and TCIL are companies incorporated in
     India and NVPL is a company incorporated in Nepal. Currently, the Company
     holds 266,000 equity shares of Nepal Rupees ("NR.") 100 each out of the
     total paid up capital of NR.100 million. UTL has been formed for bidding
     for license to operate and invest in basic telephony services in Nepal
     based on Wireless-in-Local Loop technology. As of date, UTL is yet to
     commence commercial operations. The equity shares of UTL are recorded at
     cost.


          On May 15, 2002, UTL had further called up equity capital from all the
     joint venture partners totaling to NR.1,300 million payable as per the
     following schedule:


<TABLE>
<CAPTION>
PARTICULARS OF    EQUITY CAPITAL CALLED
EQUITY CALLS         (IN MILLIONS)            PAYABLE ON OR BEFORE
--------------    ---------------------       --------------------
<S>               <C>                         <C>
2nd call                NR.200                       May 25, 2002
3rd call                   500                      July 15, 2002
4th call                   300                 September 15, 2002
5th call                   300                  December 15, 2002
</TABLE>


          The Company on May 25, 2002 paid up the 2nd call of NR.53 million.
     Subsequent to the payment of this call, the Company now holds 798,000
     equity shares at NR.80 million.


7.   PROPERTY, PLANT AND EQUIPMENT

          Property, plant and equipment by asset category is as follows:

                                      F-18
<PAGE>


<TABLE>
<CAPTION>
                                                      AS OF MARCH 31,
                                             ------------------------------------
                                               2001          2002          2002
                                             ---------    ---------       -------
                                                        (IN MILLIONS)
<S>                                          <C>          <C>             <C>
Land                                         Rs.   754    Rs.   773       US$  16
Buildings                                        2,062        2,210            45
Plant and machinery                             23,349       25,117           515
Computers                                          574          587            12
Motor vehicles                                      16           16             -
Furniture and fixtures                             366          184             4
                                             ---------    ---------       -------
    Property, plant and equipment, at cost      27,121       28,887           592
Less: Accumulated depreciation                  (9,044)     (10,829)         (222)
                                             ---------    ---------       -------
    PROPERTY, PLANT AND EQUIPMENT, NET       Rs.18,077    Rs.18,058       US$ 370
                                             =========    =========       =======
</TABLE>



          Depreciation expense for the years ended March 31, 2000, 2001 and 2002
     was Rs.1,534 million, Rs.1,729 million and Rs.1,898 million, respectively.

          During the year 1998-99 the Company had spent Rs.496 million towards
     gateway equipment for Iridium India Telecom Limited ("IITL"), Pune, which
     was capitalized and was being depreciated. IITL stopped operational
     activities in April 2000 and since then these assets have not been used by
     IITL. An impairment charge has been recognized of Rs.356 million, Rs.Nil
     million and Rs.30 million for the years ended March 31, 2000, 2001 and 2002
     to reflect their estimated realizable value.


          Property, plant and equipment include Rs.1,672 million and Rs.2,262
     million for indefeasible rights of use as of March 31, 2001 and 2002,
     respectively.


8.   CAPITAL WORK-IN-PROGRESS

          Capital work-in-progress includes the following:


<TABLE>
<CAPTION>
                                   AS OF MARCH 31,
                           -----------------------------
                             2001        2002       2002
                           --------    --------    -----
                                    (IN MILLIONS)
<S>                        <C>         <C>         <C>
Buildings                  Rs.  382    Rs.  315    US$ 6
Plant and machinery           1,912       2,583       53
Other assets                     34          45        1
                           --------    --------    -----
    TOTAL                  Rs.2,328    Rs.2,943    US$60
                           ========    ========    =====
</TABLE>



9.   OTHER ASSETS

          Other assets includes the following:

<TABLE>
<CAPTION>
                                             AS OF MARCH 31,
                                     --------------------------------
                                       2001        2002         2002
                                     --------    --------      ------
                                              (IN MILLIONS)
<S>                                  <C>         <C>           <C>
Advance tax (net)                    Rs.7,463    Rs.7,752      US$159
Advance paid for capital goods             63           6           -
Prepaid expenses                          235         530          11
Inventories                                17           5           -
                                     --------    --------      ------
    TOTAL                            Rs.7,778    Rs.8,293      US$170
                                     ========    ========      ======
</TABLE>

                                      F-19
<PAGE>
10.  SHORT-TERM BORROWING

          During the last quarter of fiscal 2002, the Company availed short-term
     borrowings of Rs.28,205 million against pledge of fixed deposits placed
     with banks. These borrowings were for a maximum duration of six months.
     Interest rates on these borrowings ranged from approximately 8.25% to
     9.00%. As of March 31, 2002, short-term borrowings of Rs.5,751 million
     were outstanding.


11.  TRADE PAYABLES

          Trade payables include the following:


<TABLE>
<CAPTION>
                                                             AS OF MARCH 31,
                                                 --------------------------------------
                                                    2001          2002            2002
                                                 ---------      --------         ------
                                                              (IN MILLIONS)
<S>                                              <C>            <C>              <C>
Accounts payable-trade:
  Amounts due to foreign administrations         Rs. 2,585      Rs.1,420         US$ 29
  Amounts due to BSNL net of amounts due from
   BSNL for traffic settlement                       8,724         4,308             88
                                                 ---------      --------         ------
    TOTAL                                        Rs.11,309      Rs.5,728         US$117
                                                 =========      ========         ======
</TABLE>


12.  ACCRUED EXPENSES AND OTHER LIABILITIES

          Accrued expenses and other liabilities include the following:


<TABLE>
<CAPTION>
                                                       AS OF MARCH 31,
                                            ---------------------------------
                                               2001         2002        2002
                                            ---------    ---------     ------
                                                      (IN MILLIONS)
<S>                                         <C>          <C>           <C>
Unearned income                             Rs. 2,235    Rs. 1,762     US$ 36
Deferred taxation                               3,183        2,363         48
Interest accrued but not due                        -           11          -
Sundry creditors                                4,051        4,616         95
Other payables and accrued expenses             1,262        1,573         33
                                            ---------    ---------     ------
    TOTAL                                   Rs.10,731    Rs.10,325     US$212
                                            =========    =========     ======
</TABLE>



13.  INCOME TAX

          The income tax expense comprises the following:


<TABLE>
<CAPTION>
                                                 YEARS ENDED MARCH 31,
                                  ---------------------------------------------------
                                    2000            2001           2002         2002
                                  --------        --------       --------      ------
                                                      (IN MILLIONS)
<S>                               <C>             <C>            <C>           <C>
Current income tax expense        Rs.6,375        Rs.7,887       Rs.6,661      US$136
Deferred income tax expense
  (benefit)                           (219)          1,759           (702)        (14)
                                  --------        --------       --------      ------
    INCOME TAX EXPENSE            Rs.6,156        Rs.9,646       Rs.5,959      US$122
                                  ========        ========       ========      ======
</TABLE>



          The following is the reconciliation of estimated income taxes at the
     Indian statutory income tax rate to income tax expense as reported:

                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                                                              YEARS ENDED MARCH 31,
                                                 ----------------------------------------------
                                                     2000       2001         2002        2002
                                                 ---------   ---------    ---------    --------
                                                                   (IN MILLIONS)
<S>                                              <C>         <C>          <C>          <C>
Income before income taxes                       Rs.19,331   Rs.25,173    Rs.19,130    US$  392
Effective statutory income tax rate                  38.50%      39.55%       35.70%      35.70%
Expected income tax expense                          7,442       9,956        6,829         140

Adjustments to reconcile expected
 income tax to actual tax expense:
  Permanent differences:
   Income exempt under tax holiday                    (899)     (1,209)        (957)        (20)
   Provision for diminution in value of
    investment not allowed for tax                      21         153           24           -
   Stock based compensation cost                         -           -          320           7
   Exchange gain on GDR deposits treated
    as capital receipt for income tax
    purposes                                           (94)        (60)          59           1
   Others, net                                        (451)        775         (110)         (2)
  Effect of change in statutory
   tax rate                                            137          31         (206)         (4)
                                                 ---------   ---------    ---------    --------
    INCOME TAX EXPENSE                           Rs. 6,156    Rs.9,646    Rs. 5,959     US$ 122
                                                 =========   =========    =========    ========
</TABLE>


          The tax effects of significant temporary differences are as follows:


<TABLE>
<CAPTION>
                                                            AS OF MARCH 31,
                                                   ------------------------------
                                                     2001        2002        2002
                                                   --------   --------      -----
                                                             (IN MILLIONS)
<S>                                                <C>        <C>           <C>
TAX EFFECT OF:
  DEDUCTIBLE TEMPORARY DIFFERENCES:
    Allowances for trade receivable                Rs.  387   Rs.  608      US$12
    Other                                                 -        126          3
                                                   --------   --------      -----
      DEFERRED TAX ASSET                           Rs.  387   Rs.  734      US$15
                                                   --------   --------      -----

  TAXABLE TEMPORARY DIFFERENCES:
    Property, plant and equipment                  Rs.3,204   Rs.2,946      US$60
    Unrealized gain on securities available for         269        151          3
     sale
    Other                                                97          -          -
                                                   --------   --------      -----
      DEFERRED TAX LIABILITY                       Rs.3,570   Rs.3,097      US$63
                                                   --------   --------      -----
      NET DEFERRED TAX LIABILITY                   Rs.3,183   Rs.2,363      US$48
                                                   ========   ========      =====
</TABLE>


14.  REVENUES

          Revenues comprise the following:

                                      F-21
<PAGE>
<TABLE>
<CAPTION>
                                                              YEARS ENDED MARCH 31,
                                              ------------------------------------------------------
                                                 2000           2001           2002           2002
                                              ---------      ---------      ---------       --------
                                                                   (IN MILLIONS)
<S>                                           <C>            <C>            <C>             <C>
Revenues from foreign administrations for
 incoming traffic:
  Telephone                                   Rs.45,161      Rs.46,674      Rs.41,503       US$  850
  Telex                                             128            112             70              1
Revenues from BSNL for outgoing traffic:
  Telephone                                      18,375         18,345         16,153            331
  Telex                                             175            112             88              2
Leased circuits                                   2,986          3,140          3,584             73
Telegraph, television and others                  2,815          3,533          3,652             75
                                              ---------      ---------      ---------       --------
     TOTAL                                    Rs.69,640      Rs.71,916      Rs.65,050       US$1,332
                                              =========      =========      =========       ========
</TABLE>


15.  NETWORK AND TRANSMISSION COSTS

          Network and transmission costs comprise the following:


<TABLE>
<CAPTION>
                                               YEARS ENDED MARCH 31,
                                   -------------------------------------------
                                     2000         2001        2002       2002
                                   ---------   ---------   ---------    ------
                                                  (IN MILLIONS)
<S>                                <C>         <C>         <C>          <C>
Payment for traffic costs to:
  BSNL                             Rs.29,254   Rs.27,341   Rs.23,050    US$472
  Foreign administrations             13,374      13,866      10,721       220
Rent of land lines                       579       1,037       2,914        60
Other transmission facilities          2,414       2,906       2,892        59
                                   ---------   ---------   ---------    ------
     TOTAL                         Rs.45,621   Rs.45,150   Rs.39,577    US$811
                                   =========   =========   =========    ======
</TABLE>


16.  OTHER OPERATING COSTS

          Other operating costs comprise the following:

<TABLE>
<CAPTION>
                                               YEARS ENDED MARCH 31,
                                     ---------------------------------------
                                       2000       2001       2002      2002
                                     --------   --------   --------    -----
                                                  (IN MILLIONS)
<S>                                  <C>        <C>        <C>         <C>
Staff costs:
  Salaries and wages                 Rs.  866   Rs.1,400   Rs.2,134    US$43
  Social security contributions            90        132        391        8
Energy costs                              235        271        286        6
Advertising                               113        116         35        1
Repairs, maintenance, marketing
 and other costs                        1,318      1,104      1,957       40
                                     --------   --------   --------    -----
     TOTAL                           Rs.2,622   Rs.3,023   Rs.4,803    US$98
                                     ========   ========   ========    =====
</TABLE>

          On August 1, 2001, the Company announced a Voluntary Retirement Scheme
     ("VRS") with the primary objective of improving the average mix of its
     employees and also to improve the overall skill level. The original period
     of the scheme was from September 01, 2001 to September 30, 2001. The scheme
     was later extended upto October 31, 2001. Employees who were at least 50
     years of age and had rendered a minimum of 10 years service in the Company
     were eligible to opt for voluntary retirement. Apart from normal retirement
     benefits, employees who opted for voluntary retirement were

                                      F-22
<PAGE>
     entitled to an ex-gratia payment of 60 days salary (basic and dearness
     allowance) for each completed year of service or payment of salary for the
     remaining period of service left before retirement, whichever was lower. At
     the close of the scheme, 81 employees had opted for voluntary retirement.
     Staff costs include an amount of Rs.36 million on account of this scheme.


17.  NON-OPERATING INCOME

          Non-operating income comprises the following:


<TABLE>
<CAPTION>
                                                        YEARS ENDED MARCH 31,
                                             ------------------------------------------
                                               2000       2001         2002       2002
                                             --------   --------     --------     -----
                                                            (IN MILLIONS)
<S>                                          <C>        <C>          <C>          <C>
Foreign exchange gains, net                  Rs.1,449   Rs.2,878     Rs.  939     US$19
Profit (loss) on sale of fixed assets              86         (5)          (2)        -
Reimbursement by GoI of entry fees
 (See Note 1(c))                                    -          -          279         6
Miscellaneous income                              286        185          155         3
                                             --------   --------     --------     -----
     TOTAL                                   Rs.1,821   Rs.3,058     Rs.1,371     US$28
                                             ========   ========     ========     =====
</TABLE>


18.  EMPLOYEE STOCK PURCHASE SCHEME ("ESPS")

          As part of the process of disinvestment, GoI on various dates
     transferred 5,661,546 equity shares to employees of the Company at a price
     significantly lower than the fair value on the date of transfer. The
     transfer of such equity shares has been accounted for as a charge to
     compensation cost of Rs.896 million and an accretion to additional paid in
     capital in the year ended March 31, 2002.

          In addition to the equity shares already transferred, GoI is yet to
     transfer 346,860 equity shares to employees, which has been approved by the
     board of directors of the Company.

          Had compensation cost for the Company's ESPS been determined based on
     the fair value at the grant dates, consistent with the method prescribed by
     SFAS No. 123, the Company's net income and earnings per share would have
     been as per the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                               YEAR ENDED MARCH 31, 2002
                                            ------------------------------
                                            (IN MILLIONS, EXCEPT PER SHARE
                                                        AMOUNTS)
<S>                                         <C>                    <C>
NET INCOME:
  As reported                               Rs.9,537               US$ 195
  Pro forma                                    9,776               US$ 200

BASIC AND DILUTED EARNINGS PER SHARE
  As reported                               Rs.33.46               US$0.69
  Pro forma                                    34.30               US$0.70
</TABLE>

          The fair value of options used to compute pro forma net income and
     basic earnings per equity share have been estimated on the dates of grant
     using the Black-Scholes option pricing model with the following
     assumptions:


<TABLE>
<CAPTION>
                                  YEAR ENDED MARCH
                                      31, 2002
                                  ----------------
<S>                               <C>
Dividend yield                              1%
Expected volatility                        88%
Risk-free interest rate                     9%
Lock-in period                          1 year
</TABLE>

                                      F-23
<PAGE>
19.  RETIREMENT BENEFITS

          GRATUITY

               The following table sets out the funded status of the gratuity
     plan and the amounts recognized in the Company's financial statements as of
     March 31, 2001 and 2002.


<TABLE>
<CAPTION>
                                                                      AS OF MARCH 31,
                                                             --------------------------------
                                                              2001         2002          2002
                                                             ------       ------        -----
                                                                         (IN MILLIONS)
<S>                                                          <C>          <C>           <C>
CHANGE IN BENEFIT OBLIGATION:

  Projected benefit obligation, beginning of the year        Rs.153       Rs.232        US$ 5
  Service cost                                                    8           16            -
  Interest cost                                                  16           23            -
  Actuarial loss                                                 65           39            1
  Benefits paid                                                 (10)         (22)           -
                                                             ------       ------        -----
     PROJECTED BENEFIT OBLIGATION, END OF THE YEAR              232          288            6
                                                             ------       ------        -----
CHANGE IN PLAN ASSETS:

  Fair value of plan assets, beginning of the year               95          127            3
  Actual return on plan assets                                   10           11            -
  Employer contributions                                         32            -            -
  Benefits paid                                                 (10)         (22)           -
                                                             ------       ------        -----
     FAIR VALUE OF PLAN ASSETS, END OF THE YEAR                 127          116            3
                                                             ------       ------        -----
  Excess of obligation over plan assets                        (105)        (172)          (3)
  Unrecognized actuarial loss                                    68          101            2
  Unrecognized transitional obligation                           13            9            -
                                                             ------       ------        -----
     ACCRUED BENEFIT                                         Rs.(24)      Rs.(62)       US$(1)
                                                             ======       ======        =====
</TABLE>

          Net gratuity cost for the years ended March 31, 2000, 2001 and 2002
     comprises the following components:


<TABLE>
<CAPTION>
                                                         YEARS ENDED MARCH 31,
                                              ------------------------------------------
                                              2000         2001       2002          2002
                                              -----       -----      ------         ----
                                                             (IN MILLIONS)
<S>                                           <C>         <C>        <C>            <C>
Service cost                                  Rs. 8       Rs. 8      Rs. 16         US$-
Interest cost                                    16          16          23            1
Net transitional liability recognized             -           -          13            -
Net actuarial loss recognized                     -           -         105            2
Amortization of unrecognized
 transitional obligation                          5           5           -            -
Actual investment return                         (7)        (10)        (11)           -
                                              -----       -----      ------         ----
     NET GRATUITY COST                        Rs.22       Rs.19      Rs.146         US$3
                                              =====       =====      ======         ====
</TABLE>

          The assumptions used in accounting for the gratuity plan for the years
     ended March 31, 2000, 2001 and 2002 are set out below:

                                      F-24
<PAGE>
<TABLE>
<CAPTION>
                                                                  YEARS ENDED MARCH 31,
                                                                -------------------------
                                                                2000      2001       2002
                                                                ----      ----       ----
                                                                            (%)
<S>                                                             <C>       <C>        <C>
Discount rate                                                   10.5      10.5       10.0
Rate of increase in compensation levels of covered employees     6.0       6.0        6.0
Rate of return on plan assets                                    9.5       9.5        9.5
</TABLE>


          LEAVE ENCASHMENT

               The Company provided Rs.26 million, Rs.28 million and Rs.120
     million for leave encashment for the years ended March 31, 2000, 2001 and
     2002, respectively.


          Provident fund

               The Company contributed Rs.45 million, Rs.75 million and Rs.69
     million to the provident fund for the years ended March 31, 2000, 2001 and
     2002, respectively.


20.  ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

               The carrying amounts for cash, cash equivalents, short-term
     investments, accounts receivable and accounts payable approximate their
     fair values due to the short maturity of these instruments.


21.  COMMITMENTS AND CONTINGENCIES

               Commitments and contingencies are as follows:


          CAPITAL COMMITMENTS

               Capital commitments represent expenditure, principally relating
     to the construction of new buildings, submarine cables and expansion of
     transmission equipment, which had been committed under contractual
     arrangements and unpaid amounts on investments, with the majority of
     payments due within a one year period. The amount of these commitments
     totalled Rs.2,118 million as of March 31, 2002.


          CONTINGENCIES

               INCOME TAX MATTERS

               For the fiscal years 1987-88, 1993-94 and 1995-96 to 1998-99, the
     income tax authorities have raised demands aggregating Rs.16,306 million,
     including interest of Rs. 6,393 million on the disallowance of license fee
     paid by the Company to DoT and other claims against which amounts
     aggregating to Rs.10,635 million have been paid or adjusted. The claim for
     license fee for fiscal year 1994-95 has been allowed by the Income Tax
     Appellate Tribunal. The Company has been advised by counsel that the
     demands are not likely to be sustained and hence no provision is considered
     necessary.


               OTHER CONTINGENCIES

               The Company is involved in lawsuits, claims, investigations and
     proceedings, which arise in the normal course of business. There are no
     such matters pending that the Company expects to be material in relation to
     the business.


22.  RELATED PARTY TRANSACTIONS

                                      F-25
<PAGE>
          The Company's principal related parties consist of its major
     shareholders, government departments, government owned or controlled
     companies and affiliates of the Company. The Company routinely enters into
     transactions with its related parties, such as providing telecommunication
     services, paying license fees and subletting premises. Transactions other
     than with DoT and BSNL are at arm's length in accordance with law.
     Transactions with the DoT and BSNL are subject to the revenue sharing
     agreement discussed in Note 1d. The Company's significant related party
     balances and transactions with DoT are detailed in the Statement of Income
     and in Notes 5, 11, 14 and 15. In addition, the following are significant
     related party transactions.

<TABLE>
<CAPTION>
NAME OF           NATURE OF           DESCRIPTION OF THE                 AMOUNT OF
THE PARTY        RELATIONSHIP             TRANSACTION               (RECEIPTS)/PAYMENTS         OUTSTANDING BALANCES DEBIT/(CREDIT)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                    YEARS ENDED MARCH 31,                 AS OF MARCH 31,
                                                             ---------------------------------  -----------------------------------
                                                               2001         2002         2002     2001           2002          2002
                                                             ---------    ---------     ------  -------         ------         ----
                                                                                           (IN MILLIONS)
<S>             <C>                 <C>                      <C>          <C>           <C>     <C>             <C>            <C>
GoI and its
 departments    Principal owner     Rendering of services    Rs.(1,388)   Rs.   386     US$  8
                                    Royalty payments             4,968        6,414        131
                                    Dividend payments              403       18,870        386
                                    Compensation
                                     received from GoI               -         (279)        (6)
                                                             -----------------------------------------------------------------------
                                                             Rs. 3,983    Rs.25,391     US$519   Rs.444         Rs.290         US$6
TVCL            Joint venture       Purchase of VSAT
                 partner             terminals                       -           26          1        -            (12)           -
UTL             Joint venture       Investment in equity
                 partner             share capital                   -           16          -        -              -            -
Employee        Trusts controlled   Loans made                       -            8          -        2             10            -
 trusts          by the management  Payment towards
                                     gratuity                       16           32          1        -                           -
</TABLE>

          Other related party transactions and balances are immaterial
     individually and in the aggregate.

          The Company grants loans to employees for acquiring assets such as
     computers and vehicles and for purchase of equity shares of the Company.
     The annual rate of interest at which the loans have been made to employees
     are at 4%. The loans are secured by assets acquired by the employees. As of
     March 31, 2001 and 2002, amounts receivable from employees aggregated to
     Rs.75 million and Rs.301 million, respectively, are included in trade and
     other receivables. Interest free short term advances made to employees
     aggregated to Rs.67 million and Rs.8 million as of March 31, 2001 and 2002,
     respectively.

          The Company also grants interest subsidy in excess of 4% of the
     interest rate for loans taken by the employees for purchase of property.
     The cost of interest subsidy of Rs.7 million, Rs.9 million and Rs.11
     million for the years ended March 31, 2000, 2001 and 2002, respectively, is
     included in staff costs.


23.  SEGMENT INFORMATION

          The Company has three operating segments, comprising telephony,
     Internet and leased line services. Operating segments other than the basic
     telephony segment do not meet the quantitative thresholds specified by SFAS
     No. 131, Disclosures about Segments of an Enterprise and Related
     Information, and do not qualify as reportable segments. Information about
     these segments has been aggregated and reported in the "All other"
     category.

          The Company's chief operating decision maker utilizes revenue
     information in assessing performance and making overall operating decisions
     and resource allocation. Communication services are provided utilizing the
     Company's assets, which generally do not make a distinction between the
     types of services. As a result, the Company cannot, and does not, allocate
     expenses relating to assets or asset costs by segment.

          Summarized segment information for the years ended March 31, 2000,
     2001 and 2002 is as follows:

                                      F-26
<PAGE>
<TABLE>
<CAPTION>
                                                                    YEARS ENDED MARCH 31,
                                        ------------------------------------------------------------------------------
                                                  2000                        2001                       2002
                                        -----------------------      ----------------------     ----------------------
                                           BASIC                       BASIC                      BASIC
                                         TELEPHONY    ALL OTHER      TELEPHONY    ALL OTHER     TELEPHONY    ALL OTHER
                                         ---------    ---------      ---------    ---------     ---------    ---------
                                                                        (IN MILLIONS)
<S>                                      <C>          <C>            <C>          <C>           <C>          <C>
Traffic revenue                          Rs.63,535    Rs. 6,105      Rs.65,019    Rs. 6,897     Rs.57,656    Rs. 7,394
Income from satellite consortia                  -          737              -        1,160             -            -
                                         ---------    ---------      ---------    ---------     ---------    ---------
  OPERATING REVENUE                         63,535        6,842         65,019        8,057        57,656        7,394
Network and transmission costs              43,004        2,617         41,861        3,289        33,858        5,719
License fee                                  4,712            -          5,022            -         5,393            -
                                         ---------    ---------      ---------    ---------     ---------    ---------
  SEGMENT OPERATING PROFIT                  15,819        4,225         18,136        4,768        18,405        1,675
                                         =========    =========      =========    =========     =========    =========
TOTAL SEGMENT OPERATING PROFIT                           20,044                      22,904                     20,080
Less: Unallocable operating costs                         4,156                       4,752                      6,701
                                                      ---------                   ---------                  ---------
OPERATING PROFIT, AS REPORTED                         Rs.15,888                   Rs.18,152                  Rs.13,379
                                                      =========                   =========                  =========
</TABLE>

          Unallocable operating costs include staff cost, energy cost,
     depreciation and other general administrative overheads, which are not
     allocated segment-wise.

          The company renders international telephony and value added services
     and derives its revenue from administrations in the following geographical
     locations:

<TABLE>
<CAPTION>
                                                  YEARS ENDED MARCH 31,
                            -------------------------------------------------------------
                               2000          2001         2002           2002       2002
                            ---------     ---------     ---------      --------     -----
                                            (IN MILLIONS, EXCEPT PERCENTAGES)
<S>                         <C>           <C>           <C>            <C>          <C>
India                       Rs.18,550     Rs.18,346     Rs.23,527      US$   48      36.2%
United States of
 America                       18,459        23,297        19,436           398      29.8
United Arab Emirates            6,589         7,222         6,720           138      10.3
Saudi Arabia                    3,179         4,185         3,802            78       5.8
United Kingdom                  5,204         2,930         2,092            43       3.2
Canada                          1,199           702         1,961            40       3.0
Rest of the world              16,460        15,234         7,512           154      11.7
                            ---------     ---------     ---------      --------     -----
TOTAL                       Rs.69,640     Rs.71,916     Rs.65,050      US$1,332     100.0%
                            =========     =========     =========      ========     =====
</TABLE>

          Revenues from major customers are as follows:

<TABLE>
<CAPTION>
                                              YEARS ENDED MARCH 31,
                         ---------------------------------------------------------------
                            2000          2001           2002          2002        2002
                         ---------     ---------      ---------      --------      -----
                                         (IN MILLIONS, EXCEPT PERCENTAGES)
<S>                      <C>           <C>            <C>            <C>           <C>
BSNL                     Rs.18,550     Rs.18,346      Rs.23,527      US$  482       36.2%
MCI WorldCom                11,071        10,916          9,513           195       14.6
Concert AT&T                 5,157         9,639          6,987           143       10.7
United Arab Emirates         6,589         7,222          6,720           138       10.3
Others                      28,273        25,793         18,303           374       28.2
                         ---------     ---------      ---------      --------      -----
TOTAL                    Rs.69,640     Rs.71,916      Rs.65,050      US$1,332      100.0%
                         =========     =========      =========      ========      =====
</TABLE>

          Concentrations of credit risk exist when changes in economic, industry
     or geographic factors similarly affect groups of counter parties whose
     aggregate credit exposure is material in relation to the Company's total
     credit exposure. (See Note 25(a))

          The balances due from major customers are as follows:

                                      F-27
<PAGE>
<TABLE>
<CAPTION>
                                                   YEARS ENDED MARCH 31,
                                 -------------------------------------------------------
                                    2001             2002             2002          2002
                                 ---------        ---------          ------        -----
                                             (IN MILLIONS, EXCEPT PERCENTAGES)
<S>                              <C>              <C>                <C>           <C>
MCI WorldCom                     Rs. 4,066        Rs. 5,612          US$115         37.7%
Concert AT&T                         2,585            1,668              34         11.2
United Arab Emirates                 2,419            2,366              48         15.8
Saudi Arabia                         2,057            1,659              34         11.1
Others                               7,012            3,603              74         24.2
                                 ---------        ---------          ------        -----
TOTAL                            RS.18,139        RS.14,908          US$305        100.0%
                                 =========        =========          ======        =====
</TABLE>

          All revenues earned by the Company are from its operations in India.
     Substantially, all of the Company's fixed assets are located in India.


24.  SUBSEQUENT EVENTS

          On May 28, 2002, the board of directors of the Company declared a
     dividend of Rs.12.50 per equity share aggregating to Rs.3,563 million which
     is subject to approval by the shareholders at the ensuing annual general
     meeting. The board of directors of the Company also approved an investment
     of Rs.12,000 million in Tata Teleservices Ltd., company incorporated in the
     state of Andhra Pradesh, India, that provides basic telephony services in
     India. (See Note 25(c))


25.  EVENTS SUBSEQUENT TO MAY 28, 2002

     a.   CHAPTER 11 BANKRUPTCY FILING OF WORLDCOM INC. ("WORLDCOM") (SEE
          NOTE 23)

          On July 21, 2002, WorldCom announced that it and substantially all of
     its direct and indirect United States subsidiaries (the "Debtors") had
     filed voluntary petitions for relief under Chapter 11 of the United States
     Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
     Court for the Southern District of New York (the "Bankruptcy Court"). The
     Debtors continue to operate their businesses and manage their properties as
     debtors in possession pursuant to the Bankruptcy Code.

          WorldCom is one of the Company's major carrier partners with whom the
     Company exchanges traffic. For the year ended March 31, 2002, gross
     revenues from WorldCom represented 14.6% of the Company's total operating
     revenues.

          As at March 31, 2002, balances due from WorldCom amounted to Rs.5,612
     million. Of the amounts outstanding from WorldCom as of March 31, 2002, the
     Company has recovered substantial amounts during the period commencing from
     April 1, 2002 through September 24, 2002.

          Of the revenues earned during the period commencing from April 1, 2002
     through July 21, 2002, the date of voluntary petition for relief to the
     Bankruptcy Court, the Company has recovered Rs.1,512 million through
     September 24, 2002. In the event the Company is unable to recover any
     further outstanding balances due, the estimated exposure of the Company is
     approximately Rs.950 million.

          Of the revenues earned during the period commencing from July 22, 2002
     through August 31, 2002, the Company has not recovered any outstanding
     balances, as the same has not fallen due in view of the settlement cycle.


     b.   REVENUE SHARING AGREEMENT WITH BSNL (SEE NOTE 1(d))

          The revenue sharing agreement between the Company and BSNL expired on
     March 31, 2002. The Company is currently in negotiations with BSNL on a new
     revenue sharing agreement, which would be effective from April 01, 2002.
     The terms of the new revenue sharing agreement could have a significant
     adverse impact on future profitability.

                                      F-28
<PAGE>
          Similarly, the Company is currently negotiating revenue sharing
     agreements with MTNL and few other domestic telecommunications companies.
     Until such negotiations are completed, the Company is unable to predict
     with any certainty the impact on its results of these changes.

          Any reduction in the accounting rates in effect between the Company
     and US or other foreign administrations or carriers will reduce the amount
     of payments received by the Company. The Company does not give any
     guarantee that, under the new revenue sharing arrangements to be finalized
     between the Company and BSNL, MTNL and other last mile operators, any
     reductions in payments received by the Company from foreign carriers will
     result in corresponding reductions in payments made by the Company to BSNL,
     MTNL and other last mile operators. Until such negotiations with BSNL, MTNL
     and other last mile operators are completed, the Company is unable to
     predict with any certainty the impact on its results of these changes.


     c.   INVESTMENTS IN TATA TELESERVICES LIMITED (SEE NOTE 24)

          On July 29, 2002, the Company constituted a committee to decide on the
     proposal of the Board of Directors ("Board") to invest upto Rs. 12,000
     million in Tata Teleservices Limited ("TTSL"), a related party. Currently,
     the matter is under consideration of the committee.


     d.   PERFORMANCE BANK GUARANTEE OF RS.4,000 MILLION (SEE NOTE 1(c))

          On conclusion of negotiations with GoI with reference to providing a
     performance bank guarantee of Rs.4,000 million in respect of NLD license,
     the Company was required to provide the performance bank guarantee, since
     GoI took the position that the exemption applied only as long as the
     Company remained a PSU. On June 17, 2002, the Company provided the
     following performance bank guarantees to GoI aggregating to Rs.4,000
     million:-


<TABLE>
<CAPTION>
-----------------------------------------
AMOUNT OF GUARANTEE      VALID THROUGH
-----------------------------------------
   (IN MILLION)
<S>                      <C>
     Rs.1,000            June 16, 2004
        1,000            June 16, 2005
        1,000            June 16, 2006
        1,000            June 16, 2009
</TABLE>

                                      F-29
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER       DESCRIPTION
--------     ---------------------------------------------------------------------------------------
<S>          <C>
1.1*         Certificate of Incorporation of Videsh Sanchar Nigam Limited, dated March 19, 1986 and
             as currently in effect.

1.2          Memorandum and Articles of Association of Videsh Sanchar Nigam Limited, dated August
             20, 2002 and as currently in effect.

1.3*         Certificate for Commencement of Business, dated March 21, 1986 and as currently in
             effect.

1.4*         Specimen Certificate for Equity Shares of Videsh Sanchar Nigam Limited.

2.1*         Form of Deposit Agreement, among Videsh Sanchar Nigam Limited, The Bank of New York, as
             Depositary and owners and beneficial owners of American Depositary Receipts issued
             thereunder (including as an exhibit, the form of American Depositary Receipt).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER       DESCRIPTION
--------     ---------------------------------------------------------------------------------------------
<S>          <C>
2.2**        Amendment No. 1 to Deposit Agreement, among Videsh Sanchar Nigam Limited, The Bank of
             New York, as Depositary and owners and beneficial owners of American Depositary Receipts
             issued thereunder (including as an exhibit the form of American Depositary Receipt).

2.3***       Shareholders' Agreement among the President of India, Panatone Finvest Limited, Tata Sons
             Limited, Tata Power Company Limited, Tata Iron and Steel Company Limited, and Tata
             Industries Limited, dated 13 February 2002.

2.4***       Share Purchase Agreement among the Government of India, Panatone Finvest Limited, Tata
             Sons Limited, Tata Power Company Limited, Tata Iron and Steel Company Limited, and Tata
             Industries Limited and the Company dated 6 February 2002.

4.1*         License Agreement for the provision of Internet Service between the President of India
             and Videsh Sanchar Nigam Limited, dated January 25, 1999.

4.2+         Memorandum of Agreement, International Telecommunication Services between Videsh Sanchar
             Nigam Limited and AT&T Corp., Accounting Rate and Division of Revenue, dated
             April 15, 2002 (the "AT&T Agreement").

4.3+         Memorandum of Agreement regarding Total Accounting Rates between Videsh Sanchar Nigam
             Limited and British Telecommunication Service Limited, date 5/20/2002 (the "BT Agreement").

4.4+         Minutes of Meeting regarding Total Accounting Rates between Videsh Sanchar Nigam Limited
             and Etisalat UAE, dated April 13, 2002 (the "UAE Agreement").

4.5          License Agreement for national long distance services between the President of India
             and the Company, dated February 8, 2002.

4.6          License Agreement for Provision of Internet Service (Including Internet Telephony)
             between the President of India and the Company, dated May 3, 2002.

10.3*        License granted under the Indian Telegraph Act, 1885 to Videsh Sanchar Nigam Limited,
             dated January 22, 1999 by the Department of Telecommunications.

10.4**       Letter from the Ministry of Communications, Department of Telecommunications regarding
             termination of the monopoly granted to Videsh Sanchar Nigam Limited, dated September 7, 2000.

99.1         Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
             the Sarbanes-Oxley Act of 2002.
</TABLE>

+    Registrant has requested confidential treatment pursuant to Rule 406 for a
     portion of the referenced exhibit and has separately filed such exhibit
     with the Commission.

*    Previously filed as an exhibit to the Company's Annual Statement on Form
     20-F (Registration Statement No. 001-15118) filed with the Commission on
     October 13, 2000 and incorporated herein by reference.

**   Previously filed as an exhibit to the Company's Annual Statement on Form
     20-F (Registration No. 001-15118) filed with the Commission on October 1,
     2001 and incorporated herein by reference.

***  Previously filed as an exhibit to the Schedule 13D filed on February 15,
     2002, by Panatone Finvest Limited and Tata Sons Limited relating to the
     purchase of shares of the Company.