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

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

                                    FORM 20-F

(Mark One)

[ ]     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, 2001.

                                       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 000-27663

                             SATYAM INFOWAY LIMITED
             (Exact name of Registrant as specified in its charter)

                                 Not Applicable
                 (Translation at Registrant's name into English)

                                Republic of India
                 (Jurisdiction of incorporation or organization)

                              Tidel Park, 2nd Floor
                             No. 4, Canal Bank Road
                         Taramani, Chennai 600 113 India
                                (91) 44-254-0770
                    (Address of principal executive offices)

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

Securities registered or to be registered pursuant to Section 12(g) of the Act:
American Depositary Shares, each representing one-fourth of one Equity Share,
par value Rs.10 per share.

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None

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

        23,183,103 Equity Shares were issued and outstanding as of March 31,
2001

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]

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item                                                                                      Page
----                                                                                      ----
<S>                                                                                       <C>
Currency of Presentation and Certain Defined Terms........................................  1
Forward-Looking Statements May Prove Inaccurate...........................................  1

PART I....................................................................................  2

Item 1.   Identity of Directors, Senior Management and Advisers...........................  2
Item 2.   Offer Statistics and Expected Timetable.........................................  2
Item 3.   Key Information.................................................................  2
Item 4.   Information on the Company...................................................... 18
Item 5.   Operating and Financial Review and Prospects.................................... 37
Item 6.   Directors, Senior Management and Employees...................................... 46
Item 7.   Major Stockholders and Related Party Transactions............................... 50
Item 8.   Financial Information........................................................... 52
Item 9.   The Offer and Listing........................................................... 52
Item 10.  Additional Information.......................................................... 53
Item 11.  Quantitative and Qualitative Disclosures About Market Risk...................... 66
Item 12.  Description of Securities Other Than Equity Securities.......................... 66

PART II................................................................................... 66

Item 13.  Defaults, Dividend Arrearages and Delinquencies................................. 66
Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds.... 66
Item 15.  Reserved........................................................................ 66
Item 16.  Reserved........................................................................ 66

PART III.................................................................................. 66

Item 17.  Financial Statements............................................................ 66
Item 18.  Financial Statements............................................................ 66
Item 19.  Exhibits........................................................................ 98
</TABLE>



<PAGE>   3

               CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

        Unless the context otherwise requires, references in this annual report
to "we," "us," the "company," "SIFY" or "Satyam Infoway" are to Satyam Infoway
Limited, a limited liability company organized under the laws of the Republic of
India. References to "U.S." or the "United States" are to the United States of
America, its territories and its possessions. References to "India" are to the
Republic of India. We are presently a majority-owned subsidiary of Satyam
Computer Services Limited, a leading Indian information technology services
company which is traded on the New York Stock Exchange and the major Indian
stock exchanges. "Satyam" is a trademark owned by Satyam Computer Services,
which has licensed the use of the "Satyam" trademark to us subject to specified
conditions. "Sify.com," "SatyamOnline," "Satyam: Net," "satyamonline.com" and
"Satyam iway" are trademarks used by us for which we have registration
applications pending in India. All other trademarks or tradenames used in this
Annual Report on Form 20-F, or annual report, are the property of their
respective owners.

        In this annual report, references to "$," "Dollars" or "U.S. dollars"
are to the legal currency of the United States, and references to "Rs.,"
"rupees" or "Indian rupees" are to the legal currency of India. References to a
particular "fiscal" year are to our fiscal year ended March 31 of such year.

        For your convenience, this annual report contains translations of some
Indian rupee amounts into U.S. dollars which should not be construed as a
representation that those Indian rupee or U.S. dollar amounts could have been,
or could be, converted into U.S. dollars or Indian rupees, as the case may be,
at any particular rate, the rate stated below, or at all. Except as otherwise
stated in this annual report, all translations from Indian rupees to U.S.
dollars contained in this annual report have been based on the noon buying rate
in the City of New York on March 31, 2001 for cable transfers in Indian rupees
as certified for customs purposes by the Federal Reserve Bank of New York. The
noon buying rate on March 31, 2001 was Rs.46.85 per $1.00.

        Our financial statements are prepared in Indian rupees and presented in
accordance with United States generally accepted accounting principles, or U.S.
GAAP. Solely for your convenience, some of the information contained in our
financial statements has been translated into U.S. dollars. In this annual
report, any discrepancies in any table between totals and the sums of the
amounts listed are due to rounding.

        The International Data Corporation market data presented in this annual
report shows International Data Corporation's estimates derived from a
combination of vendor, user and other market sources and therefore may differ
from numbers claimed by specific vendors using different market definitions or
methods. There can be no assurance that the projected amounts will be achieved.

        Information contained in our websites, including our corporate website,
www.sifycorp.com, is not part of this annual report.

                 FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

        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. YOU ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE OF THIS ANNUAL REPORT. IN
ADDITION, YOU SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS ANNUAL
REPORT AND IN OUR QUARTERLY REPORTS AND OTHER DOCUMENTS FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") FROM TIME TO TIME. OUR
FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE, WWW.SEC.GOV.



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                                     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

        You should read the following selected consolidated historical financial
data in conjunction with our financial statements and the related notes and
"Item 5. Operating and Financial Review and Prospects" included elsewhere in
this annual report. The statement of operations data for the fiscal years ended
March 31, 1997, 1998, 1999, 2000 and 2001 and the balance sheet data as of March
31, 1998, 1999, 2000 and 2001 are derived from our consolidated audited
financial statements which have been audited by KPMG India, independent
accountants. Our financial statements are prepared in Indian rupees and
presented in accordance with U.S. GAAP for the fiscal years ended March 31,
1997, 1998, 1999, 2000 and 2001. Financial statements for the year ended March
31, 2001 also have been translated into U.S. dollars for your convenience.

        The selected consolidated historical financial data includes a
presentation of EBITDA. EBITDA represents earnings (loss) before depreciation
and amortization, interest income and expense, income tax expense (benefit) and
extraordinary items. EBITDA is presented because we believe some investors find
it to be a useful tool for measuring a company's ability to fund capital
expenditures or to service future debts. EBITDA is not determined in accordance
with generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity. Because
EBITDA excludes interest expense and capital expenditures, negative EBITDA would
limit our ability to fund capital expenditures and service future debt
obligations. Our EBITDA is not comparable to that of other companies which may
determine EBITDA differently.



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<TABLE>
<CAPTION>
                                                                        Fiscal Year Ended March 31,
                                                           ----------------------------------------------------
                                                                 1997               1998               1999
                                                           ---------------      ------------       ------------
                                                                               Indian rupees
                                                             (in thousands, except share and per share data)
<S>                                                        <C>                  <C>                <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..............................................    Rs.          --      Rs.    6,805       Rs.  103,344
Cost of revenues (excluding depreciation and
    amortization) .....................................                 --           (19,498)           (63,651)
                                                           ---------------      ------------       ------------

Gross profit (excluding depreciation and
    amortization) .....................................                 --           (12,693)            39,693
Operating expenses:
    Selling, general and administrative expenses ......             26,337            80,394            200,213
    Amortization of goodwill ..........................                 --                --                 --
    Amortization of deferred stock compensation
        expense .......................................                 --                --                 69
    Foreign exchange (gain)/loss ......................                 --                 6               (615)
                                                           ---------------      ------------       ------------
           Total operating expenses ...................             26,337            80,400            199,667
                                                           ---------------      ------------       ------------
Operating loss ........................................            (26,337)          (93,093)          (159,974)
                                                           ---------------      ------------       ------------
Other (expense)/income, net ...........................                 --            (7,498)           (27,402)
                                                           ---------------      ------------       ------------

Loss before equity in losses of affiliates, income
    taxes and minority interest .......................            (26,337)         (100,591)          (187,376)
                                                           ---------------      ------------       ------------
Equity in losses of affiliates ........................                 --                --                 --
                                                           ---------------      ------------       ------------
Loss before income taxes and minority interest ........            (26,337)         (100,591)          (187,376)
                                                           ---------------      ------------       ------------
Income taxes ..........................................                 --                --                 --
                                                           ---------------      ------------       ------------
Minority interest .....................................                 --                --                 --
                                                           ---------------      ------------       ------------
Net loss ..............................................    Rs.     (26,337)     Rs. (100,591)      Rs. (187,376)
                                                           ---------------      ------------       ------------
Net loss per equity share .............................    Rs. (114,508.27)     Rs.  (121.66)      Rs.   (17.31)
Weighted equity shares used in computing net loss
    per equity share ..................................                230           826,805         10,824,826

OTHER FINANCIAL DATA:
EBITDA ................................................    Rs.     (25,801)     Rs.  (73,709)      Rs. (111,068)
Capital expenditures ..................................              3,230            77,070            144,331
Net cash provided by (used in):
    Operating activities ..............................            (30,426)          (73,950)          (172,107)
    Investing activities ..............................             (3,230)          (77,070)          (144,196)
    Financing activities ..............................             35,138           159,449            431,939
</TABLE>

<TABLE>
<CAPTION>
                                                                     Fiscal Year Ended March 31,
                                                          --------------------------------------------------
                                                              2000             2001                 2001
                                                          ------------     --------------       ------------
                                                                    Indian rupees               U.S. dollars
                                                            (in thousands, except share and per share data)
<S>                                                       <C>              <C>                  <C>
STATEMENT OF OPERATIONS DATA:
Revenues ..............................................   Rs.  671,025     Rs.  1,787,076       $     38,145
Cost of revenues (excluding depreciation and
    amortization) .....................................       (293,731)        (1,261,088)           (26,918)
                                                          ------------     --------------       ------------

Gross profit (excluding depreciation and
    amortization) .....................................        377,294            525,988             11,227
Operating expenses:
    Selling, general and administrative expenses ......        703,114          2,135,649             45,585
    Amortization of goodwill ..........................        115,992          1,133,299             24,190
    Amortization of deferred stock compensation
        expense .......................................         20,627             86,796              1,853
    Foreign exchange (gain)/loss ......................         (5,414)          (162,136)            (3,461)
                                                          ------------     --------------       ------------
           Total operating expenses ...................        834,319          3,193,608             68,167
                                                          ------------     --------------       ------------
Operating loss ........................................       (457,025)        (2,667,620)           (56,940)
                                                          ------------     --------------       ------------
Other (expense)/income, net ...........................         71,852            242,368              5,173
                                                          ------------     --------------       ------------

Loss before equity in losses of affiliates, income
    taxes and minority interest .......................       (385,173)        (2,425,252)           (51,767)
                                                          ------------     --------------       ------------
Equity in losses of affiliates ........................             --            (93,208)            (1,990)
                                                          ------------     --------------       ------------
Loss before income taxes and minority interest ........       (385,173)        (2,518,460)           (53,757)
                                                          ------------     --------------       ------------
Income taxes ..........................................          1,478             (1,707)                36
                                                          ------------     --------------       ------------
Minority interest .....................................          1,799             11,137                238
                                                          ------------     --------------       ------------
Net loss ..............................................   Rs. (381,896)    Rs. (2,509,030)      $    (53,555)
                                                          ------------     --------------       ------------
Net loss per equity share .............................   Rs.   (20.59)    Rs.    (109.79)      $      (2.34)
Weighted equity shares used in computing net loss
    per equity share ..................................     18,545,399         22,852,600         22,852,600

OTHER FINANCIAL DATA:
EBITDA ................................................   Rs. (198,307)    Rs. (1,004,009)      $    (21,430)
Capital expenditures ..................................        714,135          1,942,824             41,469
Net cash provided by (used in):
    Operating activities ..............................       (527,248)        (1,308,361)           (27,927)
    Investing activities ..............................     (2,458,384)        (4,338,491)           (92,604)
    Financing activities ..............................     10,167,709           (216,466)            (4,620)
</TABLE>

<TABLE>
<CAPTION>
                                                                          As of March 31,
                                   -----------------------------------------------------------------------------------------------
                                      1997            1998             1999             2000              2001            2001
                                   ----------      -----------      -----------     --------------    --------------     ---------
                                                                   Indian rupees                                        U.S. dollars
                                                                          (in thousands)
<S>                                <C>             <C>              <C>             <C>               <C>                <C>
Balance Sheet Data:
Cash and cash equivalents ......   Rs.  1,482      Rs.   9,912      Rs. 125,547     Rs.  7,307,625    Rs.  1,444,307     $  30,828
Working capital (deficit) ......      (33,628)          (5,355)         (21,706)         7,503,518         2,042,041        43,587
Total assets ...................       11,970          107,632          454,888         10,634,004        11,501,884       245,504
Long-term debt, including
 current installments ..........           --          134,455          259,256            215,537            13,795           294
Total stockholders' equity
 (deficit) .....................      (26,969)         (52,560)          67,617          9,927,840        10,588,338       226,005
</TABLE>



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RISK FACTORS

        Any investment in our ADSs involves a high degree of risk. You should
consider carefully the following information about these risks, together with
the other information contained in this annual report, before you make an
investment decision regarding our ADSs. If any of the following risks actually
occur, our company could be seriously harmed. In any such case, the market price
of our ADSs could decline, and you may lose all or part of the money you paid to
buy our ADSs.

RISKS RELATED TO INVESTMENTS IN INDIAN COMPANIES

        We are incorporated in India, and a significant majority of our assets
and employees are located in India. Consequently, our financial performance and
the market price of our ADSs will be affected by changes in exchange rates and
controls, interest rates, Government of India policies, including taxation
policies, as well as political, social and economic developments affecting
India.

      Political instability could halt or delay the liberalization of the
      Indian economy and adversely affect business and economic conditions in
      India generally and our business in particular.

        During the past decade, the Government of India has pursued policies of
economic liberalization, including significantly relaxing restrictions on the
private sector. Nevertheless, the role of the Indian central and state
governments in the Indian economy as producers, consumers and regulators has
remained significant. The Government of India has changed five times since 1996.
The rate of economic liberalization could change, and specific laws and policies
affecting technology companies, foreign investment, currency exchange rates and
other matters affecting investment in our securities could change as well. A
significant change in India's economic liberalization and deregulation policies
could adversely affect business and economic conditions in India generally and
our business in particular.

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

        South Asia has from time to time experienced instances of civil unrest
and hostilities among neighboring countries, including between India and
Pakistan. In April 1999, India and Pakistan conducted long-range missile tests.
Since May 1999, military confrontations between India and Pakistan have occurred
in the Himalayan region of Kargil and other border areas. Further, in October
1999 the leadership of Pakistan changed as a result of a coup led by the
military. Events of this nature in the future could influence the Indian economy
and could have a material adverse effect on the market for securities of Indian
companies, including our ADSs, and on the market for our services.

      We are subject to foreign investment restrictions under Indian law that
      limit our ability to attract foreign investors which, together with the
      lack of a public market for our equity shares, may adversely impact the
      value of our ADSs.

        Currently, there is no public trading market for our equity shares in
India nor can we assure you that we will take steps to develop one. Our equity
securities are not traded publicly in India, but are only traded on Nasdaq
through the ADSs as described in this annual report. Until recently, under
Indian laws and regulations our depositary could not accept deposits of
outstanding equity shares and issue ADRs evidencing ADSs representing such
equity shares without prior approval of the Government of India. The Reserve
Bank of India recently announced new fungibility regulations permitting the
conversion of ADSs to equity shares and the reconversion of equity shares to
ADSs provided that the actual number of ADSs outstanding after such reconversion
is not greater than the original number of ADSs outstanding. If you elect to
surrender your ADSs and receive equity shares, you will not be able to trade
those equity shares on any securities market and may not be permitted to
reconvert those equity shares to ADSs.

        If in the future a market for our equity shares is established in India
or another market outside of the United States, those shares may trade at a
discount or premium to the ADSs in part because of restrictions on foreign
ownership of the underlying shares. Under current Indian regulations and
practice, the approval of the Reserve Bank of India is required for the sale of
equity shares underlying ADSs by a non-resident of India to a resident of


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<PAGE>   7

India as well as for renunciation of rights to a resident of India, unless the
sale of equity shares underlying the ADSs is through a recognized stock exchange
or in connection with the offer made under the regulations regarding takeovers.
Since exchange controls still exist in India, the Reserve Bank of India will
approve the price at which the equity shares are transferred based on a
specified formula, and a higher price per share may not be permitted. Holders
who seek to convert the rupee proceeds from a sale of equity shares in India
into foreign currency and repatriate that foreign currency from India will have
to obtain Reserve Bank of India approval for each transaction. We cannot assure
you that any required approval from the Reserve Bank of India or any other
government agency can be obtained.

    Because we operate our business in India, exchange rate fluctuations may
    affect the value of our ADSs independent of our operating results.

        The exchange rate between the rupee and the U.S. dollar has changed
substantially in recent years and may fluctuate substantially in the future.
During the three-year period from April 1, 1998 through March 31, 2001, the
value of the rupee against the U.S. dollar declined by approximately 18%.
Devaluations of the rupee will result in higher expenses to our company for the
purchase of capital equipment, such as servers, routers, modems and other
telecommunications and computer equipment, which is generally manufactured in
the U.S. In addition, our market valuation could be materially adversely
affected by the devaluation of the rupee if U.S. investors analyze our value
based on the U.S. dollar equivalent of our financial condition and results of
operations.

    The Government of India may change its regulation of our business or the
    terms of our license to provide Internet access services without our
    consent, and any such change could decrease our revenues and/or increase our
    costs which would adversely affect our operating results.

        Our business is subject to government regulation under Indian law and to
significant restrictions under our Internet service provider license issued by
the Government of India. These regulations and restrictions include the
following:

     -       Our Internet service provider license has a term of 15 years and
             we have no assurance that the license will be renewed. If we are
             unable to renew our Internet service provider license in 2013
             for any reason, we will be unable to operate as an Internet
             service provider in India and will lose one of our primary
             sources of revenue.

     -       The Telecom Regulatory Authority of India, or TRAI, a statutory
             authority constituted under the Telecom Regulatory Authority of
             India Act, 1997, maintains the right to regulate the prices we
             charge our subscribers. The success of our business model
             depends on our ability to price our services at levels we
             believe are appropriate. If the TRAI sets a price floor, we may
             not be able to attract and retain subscribers. Likewise, if the
             TRAI sets a price ceiling, we may not be able to generate
             sufficient revenues to fund our operations. Similarly, an action
             of the Indian Parliament may impact our ability to set the
             prices for our services.

     -       The Government of India maintains the right to take over our
             entire operations or revoke, terminate or suspend our license
             for national security and similar reasons without compensation
             to us. If the Government of India were to take any of these
             actions, we would be prevented from conducting all or part of
             our business.

        We had outstanding performance guarantees for various statutory purposes
totaling Rs.20.0 million ($0.4 million) as of March 31, 2001. These guarantees
are generally provided to government agencies, primarily the TRAI and the
Department of Telecommunications, or DOT, as security for compliance with and
performance of terms and conditions contained in an Internet service provider
license, and Videsh Sanchar Nigam Limited, or VSNL, the government-controlled
provider of international telecommunications services in India, towards the
supply and installation of an electronic commerce platform. These guarantees may
be seized by the governmental agencies if they suffer any losses or damage by
reason of our failure to perform our obligations. Any failure on our part to
comply with governmental regulations and the terms of our Internet service
provider license could result in the loss of our license and any amount
outstanding as performance guarantees, which would also prevent us from carrying
on a very significant part of our business. Further, additional laws regulating
telecommunications, electronic



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<PAGE>   8

records, the enforceability of electronic documents and the liability of network
service providers are under consideration and, if enacted, could impose
additional restrictions on our business.

        The charges for international gateways and other services presently
being provided by VSNL are the subject of a dispute pending before the TRAI and
the Telecom Disputes Settlement and Appellate Tribunal between VSNL and private
Internet service providers, including our company. VSNL has priced these
services at levels which we believe are inconsistent with the terms and
conditions on which VSNL has secured the bandwidth for its international
gateways. This is a pending matter and, as of the date of this annual report, no
decision has been announced. The resolution of this dispute will have an impact
on our business.

    Surcharges on Indian income taxes will increase our tax liability and
    decrease any profits we might have in the future.

        The statutory corporate income tax rate in India is currently 35.0%. For
fiscal 2001, this tax rate was subject to a 13.0% surcharge resulting in an
effective tax rate of 39.6%. The tax surcharge for fiscal 2002 has been reduced
to 2.0%. We cannot assure you that the surcharge will be in effect for a limited
period of time or that additional surcharges will not be implemented by the
Government of India. Dividends declared, distributed or paid by an Indian
corporation are subject to a dividend tax of 10.2%, including the applicable
surcharge for fiscal 2001, of the total amount of the dividend declared,
distributed or paid. This tax is not paid by stockholders nor is it a
withholding requirement, but rather it is a direct tax payable by the
corporation before the distribution of a dividend.

RISKS RELATED TO THE INTERNET MARKET IN INDIA

        Our success will depend in large part on the increased use of the
Internet by consumers and businesses in India. However, our ability to exploit
the Internet service provider and other data service markets in India is
inhibited by a number of factors. If India's limited Internet usage does not
grow substantially, our business may not succeed.

    The success of our business depends on the acceptance of the Internet in
    India which may be slowed or halted by high bandwidth costs and other
    technical obstacles in India.

        Bandwidth, the measurement of the volume of data capable of being
transported in a communications system in a given amount of time, remains very
expensive in India, especially when compared to bandwidth costs in the United
States. Bandwidth rates are commonly expressed in terms of Kbps (kilobits per
second, or thousands of bits of data per second) or Mbps (megabits per second,
or millions of bits of data per second). Prices for bandwidth capacity are set
by the TRAI and have remained high due to, among other things, capacity
constraints. High bandwidth prices have continued notwithstanding rapid
increases in demand for Internet access and a very competitive pricing
environment for those services which has resulted in decreasing average selling
prices.

    The limited installed personal computer base in India limits our pool of
    potential customers and restricts the amount of revenues that our consumer
    Internet access services division may generate.

        The market penetration rates of personal computers and online access in
India are far lower than such rates in the United States. For example, according
to International Data Corporation, in 2000 the Indian market contained
approximately 4.4 million Internet users compared to a total population in India
of 1.0 billion, while the U.S. market contained approximately 135 million
Internet users compared to a total population in the U.S. of 275 million.
Alternate methods of obtaining access to the Internet, such as through set-top
boxes for televisions, are currently not popular in India. There can be no
assurance that the number or penetration rate of personal computers in India
will increase rapidly or at all or that alternate means of accessing the
Internet will develop and become widely available in India. While the personal
computer penetration level in India is relatively low, we are addressing the
demand for public Internet access through the establishment of a retail chain of
public Internet access centers, which we refer to as "cybercafes." Although this
service creates a larger market, it also imposes on the operator of the
cybercafe the considerable costs of providing the consumer access to a personal
computer and related hardware and software.



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<PAGE>   9

    The high cost of accessing the Internet in India limits our pool of
    potential customers and restricts the amount of revenues that our consumer
    Internet access services division may generate.

        Our growth is limited by the cost to Indian consumers of obtaining the
hardware, software and communications links necessary to connect to the Internet
in India. If the costs required to access the Internet do not significantly
decrease, most of India's population will not be able to afford to use our
services. The failure of a significant number of additional Indian consumers to
obtain affordable access to the Internet would make it very difficult to execute
our business plan.

    The success of our business depends on the acceptance and growth of
    electronic commerce in India which is uncertain and, to a large extent,
    beyond our control.

        Many of our existing and proposed products and services are designed to
facilitate electronic commerce in India, although there is relatively little
electronic commerce currently being conducted in India. Demand and market
acceptance for these products and services by businesses and consumers,
therefore, are highly uncertain. Although the Indian Parliament has passed the
Information Technology Act, 2000, several critical issues concerning the
commercial use of the Internet in India, such as legal recognition of electronic
records, validity of contracts entered into online and the validity of digital
signatures, remain uncertain. In addition, many Indian businesses have deferred
purchasing Internet access and deploying electronic commerce initiatives for a
number of reasons, including the existence or perception of, among other things:

     -       inconsistent quality of service;

     -       need to deal with multiple and frequently incompatible vendors;

     -       inadequate legal infrastructure relating to electronic commerce
             in India;

     -       lack of security of commercial data, such as credit card
             numbers; and

     -       low number of Indian companies accepting credit card numbers
             over the Internet.

        If usage of the Internet in India does not increase substantially and
the legal infrastructure and network infrastructure in India are not developed
further, we are not likely to realize any benefits from our investment in the
development of electronic commerce products and services.

RISKS RELATED TO SATYAM INFOWAY

    Our limited operating history makes it difficult to evaluate our business.

        We commenced operation of our private data network business in April
1998 and launched our Internet service provider operations and Internet portal
website in November 1998. Accordingly, we have a limited operating history to
evaluate our business. You must consider the risks and difficulties frequently
encountered by companies in the early stages of development, particularly
companies in the new and rapidly evolving Internet service markets. These risks
and difficulties include our ability to:

     -       continue to develop and upgrade our technology, including our
             network infrastructure;

     -       maintain and develop strategic relationships with business
             partners;

     -       offer compelling online services and content; and

     -       promptly address the challenges faced by early stage, rapidly
             growing companies which do not have an experience or performance
             base to draw on.

        Not only is our operating history short, but we have determined to
compete in three businesses that we believe are complementary. These three
businesses are corporate network and e-consulting services, Internet service
provider and online portal. Our three businesses were started at different times
and have only been functioning



                                       7
<PAGE>   10

together since late in 1998. We do not yet know whether these businesses will
prove complementary. We cannot assure you that we will successfully address the
risks or difficulties described above. Failure to do so could lead to an
inability to attract and retain corporate customers for our network services and
subscribers for our Internet services as well as the loss of advertising
revenues.

    We have a history of losses and negative cash flows and anticipate this to
    continue because our business plan, which is unproven, calls for additional
    subscribers and other customers to attain profitability.

        Since our founding, we have incurred significant losses and negative
cash flows. As of March 31, 2001, we had an accumulated deficit of approximately
$68.4 million. We have not been profitable and expect to incur operating losses
as we expand our services, invest in expansion of our network and technology
infrastructure, and advertise and promote our brand. Our business plan assumes
that businesses in India will demand private network and related electronic
commerce and web-based services. Our business plan also assumes that consumers
in India will be attracted to and use Internet access services and content
available on the Internet in increasing numbers. This business model is not yet
proven in India, and we cannot assure you that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.

    Our ability to compete in the Internet service provider market is hindered
    by the fact that our principal competitor is a government-controlled
    provider of international telecommunications services in India which enjoys
    significant competitive advantages over our company.

        VSNL is a government-controlled provider of international
telecommunications services in India. VSNL is also the largest Internet service
provider in India and, according to information published on VSNL's website, had
631,000 subscribers as of March 31, 2001. VSNL enjoys significant competitive
advantages over our company, including the following:

     -       Longer service history. VSNL has offered Internet service
             provider services since August 1995, whereas we have offered
             Internet service provider services only since November 1998.

     -       Access to network infrastructure. Because VSNL is controlled by
             the Government of India, it has direct access to network
             infrastructure which is owned by the Indian government.

     -       Greater financial resources. VSNL has significantly greater
             total assets and annual revenues than our company.

        Recently, VSNL has continued to aggressively reduce consumer Internet
access prices despite the lack of offsetting reductions in prevailing bandwidth
tariffs payable by private competitors, such as our company. We believe that
these practices constitute an improper cross-subsidy funded by VSNL's present
monopoly in long distance telephone service. The charges for international
gateways and other services presently being provided by VSNL are the subject of
a dispute pending before the TRAI and the Telecom Disputes Settlement and
Appellate Tribunal between VSNL and private Internet service providers,
including our company. This is pending matter and, as of the date of this annual
report, no decision has been announced. Unless there is a change in government
policy or favorable resolution of this dispute, or until we are able to reduce
our bandwidth costs through other means, we will continue to face difficult
market conditions in the consumer access business.

        These competitive issues may prevent us from attracting and retaining
subscribers and generating advertising revenue. This could result in loss of
market share, price reductions, reduced margins or negative cash flow for our
company's operations.

    We may be required to further lower the rates we charge for our products and
    services in response to new pricing models introduced by new and existing
    competition in the Internet services market which would significantly
    decrease our revenues.

        A significant number of new competitors have recently entered India's
recently liberalized Internet service provider market, and we expect additional
competitors to emerge in the near future. As of December 2001, approximately 437
companies had obtained Internet service provider licenses in India, including 79
companies which have obtained licenses to offer Internet service provider
services throughout India. New entrants into the national Internet service
provider market in India may enjoy significant competitive advantages over our
company, including greater financial resources, which could allow them to charge
Internet access fees that are lower than ours in order to attract subscribers.
Since May 2000, we have offered unlimited Internet access to consumers for a
fixed



                                       8
<PAGE>   11
price. A number of our competitors, including VSNL, Dishnet and Mantra, also
offer unlimited Internet access for a fixed price. In addition, some competitors
offer free Internet service. These factors have resulted in significant
reduction in actual average selling prices for consumer ISP services over the
past several quarters. We expect the market for consumer Internet access to
remain extremely price competitive.

        Our corporate and e-consulting services business faces significant
competition from well-established companies, including Global E-Commerce
Limited, Sprint-RPG Limited and WIPRO-CSD. Reliance Infocom, a member of the
Reliance Group, is building a nationwide fiber optic network in India and has
announced plans to provide a range of value-added services, including corporate
connectivity services.

        Our online portal, www.sify.com, faces significant competition from
well-established Indian content providers, including rediff.com, which completed
its initial public offering in the United States in June 2000. Some of these
sites currently have greater traffic than our site and offer some features that
we do not. Further, the dominant Internet portals continue to be the online
services and search engine companies based in the United States, such as America
Online, Excite@Home, Lycos, Microsoft Network and Yahoo!. These companies have
been developing specially branded or co-branded products designed for audiences
in specific markets. We expect that these companies will deploy services that
are targeted at the Indian market. For example, Yahoo! launched an Indian
service in June 2000.

        Increased competition may result in reduced operating margins or
operating losses, loss of market share and diminished value in our services, as
well as different pricing, service or marketing decisions. We cannot assure you
that we will be able to successfully compete against current and future
competitors.

    Our marketing campaign to establish brand recognition and loyalty for the
    SatyamOnline and SIFY brands could be unsuccessful or, if successful, may
    not benefit our company if in the future we are no longer permitted to use
    the "Satyam" trademark that we license from Satyam Computer Services.

        In order to expand our customer base and increase traffic on our
websites, we must establish, maintain and strengthen the SatyamOnline and SIFY
brands. We plan to continue to incur additional marketing expenditures to
establish brand recognition and brand loyalty. If our marketing efforts do not
produce a significant increase in consumer traffic to offset our marketing
expenditures, our losses will be increased or, to the extent that we are
generating profits, our profits will be decreased. Furthermore, our Internet
portal will be more attractive to advertisers if we have a large audience of
consumers with demographic characteristics that advertisers perceive as
favorable. Therefore, we intend to introduce additional and enhanced content,
interactive tools and other services and features in the future in an effort to
retain our current subscribers and users and attract new ones. Our reputation
and brand name could be adversely affected if we are unable to do so
successfully.

        "Satyam" is a trademark owned by Satyam Computer Services, our parent
company. We have a license to use the "Satyam" trademark for so long as Satyam
Computer Services continues to own at least 51% of our company. If its ownership
is reduced below 51%, however, Satyam Computer Services may terminate our
license to use the "Satyam" trademark upon two years' prior written notice.
Termination of our license to use the "Satyam" trademark would require us to
invest significant funds in building a new brand name and could have a material
adverse effect on our business, results of operations and financial condition.

    If our efforts to retain our subscribers through investment in network
    infrastructure and customer and technical support are unsuccessful, our
    revenues will decrease without a corresponding reduction in costs.

        Our sales, marketing and other costs of acquiring new subscribers are
substantial relative to the fees actually derived from these subscribers.
Accordingly, our long-term success depends to a great extent on our ability to
retain our existing subscribers, while continuing to attract new subscribers. We
invest significant resources in our network infrastructure and in our customer
and technical support capabilities to provide high levels of customer service.
We cannot be certain, however, that these investments will maintain or improve
subscriber retention. We believe that intense competition from our competitors,
some of whom may offer free hours of service or other enticements for new
subscribers, has caused, and may continue to cause, some of our subscribers to
switch to our competitors' services. In addition, some new subscribers use the
Internet only as a novelty and do not become consistent users of Internet
services, and therefore are more likely to discontinue their service. Any
decline in our subscriber retention rate could decrease the revenues generated
by our consumer Internet access services division.



                                       9
<PAGE>   12

    Our future operating results could fluctuate in part because our expenses
    are relatively fixed in the short-term while future revenues are uncertain,
    and any adverse fluctuations could negatively impact the price of our ADSs.

        Our revenues, expenses and operating results have varied in the past and
may fluctuate significantly in the future due to a number of factors, many of
which are outside our control. Our business involves significant capital outlays
and, thus, a significant portion of our investment and cost base is relatively
fixed in the short term. Our revenues for the foreseeable future will depend on
the following:

     -       the products developed by our strategic partners and the usage
             thereof by our customers determines the amount of revenues
             generated by our corporate network and e-consulting services
             division;

     -       the number of subscribers to our Internet service provider
             service and the prevailing prices charged determine the amount
             of revenues generated by our consumer Internet access services
             division; and

     -       advertising and electronic commerce activity on www.sify.com and
             its related sites determines the amount of revenues generated by
             our online portal and content offerings division.

             Our future revenues are difficult to forecast and, in addition
             to the foregoing, will depend on the following:

     -       the timing and nature of any agreements we enter into with
             strategic partners will determine the amount of revenues
             generated by our corporate network and e-consulting services
             division;

     -       new Internet sites, services, products or pricing policies
             introduced by our competitors may require us to introduce new
             offerings or reduce the prices we charge our customers for
             Internet access;

     -       our capital expenditures and other costs relating to the
             expansion of our operations could affect the expansion of our
             network or could require us to generate additional revenue in
             order to be profitable;

     -       the timing and nature of our marketing efforts could affect the
             number of our subscribers and the level of electronic commerce
             activity on our websites;

     -       our ability to successfully integrate operations and
             technologies from any acquisitions, joint ventures or other
             business combinations or investments, including our acquisitions
             of IndiaWorld Communications and Indiaplaza.com and our
             investment in CricInfo Limited;

     -       the introduction of alternative technologies may require us to
             reevaluate our business strategy and/or to adapt our products
             and services to be compatible with such technologies; and

     -       technical difficulties or system failures affecting the
             telecommunication infrastructure in India, the Internet
             generally or the operation of our websites.

        We plan to continue to expand and develop content and enhance our
technology and infrastructure. Many of our expenses are relatively fixed in the
short-term. We cannot assure you that our revenues will increase in proportion
to the increase in our expenses. We may be unable to adjust spending quickly
enough to offset any unexpected revenues shortfall. This could lead to a
shortfall in revenues in relation to our expenses.

        You should not rely on yearly comparisons of our results of operations
as indicators of future performance. It is possible that in some future periods
our operating results may be below the expectations of public market analysts
and investors. In this event, the price of our ADSs may underperform or fall.

    Because we lack full redundancy for our computer systems, a systems failure
    could prevent us from operating our business.

        We rely on the Internet and, accordingly, depend upon the continuous,
reliable and secure operation of Internet servers, related hardware and software
and network infrastructure such as lines leased from service providers operated
by the Government of India. We have a back-up data facility but we do not have
full redundancy



                                       10
<PAGE>   13

for all of our computer and telecommunications facilities. As a result, failure
of key primary or back-up systems to operate properly could lead to a loss of
customers, damage to our reputation and violations of our Internet service
provider license and contracts with corporate customers. These failures could
also lead to a decrease in value of our ADSs, significant negative publicity and
litigation. From time to time, a number of several large Internet companies have
suffered highly publicized system failures resulting in adverse reactions to
their stock prices, significant negative publicity and, in some instances,
litigation.

        We have at times suffered service outages. We guarantee to a number of
our corporate customers that our network will meet or exceed contractual
reliability standards, and our Internet service provider license requires that
we provide an acceptable level of service quality and that we remedy customer
complaints within a specified time period. Our computer and communications
hardware are protected through physical and software safeguards. However, they
are still vulnerable to fire, storm, flood, power loss, telecommunications
failures, physical or software break-ins and similar events. We do not carry
business interruption insurance to protect us in the event of a catastrophe even
though such an event could lead to a significant negative impact on our
business. Any sustained disruption in Internet access provided by third parties
could also have a material adverse effect on our business.

    Security breaches could damage our reputation or result in liability to us.

        Our facilities and infrastructure must remain secure, and be perceived
by our corporate and consumer customers to be secure, because we retain
confidential customer information in our database. Despite the implementation of
security measures, our infrastructure may be vulnerable to physical break-ins,
computer hacking, computer viruses, programming errors or similar disruptive
problems. If a person circumvents our security measures, he or she could
jeopardize the security of confidential information stored on our systems,
misappropriate proprietary information or cause interruptions in our operations.
We may be required to make significant additional investments and efforts to
protect against or remedy security breaches. A material security breach could
damage our reputation or result in liability to us, and we do not carry
insurance that protects us from this kind of loss.

        The security services that we offer in connection with our business
customers' networks cannot assure complete protection from computer viruses,
break-ins and other disruptive problems. Although we attempt to limit
contractually our liability in such instances, the occurrence of these problems
could result in claims against us or liability on our part. These claims,
regardless of their ultimate outcome, could result in costly litigation and
could damage our reputation and hinder ability to attract and retain customers
for our service offerings.

    If we are unable to manage the rapid growth required by our business
    strategy, our results of operations will be adversely affected.

        We have experienced and are currently experiencing a period of
significant growth. This growth has placed, and the future growth we anticipate
in our operations will continue to place, a significant strain on our
managerial, operational, financial and information systems resources. As part of
this growth, we will have to implement new operational and financial systems and
procedures and controls, expand our office facilities, train and manage our
employee base and maintain close coordination among our technical, accounting,
finance, marketing, sales and editorial staffs. If we are unable to manage our
growth effectively, we will be unable to implement our growth strategy, upon
which the success of our business depends.

    We face a competitive labor market for skilled personnel and therefore are
    highly dependent on our existing key personnel and on our ability to hire
    additional skilled employees.

        Our success depends upon the continued service of our key personnel,
particularly Mr. Ramaraj, our Chief Executive Officer, Mr. Zacharias, our
President and Chief Operating Officer, Mr. Santhanakrishnan, our Chief Financial
Officer, and each other member of our senior management. Although we recently
determined to open a branch in Northern California, substantially all of our
employees are located in India. Each of our Indian employees may voluntarily
terminate his or her employment with us. We do not carry key person life
insurance on any of our personnel. Our success also depends on our ability to
attract and retain additional highly qualified technical, marketing and sales
personnel. The labor market for skilled employees in India and Northern
California is extremely competitive, and the process of hiring employees with
the necessary skills is time consuming and requires the diversion of significant
resources. While we have not experienced difficulty in employee retention or
integration



                                       11
<PAGE>   14

to date, we may not be able to continue to retain or integrate existing
personnel or identify and hire additional personnel in the future. The loss of
the services of key personnel, especially the unexpected death or disability of
such personnel, or the inability to attract additional qualified personnel,
could disrupt the implementation of our growth strategy, upon which the success
of our business depends.

    We are highly dependent on our relationships with strategic partners to
    provide key products and services to our customers.

        We rely on our arrangements with strategic partners to provide key
network and electronic commerce products and services to our business clients.
Our relationships with Open Market, Sterling Commerce, a unit of SBC
Communications, and UUNet Technologies, can be terminated by our partners in
some circumstances. We also rely on some of our strategic partners to provide us
with access to their customer base. If our relationships with our strategic
partners do not continue, the ability of our corporate network/dates and
e-consulting services division to generate revenues will be decreased
significantly. We also provide access to a co-branded version of the AOL Instant
Messenger service to our portal customers, and this proprietary service is an
important feature of our website.

    We and our subsidiary IndiaWorld Communications are engaged in disputes
    which, if resolved unfavorably, could impose costs on us or have other
    undesirable effects.

        We and our subsidiary IndiaWorld Communications are involved in
litigation with a party located in the United States which has alleged, among
other things, that the activities of IndiaWorld Communications infringe a United
States trademark for the term "IndiaWorld" and associated logos and trade dress
purportedly owned by this third party and that the third party has an ownership
interest in the underlying technology. We have been advised by the prior owners
of IndiaWorld Communications that no such infringement or misappropriation has
taken place. This matter is currently pending in federal court in San Diego,
California. Our contract with the prior owners of IndiaWorld Communications
includes an indemnity for past infringement or misappropriation. We and
IndiaWorld Communications have also been contacted by a party that alleges,
among other things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as to
the possible outcome, including whether or not our indemnity will be effective
in protecting us, and also could divert management time and attention away from
our business.

    We face risks associated with our joint venture with Refco Sify, our
    strategic partnership with VeriSign and our co-branding agreement with
    America Online, our acquisitions of Indiaplaza.com and IndiaWorld
    Communications, our investment in CricInfo Limited and with other potential
    acquisitions, investments, strategic partnerships or other ventures,
    including whether any such transactions can be identified, completed and the
    other party integrated with our business on favorable terms.

        In November 1999, we acquired 24.5% of the outstanding shares of
IndiaWorld Communications, together with an option to acquire IndiaWorld
Communications' remaining outstanding shares which we exercised in June 2000. In
May 2000, we entered into a strategic partnership with VeriSign to provide
managed digital certificate-based authentication services in India. In June
2000, we acquired a 25% stake in CricInfo Limited, entered into an agreement
with America Online to distribute a co-branded version of the AOL Instant
Messenger and made an investment in Refco Sify. In July 2000, we completed our
investment in CricInfo Limited and agreed to acquire Indiaplaza.com. In December
2000, we completed our acquisition of Indiaplaza.com. These transactions were
only recently entered into and most of them are not yet fully operational. These
alliances may not provide all or any portion of the anticipated benefits. We may
acquire or make investments in other complementary businesses, technologies,
services or products, or enter into additional strategic partnerships with
parties who can provide access to those assets, if appropriate opportunities
arise in the future. From time to time we have had discussions and negotiations
with a number of companies regarding our acquiring, investing in or partnering
with their businesses, products, services or technologies, and we regularly
engage in such discussions and negotiations in the ordinary course of our
business. Some of those discussions also contemplate the other party making an
investment in our company. We may not identify suitable acquisition, investment
or strategic partnership candidates in the future, or



                                       12
<PAGE>   15

if we do identify suitable candidates, we may not complete those transactions on
commercially acceptable terms or at all. In addition, the key personnel of an
acquired company may decide not to work for us. If we make other types of
acquisitions, we could have difficulty in integrating the acquired products,
services or technologies into our operations. These difficulties could disrupt
our ongoing business, distract our management and employees and increase our
expenses which could adversely affect our operating results and cause the price
of our ADSs to decline. Furthermore, we may incur indebtedness or issue
additional equity securities to pay for any future acquisitions. The issuance of
additional equity securities would dilute the ownership interests of the holders
of our ADSs.

    Our financial results are impacted by the financial results of entities that
    we do not control.

        We have a significant, non-controlling minority interest in CricInfo
Limited and Refco Sify that is accounted for under U.S. GAAP using the equity
method of accounting. Under this method, we are obligated to report as "Equity
in losses (gains) of affiliates" a pro rata portion of the financial results of
any such company in our statement of operations even though we do not control
the other company. Thus, our reported results of operations can be significantly
increased or decreased depending on the results of CricInfo Limited and Refco
Sify or other companies in which we may make similar investments even though we
may have only a limited ability to influence these activities.

    Satyam Computer Services controls our company and may have interests which
    conflict with those of our other stockholders or holders of our ADSs.

        As of the date of this annual report, Satyam Computer Services
beneficially owns approximately 52.5% of our equity shares. As a result, it is
able to exercise control over many matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. Under Indian law, a simple majority is sufficient to
control all stockholder action except for those items which require approval by
a special resolution. If a special resolution is required, the number of votes
cast in favor of the resolution must not be less than three times the number of
votes cast against it. Examples of actions that require a special resolution
include:

    -       altering our Articles of Association;

    -       issuing additional shares of capital stock, except for pro rata
            issuances to existing stockholders;

    -       commencing any new line of business; and

    -       commencing a liquidation.

        Circumstances may arise in which the interests of Satyam Computer
Services could conflict with the interests of our other stockholders or holders
of our ADSs. Satyam Computer Services could delay or prevent a change of control
of our company even if a transaction of that sort would be beneficial to our
other stockholders, including the holders of our ADSs. In addition, we have an
agreement with South Asia Regional Fund, an investor in our company, which
assures them a board seat and provides specified additional rights to them.

    We have recorded significant amounts of goodwill in connection with recent
    investments and acquisitions and should we be required by applicable
    accounting principles to conclude that an impairment in the value of the
    investments has occurred we could be required to recognize material,
    non-cash charges to our statements of operations.

        We have made a number of significant acquisitions of, and investments
in, Internet companies which we believe are complementary to our businesses,
including our acquisition of IndiaWorld, an operator of an Internet portal and
related content sites, our acquisition of IndiaPlaza.com, an operator of a
consumer e-commerce site, and our strategic investment in CricInfo Limited, the
operator of a popular Internet site covering the sport of cricket. In connection
with these transactions, as of March 31, 2001, we were carrying on our
consolidated balance sheet goodwill amounts of $85.1 million for IndiaWorld
Communications, $8.9 million for Indiaplaza.com and $27.8 million for CricInfo
Limited. Under present accounting principles, we are amortizing this goodwill
into our statement of operations on a periodic basis. This accounting method
will change materially in July 2001 assuming that the Financial Accounting
Standards Board adopts and implements pending proposals to change significantly
the



                                       13
<PAGE>   16

accounting under U.S. GAAP for business combinations and the related treatment
of goodwill and other intangible assets with indefinite lives. Please see, "Item
5. Operating and Financial Review and Prospects -- Impact of Recently Issued
Accounting Standards" for a discussion of these proposed changes.

        If, either under present or future accounting principles, we conclude
that there has been an impairment in the value of one or more of these
investments or any of the other transactions that we have completed or may
complete that results in the recognition of intangible assets, we would be
required to write-down the carrying value of the asset to its estimated fair
value with an offsetting charge to our statement of operations. While such a
charge would be non-cash, it nonetheless could be highly material to our
reported results of operations for any such period in which a charge would have
to be recognized.

    We must continue to make capital expenditures in new network infrastructure
    which, if not offset by additional revenue, will adversely affect our
    operating results.

        We must continue to expand and adapt our network infrastructure as the
number of users and the amount of information they wish to transfer increases
and as the requirements of our customers change. The expansion of our Internet
network infrastructure will require substantial financial, operational and
management resources. The development of private Internet access and other data
networks and related services in India is a new business, and we may encounter
cost overruns, technical difficulties or other project delays in connection with
any or all of the new facilities. We can give no assurance that we will be able
to expand or adapt our network infrastructure to meet the additional demand or
our customers' changing requirements on a timely basis, or at a commercially
reasonable cost, or at all. A portion of our capital expenditures for network
development are fixed, and the success of our business depends on our ability to
grow our business to utilize this capacity. In addition, if demand for usage of
our network were to increase faster than projected, our network could experience
capacity constraints, which would adversely affect the performance of the
system.

    The legal system in India does not protect intellectual property rights to
    the same extent as those of the United States, and we may be unsuccessful in
    protecting our intellectual property rights.

        Our intellectual property rights are important to our business. We rely
on a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect our intellectual property.

        Our efforts to protect our intellectual property may not be adequate.
Our competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of
India do not protect proprietary rights to the same extent as laws in the United
States, and the global nature of the Internet makes it difficult to control the
ultimate destination of our products and services. For example, the legal
processes to protect service marks in India are not as effective as those in
place in the United States. The misappropriation or duplication of our
intellectual property could disrupt our ongoing business, distract our
management and employees, reduce our revenues and increase our expenses. In the
future, litigation may be necessary to enforce our intellectual property rights
or to determine the validity and scope of the proprietary rights of others. Any
such litigation could be time-consuming and costly.

        We could be subject to intellectual property infringement claims as the
number of our competitors grows and the content and functionality of our
websites or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert management's attention from operating our company. If we
become liable to third parties for infringing their intellectual property
rights, we could be required to pay a substantial damage award and forced to
develop non-infringing technology, obtain a license or cease selling the
applications that contain the infringing technology. We may be unable to develop
non-infringing technology or obtain a license on commercially reasonable terms,
or at all.

    Our platform infrastructure and its scalability are not proven, and our
    current systems may not accommodate increased use while maintaining
    acceptable overall performance.

        Currently, only a relatively limited number of customers use our
Internet service provider services and Internet portal and our corporate
network. We must continue to expand and adapt our network infrastructure to



                                       14
<PAGE>   17

accommodate additional users, increasing transaction volumes and changing
customer requirements. We may not be able to project accurately the rate or
timing of increases, if any, in the use of our websites or expand and upgrade
our systems and infrastructure to accommodate such increases. Our systems may
not accommodate increased use while maintaining acceptable overall performance.
Service lapses could cause our users to use the online services of our
competitors.

    We do not plan to pay dividends in the foreseeable future.

        We do not anticipate paying cash dividends to the holders of our ADSs in
the foreseeable future. Accordingly, investors must rely on sales of their ADSs
after price appreciation, which may never occur, as the only way to realize a
positive return on their investment. Investors seeking cash dividends should not
purchase our ADSs.

RISKS RELATED TO THE INTERNET

    We may be liable to third parties for information retrieved from the
Internet.

        Because users of our Internet service provider service and visitors to
our websites may distribute our content to others, third parties may sue us for
defamation, negligence, copyright or trademark infringement, personal injury or
other matters. We could also become liable if confidential information is
disclosed inappropriately. These types of claims have been brought, sometimes
successfully, against online services in the United States and Europe. Others
could also sue us for the content and services that are accessible from our
websites through links to other websites or through content and materials that
may be posted by our users in chat rooms or bulletin boards. We do not carry
insurance to protect us against these types of claims, and there is no precedent
on Internet service provider liability under Indian law. Further, our business
is based on establishing our network as a trustworthy and dependable provider of
information and services. Allegations of impropriety, even if unfounded, could
damage our reputation, disrupt our ongoing business, distract our management and
employees, reduce our revenues and increase our expenses.

    The success of our strategy depends on our ability to keep pace with
technological changes.

        Our future success depends, in part, upon our ability to use leading
technologies effectively, to continue to develop our technical expertise, to
enhance our existing services and to develop new services that meet changing
customer requirements. The market for our service is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new service introductions. We may not successfully identify new
opportunities and develop and bring new services to market in a timely manner.

    Our business may not be compatible with delivery methods of Internet access
    services developed in the future.

        We face the risk that fundamental changes may occur in the delivery of
Internet access services. Currently, Internet services are accessed primarily by
computers and are delivered by modems using telephone lines. As the Internet
becomes accessible by cellular telephones, personal data assistants, television
set-top boxes and other consumer electronic devices, and becomes deliverable
through other means involving digital subscriber lines, coaxial cable or
wireless transmission mediums, we will have to develop new technology or modify
our existing technology to accommodate these developments. Our pursuit of these
technological advances, whether directly through internal development or by
third party license, may require substantial time and expense. We may be unable
to adapt our Internet service business to alternate delivery means and new
technologies may not be available to us at all.

    Our product and service offerings may not be compatible with industry
    standards developed in the future.

        Our ability to compete successfully depends upon the continued
compatibility and interoperability of our services with products and
architectures offered by various vendors. Although we intend to support emerging
standards in the market for Internet access, industry standards may not be
established and, if they become established, we may not be able to conform to
these new standards in a timely fashion or maintain a competitive



                                       15
<PAGE>   18

position in the market. The announcement or introduction of new products or
services by us or our competitors and any change in industry standards could
cause customers to deter or cancel purchases of existing products or services.

RISK RELATED TO THE ADSS AND OUR TRADING MARKET

    Holders of ADSs are restricted in their ability to exercise preemptive
    rights under Indian law and thereby may suffer future dilution of their
    ownership position.

        Under the Companies Act, 1956 of India, or Companies Act, a public
company incorporated in India must offer its holders of equity shares preemptive
rights to subscribe and pay for a proportionate number of shares to maintain
their existing ownership percentages prior to the issuance of any new equity
shares, unless the preemptive rights have been waived by adopting a special
resolution by holders of three-fourths of the company's shares which are voted
on the resolution. At our 2000 Annual General Meeting, our stockholders approved
a special resolution permitting us to issue up to one million equity shares
(equivalent to four million ADSs) in connection with acquisitions. We issued
virtually all of these equity shares in connection with our acquisitions of
IndiaWorld Communications and Indiaplaza.com and our investment in CricInfo
Limited. At our 2001 Annual General Meeting, our stockholders will consider a
special resolution permitting us to issue up to four million additional equity
shares (equivalent to 16 million ADSs) in connection with acquisitions or
capital raising transactions. If this special resolution is passed, ADS holders
will be deemed to have waived their preemptive rights with respect to these
shares and our Board of Directors will be able to approve the issuance of these
shares without further action of our stockholders.

        Even if a waiver is not granted, U.S. holders of ADSs may be unable to
exercise preemptive rights for equity shares underlying ADSs unless approval of
the Ministry of Finance of the Government of India is obtained and a
registration statement under the Securities Act of 1933, as amended, is
effective with respect to the rights or an exemption from the registration
requirements of the Securities Act is available. Our decision to file a
registration statement will depend on the costs and potential liabilities
associated with any given registration statement as well as the perceived
benefits of enabling the holders of our ADSs to exercise their preemptive rights
and any other factors that we deem appropriate to consider at the time the
decision must be made. We may elect not to file a registration statement related
to preemptive rights otherwise available by law to our stockholders. In the case
of future issuances, the new securities may be issued to our depositary, which
may sell the securities for the benefit of the holders of the ADSs. The value,
if any, our depositary would receive upon the sale of such securities cannot be
predicted. To the extent that holders of ADSs are unable to exercise preemptive
rights granted in respect of the equity shares represented by their ADSs, their
proportional interests in our company would be reduced.

    Holders of ADSs may be restricted in their ability to exercise voting rights
    and the information provided with respect to stockholder meetings.

        As a holder of ADSs, you generally have the right under the deposit
agreement to instruct the depositary bank to exercise the voting rights for the
equity shares represented by your ADSs. At our request, the depositary bank will
mail to you any notice of stockholders' meeting received from us together with
information explaining how to instruct the depositary bank to exercise the
voting rights of the securities represented by ADSs. If the depositary bank
timely receives voting instructions from a holder of ADSs, it will endeavor to
vote the securities represented by the holder's ADSs in accordance with such
voting instructions. However, the ability of the depositary bank to carry out
voting instructions may be limited by practical and legal limitations and the
terms of the securities on deposit. We cannot assure you that you will receive
voting materials in time to enable you to return voting instructions to the
depositary bank in a timely manner. Securities for which no voting instructions
have been received will not be voted on a poll.

        As a foreign private issuer, we are not subject to the SEC's so-called
proxy rules which regulate the form and content of solicitations by United
States-based issuers of proxies from their stockholders. To date, our practice
has been to provide advance notice to our ADS holders of all stockholder
meetings and to solicit their vote on such matters, through the depositary, and
we expect to continue this practice. The form of notice and proxy statement that
we have been using is consistent with practice in India, but does not include
all of the information that would be provided under the SEC's proxy rules.



                                       16
<PAGE>   19

    The market price of our ADSs has been and may continue to be highly
volatile.

        The market price of our ADSs has fluctuated widely and may continue to
do so. For example, since our initial public offering in October 1999 through
May 31, 2001 and, after giving effect to the 4-for-1 split of our ADSs in
January 2000, the trading price of our ADSs has ranged from a high of $113 per
ADS to a low of $2.50 per ADS. Many factors could cause the market price of our
ADSs to rise and fall. Some of these factors include:

     -       our failure to integrate successfully our operations with those
             of acquired companies;

     -       actual or anticipated variations in our quarterly operating
             results;

     -       announcement of technological innovations;

     -       conditions or trends in the corporate network services, Internet
             and electronic commerce industries;

     -       the competitive and pricing environment for consumer Internet
             access and corporate network services in India and the related
             cost and availability of bandwidth;

     -       the perceived attractiveness of investment in Indian companies;

     -       acquisitions and alliances by us or others in the industry;

     -       changes in estimates of our performance or recommendations by
             financial analysts;

     -       market conditions in the industry and the economy as a whole;

     -       introduction of new services by us or our competitors;

     -       changes in the market valuations of other Internet service
             companies;

     -       announcements by us or our competitors of significant
             acquisitions, strategic partnerships, joint ventures or capital
             commitments;

     -       additions or departures of key personnel; and


     -       other events or factors, many of which are beyond our control.

        The financial markets in the United States and other countries have
experienced significant price and volume fluctuations, and the market prices of
technology companies, particularly Internet-related companies, have been and
continue to be extremely volatile with negative sentiment prevailing. Volatility
in the price of our ADSs may be caused by factors outside of our control and may
be unrelated or disproportionate to our operating results. In the past,
following periods of volatility in the market price of a public company's
securities, securities class action litigation has often been instituted against
that company. Such litigation could result in substantial costs and a diversion
of our management's attention and resources.

    An active or liquid market for the ADSs is not assured, particularly in
    light of Indian legal restrictions on equity share conversion and foreign
    ownership of an Internet service provider.

        We cannot predict the extent to which an active, liquid public trading
market for our ADSs will exist. Active, liquid trading markets generally result
in lower price volatility and more efficient execution of buy and sell orders
for investors. Liquidity of a securities market is often a function of the
volume of the underlying shares that are publicly held by unrelated parties.
Although ADS holders are entitled to withdraw the equity shares underlying the
ADSs from the depositary at any time, there is no public market for our equity
shares in India or the United States. Furthermore, foreign ownership in our
company, which includes all ADSs, is limited to 74% under present Indian law,
assuming that our license is amended in accordance with a recently-enacted
change in Government of India policy. The previous policy limit was 49%. This
limitation means that, unless Indian law changes, at least 26% of our equity
shares will never be available to trade in the United States market.



                                       17
<PAGE>   20

    The future sales of securities by our company or existing stockholders may
    hurt the price of our ADSs.

        The market price of our ADSs could decline as a result of sales of a
large number of equity shares or ADSs or the perception that such sales could
occur. Such sales also might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate. We
intend to issue additional equity shares and ADSs to raise capital and to fund
acquisitions and investments, and the parties to any such future transactions
could also decide to sell them.

    Forward-looking statements contained in this annual report may not be
realized.

        This annual report contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risks faced
by us described above and elsewhere in this annual report. We do not intend to
update any of the forward-looking statements after the date of this annual
report to conform such statements to actual results.

ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT

        Our company, Satyam Infoway Limited, was organized as a limited
liability company under the laws of the Republic of India pursuant to the
provisions of the Companies Act on December 12, 1995. We are presently a
majority-owned subsidiary of Satyam Computer Services, a leading Indian
information technology services company traded on the New York Stock Exchange
and the principal Indian stock exchanges. We conduct a significant majority of
our business in India. Our wholly-owned subsidiary, Indiaplaza.com, is located
in San Jose, California and conducts business in the United States. The address
of our principal executive offices is Tidel Park, 2nd Floor, No. 4, Canal Bank
Road, Taramani, Chennai 600 113 India, and our telephone number is (91)
44-254-0770.

        Our company was formed as an independent business unit of Satyam
Computer Services to develop and offer connectivity-based corporate services
allowing businesses in India to exchange information, communicate and transact
business electronically. From December 1995 through 1997, we focused on the
development and testing of our private data network. In 1997, we began forming
strategic partnerships with a number of leading technology and electronic
commerce companies, including Open Market, Sterling Commerce and UUNet
Technologies, in order to broaden our product and service offerings to our
corporate customers. In March 1998, we obtained network certification for
conformity with Indian and international network operating standards from the
Technical Evaluation Committee of India. In April 1998, we began offering
private network services to businesses in India. Our initial products and
services included electronic data interchange, e-mail and other messaging
services, virtual private networks and related customer support.

        In October 1998, we initiated our online content offerings with two
websites: carnaticmusic.com and indiaupdate.com. We also started development of
www.sify.com, our online portal, and other related content sites for personal
finance, movies and automobiles with the goal of offering a comprehensive suite
of websites offering content specifically tailored to Indian interests
worldwide.

        On November 6, 1998, the Indian government opened the Internet service
provider marketplace to private competition. Capitalizing on our existing
private data network, we launched our Internet service provider business,
SatyamOnline, on November 22, 1998 and became the first private national
Internet service provider in India. We began offering SatyamOnline Internet
access and related services to India's consumer market as a complement to the
network services offered to our business customers. Our SatyamOnline service was
the first in India to offer ready-to-use CD-ROMs enabling online registration
and immediate usage.

        In October 1999, we completed our initial public offering and issued
19,205,000 ADSs (representing 4,801,250 equity shares) at a price of $4.50 per
ADS. We received approximately $79.2 million, net of underwriting discounts,
commissions and other offering costs.

        On November 29, 1999, we purchased 24.5% of the outstanding shares of
IndiaWorld Communications, a private company organized under the laws of the
Republic of India, for a cash purchase price of Rs.1,222.5 million.



                                       18
<PAGE>   21

Prior to its acquisition by our company, IndiaWorld was a leading provider of
Internet content and services in India. In connection with this purchase, we
acquired an option to purchase the remaining 75.5% of the outstanding shares in
IndiaWorld Communications for a cash purchase price of Rs.3,767.4 million. In
June 2000, we amended the option agreement to provide for the payment of the
exercise price by us with a mix of equity shares and cash. We completed the
acquisition by exercising the option in June 2000 through the payment of
Rs.2,154.3 million in cash and the issuance of 268,500 equity shares. For U.S.
GAAP reporting purposes, the financial statements of IndiaWorld Communications
have been consolidated with our financial statements from and after December 1,
1999. The acquisition has been accounted for as a purchase and most of the
purchase price represented goodwill. We are amortizing the goodwill on a
straight line basis over a period of five years, although there are proposals
pending to change the accounting treatment for goodwill. Please see, "Item 5.
Operating and Financial Review and Prospects."

        In February 2000, we completed a secondary offering and issued 1,868,700
ADSs (representing 467,175 equity shares) at a price at $80.00 per ADS. We
received approximately $141.2 million, net of underwriting discounts,
commissions and other costs.

        In July 2000, we acquired a 25% stake in CricInfo Limited, a private
company incorporated in the United Kingdom, through the issuance of 2,204,720
ADSs (representing 551,180 equity shares). Also in July 2000, we entered into an
agreement to acquire of the outstanding capital stock of Indiaplaza.com, a
private company incorporated in California. We completed our acquisition of
Indiaplaza.com in December 2000 through the issuance of an aggregate of 455,192
shares ADSs (representing 113,798 equity shares) to the former equity holders of
Indiaplaza.com. A portion of those ADSs are being held by an escrow agent to
compensate us for potential damages relating to a breach of the merger agreement
and will be released on January 1, 2002 if no such breach is identified. For
U.S. GAAP reporting purposes, the financial statements of Indiaplaza.com have
been consolidated with our financials statements from and after December 8,
2000.

        As of March 31, 2001, we had spent approximately Rs.1,177 million to
develop and deploy our network infrastructure. As of March 31, 2001, we had
aggregate commitments for capital expenditures in an amount equal to
approximately Rs.266.9 million ($5.7 million), of which we had advanced
approximately Rs.129.6 million ($2.8 million).

        Approximately 30% of our revenues are denominated in foreign currency.
Our expenses denominated in foreign currency include the cost of purchasing
software from BroadVision, Open Market and Sterling Commerce.

        Our foreign exchange loss was Rs.0 and Rs.0.01 million in fiscal 1997
and 1998, respectively, and our foreign exchange gain was Rs. 0.6 million,
Rs.5.4 million and Rs.162 million for fiscal 1999, 2000 and 2001, respectively.
Our foreign exchange gain in fiscal 1999, 2000 and 2001 was primarily due to our
short-term investment of the proceeds from our public offerings in high quality,
interest bearing instruments denominated in U.S. dollars.

BUSINESS OVERVIEW

        We are the largest integrated Internet and electronic commerce services
company in India, offering end-to-end solutions with a comprehensive range of
products delivered over a common Internet backbone infrastructure. Our primary
businesses include the following:

     -       corporate network/data and e-consulting services;

     -       consumer Internet access services; and

     -       online portal and content offerings.

Our comprehensive range of products and services enables our business and
consumer customers to communicate, transmit and share information, access online
content and conduct business remotely using our private data network or the
Internet.



                                       19
<PAGE>   22

        We began providing corporate network/data and e-consulting services to
businesses in April 1998, and as of March 31, 2001 we had more than 650
corporate customers. We launched our Internet service provider business in
November 1998, becoming the first private Internet service provider to begin
service after the Indian government, which controls the largest Internet service
provider in India, opened the market to private competition. We currently have
more than 460,000 subscribers for our SatyamOnline services. We also operate an
online portal, www.sify.com, and related content sites specifically tailored for
Indian interests worldwide. Sify.com is one of India's leading portals with
services in areas such as news, travel, finance, health and shopping in addition
to e-mail, chat and search. During March 2001, our websites generated
approximately 180 million page views.

        We currently operate India's largest national private data network
utilizing Internet protocol, which is an Internet industry standard for tracking
Internet addresses, routing outgoing messages and recognizing incoming messages.
As of March 31, 2001, we owned and operated 51 points of presence serving more
than 220 cities across India, representing an estimated 90% of the installed
personal computer base in India. Points of presence are telecommunications
facilities located in a particular market which allow our customers to connect
to the Internet through a local telephone call. We operate international
Internet gateways in Ahmedabad, Delhi, Hyderabad, Mumbai (Bombay) and Pune and
are in the process of building additional international gateways in 12 other
cities across India.

        We seek to become the premier integrated Internet and electronic
commerce solutions provider to businesses and consumers in India. We believe
that demand for our services is significant in India and growing rapidly as
businesses and consumers seek alternatives to the communications services
offered by India's government-controlled telecom providers. We intend to
continue to focus on providing superior network performance and high levels of
customer service and technical support to increase our customer base and
maximize customer satisfaction.

INDUSTRY OVERVIEW

        Development of the Internet. According to International Data
Corporation, the total number of Internet users worldwide is expected to grow at
a compound annual growth rate of 27% from approximately 196 million in 1999 to
502 million in 2003. We believe that the large and increasing number of home and
office computers linked to the Internet, advances in network design, increased
availability of Internet-based software and applications, the emergence of
useful content and electronic commerce technologies, and convenient, fast and
inexpensive Internet access will continue to drive Internet growth and usage in
the near future.

        Special Communications Needs of Businesses. As the Internet becomes more
developed and reliable, businesses are increasingly utilizing the Internet for
functions critical to their core business strategies such as sales and
marketing, customer service and project coordination. The Internet presents a
compelling profit opportunity for businesses by enabling them to reduce
operating costs, access valuable information and reach new markets. To maintain
a significant presence on the Internet, businesses typically purchase Internet
access services and establish a website. Internet access provides a company with
its basic gateway to the Internet, allowing it to transfer e-mail, access
information and connect with employees, customers and suppliers. A website
provides a company with a tangible identity and an interactive presence on the
Internet. Many corporations are also converting their information systems and
databases to web-enabled systems. International Data Corporation estimates that
revenue from Internet web hosting services worldwide will grow at a rate that
averages 96.0% annually from $0.8 billion in 1998 to $11.8 billion in 2002.
International Data Corporation also estimates that revenue from electronic
commerce spending worldwide will grow from $111 billion in 1999 to $1,317
billion in 2003.

        The Opportunity in India. As with many developing nations, the
telecommunications infrastructure in India historically has been controlled by
government-controlled telecom providers. The resulting service has been and
remains inferior to service in developed countries. At the same time, however,
the Indian economy continues to modernize and expand, particularly in sectors
such as software development that are dependent on a reliable communications
network. The growth of these industries is leading to an increasing base of
personal computers and wired homes and businesses in India with a resulting
increased demand for Internet services. We believe these trends, which mirror
trends in more mature economies, will continue to develop in India.

        The ability to exploit the Internet service provider and other data
service markets in India is currently inhibited by bandwidth limitations imposed
by cost and technical obstacles. Bandwidth refers to the measurement



                                       20
<PAGE>   23

of the volume of data capable of being transported in a communications system in
a given amount of time. Bandwidth rates are commonly expressed in terms of Kbps
(kilobits per second, or thousands of bits of data per second) or Mbps
(megabits, or millions of bits of data per second). Generally, bandwidth remains
very expensive in India. Prices for bandwidth are set by two agencies in India,
the Department of Telecommunications, or DOT, and the TRAI and have remained
high due to, among other things, capacity constraints.

        To date, a significant amount of the usage of Indian content sites on
the World Wide Web has been driven by Internet users outside of India. We expect
the growth in personal computers and Internet users to increase the demand for
Internet content directed towards domestic Indian consumers as well as the
amount of electronic commerce in India. Set forth below is a table summarizing
International Data Corporation's projections for Internet use and electronic
commerce revenue in India:

<TABLE>
<CAPTION>
                                                                                                              ANNUALIZED
                                                                          2000                 2005             GROWTH
                                                                        ---------            ---------        ----------
                                                                             (in millions, except annualized growth)
<S>                                                                     <C>                  <C>              <C>
Indian Internet users ......................................                  4.4                 37.6             53%
Indian installed personal and network computer base ........                  4.2                 33.0             51%
Indian Internet commerce revenues ..........................            $     393            $  27,000            134%
</TABLE>

        Private market participants historically have not been able to exploit
the market opportunities in India because the regulatory environment in India
largely prevented any competition with the national government-controlled
telecom providers. Until November 1998, the only Internet service provider
permitted in India was VSNL, a government sponsored and majority-owned entity,
which at that time had approximately 150,000 subscribers. VSNL began providing
Internet access on August 15, 1995. According to information contained on its
website, VSNL had 631,000 subscribers as of March 31, 2001. On November 6, 1998,
the government opened the Indian Internet service provider market to private
competition and grants Internet Service Provider Licenses. The licensees include
cable television operators and joint ventures between local companies and large
international telecom providers. Internet service provider licenses are granted
for 15 years, with only nominal license fees. Internet telephony is not
permitted by the current regulations. Currently, pricing of Internet service
provider services is not regulated by the Government of India, although it has
the power to elect to do so through policy directives. The prices Internet
service providers charge their subscribers and the interconnection charges
between service providers are regulated by the TRAI.

SIFY BUSINESS MODEL

        We believe that the growth of the Internet and other network services in
India has been inhibited by relatively high costs and poor user experiences
caused by an inadequate telecommunications infrastructure and slow network
connection speeds. We are committed to expanding and enhancing our private
network backbone and to providing high quality technical support to attract
users to our services. We believe that our products and services provide our
customers with the ability to exchange information, communicate and transact
business over the Internet with speed, efficiency, reliability and security
superior to other Internet service providers. Key advantages of the Sify
business model include:

     -       End-to-end network solutions for business customers. We provide
             our business customers with a comprehensive range of Internet,
             connectivity and private network solutions complemented by a
             broad base of web-based business applications. Our corporate
             services range from dial-up and dedicated Internet access,
             international roaming to virtual private networks, web
             implementation, electronic commerce solutions and web hosting.
             Our end-to-end solutions enable our corporate customers to
             address their networking and data communication needs
             efficiently without having to assemble products and services
             from different value-added resellers, Internet service providers
             and information technology firms.



                                       21
<PAGE>   24

     -       National private Internet protocol network backbone with
             International Gateways. We currently operate India's largest
             private national Internet protocol data network. As of March 31,
             2001, we owned and operated 51 points of presence serving more
             than 220 cities across India, representing an estimated 90% of
             the installed personal computer base in India. Our network
             provides the platform for the national delivery of Internet
             access to consumers as well as the backbone for our full range
             of corporate network and technology services. Our private
             network infrastructure allows corporations to establish virtual
             private networks and electronic data interchanges without
             dealing directly with the government telecom providers. We
             operate International Internet gateways in Ahmedabad, Delhi,
             Hyderabad, Mumbai (Bombay) and Pune and are in the process of
             building additional international gateways in 12 other cities
             across India.

     -       Superior end-user performance and customer support. We provide a
             high level of customer service, network performance and
             technical support to maximize customer satisfaction. A
             significant number of our employees are engaged in our customer
             service or technical support departments, which operate
             24-hours-a-day, seven-days-a-week. Our network engineers
             continually monitor network traffic and congestion points to
             deliver consistent, high quality network performance. Our
             strategy of providing superior network performance and customer
             service is designed to result in significant customer growth
             from referrals and industry recognition.

     -       Internet content and electronic commerce websites customized for
             the Indian market. We view the Indian market as a series of
             specific market segments with unique cultural and topical
             interests, rather than an extension of a homogeneous, worldwide
             Internet market. We have assembled a team of India-based employees
             familiar with the local culture, language and business environments
             in our markets to develop Internet content and electronic commerce
             websites tailored for the Indian market. We regularly incorporate
             new and original third-party content suited to our local and
             regional audiences to enhance our customers' online experience and
             to attract new users both within India and abroad. As a result of
             our local market knowledge, we have been able to increase traffic
             flow to our websites and to create brand awareness for our
             SatyamOnline access service. Our acquisitions of IndiaWorld
             Communications and Indiaplaza and our relationship with CricInfo
             Limited provide us with additional content sites tailored to Indian
             interests worldwide.

     -       Strategic partnerships with industry leaders. We have developed
             strategic relationships with leading Internet and
             telecommunications manufacturers. For example, we are the exclusive
             network partner for UUNet Technologies, providing its customers
             with roaming services in India. Our arrangements with Broadvision,
             Open Market and Sterling Commerce provide our customers access to
             cutting edge business-to-business electronic data and communication
             applications and Internet electronic commerce software.

GROWTH STRATEGY

        Our goal is to become the premier integrated Internet and electronic
commerce solutions provider to businesses and consumers in India. Our principal
business strategies to accomplish this objective are:

     -       Invest in the continued enhancement and expansion of our network
             infrastructure to support customer growth, enter new markets and
             accommodate increased customer usage. We intend to continue to
             increase the capacity and geographic reach of our network in
             order to support subscriber growth, enter new markets and
             accommodate increased customer usage. We are committed to using
             proven technologies and equipment and to providing superior
             network performance. We have deployed asynchronous transfer
             mode, or ATM, switches on nine points of presence along our
             network. These ATM switches enable us to allocate our network
             capacity more efficiently. Our Internet service provider license
             permits us to establish and maintain our own direct connections
             to the international Internet, either by purchasing satellite
             earth stations or by leasing or purchasing capacity on
             transoceanic fiber optic cables. In partnership with Singapore
             Telecommunications Ltd., Loral Cyberstar and New Skies, we have
             deployed private international gateways in Ahmedabad, Delhi,
             Hyderabad, Mumbai (Bombay) and Pune. These private international
             gateways enable Internet users to access globally available data
             faster and provide enhanced service to customers. We believe
             that as the size and capacity of our network infrastructure
             grows, its large scale and national coverage will create
             economies of scale and barriers to entry for our competitors.



                                       22
<PAGE>   25

     -       Increase penetration in our existing markets by expanding
             awareness of the "SatyamOnline" brand name to capitalize on our
             first mover advantage in India. We intend to capitalize on our
             first-to-market advantage in India to establish national service
             and a brand name in advance of other private competitors. We are
             presently the largest national independent Internet service
             provider in India, based on number of subscribers. As of March
             31, 2001, we operated 51 points of presence serving more than
             220 cities across India, representing an estimated 90% of the
             installed personal computer base in India. We intend to
             accelerate penetration within our existing markets and enter
             additional targeted markets by creating awareness of the
             "SatyamOnline" brand name. We intend to make SatyamOnline
             synonymous with superior Internet connectivity and with online
             content tailored specifically for the Indian market and Indian
             interests worldwide. Our marketing strategy includes print,
             television and radio advertising, direct mailing campaigns
             targeting personal computer owners and operating with
             "cybercafes."

     -       Expand our products and services with new technologies to enable
             our customers to use the Internet more effectively. We
             continually seek to expand the breadth of our product and
             service offerings with new technologies. For example, we have
             launched cybercafes to tap the large non-personal computer owner
             market in India. Our cybercafes prominently display the SIFY and
             SatyamOnline brands and offer a full range of our Internet
             connectivity services. We recently introduced a number of other
             new products and services, including e-mail designed for
             regional Indian dialects, a user customized portal site, video
             mail, Internet Protocol fax service, Internet messaging and
             micro-payments.

     -       Strengthen our Internet portal and other Internet content websites
             with more content tailored to Indian interests worldwide. Our
             portal, www.sify.com, functions as an initial gateway to the
             Internet, the user's starting point for web browsing and other
             Internet services, for our consumer Internet service provider
             subscribers. Our portal is a media rich, user friendly, interactive
             website offering hyperlinks to a wide variety of websites and
             services, including our own websites. Our websites cater to a
             variety of Indian interests within and outside of India. To achieve
             our goal of developing the premier Internet portal focused on the
             Indian market, we intend to continue to expand and improve the
             quality of www.sify.com, and are actively developing additional
             content oriented towards topical and cultural interests of Indians
             worldwide. As the availability of Internet access expands in India,
             we believe that increasing numbers of Internet users will be
             attracted to our high quality websites and online content designed
             specifically for the Indian consumer. We will seek to attract
             advertisers, electronic commerce merchants and third-party content
             providers trying to reach our users in order to generate additional
             revenues for sify.com.

     -       Expand our customer distribution channels through strategic
             alliances to take advantage of the sales and marketing
             capabilities of our strategic partners. We intend to continue to
             expand our customer acquisition channels, for both our consumer
             Internet access and corporate network and technology services.
             We have arrangements with two leading personal computer
             manufacturers, Compaq and Hewlett-Packard, to bundle our
             SatyamOnline Internet access service with the sale of their
             personal computers in India. We have also formed strategic
             alliances with computer and electronics retailers.

     -       Pursue selective strategic investments, alliances and acquisitions
             to expand our customer base, increase utilization of our network
             and add new technologies to our product mix. We believe that our
             growth can be supplemented by selective acquisitions of
             complementary businesses. We may seek to expand our market presence
             in our corporate network business through the acquisition of web
             hosting, data center, web implementation and/or systems integration
             companies. We will also consider acquisition of third party
             websites and content providers for our portal, www.sify.com, and
             acquisitions of Internet service providers that have a significant
             or growing customer base in our current or targeted markets. We
             believe that as the Internet service provider market in India
             evolves, customers will place greater emphasis on Internet service
             provider performance, network coverage, reliability, value-added
             services and customer support. These trends could lead to a future
             consolidation of Internet service providers in India.



                                       23
<PAGE>   26

SERVICE OFFERINGS

        We offer a wide range of Internet and other network services to meet the
needs of corporate customers and consumers. These services can be divided into
three categories:

     -       corporate network/data and e-consulting services;

     -       consumer Internet access services; and

     -       online portal and content offerings.

        Corporate Network/Data and e-Consulting Services.

        We offer a comprehensive suite of technology products and network-based
services that provide our corporate customers with comprehensive Internet and
private network access. Our products and services enable our corporate customers
to offer a full range of business-to-business and electronic commerce-related
services.

        Our corporate network/data and e-consulting services consist of the
following:

        Internet access. We offer continuous high-speed Internet access, as well
as dial-up Internet access, to businesses in India. Our dedicated Internet
access services are provided to corporate customers at speeds ranging from 64
Kbps to 2 Mbps. Our Venture 500 Plan provides dial-up access to the Internet
tailored to corporate customers requiring multiple e-mail identifications and
includes our 24-hour-a-day, seven-day-a-week customer service. A corporate
customer who is within local dialing range of one of our points of presence can
access our services with a local telephone call. We also offer an international
roaming service which caters to business executives who travel outside of India.
Our principal Internet access options for corporate customers include:

<TABLE>
<CAPTION>
Service                         Summary Description                                Pricing
-------                         -------------------                                -------
<S>               <C>                                                         <C>
Leased Line       Dedicated high speed Internet access at up to 64 Kbps       Rs.200,000 annually

ISDN              Dedicated high speed Internet access at up to 64 Kbps       Rs.200,000 annually

PSTN              Dedicated Internet access at up to 28.8 Kbps                Rs.120,000 annually

NetName           Domain name registration                                    Rs.990

NetWorld          25 Hours of Internet access over a 12-month period          Rs.7,000
                  while roaming outside India

NetMail           Additional e-mail capability without Internet access        Rs.2,000
</TABLE>

        Private network services. We offer a wide variety of private network
services for both small and large corporate customers. Many companies in India
have established private data communication networks, which are often referred
to as wide area networks, or WANs, and built on expensive leased lines, to
transfer proprietary data between office locations. We were the first company in
India to offer a cost-effective replacement alternative to WANs by providing
secure transmission of data using Internet protocol over our private network
infrastructure. Virtual private network products, often in combination with a
website, are also the basis for offering intranet and extranet services.
Intranets are corporate networks that rely on Internet-based technologies to
provide secure links between corporate offices and secure access to internal
company data. Extranets expand the network to selected business partners through
secure links on the Internet. We also allow our corporate customers to outsource
all of their WAN requirements to us. Our virtual private network solutions offer
Internet service without the waiting periods created when obtaining such service
from the government provider. Our nationwide Lotus Notes management system
provides the software and framework for our customers to utilize their private
network systems to interlink their offices and exchange information. We also
support the Microsoft Exchange messaging system.



                                       24
<PAGE>   27

        We are the exclusive network partner to UUNet Technologies in India.
Through our partnership, we enable UUNet Technologies' customers traveling in
India to connect to their corporate network and systems resources using the
Internet. We offer Internet access through a local phone call in all locations
in India that are serviced by our network points of presence. Our service allows
Internet connectivity from India without incurring international telephone
charges. For providing our network services, we receive a portion of the fees
paid by UUNet Technologies' customers to UUNet Technologies when using its
service in India.

        Business-to-business commerce applications. We deliver complete data
transfer and business-to-business electronic commerce applications to our
corporate customers through our relationships with key vendors of
Internet-related hardware, software and services. Our data transfer applications
provide supply chain integration and help coordinate the manufacturing and
distribution process for our corporate customers. We have an agreement with
Sterling Commerce to provide its data transfer and electronic commerce software
and systems in India. These products include:

     -       the CONNECT product line that provides the software
             infrastructure for moving and managing information inside and
             outside the enterprise;

     -       the COMMERCE product line that provides value-added services to
             help customers build, manage, and service global commerce
             business communities;

     -       the GENTRAN product line that provides software for the
             integration of business processes and the automation of business
             transactions; and

     -       EC Managed Services which offer businesses a full range of
             electronic commerce outsourcing services and consulting
             solutions.

        Web-based services. We provide comprehensive website design,
development, implementation and hosting services. We believe we are one of the
largest website developers in India. Our customers' websites range from basic
informational sites to complex interactive sites featuring sophisticated
graphics, animation, sound and other multimedia content. Our interactive
development capabilities utilize tools such as Hypertext Markup Language, or
HTML, Virtual Reality Markup Language, or VRML, computer animation, composting
and motion capture. We have a dedicated team of design and development personnel
who are available for large-scale web development projects. We have an agreement
with Open Market to provide its electronic commerce products and services in
India. These products include:

     -       web-based Internet catalogs with database capabilities of
             various sizes;

     -       Internet publishing software;

     -       a transaction engine that enables an organization to conduct
             commerce over the Internet; and

     -       a payment gateway to facilitate commerce services to other
             service providers or merchants.

        We also offer web hosting accounts for companies and other organizations
that wish to create their own websites without maintaining their own web servers
and Internet connections. Our web hosting services feature state-of-the-art web
servers for high speed and reliability, high capacity connections to the
Internet and specialized customer support and security features. Our co-location
services accommodate customers who prefer to own their servers, but require the
high performance and reliability of our Internet data center. Co-location
customers are typically larger enterprises employing more sophisticated Internet
hardware and software and having the expertise to maintain their websites and
related equipment.

        Data Center. Our 20,000 square foot data center in Mumbai (Bombay) has
been designed to act as a reliable, secure and scalable facility to host
mission-critical applications with the capacity to host 4,000 servers. Through
this data center, which is connected to the DOT's telecom backbone by redundant
fiber optic links, we offer co-location and hosting services with an uptime of
99%.



                                       25
<PAGE>   28

        Recent initiatives in our corporate network and technology services
business include:

     -       International Gateways. We have launched private international
             gateways to the Internet in partnership with Singapore
             Telecommunications Ltd., Loral Cyberstar and New Skies in five
             strategic cities in India. These private international gateways
             enable Internet users to access globally available data faster
             and provide enhanced service to customers. Our international
             gateways are located in Ahmedebad, Delhi, Hyderabad, Mumbai
             (Bombay) and Pune. We are in the process of building additional
             gateways in 12 other cities across India.

     -       Northern California Branch. In connection with our acquisition of
             Indiaplaza.com, we recently determined to open a branch in San
             Jose, California to focus on corporate network and e-consulting
             services opportunities in the United States. We expect to hire or
             transfer approximately 80 employees to our Northern California
             branch over the next 10 months.

     -       SafeScrypt Limited. In partnership with Verisign, a leading
             provider of Internet trust services, we have formed a
             wholly-owned subsidiary, SafeScrypt Limited, to provide managed
             digital certificate-based authentication services in India.
             SafeScrypt Limited is the principal affiliate of Verisign in
             India and is a member of Verisign's Global Affiliate Network.
             This Global Affiliate Network is a group of prominent
             international service providers utilizing common technology,
             operating practices and infrastructure to deliver interoperable
             trust services over the Internet through the Verisign Trust
             Network, the world's largest network of globally-interoperable
             digital certificates.

        Our corporate network/data and e-consulting services division accounted
for approximately 87.1%, 42.5% and 64.6% of our revenues in fiscal 1999, 2000
and 2001, respectively. The decrease in corporate network and e-consulting
services division revenues as a percentage of total revenues from fiscal 1999 to
fiscal 2000 was due to our introduction of consumer Internet access services in
November 1998. The increase in corporate network and e- consulting services
division revenues as a percentage of total revenues from fiscal 2000 to fiscal
2001 was due to the growth of our corporate customer base combined with
increased competition and pricing pressures in the consumer Internet access
services division. Recent trends cause us to believe that corporate services
will continue to be the largest part of our business for the immediate future.

        Consumer Internet access services.

        We offer dial-up Internet access, e-mail and web page hosting to
consumers in India through convenient online registration and user-friendly
software. In November 1998 after deregulation of the Internet service provider
market in India, we launched our Internet service provider business and became
the first private Internet service provider in India. As of March 31, 2001, we
had 460,000 consumer Internet subscribers.

        In addition, we offer public Internet access to consumers through
cybercafes, which we refer to as "iways." Because the personal computer
penetration rate in India is relatively low, iways are designed to provide
public Internet access to the significant portion of the Indian population that
does not own a personal computer. We believe that iways will expand access to
our portal and websites to consumers who do not own a personal computer or have
Internet access at home. Iways offer a full range of Internet connectivity
services. As of March 31, 2001, we operated 301 iways in six cities.

        We are the second largest national provider, and the largest private
provider, of Internet access and Internet services to consumers and businesses
in India, based on the number of subscribers as of March 31, 2001. Currently,
the largest national Internet service provider in India is VSNL, which is
majority-owned by the Indian government.

        We launched our consumer Internet service provider business on November
22, 1998, just 15 days after the Government of India opened the market to
private competition. Within 45 days, we had initiated service in 12 cities,
including Ahmedabad, Bangalore, Calcutta, Chennai (Madras) Cochin, Coimbatore,
Delhi, Hyderabad, Ludhiana, Mumbai (Bombay), Pondicherry and Pune. As of March
31, 2001, we owned and operated 51 points of presence serving more than 220
cities across India, representing an estimated 90% of the installed personal
computer base in India. Our expansion plan targets major metropolitan areas and
state capitals that we believe have a sufficient number of installed personal
computers to support a point of presence.



                                       26
<PAGE>   29

        Our strategy is to offer better and more extensive services to our
subscribers than our competitors, with an emphasis on ease of use. Our
subscribers purchase a ready-to-use CD-ROM available at bookstores, computer
stores and universities, or bundled with a personal computer, to access our
service immediately. Our online registration process is available to initiate
service and purchase renewals. We also support our subscribers with a
24-hour-a-day, seven-day-a-week call center staffed with trained technicians.

        Our service offerings come in a number of packages, designed to attract
beginning Internet users and service the needs of advanced users. All of our
Discover Internet access offerings are bundled with a package of value-added
products, including one megabyte of either POP3 or Imap e-mail, a one page
pre-templated web page, approximately Rs.4,000 retail value of licensed
software, including a multimedia Internet training kit, FIRE antivirus and
parental control software and IndoMail, a multilingual mail in 14 Indian
languages, and our 24-hour-a-day, seven-day-a-week customer service. Our
Discover offerings are offered only on a prepaid basis and can be renewed
online. Browsing between 11:00 p.m. and 8:00 a.m. is considered as half time.

        Since May 2000, we have offered unlimited Internet access to consumers
for a fixed price. Our "Unltd..." domestic packs for home personal computer
users offer unlimited Internet access for a period of one, three, 12 or 24
months from the date of registration. Our one and three month unlimited domestic
offerings are bundled with one user ID and one electronic mail ID with five
megabytes of mailbox storage. Our 12-month unlimited domestic offering is
bundled with 60 hours of domestic roaming access, five user ID's and five
electronic mail ID's with five megabytes of mailbox storage per ID. Our 24-month
unlimited domestic offering is bundled with 150 hours of domestic roaming
access, five user ID's and five electronic mail ID's with five megabytes of
mailbox storage per ID. We expect the market for consumer Internet access to
remain highly price competitive as late market entrants attempt to acquire
customers. Our consumer Internet service provider offerings include:

<TABLE>
<CAPTION>
   SERVICE                            SUMMARY DESCRIPTION                                    PRICE
   -------                            -------------------                                    -----
<S>                     <C>                                                                  <C>
Discover 20             40 hours of Internet access over a 12-month period                   Rs.199
Discover 25             25 hours of Internet access over a 12-month period                   Rs.350
Discover 30             80 hours of Internet access over a 12-month period                   Rs.690
Discover 60             100 hours of Internet access over a 12-month period                   Rs.790
Discover 100            125 hours of Internet access over a 24-month period                  Rs.900
Discover 200            240 hours of Internet access over a 24-month period                  Rs.1,490
Discover 500            580 hours of Internet access over a 36-month period                  Rs.2,900
Discover 1000           1000 hours of Internet access over a 36-month period                 Rs.4,900
UnLtd...(1 month)       Unlimited hours of Internet access over a 1-month period             Rs.349
UnLtd...(3 month)       Unlimited hours of Internet access over a 3-month period             Rs.999
UnLtd...(12 month)      Unlimited hours of Internet access over a 12-month period            Rs.3,588
UnLtd...(24 month)      Unlimited hours of Internet access over a 24-month period            Rs.4,750
</TABLE>

        The most common connection technique is for subscribers to dial-up to
our system using a personal computer configured with a modem. A subscriber who
is within local dialing range of one of our points of presence can access the
Internet with a local telephone call. In addition to paying for Internet access,
the customer is responsible for the cost of the call, which currently is 1.3
rupees (2.7 cents) per 3 minutes. We estimate that substantially all of our
subscribers access our services with a local telephone call. Subscribers who
access our services with a long-distance telephone call are responsible for the
long-distance charges.

        We believe that a critical element of consumer satisfaction is to have
an adequate number of access lines available to assure prompt and reliable
connection to our service. Telephone lines are in short supply in India, and
there is frequently a waiting period of one or more months to acquire additional
lines. We have ordered in advance a significant number of additional lines to
provide capacity additions in anticipation of growth in our service.

        Subscribers local to a call center can call our call center facility for
customer service and technical support through a local telephone number.
Subscribers can also e-mail their questions directly to a customer service and
technical support address at our company.



                                       27
<PAGE>   30

        Our consumer Internet access services division accounted for
approximately 12.9%, 52.5% and 26.3% of our revenues in fiscal 1999, 2000 and
2001, respectively. The increase in consumer Internet access services division
revenues as a percentage of total revenues from fiscal 1999 to fiscal 2000 was
due to the introduction of our consumer Internet access services in November
1998. The decrease in consumer Internet access services division revenues as a
percentage of total revenues from fiscal 2000 to fiscal 2001 was due to the
growth of our corporate customer base combined with increased competition and
pricing pressures in the consumer Internet access services division.

        Online portal and content offerings.

        We operate an online portal, www.sify.com, that functions as a principal
entry point and gateway for accessing the Internet by providing useful
web-related services and links. We also offer related content sites
specifically tailored to Indian interests worldwide in six local Indian
languages. Our portal site is designed to be the initial launch screen for all
of our SatyamOnline customers, but can also be accessed by Internet users
worldwide. As a portal, we provide a gateway to the Internet by offering
information services, directory tools, e-mail, contests, Internet chat and
electronic commerce activities such as online shopping and classified ads. We
also allow the user to personalize the www.sify.com start page to include links
to the user's most frequently used features on the Internet, including
particular search engines, free mail providers and favorite content sites. For
online merchants, we allow them to create their own e-commerce store hosted on
our www.sify.com virtual shopping mall web page. Our customization features
encourage users to make www.sify.com their first stop on the Internet and allow
us to provide special privileges and benefits to our Internet service provider
subscribers compared to users who access www.sify.com through another service
provider. Our objective is to attract as many users as possible to generate
revenues from advertising, sponsorship fees and electronic commerce transaction
commissions. Sify.com generated 180 million page views in March 2001.

        Channels on www.sify.com presently include:

<TABLE>
<CAPTION>
   Channel                            Description
   -------                            -----------
<S>                 <C>
Astrology           Portal offering horoscope, numerology and related
                    information.

Bawarchi            Portal dedicated to Indian cuisine.

Business            Events Business news channel offering information on
                    upcoming seminars and conferences.

Carnatic            Music Indian classical music site where users may chat with
                    artists, hear CD music clips and buy concert tickets online.
                    This site also contains a link to an online music store.

Carstreet           Comparison shopping site for automobiles.

Cities              Information channel offering content such as restaurants,
                    shopping and leisure activities specific to Bangalore,
                    Delhi, Mumbai (Bombay) and Kolkata.

Classified          Online classified advertisements.

Clubs               Portal facilitating online communities of users with common
                    interests.

Computing           Site dedicated to computer-related content, such as software
                    reviews and downloads and computer-related news and
                    discussions.

Discussions         Discussion and chatroom site.

Education           Learning and education portal.
</TABLE>



                                       28
<PAGE>   31

<TABLE>
<S>                 <C>
Entertainment       A comprehensive entertainment guide that covers film,
                    television, music, culture, people and performing arts.

Festivals           Site dedicated to holidays and festivals.

15 to 21            Portal designed to provide a forum to understand and express
                    the needs, desires and aspirations of Indian youth.

Games               A service that provides online gaming, reviews and shopping.

Greetings           Online greeting card site.

Health              An online guide to healthy living with responses to
                    health-related questions by qualified doctors.

Indiaplaza          Online shopping mall offering Indian merchandise.

Job                 Search Technology jobs and career portal.

Khel                Site featuring sports-related news and information.

Matrimonials        Matrimonial matching site.

Movies              Indian movie channel featuring movie reviews, archives,
                    interviews, chats and local movie listings.

Music               Music site featuring news, reviews and shopping.

News                Real-time news site with domestic and international news,
                    weather and entertainment.

Samachar            Indian news channel.

Say it              Comedy channel.

Search              Worldwide web search portal.

Sifymall            Online shopping channel.

Travel              Travel site offering online air travel, hotel and car hire
                    services.

Walletwatch         Personal finance site featuring stock quotes, portfolio
                    manager, links to brokerage firms and editorial content.

Weather             Indian weather channel.

Youth               Indian youth channel.
</TABLE>


        Today, there are probably more non-resident Indians than Indians
residing domestically who have access to the Internet. As a result, many content
sites, including sify.com, have more users located outside of India than within.
However, we believe that the market for content and services within India will
develop rapidly. To expand usage of our services domestically, we believe that
we must provide more services of daily value, such as the ability to buy
groceries or movie tickets online or to check an up-to-date movie review before
buying a ticket.




                                       29
<PAGE>   32

        Recent initiatives for our online portal and content offerings business
include:

     -       IndiaWorld Communications. On November 29, 1999, we purchased 24.5%
             of the outstanding shares of IndiaWorld Communications, a private
             company organized under the laws of the Republic of India, for a
             cash purchase price of Rs.1,222.5 million. Prior to its acquisition
             by our company, IndiaWorld Communications was a leading provider of
             Internet content and services in India. In connection with this
             purchase, we acquired an option to purchase the remaining 75.5% of
             the outstanding shares in IndiaWorld Communications for a cash
             purchase price of Rs.3,767.4 million. In June 2000, we amended the
             option agreement to provide for the payment of the exercise price
             by us with a mix of equity shares and cash. We completed the
             acquisition by exercising the option in June 2000 through the
             payment of Rs.2,154.3 million in cash and the issuance of 268,500
             equity shares.


     -       Online Trading in Securities. We formed a joint venture with
             Refco Group Ltd. to meet the growing demand among Internet
             subscribers for online investing services in India. The joint
             venture will offer online equity and futures trading for retail
             customers once online trading is implemented by the stock
             exchanges in India, as well as execution and clearing services
             for financial institutions. We have a 40% ownership interest in
             the joint venture.

     -       Online Travel Services. We entered into a tie-up with AFL
             Indtravels, the Indian affiliate of Carlson Wagonlit Inc., to
             offer online air travel, hotel and car hire services on
             sify.com. This new travel channel offers comprehensive travel
             and lodging services to its users, including the following
             primary services: online booking airline tickets using the
             flight search facility of Amadeus GDS (Global Distribution
             Service) which permits the user to obtain flight and seat
             availability from any city or airport to any other city or
             airport; hotel bookings at over 300 hotels in 80 cities and
             towns; and car hire service for travelers in all major cities.


     -       America Online -- AOL Instant Messenger. We have a multi-year
             agreement with AmericaOnline to distribute a co-branded version
             of the AOL Instant Messenger service to our customers. This
             service allows our subscribers to exchange real-time instant
             messages with other Satyam Internet subscribers and other AOL
             Instant Messenger users and AOL members who comprise the AOL
             Buddy List network.

     -       CricInfo Limited Investment. In July 2000, we acquired a 25%
             stake in CricInfo Limited. CricInfo Limited operates
             www.cricinfo.com, which is one of the most popular cricket sites
             in the world. We receive a portion of the revenues generated
             from advertising and electronic commerce business generated by
             www.cricinfo.com's India site.

     -       Indiaplaza.com Acquisition. In July 2000, we entered into an
             agreement to acquire all of the outstanding capital stock of
             IndiaPlaza.com, Inc., a private company incorporated in
             California. We completed this acquisition in December 2000.
             Indiaplaza.com operates an online shopping mall catering to
             Indian interests.

        Prior to fiscal 2000, this division did not constitute a material
portion of our total revenues. In fiscal 2000 and 2001, our online portal and
content offerings division accounted for approximately 5.0% and 8.1%,
respectively, of our total revenues.

STRATEGIC VENDOR PARTNERSHIPS

        We maintain a number of strategic relationships with key vendors of
Internet-related hardware, software and services. Some of these relationships
are exclusive to us in India, subject in some cases to minimum sales thresholds.
These relationships result in two significant benefits. First, they provide us
with the ability to offer valuable products and services to our customers in
India. In addition, these relationships help us market our services by providing
us with access to our partners' customer bases. Our network and related services
are focused on meeting the needs of corporate customers, particularly in
manufacturing and service organizations, which have a need to coordinate their
activities with satellite operations such as dealers, distributors, agents and
suppliers. Broadvision, Open Market, Sterling Commerce and UUNet Technologies
are among our strategic partners. For additional information regarding our
relationships with these companies, please see "Item 10. Additional
Information--Material Contracts."



                                       30
<PAGE>   33

CORPORATE CUSTOMERS

        We have established a diversified base of corporate customers in a
variety of data intensive industries, including financial services, publishing,
retail, shipping and manufacturing. Our corporate customer base has grown to
over 650 customers. Our corporate customers for data/network services include
Aventis, Gillette India, Lucent, Ranbaxy and Whirlpool. Our largest corporate
customers for e-consulting services include Banque National de Paris,
Doordarshan, HDFC Bank, State Bank of India UTI Bank and Xerox. No single
customer accounted for more than 10% of our revenues in fiscal 2001.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

        We believe that excellent customer support is critical to our success in
attracting and retaining subscribers. We currently provide customer service and
technical support via a local telephone call in all 51 cities in which we have a
point of presence. Subscribers can also e-mail their questions directly to a
customer service and technical support address at our company. Our customer
service and technical support staff handles all questions regarding a
subscriber's account and the provision of our services and is available
24-hours-a-day, seven-days-a-week.

SALES AND MARKETING

        Corporate Offerings. The principal focus of our sales and marketing
staff is existing and potential corporate customers. We seek to penetrate this
market through trade publication ads, industry trade shows and seminars for the
benefit of industry associations and potential customers. As of March 31, 2001,
we had 183 employees dedicated to sales and marketing.

        Consumer Offerings. A key element of our business strategy is to
increase our brand awareness and market penetration among consumers through a
number of means including an expanded advertising campaign focused primarily on
print advertising, direct mail and free software to consumers who become
subscribers.

        In addition, we intend to continue to operate cybercafes under the
"iway" brand name, and to enter into relationships with independent cybercafes
to co-brand our websites with their businesses, in order to expand access to our
portal and websites by consumers who do not own a personal computer or have
Internet access at home. To increase Internet access and use of our websites by
personal computer buyers, we have entered into arrangements with personal
computer manufacturers and vendors, including Compaq and Hewlett-Packard, to
have our Internet access software bundled with their computers.

TECHNOLOGY AND NETWORK INFRASTRUCTURE

        We currently operate India's largest national Internet protocol private
data network with 51 points of presence serving more than 220 cities across
India, representing an estimated 90% of the installed personal computer base in
India. A point of presence is commonly defined as the ability to access online
services in a market through a local telephone call or local leased lines. We
own and operate our network facilities and customer service operations which
gives us greater control over the utilization and quality of our network. We
have designed and built our network using advanced technologies and equipment
which allows us to continue to expand the geographic range of our network,
integrate improved data processing technologies and enhance speed and capacity
with little or no disruption to our customers.

        Geographic Coverage. Through our national network of points of presence,
our business and consumer Internet access customers are able to access the
Internet in 51 of the largest markets in India via a local phone call. We have
backbone points of presence in Ahmedabad, Bangalore, Calcutta, Chennai (Madras),
Cochin, Coimbatore, Delhi, Hyderabad, Lucknow, Ludhiana, Mumbai (Bombay) and
Pune. These backbone points of presence, also called primary nodes, reside at
the core of a larger Internet protocol network with a meshed topology
architecture. We also have additional points of presence, or secondary nodes, in
Aurangabad, Baroda, Belgaum, Bhopal, Bhubaneshwar, Calicut, Chandigarh,
Davengere, Goa, Gurgaon, Guwahati, Hubli, Indore, Jaipur, Jamnagar, Jamshedpur,
Jodhpur, Kanpur, Kakinada, Karnal, Kota, Madurai, Mangalore, Mesana, Nagpur,
Nasik, Patna, Pondicherry, Raipur, Rajkot, Shimoga, Siliguri, Surat,
Thiruvananthapuram, Tiruvalla, Trichy, Varanasi, Vijayawada and Vishakapatnam.
Each point of presence contains data communications equipment housed in a secure
facility owned or leased by our company located near a DOT or Mahanagar
Telephone Nigam Limited telephone switching station. Each point of presence
contains a modem bank which receives and aggregates



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<PAGE>   34

incoming calls from customers who access our system by modem connection through
a local call on the public telephone system. Our larger corporate customers
access the point of presence directly through leased lines.

        Network Architecture. We ensure network reliability through several
methods and have invested in proven technologies. We use Cisco routers to route
traffic between nodes and an IGX WAN switch to terminate traffic. The routers
and WAN switches are interconnected using a high speed interface. Our
applications and network verification servers are manufactured by
Hewlett-Packard.

        The primary nodes on the backbone network are connected by up to 6 Mbps
high speed fiber optic lines that we lease from the DOT. The secondary nodes are
connected by 2 Mbps or multiple 64 Kbps leased lines. Almost all nodes are
accessible from at least two other nodes, allowing us to reroute traffic. In
addition, we minimize the possibility that system failures interrupt service by
automatically activating an ISDN dial-up on the backbone network in the event
any segment goes down. We reduce our exposure to failures on the local loop by
usually locating our points of presence within one segment of the central
telephone exchange and purchasing connectivity from multiple exchanges. To
further maximize our network uptime, we are continuing to install fiber optic
connections directly from each of our primary nodes to the central exchange.

        We operate international Internet gateways in Ahmedabad, Hyderabad,
Mumbai (Bombay) and Pune and are in the process of building additional
international gateways in 12 other cities across India. Our international
gateways, which we have launched in partnership with Singapore
Telecommunications Ltd., Loral Cyberstar and New Skies, enable Internet users to
access globally available data faster and provide enhanced service to our
customers. The Government of India only recently permitted private companies
such as ours to operate their own international gateways. Previously, we used
international gateways operated by VSNL, the government-controlled provider of
international telecommunications services in India.

        In addition to a fundamental emphasis on reliability, our network design
philosophy has focused on compatibility, interoperability and scalability. We
use ethernet and Internet protocols to transmit data, thus ensuring that our
network is completely interoperable with other networks and systems and that we
may port any application onto our network. The modular design of our network is
fully scalable, allowing us to expand without changing the network design or
architecture, thus ensuring little or no service disruption. Finally, we have
deployed Cisco ATM switches on nine points of presence along our network. These
ATM switches allow us to allocate our existing capacity more efficiently by
offering frame relay and dedicated bandwidth.

        Network Operations Center. We maintain a network operation center
located in Chennai (Madras) and a 20,000 square foot data center in Mumbai
(Bombay). The Chennai facility houses our central network servers as well as our
network staff which monitors network traffic, service quality and equipment at
all our points of presence to ensure a reliable Internet service. Our operations
centers are staffed 24-hours-a-day, seven-days-a-week. We have backup power
generators and software and hardware systems designed to prevent network
downtime in the event of system failures. In the future, we may add additional
facilities to supplement or add redundancy to our current network monitoring
capability.

COMPETITION

        General. We face competition in each of our markets and expect that this
competition will intensify as the market in India for corporate network services
and technology products, Internet service provider services and online content
develops and expands. We compete primarily on the basis of service, reliability
and customer support. Price and ease of use are also competitive factors.

        Corporate network/data and e-consulting services. Our competitors for
many private network services include government services, companies that have
built and operate their own private data networks, satellite communications
agencies, such as Bharti BT, Comsat, HCL Comnet and Hughes, and terrestrial
network providers, such as Global Electronic Commerce Services, Sprint RPG (a
joint venture between Sprint and RPG Group) and WiproNet Ltd.

        Consumer Internet Access Services. Our principal competitor is VSNL, the
government-controlled telecom provider. VSNL currently has significantly more
subscribers than we do because private companies, such as our company, were not
permitted to enter the Internet service provider market until November 1998. As
of December



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<PAGE>   35

15, 2000, approximately 437 companies had obtained Internet service provider
licenses in India. We expect other competitors to emerge in the future. We also
expect prices to continue to fall as more competitors enter the market. Further,
we believe that it is inevitable that the large, foreign providers of Internet
service provider services will eventually attempt to enter the Indian market
through local joint ventures or other means.

        Since May 2000, we have offered unlimited Internet access to consumers
for a fixed price. A number of our competitors, including VSNL, Dishnet and
Mantra, also offer unlimited Internet access for a fixed price. In addition, at
least one of our competitors offers free Internet service. We expect the market
for consumer Internet access to become increasingly price competitive as late
market entrants attempt to acquire customers.

        Recently, VSNL has continued to aggressively reduce consumer Internet
access prices despite the lack of offsetting reductions in prevailing bandwidth
tariffs payable by private competitors, such as our company. We believe that
these practices constitute an improper cross-subsidy funded by VSNL's present
monopoly in long distance telephone service.  The charges for international
gateways and other services presently being provided by VSNL are the subject of
a dispute pending before the TRAI and the Telecom Disputes Settlement and
Appellate Tribunal between VSNL and private Internet service providers,
including our company. This is pending matter and, as of the date of this annual
report, no decision has been announced. Unless there is a change in government
policy or favorable resolution of this dispute, or until we are able to reduce
our bandwidth costs through other means, we will continue to face difficult
market conditions in the consumer access business.

        In addition, we could face competition from companies that develop new
and innovative techniques to access the Internet. Although growing rapidly,
International Data Corporation estimates that India had an installed base of
only approximately 4.2 million personal computers in 2000. Technology permitting
a connection to the Internet through alternative, less capital intensive means
is likely to be attractive to Indian consumers. A number of companies are
planning alternative Internet access devices, such as set-top boxes for
televisions, to create demand for Internet services in excess of that which
could be supported by the installed base of personal computers. The provider who
develops this technology is likely to have a significant advantage in the
marketplace.

        Online Portal. There are several other companies in India that have
developed websites, including rediff.com which completed its initial public
offering in the United States in June 2000 and others, that are designed to act
as Internet portals. These sites currently have greater traffic than our site
and offer some features that we do not. Further, the dominant Internet portals
continue to be the online services and search engine companies based in the
United States, such as America Online, Excite@Home, Infoseek, Lycos, Microsoft
Network and Yahoo!. These companies have been developing specially branded or
co-branded products designed for audiences in specific markets. We expect that
these companies will deploy services that are targeted at the Indian market. For
example, Yahoo! launched an Indian service in June 2000.

        Many of our existing or potential competitors in each of our markets
enjoy substantial competitive advantages compared to our company, including:

     -       the ability to offer a wider array of services;

     -       larger production and technical staffs;

     -       greater name recognition and larger marketing budgets and
             resources;

     -       larger subscriber bases; and

     -       substantially greater financial, technical and other resources.

        To be competitive, we must respond promptly and effectively to the
challenges of technological change, evolving standards and our competitors'
innovations by continuing to enhance our products and services, as well as our
sales and marketing channels. Increased competition could result in loss of
market share, reduced prices or reduced margins, any of which could adversely
affect our business. Competition is likely to increase significantly as new
companies enter the market and current competitors expand their services.

INTELLECTUAL PROPERTY

        Our intellectual property rights are important to our business. We rely
on a combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual



                                       33
<PAGE>   36

property. We require employees, independent contractors and, when possible,
suppliers to enter into confidentiality agreements upon the commencement of
their relationships with our company. These agreements generally provide that
confidential information developed or made known during the course of a
relationship with our company be kept confidential.

        Our efforts to protect our intellectual property may not be adequate.
Our competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of
India do not protect proprietary rights to the same extent as laws in the United
States, and the global nature of the Internet makes it difficult to control the
ultimate destination of our products and services. For example, the legal
processes to protect service marks in India are not as effective as those in
place in the United States. In the future, litigation may be necessary to
enforce our intellectual property rights or to determine the validity and scope
of the proprietary rights of others. Any such litigation could be time-consuming
and costly.

        We could be subject to intellectual property infringement claims as the
number of our competitors grows and the content and functionality of our website
or other product or service offerings overlap with competitive offerings.
Defending against these claims, even if not meritorious, could be expensive and
divert management's attention from operating our company. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and be forced to develop
non-infringing technology, obtain a license or cease selling the applications
that contain the infringing technology. We may be unable to develop
non-infringing technology or obtain a license on commercially reasonable terms,
or at all.

        We also rely on a variety of technologies that are licensed from third
parties, including Broadvision, Open Market, Sterling Commerce and UUNet
Technologies. The software developed by these and other companies is used in the
sify.com website to perform key functions. These third-party licenses may not be
available to us on commercially reasonable terms in the future. The loss of any
of these licenses could delay the introduction of software enhancements,
interactive tools and other features until equivalent technology could be
licensed or developed. Any such delays could materially adversely affect our
business, results of operations and financial condition.

        The trademark "Satyam" is owned by Satyam Computer Services, our parent
company, and licensed to our company for so long as Satyam Computer Services
continues to own at least 51% of our company. If its ownership in our company is
reduced below 51%, however, Satyam Computer Services may terminate our license
to use the "Satyam" trademark upon two years prior written notice. We have filed
trademark applications for "SatyamOnline," "Satyam:Net," "satyamonline.com" and
"sify.com" in India. These applications are currently pending, and we plan to
file applications for these marks in the United States.

        We and our subsidiary IndiaWorld Communications are involved in
litigation with a party located in the United States which has alleged, among
other things, that the activities of IndiaWorld Communications infringe a United
States trademark for the term "IndiaWorld" and associated logos and trade dress
purportedly owned by this third party and that the third party has an ownership
interest in the underlying technology. We have been advised by the prior owners
of IndiaWorld Communications that no such infringement or misappropriation has
taken place. This matter is currently pending in federal court in San Diego,
California. Our contract with the prior owners of IndiaWorld Communications
includes an indemnity for past infringement or misappropriation. We and
IndiaWorld Communications have also been contacted by a party that alleges,
among other things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as to
the possible outcome, including whether or not our indemnity will be effective
in protecting us, and also could divert management time and attention away from
our business.

GOVERNMENT REGULATION

        Our business is subject to comprehensive regulation by the Ministry of
Communications through the Telecom Commission and the DOT pursuant to the
provisions of the Indian Telegraph Act of 1885, or Telegraph Act, the India
Wireless Telegraphy Act, 1933, or Wireless Act, and the terms of the Internet
service provider license agreement we entered into with the DOT under which we
operate. Pursuant to the Telegraph Act, the provision of any telecommunications
services in India requires a license from the Government of India, obtained
through the



                                       34
<PAGE>   37

DOT. While the Telegraph Act sets the legal framework for regulation of the
telecommunications sector and the Wireless Act regulates the possession of
wireless telegraphy equipment, much of the supervision and regulation of our
company is implemented more informally through the general administrative powers
of the DOT, including those reserved to the DOT and other governmental agencies
under our license.

        In March 1997, the Government of India established the TRAI, an
independent regulatory authority, under the provisions of the Telecom Regulatory
Authority of India Act. The TRAI is an autonomous body consisting of a
chairperson and at least two and not more than four members.

        Under the Telecom Regulatory Authority of India Act, the functions of
the TRAI are to:

     -       make recommendations on (i) the need and timing for the
             introduction of new service providers, (ii) the terms and
             conditions of licenses granted to service providers, (iii) the
             revocation of licenses for non-compliance, (iv) measures to
             facilitate competition and promote efficiency in the operation
             of telecommunications services so as to facilitate growth in
             such services, (v) technological improvements in the services
             provided by service providers, (vi) the type of equipment to be
             used by service providers, (vii) measures for the development of
             telecommunications technology and the telecommunications
             industry and (viii) the efficient management of the available
             spectrum;


     -       discharge the following functions: (i) ensure compliance of the
             terms and conditions of licenses, (ii) fix the terms and
             conditions of interconnectivity between service providers, (iii)
             ensure technical compatibility and effective interconnection
             between service providers, (iv) regulate revenue sharing
             arrangements between service providers, (v) establish standards
             of quality of service, (vi) establish time periods for providing
             local and long distance telecommunications circuits between
             service providers, (vii) maintain and keep for public inspection
             a register of interconnect agreements and (viii) ensure
             effective compliance of universal service obligations;

     -       levy fees and other charges at such rates and in respect of such
             services as may be determined by regulation; and

     -       perform such other functions as may be entrusted to it by the
             Government of India or as may be necessary to carry out the
             provisions of the Telecom Regulatory Authority of India Act.

        The TRAI also has the authority to, from time to time, set the rates at
which domestic and international telecommunications services are provided in
India. The TRAI does not have authority to grant licenses to service providers
or renew licenses, functions which remain with the DOT. The TRAI, however, has
the following powers:

     -       to call on service providers to furnish information relating to
             their operations;

     -       to appoint persons to make official inquiries;

     -       to inspect the books of service providers; and

     -       to issue directives to service providers to ensure their proper
             functioning.

Failure to follow TRAI directives may lead to the imposition of fines. Decisions
of the TRAI may be appealed to the Telecom Disputes Settlement and Appellate
Tribunal.

        We began offering Internet access services on November 22, 1998, and as
of March 31, 2001, we operated 51 Internet access nodes. In November 1998, the
Government of India opened the Internet service provider market to private
competition, and the DOT instituted a mandatory license requirement for the
provision of Internet services. We entered into a license agreement with the DOT
on November 12, 1998 with effect on the same day, under which we were granted a
license to provide national Internet services on a non-exclusive basis. The
terms and conditions of our license are generally consistent with the policy for
licensing Internet service providers. The term of our license is 15 years. Our
license can be revoked by the DOT if we breach the terms and conditions of the
license. The DOT retains the right to take over our network and to modify,
revoke, terminate or suspend the terms and conditions of the license at any time
if, in its opinion, it is necessary or expedient to do so in the interest of



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<PAGE>   38

general public, or for the proper operation of the telecommunications sector or
for security considerations. The DOT also retains the right to review the terms
of our license based on changes in national telecommunications policy. We are
not allowed to assign or transfer our rights under our license without the prior
written consent of the DOT.

        Until recently, Government of India policies limited the total foreign
equity in an Internet service provider to 49%. Our license currently provides
that the total foreign equity in our company may not, at any time, exceed 49% of
our total equity. In May 2001, the Department of Commerce and Industry increased
the limit on foreign direct investment for Internet companies, such as our
company, from 49% to 74%. The administrative process to implement this policy
has commenced, and we expect to apply to the DOT to amend our license to
increase the total foreign equity restriction contained therein from 49% to 74%.

        Internet telephony is not permitted by current regulations. Our license
currently requires us to take measures to ban carriage of telephone traffic over
the Internet. Our license also requires us to ensure that objectionable, obscene
and unauthorized content, or any other content, messages or communications
infringing copyrights, intellectual property rights and domestic and
international cyberlaws or which is inconsistent with the laws of India, is not
carried on our network.


        Although under the terms of our license we are free to fix the prices we
charge our subscribers, the TRAI may set prices for the provision of Internet
access services generally. We are permitted to use encryption to safeguard
information transmitted over our network. However, if we use a higher level of
encryption than that specified by the Government of India, our license requires
us to deposit a set of keys with the Government of India. License fees are
waived through October 31, 2003, and a nominal license fee of Rs.1 per annum is
payable from November 1, 2003. Our obligations under the license are secured by
a performance bank guarantee in the amount of Rs.20.0 million ($0.4 million).

        We may be required to import into India computer hardware and Internet
related software purchased from foreign manufacturers for business purposes.
These imports will be subject to the Export and Import Policy as declared by the
Ministry of Commerce. At the time of import, we will be required to pay a
customs duty pursuant to the Customs Tariff Act, 1975.

SEASONALITY

        Given the early stage of the development of the Internet in India, the
rapidly evolving nature of our business and our limited operating history, we
cannot predict to what extent, if at all, our operations will prove to be
seasonal.

FACILITIES

        Our approximately 100,000 square foot corporate headquarters is located
in Chennai (Madras), India. We maintain a network operations center located in
Chennai and a 20,000 square foot data center in Mumbai (Bombay). Our
Chennai facility houses our central network servers as well as our network staff
which monitors network traffic, service quality and equipment at all our points
of presence to ensure a reliable Internet service. Most of our points of
presence are staffed 24-hours-a-day, seven-days-a-week. We have backup power
generators and software and hardware systems designed to prevent network
downtime in the event of system failures. In the future, we may add additional
facilities to supplement or add redundancy to our current network monitoring
capability. We also have additional facilities located in Ahmedabad, Aurangabad,
Bangalore, Baroda, Belgaum, Bhopal, Bhubaneshwar, Calcutta, Calicut, Handigarh,
Chennai, Cochin, Coimbatore, Davengere, Delhi, Goa, Gurgaon, Guwahati, Hubli,
Hyderabad, Indore, Jaipur, Jamnagar, Jamshedpur, Jodhpur, Kakinada, Karnal,
Kota, Kanpur, Lucknow, Ludhiana, Madurai, Mangalore, Mesana, Mumbai (Bombay),
Nagpur, Nasik, Patna, Pondicherry, Pune, Raipur, Rajkot, Shimoga, Siliguri,
Surat, Thiruvananthapuram, Tiruvalla, Trichy, Varanasi and Vijayawada. As we
expand our operations, we anticipate leasing additional facilities in each city
in which we develop a point of presence.



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<PAGE>   39

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

REVENUES

        For reporting purposes, we classify our revenues into three divisions:

     -       corporate network/data and e-consulting services;

     -       consumer Internet access services; and

     -       online portal and content offerings.

        Our corporate network/data and e-consulting services division derives
its revenues from dial-up and dedicated Internet access, electronic commerce,
e-mail and other messaging services, virtual private networks, web hosting and
web-based solutions. An important asset in this business is the quality and
reach of our network which, as of the date of this annual report, is the largest
IP protocol network in India. Our corporate private network customers typically
enter into one-year arrangements that provide for an initial installation fee
and recurring service fees. E-consulting is generally charged on a fixed-price
basis. We derive revenues from website hosting based upon our customer's
bandwidth requirements, and we charge co-location customers for use of our
physical facilities. We also generate a small portion of our revenues through
the sale of third-party hardware.

        Our consumer Internet access services division derives its revenues
primarily from the "SatyamOnline" dialup business and the "iway" public Internet
access business. We offer our prepaid subscriptions in a number of time period
and pricing plans through ready-to-use CD-ROMs sold to our distribution
partners. Our distribution partners resell the CD-ROMs to consumers for online
registration and immediate Internet access. Revenues are recognized ratably as
the prepaid subscription is used with any unused portion recognized as revenue
at the expiration date of the subscription. We also generate revenues through
international roaming and e-mail registration fees. As of March 31, 2001, there
were 301 iway cafes operational in six cities providing Internet access to
consumers on a non-subscription basis.

        Our online portal and content offerings division derives revenues from
third-party advertising and commissions from electronic commerce transactions on
our websites. Advertising fees are recognized over the period in which the
advertisements are hosted on our websites.

EXPENSES

        Cost of revenues for the corporate network/data and e-consulting
services division is divided into three groups: corporate Internet access,
corporate e-consulting and electronic commerce products, and web development.
Cost of revenues for the corporate Internet access subdivision consists of
telecommunications costs necessary to provide service, customer support costs
and the cost of providing network operations. Cost of revenues for corporate
e-consulting and electronic commerce products subdivision consists primarily of
third-party software and hardware purchased from our strategic partners for
resale, direct labor costs for initial installation and recurring customer
support and network operation and associated telecommunications costs. Cost of
revenues for web development, website hosting and co-location includes direct
labor and associated telecommunications costs.

        Cost of revenues for the consumer Internet access services division
consists primarily of recurring telecommunications costs necessary to provide
service to subscribers. Telecommunications costs include the costs of providing
local telephone lines to our points of presence, the costs of using third-party
networks pursuant to service agreements and leased line costs. Bandwidth costs
are presently controlled to a significant extent by VSNL, the government
controlled provider which also competes with us in the Internet access business.
We are addressing these cost issues through alternative bandwidth sources and
the establishment of our own international access gateways. Until recently,
private companies in India were not permitted to operate their own international
gateways. Our initiatives are expected to result in bandwidth cost relief over
the next several quarters.

        Another recurring cost is the personnel and related operating expenses
associated with customer support and network operations. We expect that customer
support and network operations expenses will decrease as a



                                       37
<PAGE>   40

percentage of revenues as we more efficiently utilize these capabilities across
a larger customer base assuming that subscription rates stabilize.

        Cost of revenues for the online portal and content offerings division
includes the labor cost of developing and maintaining our websites, the cost of
third-party software and the cost of obtaining content from third-party vendors.

        Selling, general and administrative expenses consist primarily of
salaries and commissions for sales and marketing personnel; salaries and related
costs for executive, financial and administrative personnel; sales, marketing,
advertising and other brand building costs; travel costs; and occupancy and
overhead costs.

        A total of 825,000 equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. At our 2001 Annual General Meeting, our
stockholders will consider a special resolution to increase the total number of
equity shares reserved for issuance under our ASOP to 1.2 million. As of March
31, 2001, we had outstanding an aggregate of 565,020 options (net of 95,740
options forfeited by employees and 200 options exercised for equity shares)
under our ASOP with a weighted average exercise price equal to approximately
Rs.2,621 per equity share. We recorded non-cash compensation charges related to
these grants in the aggregate amount of approximately Rs.101.1 million to be
recognized over a three-year period in accordance with vesting provisions.

        We depreciate our tangible assets on a straight-line basis over the
useful life of assets, ranging from two to five years. We depreciate our
intangible assets, including the goodwill recognized in the Indiaplaza.com and
IndiaWorld Communications transactions, on a straight-line basis over five
years. It is likely that the accounting treatment of intangible assets will
change materially in July 2001 assuming that the Financial Accounting Standards
Board adopts and implements pending proposals. Please see, " -- Impact of
Recently Issued Accounting Standards" for a discussion of these proposed
changes.

        We face significant competitive pricing pressure from VSNL and a number
of new competitors that are entering India's Internet service provider market.
This competition has resulted in erosion in selling prices in the consumer
Internet access business. In the face of this competition, we do not anticipate
being able to maintain our present subscriber retention rates as our subscriber
base grows.

        In addition to our operations and those of our consolidated
subsidiaries, our financial statements include our pro rata share of the
financial results of those companies in which we have significant,
non-controlling minority interests, such as CricInfo Limited and Refco Sify
Limited. These investments are accounted for under the equity method of
accounting.

        Since our inception, we have experienced negative cash flow from
operations and have incurred net losses. Our ability to generate positive cash
flow from operations and achieve profitability is dependent on our ability to
continue to grow our revenues base and achieve further operating efficiencies.

        For fiscal 1997 through 2001, we incurred negative cash flow from
operations of approximately Rs.30.4 million, Rs.74.0 million, Rs.172.1 million,
Rs.527.2 and Rs.1,308.4 million ($27.9 million), respectively. For fiscal 1997
through 2001, we incurred net losses of approximately Rs.26.3 million, Rs.100.6
million, Rs.187.4 million, Rs.381.9 million and Rs.2,509.0 million ($53.6
million), respectively. Giving pro forma effect to our acquisitions of
Indiaplaza.com and IndiaWorld Communications as if they had occurred at the
beginning of each period, we would have incurred net losses of approximately
Rs.1,457.1 million and Rs.2,883.6 million ($61.5 million) for fiscal 2000 and
2001, respectively. We may not be able to realize sufficient future revenues to
offset our present investment in network infrastructure and online content
offerings or achieve positive cash flow or profitability in the future. As of
March 31, 2001, we had an accumulated deficit of approximately Rs.3,205.9
million ($68.4 million). For additional information, see "Item 3. Key
Information--Risk Factors."

        Certain prior-year's amounts have been reclassified to conform to the
current year's presentation.


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<PAGE>   41

RESULTS OF OPERATIONS

        Year ended March 31, 2001 compared to year ended March 31, 2000

        Revenues. We recognized Rs.1,787.1 million ($38.1 million) in revenues
for the year ended March 31, 2001, as compared to Rs.671.0 million for the year
ended March 31, 2000, representing an increase of Rs.1,116.1 million. This
increase was attributable to a significant increase in the corporate, or 266%
services businesses which increased by 132% over the prior year. The corporate
services businesses successfully obtained a significant number of new orders
from prominent customers with operations throughout India. Internet access
revenues grew by 33.4%, which was less than proportionate to the growth in
number of subscribers due to continuing decreases in average selling prices
resulting from competition. From March 31, 2000 to March 31, 2001, our number of
corporate customers grew from more than 500 to more than 650, and our number of
Internet access subscribers grew from more than 151,000 to more than 460,000.
Our online portal and content offerings division accounted for Rs.144.4 million
of revenues for the year ended March 31, 2001, as compared to Rs.33.6 million
for the year ended March 31, 2000, representing an increase of 330%.

        Cost of Revenues. Cost of revenues were Rs.1,261.1 million ($26.9
million), or 71% of revenues, for the year ended March 31, 2001, compared to Rs.
293.7 million or 44% of revenues for the year ended March 31, 2000, representing
an increase of Rs.967.4 million, or 330%. This increase was primarily
attributable to a Rs.208.6 million increase in software and hardware purchased
for resale, a Rs.585.0 million increase in leased line charges due to the
increased requirement for international bandwidth and last mile connectivity,
Rs.15.0 million towards web development charges and a Rs.135.7 million increase
in direct personnel costs for web development and customer technical support.

        Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.2,135.6 million ($45.6 million) for the year
ended March 31, 2001, compared to Rs.703.1 million for the year ended March 31,
2000, representing an increase of Rs.1,432.5 million, or 204%.

        Amortization of goodwill. Amortization of goodwill was Rs.1,133.3
million ($24.2 million) for the year ended March 31, 2001, compared to Rs.116.0
million for the year ended March 31, 2000, representing an increase of
Rs.1,017.3 million. Amortization of goodwill for the year ended March 31, 2001
consisted of Rs.902.4 million ($19.2 million) in connection with our acquisition
of IndiaWorld Communications, Rs.29.4 million ($0.6 million) in connection with
our acquisition of Indiaplaza and Rs.201.3 ($4.3 million) in connection with our
investment in CricInfo Limited. Please see "--Impact of Recently Issued
Accounting Standards" for a discussion of proposed changes which may impact
future periods.

        Amortization of deferred compensation expense. Amortization of deferred
compensation expense was Rs.86.8 million ($1.9 million) for the year ended March
31, 2001, compared to Rs.20.6 million for the year ended March 31, 2000,
representing an increase of Rs.66.2 million, or 321%. The increase in
amortization of deferred compensation expense was primarily due to additional
option grants during the fiscal year ended March 31, 2001.

        Other income. Other income was Rs.242.4 million ($5.2 million) for the
year ended March 31, 2001, compared to Rs.71.9 million for the year ended March
31, 2000, representing an increase of Rs.170.5 million, or 237%. The increase in
other income was primarily due to an increase in interest income accompanied by
a decrease in interest expense. Interest income was Rs.246.2 million ($5.3
million) for the year ended March 31, 2001, compared to Rs.106.2 million for the
year ended March 31, 2000, representing an increase of Rs.140.0 million, or
132%. This increase was attributable to interest income from short-term
deposits. Interest expense was Rs.11.8 million ($0.3 million) for the year ended
March 31, 2001, compared to Rs. 30.5 million for the year ended March 31, 2000,
representing a decrease of Rs.18.7 million, or 61.3%. This decrease was
attributable to the repayment of outstanding indebtedness in the year ended
March 31, 2001.

        Equity in losses of affiliates. Equity in losses of affiliates was
Rs.93.2 million for the year ended March 31, 2001 consisting of losses of Rs.9.9
million ($0.2 million), Rs.16.3 million ($0.3 million) and Rs.67.0 million ($1.4
million), respectively, in connection with our investments in Refco Sify,
Placements.com and CricInfo Limited. We had no equity in losses of affiliates
for the year ended March 31, 2000.

        Net loss. Our net loss was Rs.2,509.0 million ($53.6 million) for the
year ended March 31, 2001, compared to Rs.381.9 million for the year ended March
31, 2000.



                                       39
<PAGE>   42

        Year ended March 31, 2000 compared to year ended March 31, 1999

        Revenues. We recognized Rs.671.0 million in revenues for the year ended
March 31, 2000, as compared to Rs.103.3 million for the year ended March 31,
1999, representing an increase of Rs.567.7 million. This increase was primarily
attributable to an increase in the number of customers and the introduction of
new service offerings. From March 31, 1999 to March 31, 2000, our number of
corporate customers grew from more than 350 to more than 500, and our number of
Internet access subscribers grew from more than 29,000 to more than 151,000.

        Cost of Revenues. Cost of revenues were Rs.293.7 million, or 44% of
revenues, for the year ended March 31, 2000, compared to Rs.63.7 million or 62%
of revenues for the year ended March 31, 1999, representing an increase of
Rs.230.0 million, or 361%. This increase was primarily attributable to a Rs.54.0
million increase in software and hardware purchased for resale, a Rs.110.6
million increase in leased line charges due to the increased capacity of our
network backbone, Rs.2.0 million towards web development charges and a Rs.54.7
million increase in direct personnel costs for web development and customer
technical support.

        Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.703.1 million for the year ended March 31, 2000,
compared to Rs.200.2 million for the year ended March 31, 1999, representing an
increase of Rs.502.7 million, or 251%.


        Amortization of goodwill. Amortization of goodwill was Rs.116.0 million
for the year ended March 31, 2000. We had no amortization of good will for the
fiscal year ended March 31, 1999. Amortization of goodwill for the year ended
March 31, 2000 arose in connection with our acquisition of IndiaWorld
Communications.

        Amortization of deferred compensation expense. Amortization of deferred
compensation expense was Rs.20.6 million for the year ended March 31, 2000,
compared to Rs.0.1 million for the year ended March 31, 1999.

        Other income. Other income was Rs.71.9 million for the year ended March
31, 2000, compared to an expense of Rs.27.4 million for the year ended March 31,
1999. Interest income was Rs.106.2 million for the year ended March 31, 2000,
compared to Rs.0.6 million for the year ended March 31, 1999. This increase was
attributable to interest income from short-term deposits.

        Net loss. Our net loss was Rs.381.9 million for the year ended March 31,
2000, compared to Rs.187.4 million for the year ended March 31, 1999.

        Year ended March 31, 1999 compared to the year ended March 31, 1998

        Revenues. We recognized Rs.103.3 million in revenues for the year ended
March 31, 1999, as compared to Rs.6.8 million for the year ended March 31, 1998,
representing an increase of Rs.96.5 million. Fiscal 1999 revenues exclude
Rs.71.5 million of deferred income representing consumer access subscriptions
which had been purchased but not yet used by the consumer subscribers. This
increase was primarily attributable to the introduction of our business network
services in April 1998 and consumer Internet access services in November 1998.
From March 31, 1998 to March 31, 1999, our number of corporate customers grew
from approximately 30 to more than 300, and our number of subscribers grew to
more than 29,000.

        Cost of Revenues. Cost of revenues were Rs.63.7 million, or 62% of
revenues, for the year ended March 31, 1999, compared to Rs.19.5 million or 287%
of revenues for the year ended March 31, 1998, representing an increase of
Rs.44.2 million, or 227%. This increase was primarily attributable to a Rs.10.5
million increase in software and hardware purchased for resale, a Rs.7.9 million
increase in leased line charges due to the increased capacity of our network
backbone, Rs.1.8 million towards web development charges and a Rs.23.9 million
increase in direct personnel costs for web development and customer technical
support.

        Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.200.2 million for the year ended March 31, 1999,
compared to Rs.61.0 million for the year ended March 31, 1998, representing an
increase of Rs.139.2 million, or 228%.

        Interest expense. Interest expense was Rs.27.8 million for the year
ended March 31, 1999, compared to Rs.11.3 million for the year ended March 31,
1998, representing an increase of Rs.16.5 million, or 146%. This



                                       40
<PAGE>   43

increase was attributable to increased interest payments from additional
borrowings of Rs.136.5 million during the year under a new term loan.

        Other income. Other income was Rs.27.4 million for the year ended March
31, 1999, compared to Rs.7.5 million for the year ended March 31, 1998,
representing an increase of Rs.19.9 million, or 265%. This decrease was
primarily attributable to reduced interest income as excess funds were deployed
in the business.

        Net loss. Our net loss was Rs.187.4 million for the year ended March 31,
1999, compared to a net loss of Rs.100.6 million for the year ended March 31,
1998.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, we have financed our operations primarily through a
combination of equity sales and borrowings from institutions and banks. During
fiscal 1998, 1999 and 2000, we received Rs.38.5 million, Rs.307.5 million and
Rs.10,220.0 million, respectively, in net cash proceeds from the sale of equity
securities. We did not sell any equity securities for cash in fiscal 2001.

        In July 1999, we agreed to sell 481,000 equity shares to Sterling
Commerce for $5.0 million. We completed this transaction in September 1999 and
used the funds for general corporate purposes, primarily the repayment of debt.

        In October 1999, we completed our initial public offering and issued
19,205,000 ADSs (representing 4,801,250 equity shares) at a price of $4.50 per
share. We received approximately $78.9 million in cash, net of underwriting
discounts, commissions and other offering costs. We used approximately $28.0
million of these proceeds to purchase 24.5% of the outstanding shares of
IndiaWorld Communications and an additional $12.0 million towards purchasing the
remaining 75.5% of the outstanding shares of IndiaWorld Communications. We used
the balance of these proceeds to fund network expansion and enhancements, to
advertise and promote our brand and for general corporate purposes. Pending
these uses we invested these proceeds in high quality, interest bearing
instruments.

        In February 2000, we completed a secondary offering and issued 1,868,700
ADSs (representing 467,175 equity shares) at a price at $80.00 per ADS. We
received approximately $141.3 million, net of underwriting discounts, commission
and other offering costs. We used approximately $48.0 million of the proceeds
from our public offering to complete our acquisition of IndiaWorld
Communications. The balance of the proceeds are being



                                       41
<PAGE>   44

used for general corporate purposes. Pending this use we have invested these
proceeds in high quality, interest bearing instruments.

        The following table summarizes our statements of cash flows for the
periods presented:

<TABLE>
<CAPTION>
                                                            FISCAL YEAR ENDED MARCH 31,
                                     -------------------------------------------------------------------------------------------
                                        1997           1998           1999          2000               2001             2001
                                     ----------    -----------    -----------    -----------       -------------      ----------
                                                                 INDIAN RUPEES                                       U.S. DOLLARS
                                                                 (IN THOUSANDS)
<S>                                  <C>           <C>            <C>            <C>               <C>                <C>
Net loss ........................    Rs.(26,337)   Rs.(100,590)   Rs.(187,376)   Rs.(381,896)      Rs.(2,509,030)     $  (53,555)
Net decrease (increase) in
 working capital ................        (4,625)         7,257        (34,434)      (406,189)           (569,381)        (12,153)
Other adjustments for non-cash
 items ..........................           536         19,383         49,703        260,837           1,770,050          37,781
Net cash provided by (used in)
 operating activities ...........       (30,426)       (73,950)      (172,107)      (527,248)         (1,308,361)        (27,927)
Net cash provided by (used in)
 investing activities ...........        (3,230)       (77,070)      (144,196)    (2,458,384)         (4,338,491)        (92,604)
Net cash provided by (used in)
 financing activities ...........        35,138        159,449        431,939     10,167,709            (216,466)         (4,620)
Net increase (decrease) in cash
 and cash equivalents ...........         1,482          8,429        115,636      7,182,077          (5,863,318)       (125,151)
</TABLE>

        Our principal capital and liquidity needs historically have related to
developing our network infrastructure and our corporate network and electronic
commerce products, establishing our customer service and support operations,
developing our sales and marketing activities and for general working capital
needs. Prior to 1998, our capital needs were primarily met by funding from our
parent company, Satyam Computer Services, and borrowings from institutions and
banks. As we placed greater emphasis on expanding our network infrastructure and
developing our consumer Internet access and online portal and content services,
we sought additional capital from other sources, including vendor capital leases
and other vendor financing arrangements and through private placements of our
securities. During recent periods, we have also expended significant funds in
our acquisition and investment program, including the IndiaWorld Communications
transaction.

        Cash used in operating activities for fiscal 2001 was Rs.1,308.4 million
($27.9 million) primarily attributable to a net loss of Rs.2,509.0 million
($53.6 million) and increases in accounts receivable of Rs.608.1 million ($13
million) and other assets of Rs.212.9 million ($4.5 million), partially offset
by depreciation of plant and equipment and amortization of Rs.1,655.6 million
($35.3 million) and equity in losses of affiliate of Rs.93.2 million ($2.0
million). Cash used in investing activities during fiscal 2001 was Rs.4,338.5
million ($92.6 million), principally as a result of the cash portion of the
purchase consideration paid in connection with our acquisition of IndiaWorld
Communications amounting to Rs.2,154.3 million ($46 million) and an amount of
Rs.1,914.8 million ($40.9 million) towards the purchase of routers, modems,
ports, servers and other capital equipment in connection with the expansion of
our servers and other capital equipment in connection with the expansion of our
network, expenditure on investments in affiliates of Rs. 163.6 million ($3.5
million) and expenditure on license fees of Rs.28 million ($0.6 million). Cash
used in financing activities was Rs.216.4 million ($4.6 million) for fiscal
2001, which consisted primarily of repayment of Rs.107.5 million ($2.3 million)
of debentures to IDBI Bank and repayment of Rs.100.7 million ($2.2 million) of
our term loan to Exim Bank.

        Cash used in operating activities of Rs.527.2 million during fiscal 2000
was primarily attributable to a net loss of Rs.381.9 million, increases in
accounts receivable of Rs.195.4 million, other assets of Rs.198.4 million and
prepaid expenses of Rs.181.2 million, partially offset by depreciation of plant
and equipment and amortization of Rs.262.5 million and an increase in deferred
revenues of Rs.78.0 million. Cash used in investment activities during fiscal
2000 was Rs.2,458.3 million, principally as a result of the purchase of routers,
modems, ports, servers and other capital equipment in connection with the
expansion of our network. Cash provided from financing activities was Rs.10,168
million for fiscal 2000, which consisted primarily of Rs.3,444.7 million of net
proceeds from our initial public offering of ADSs in October 1999 and Rs.6,167.9
million of proceeds from our secondary offering of ADSs in February 2000.

        Cash used in operating activities of Rs.172.1 million during fiscal 1999
was primarily attributable to a net loss of Rs.187.4 million, increases in
accounts receivable of Rs.43.6 million and other assets of Rs.4.2 million,
partially offset by depreciation of plant and equipment of Rs.49.2 million and
an increase in deferred revenues of



                                       42
<PAGE>   45

Rs.71.5 million. Cash used in investment activities during fiscal 1999 was
Rs.144.2 million, principally as a result of the purchase of routers, modems,
ports, servers and other capital equipment in connection with the expansion of
our network. Cash provided from financing activities was Rs.431.9 million for
fiscal 1999, which consisted primarily of Rs.307.5 million of net proceeds
raised in a private placement of our equity shares to South Asia Regional Fund
and Satyam Computer Services, and Rs.136.5 million of proceeds from a term loan
from the Export Import Bank of India.

        As of March 31, 2001, we had spent approximately Rs.1,177 million to
develop and deploy our network infrastructure. As of March 31, 2001, we had
aggregate commitments for capital expenditures in an amount equal to
approximately Rs.266.9 illion ($5.7 million), of which we had advanced
approximately Rs.129.6 million ($2.8 million).

        In the ordinary course of our business we regularly engage in
discussions and negotiations relating to potential investments, strategic
partnerships and acquisitions. We will continue to be aggressive in our efforts
to identify one or more investment or acquisition opportunities. However, we
cannot assure you that we will be able to identify or complete any such
transaction on favorable terms, or at all.

        Our highest operational priority for the fiscal year ending March 31,
2002 is to reduce the negative cash flow incurred by our company during its
rapid growth stage and, ideally, to reach a cash flow neutral or cash flow
positive operating position by the end of this fiscal year. Accomplishment of
these objectives will require continued progress in our business, including
continued significant growth in revenues, which cannot be assured. Nonetheless,
we expect to incur continued losses in the near future. Based upon our present
business and funding plans and a May 2001 government policy change that
increased the permissible foreign ownership in certain Internet service
providers, including our company, from 49.0% to 74.0% (assuming that our
Internet service provider license is amended accordingly), we believe that our
cash and cash equivalents of $30.8 million as of March 31, 2001 and, if
necessary, other resources believed to be available to us, are sufficient to
meet our currently known requirements through March 31, 2002. In light of the
highly dynamic nature of our business, however, we cannot assure you that our
capital requirements and sources will not change significantly in the future.

        In order to provide further financial flexibility, we are actively
investigating opportunities to raise additional capital, which could be in the
form of debt, equity, or a combination. As noted elsewhere in this annual
report, our ability to raise funds through the sale of equity is limited by
foreign ownership restrictions imposed on us by Indian law and the terms of our
Internet service provider license. Until recently, Government of India policies
limited the total foreign equity in an Internet service provider to 49%. Our
license currently provides that the total foreign equity in our company may not,
at any time, exceed 49% of our total equity. In May 2001, the Department of
Commerce and Industry increased the limit on foreign direct investment for
Internet companies, such as our company, from 49% to 74%. The administrative
process to implement this policy has commenced, and we expect to apply to the
DOT to amend our license to increase the total foreign equity restriction
contained therein from 49% to 74%. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
our stockholders and the holders of our ADSs will be reduced and these
securities may have rights, preferences or privileges senior to those of our
stockholders and the holders of our ADSs. We cannot assure you that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
fund and expand our operations, take advantage of unanticipated opportunities,
develop or enhance Internet content, features or services, or otherwise respond
to competitive pressures will be significantly limited. Our business, results of
operations and financial condition could be materially adversely affected by any
such limitation. Please see "Item. 3 Key Information - Risk Factors -
Forwarding-looking statements contained in this annual report may not be
realized."

INCOME TAX MATTERS

        As of March 31, 2001, we had a net operating loss carryforward of
approximately Rs.1,777.5 million ($37.9 million) for financial reporting
purposes. Under Indian law, loss carryforwards from a particular year may be
used to offset taxable income over the next eight years.

        The statutory corporate income tax rate in India is currently 35.0%. For
fiscal 2001, this tax rate was subject to a 13.0% surcharge resulting in an
effective tax rate of 39.6%. The tax surcharge for fiscal 2002 has been reduced
to 2.0%. We cannot assure you that the surcharge will be in effect for a limited
period of time or that additional surcharges will not be implemented by the
Government of India. Dividends declared, distributed or paid by an Indian
corporation are subject to a dividend tax of 10.2%, including the applicable
surcharge for fiscal 2001,



                                       43
<PAGE>   46

of the total amount of the dividend declared, distributed or paid. This tax is
not paid by stockholders nor is it a withholding requirement, but rather it is a
direct tax payable by the corporation.

EFFECTS OF INFLATION

        Inflation has not had a significant effect on our results of operations
and financial condition to date. However, India has experienced relatively high
rates of inflation. According to the Economist Intelligence Unit, the rates of
inflation in India for 1997 through 2000 were 7.2%, 13.2%, 5.0% and 4.3%,
respectively. Under our Internet service provider license, we are given the
right to establish the prices we charge to our subscribers, as determined by
market forces. However, under the conditions of our license, the TRAI of India
may review and fix the prices we charge our subscribers at any time. If the TRAI
were to fix prices for the Internet service provider services we provide, we
might not be able to increase the prices we charge our subscribers to mitigate
the impact of inflation, which could have a material adverse effect on our
business, results of operations and financial condition.

EXCHANGE RATES

        The following table sets forth, for each of the months indicated,
information concerning the number of Indian rupees for which one U.S. dollar
could be exchanged based on the average of the noon buying rate in the City of
New York on the last day of each month during each of such months for cable
transfers in Indian rupees as certified for customs purposes by the Federal
Reserve Bank of New York:

<TABLE>
<CAPTION>
         MONTH                                  MONTH END     AVERAGE      HIGH          LOW
         -----                                  ---------    ---------   ---------    ---------
<S>                                             <C>          <C>         <C>          <C>
December 2000................................   Rs. 46.69    Rs. 46.79   Rs. 46.87    Rs. 46.55
January 2001.................................       46.46        46.59       46.77        46.28
February 2001................................       46.66        46.55       46.67        46.25
March 2001...................................       46.85        46.64       46.85        46.43
April 2001...................................       46.66        46.80       47.05        46.48
May 2001.....................................       47.00        46.94       47.05        46.74
</TABLE>

        The following table sets forth, for the fiscal years indicated,
information concerning the number of Indian rupees for which one U.S. dollar
could be exchanged based on the average of the noon buying rate in the City of
New York on the last 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>
   FISCAL YEAR ENDED
       MARCH 31,                               PERIOD END     AVERAGE      HIGH          LOW
   -----------------                           ----------    ---------   ---------    ---------
<S>                                            <C>           <C>         <C>          <C>
1996 (from December 12, 1995)................   Rs. 34.22    Rs. 35.49   Rs. 38.35    Rs. 33.65
1997.........................................       35.94        35.52       35.98        33.75
1998.........................................       39.50        37.18       40.40        35.33
1999.........................................       42.44        42.08       43.68        39.25
2000.........................................       43.63        43.34       43.82        42.20
2001.........................................       46.85        45.70       46.91        43.56
</TABLE>



                                       44
<PAGE>   47

FOREIGN EXCHANGE LOSS

        Approximately 30% of our revenues are denominated in foreign currency.
Our expenses denominated in foreign currency include the cost of purchasing
software from BroadVision, Open Market and Sterling Commerce.

        Our foreign exchange loss was Rs.0 and Rs.0.01 million in fiscal 1997
and 1998, respectively, and our foreign exchange gain was Rs. 0.6 million,
Rs.5.4 million and Rs.162 million for fiscal 1999, 2000 and 2001, respectively.
Our foreign exchange gain in fiscal 1999, 2000 and 2001 was primarily due to our
short-term investment of the proceeds from our public offerings in high quality,
interest bearing instruments denominated in U.S. dollars.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

        In June 1998, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133, as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet either as an asset or as a liability and be measured at its fair
value. The Statement requires that changes in a derivative's fair value be
recognized in the current period unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement and
requires that the company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
effective for all fiscal periods beginning after June 15, 2000. Application of
this statement will not have a significant impact on the financial statements of
our company.

        The FASB has pending a standard setting project which contemplates very
significant changes to the accounting for business combinations under U.S. GAAP.
In connection with this project, the FASB released an exposure draft, "Business
Combinations and Intangible Assets," in 1999 and revised that draft in 2001. The
FASB announced a tentative decision in May 2001, updated in June 2001, and has
indicated that a vote seeking final approval of these new accounting standards
is expected to occur by June 30, 2001 with a stated objective of publishing two
final statements, SFAS 141, "Business Combinations," and SFAS 142, "Goodwill and
Other Intangible Assets," in the second half of July 2001. Since no final action
has yet been taken, the general description of the proposed changes in U.S. GAAP
described below is based on the information published by the FASB through June
19, 2001 regarding rules that are not yet final, may never be adopted or may be
subject to further modification prior to adoption.

        As most recently proposed, the main provisions of the new rules would be
to eliminate the pooling of interests method of accounting for business
acquisitions and to cease the systematic amortization of goodwill and other
intangible assets with indefinite lives. Instead of systematic amortization of
goodwill and similar intangible assets on a periodic basis, the issuer will be
required to test such assets for impairment at the reporting unit level. The
test for impairment is proposed to be an annual test, not necessarily at the end
of the fiscal reporting year, subject to exceptions requiring tests between
annual periods. An initial test for impairment is also specified to occur within
six months of the adoption by an issuer of these new reporting rules. In their
last public announcement on the topic, the FASB stated that these new rules
would become effective for fiscal years beginning after December 15, 2001. Early
adoption would be permitted if elected by an issuer with a fiscal year beginning
after March 15, 2001, provided that its first quarter financial statements had
not previously been issued. Thus, it is possible that these rules, if adopted,
would permit us to adopt the new accounting standards effective April 1, 2001 if
the new standard is published prior to our release of financial statements for
the fiscal quarter ending June 30, 2001. We have not made any decision regarding
whether or not we will elect early adoption of the new standards, if permitted.
We are also unable, at this date, to predict the impact on our company of the
adoption and implementation of these proposed new accounting rules.

        As of March 31, 2001, we were carrying on our consolidated balance sheet
goodwill amounts relating to acquisitions and investments made by us in 1999 and
2000, including $85.1 million for IndiaWorld, $8.9 million for IndiaPlaza and
$27.8 million for CricInfo Limited. Under present accounting principles, we are
amortizing this



                                       45
<PAGE>   48

goodwill into our statement of operations on a periodic basis. If either present
accounting principles or new standards such as discussed above require that an
impairment in value be recognized, we would be required to write-down the
carrying value of the asset to its estimated fair value with an offsetting
charge to our statement of operations. While such a charge would be non-cash, it
nonetheless could be highly material to our reported results of operations for
any such period in which a charge would have to be recognized.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

BOARD OF DIRECTORS

        The following table sets forth the name and, as of March 31, 2001, age
and position of each director and executive officer of our company.

<TABLE>
<CAPTION>
Name                               Age   Position
----                               ---   --------
<S>                                <C>   <C>
R. Ramaraj                         51    Chief Executive Officer and Director
George Zacharias                   42    Chief Operating Officer
T.R. Santhanakrishnan              43    Chief Financial Officer
Ramesh Ramanathan                  45    President, Internet Access
Vivek Bali                         40    President, Portal Services
Naresh Vittal                      47    President, U.S. Operations
A.V. Ram Mohan                     48    President, e-Business
Atul Saran                         39    Chief Executive Officer, Safescrypt
Rahul Swarup                       41    President, Enterprise Solutions
J. Avinash                         39    Vice President, Internet Data Centers
Rustom Irani                       38    Chief Technology Officer
George A. Ajit                     41    Chief Human Resources Officer
Pradeep Lakshmanan                 52    Chief Executive Officer, Sify Baron Net Devices Limited
B. Ramalinga Raju(1)(2)            45    Chairman of the Board of Directors
T.H. Chowdary                      69    Director
Donald Peck(1)(2)                  48    Director
C. Srinivasa Raju                  39    Director
S. Srinivasan(1)(2)                66    Director
</TABLE>

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

(1)     Member of the Compensation Committee.

(2)     Member of the Audit Committee.

        R. Ramaraj has served as Chief Executive Officer of our company since
April 1998. Mr. Ramaraj has served as a Director since August 1996, prior to
which he served as an advisor to our company since June 1996. From 1992 to 1996,
Mr. Ramaraj served as a Director of Sterling Cellular Limited, a mobile
telephone company based in India. Mr. Ramaraj is a Director of Universal Print
Systems Ltd., a publicly held printing company based in India. Mr. Ramaraj
received a B.Tech from Madras University and a P.G.D.M. from IIM Calcutta.

        Mr. George Zacharias has served as Chief Operating Officer of our
company since March 2000. From May 1997 to March 2000, Mr. Zacharias was the
President of Madura Garments, a clothing manufacturer. Prior to joining Madura
Garments, Mr. Zacharias was the Vice President--Marketing, Consumer Thread, of
Madura Coats. From February 1994 to March 1995, he was Marketing Director, Coats
Tootal Lanks, a subsidiary of Coats Viyella Plc., UK. Mr. Zacharias received a
B. Tech from Nagpur University in 1980 and a PGDBM from XLRI, Jarnshedpur in
1982.

        T.R. Santhanakrishnan has served as Chief Financial Officer of our
company since September 1999. From 1997 to 1999, Mr. Santhanakrishnan was
Executive Vice President, Finance of Sanmar Engineering Corporation. From 1990
to 1997, he served in a senior financial position for Royal Dutch/Shell Oil
Company. Mr. Santhankrishnan received a degree in Commerce from the University
of Madras and is a member of the Institute of Chartered Accountants of India and
the Institute of Cost and Works Accountants of India.



                                       46
<PAGE>   49

        Ramesh Ramanathan has served as President, Internet Access of our
company since April 2000. From May 1996 to April 2000, Mr. Ramanathan was
President and Chief Executive Officer of Mahindra Holiday Resorts. From December
1991 to May 1996, he was President of Sterling Holiday Resorts. Mr. Ramanathan
received a degree in Economics from Madras Christian College and a P.G.D.M. from
IIM Calcutta.

        Vivek Bali has served as President, Portal Services of our company since
January 2001. From April 1999 to December 2000, Mr. Bali served as Marketing
Director of Proctor & Gamble's operations in Thailand. From October 1984 to
March 1999, he served in various positions with Proctor and Gamble in India and
several other countries.

        Naresh Vittal has served as President, U.S. Operations of our company
since July 2000. From 1992 to July 2000, Mr. Vittal served as the Senior
Manager, South India for HSBC India.
Mr. Vittal received a P.G.D.M. from IIM Calcutta.

        A.V. Ram Mohan has served as President, e-Business of our company since
March 2001. From February 2000 to February 2001, Mr. Mohan served as our
President, B2B Web Exchange. From 1997 to 2000, he served as President of Rane
Brakes Limited. From 1996 to 1997, Mr. Mohan served as Director, Industrial
Activities of Shiram Group. Mr. Mohan received a B. Tech from IIT Kharagpur and
a P.G.D.M.IIM Ahmedabad.

        Atul Saran has served as Chief Executive Officer, Safescrypt since July
2000. From 1999 to July 2000, Mr. Saran was the Managing Director of Ecard
Systems. From 1997 to 1999, he was the Country Manager for Verifone. Mr. Saran
received a B.Sc. in Engineering from Birla Insittute of Technology and Science
and an M.B.A. from IMS.

        Rahul Swarup has served as President, Enterprise Solutions of our
company since April 2001. From September 1999 to March 2000, Mr. Swarup served
as Chief Technology Officer of our company. From 1989 to 1999, he was Vice
President of Citicorp Global Technology Infrastructure. Mr. Swarup received a
B.E. in Electrical Engineering from IIT Kanpur.

        J. Avinash has served as Vice President, Internet Data Centers of our
company since March 2000. From October 1999 to March 2000, Mr. Avinash served as
our General Manager, Hosting Services. From 1994 to 1999, he served as Chief
Consultant for Infosynth.

        Rustom Irani has served as Chief Technology Officer of our company since
April 2001. From December 1999 to March 2001, Mr. Irani served as our Vice
President, Technology. From August 1999 to December 1999, he was Vice President,
Technology and Chief Information Officer of GE Capital International Services,
Hyderabad. From 1987 to August 1999, Mr. Irani was Vice President, Technology of
Citibank N.A. Mr. Irani received a B.Sc. in Chemistry from the Arts & Sciences
College, Secunderabad and a diploma in Computer Programming from Data Network
Consultants, Mumbai.

        George A. Ajit has served as Chief Human Resources Officer of our
company since May 1999. From 1998 to 1999, Mr. Ajit was Vice President, Human
Resources of Mobil India, an oil company. From 1996 to 1998, he was General
Manager, Human Resources, of Mahindra Holidays and Resorts. From 1994 to 1996,
Mr. Ajit was Deputy General Manager, BioProducts Division of E.I.D.
Parry, a manufacturing company.

        Pradeep Lakshmanan has served as Chief Executive Officer, Sify Baron Net
Devices since April 2000. Mr. Lakshmanan served as our Vice President, Internet
Sales from September 1998 to March 2000. From 1997 to 1998, he was Associate
Vice President of Amco Batteries Ltd., a battery manufacturing company based in
India. From 1991 to 1997, Mr. Lakshmanan was General Manager of Berger Paints
Limited, an international paint manufacturing company based in India. Mr.
Lakshmanan received B.Sc. in Chemical Engineering from Trichur Engineering
College.

        B. Ramalinga Raju is a co-founder of our company and has served as a
Director since 1995. Mr. B. Ramalinga Raju has served as the Chairman of the
Board of Directors since January 1996. Mr. B. Ramalinga Raju was the Chief
Executive Officer of Samrat Spinners Limited, a spinning mill, until 1995. Mr.
B. Ramalinga Raju is the Chairman of Satyam Computer Services and is a Director
of Vision Compass Inc.



                                       47
<PAGE>   50
Mr. B. Ramalinga Raju received an M.B.A. in Business Management from Ohio State
University.

        T.H. Chowdary has served as a Director of our company since February
1996. Mr. Chowdary retired as the Chief Executive Officer of VSNL, the
government-controlled provider of international telecommunications services in
India, in 1987.

        Donald Peck has served as a Director of Satyam Infoway since March 1999.
Mr. Peck has been with Commonwealth Development Corporation, a UK-based
institution investing in developing markets, since 1991. He has been based in
India since 1995, initially as head of International Venture Capital Management,
or IVCM, and since April 1998 as Chief Executive Officer of CDC Advisors Private
Limited, a Commonwealth Development Corporation subsidiary providing advisory
services to IVCM. Mr. Peck received a PhD in Latin American Economic History
from Oxford University.

        C. Srinivasa Raju has served as a Director of our company since February
1996. From 1994 to 1995, Mr. C. Srinivasa Raju was Chief Executive Officer of
Dun & Bradstreet Satyam Software Limited, a software services company based in
India. Mr. C. Srinivasa Raju is a Director of Satyam Computer Services. Mr. C.
Srinivasa Raju received an M.S. from Utah State University.

        S. Srinivasan has served as a Director of our company since February
1996. From 1989 to 1995, Mr. Srinivasan was Chief Executive Officer of AT&T
India Limited. Mr. Srinivasan received a BE in Engineering and a PG in
Management from Madras University.

BOARD COMPOSITION

        Our Articles of Association set the minimum number of directors at two
and the maximum number of directors at 12. We currently have six directors. The
Companies Act and our Articles of Association require the following:

        -       at least two-thirds of our directors shall be subject to
                re-election by our stockholders; and

        -       at least one-third of our directors who are subject to
                re-election shall be up for re-election at each annual meeting
                of our stockholders.

        Mr. B. Ramalinga Raju is a permanent director not liable to retire by
rotation. The terms of Messrs. Ramaraj and Chowdary expired, and each of them
was reelected to an additional 3-year term, at our Annual General meeting in May
2000. The terms of Messrs. C. Srinivasa Raju and Srinivasan will expire, and
each of them is up for reelection to an additional 3-year term, at our Annual
General Meeting to be held in August 2001. The term of Mr. Peck expires at our
Annual General Meeting to be held in 2002.

        B. Ramalinga Raju and C. Srinivasa Raju are brothers-in-law. There are
no other family relationships between any of the directors or executive officers
of our company.

        On February 5, 1999, we entered into a Share Subscription and
Stockholders' Agreement, or Stockholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. The Stockholders' Agreement provides, among other things,
that:

        -       so long as SARF owns at least 5.0% of our issued ordinary share
                capital, it is entitled to nominate one director to our Board of
                Directors;

        -       so long as Satyam Computer Services owns at least 50.1% of our
                issued ordinary share capital, it is entitled to nominate four
                directors to our Board of Directors; and

        -       a quorum for a meeting of our Board of Directors shall be no
                less than three directors.



                                       48
<PAGE>   51

SARF's current nominee to our Board of Directors is Mr. Peck. Satyam Computer
Services' current nominees to our Board of Directors are Messrs. Ramaraj, B.
Ramalinga Raju, T.H. Chowdary and C. Srinivasa Raju.

BOARD COMMITTEES

        The Audit Committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the recommendation of our independent auditors,
the scope of the annual audits, fees to be paid to the independent auditors, the
performance of our independent auditors and our accounting practices. The
members of the Audit Committee are Messrs. B. Ramalinga Raju, Peck and
Srinivasan.

        The Compensation Committee of the Board of Directors determines the
salaries, benefits and stock option grants for our employees, consultants,
directors and other individuals compensated by our company. The Compensation
Committee also administers our compensation plans. The members of the
Compensation Committee are Messrs. B. Ramalinga Raju, Peck and Srinivasan.

DIRECTOR AND OFFICER COMPENSATION

        Our Articles of Association provide that each of our directors receives
a sitting fee not exceeding Rs.2,000 for every Board and Committee meeting. In
fiscal 2001, we did not pay any fees to our non-employee directors. Mr. Ramaraj,
who is employed as our Chief Executive Officer, does not receive any additional
compensation for his service on our Board of Directors. Directors are reimbursed
for travel and out-of-pocket expenses in connection with their attendance at
Board and Committee meetings. We do not have service contracts with any of our
directors. The total remuneration received by our officers and directors for
their services to us in fiscal 2001 was approximately Rs.35.4 million.

STOCK OWNERSHIP

        The following table sets forth information with respect to the
beneficial ownership of our equity shares as of March 31, 2001 by each director
and our Chief Executive Officer. The table gives effect to equity shares
issuable within 60 days of March 31, 2001 upon the exercise of all options and
other rights beneficially owned by the indicated stockholders on that date.
Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to equity shares. Unless
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all equity shares beneficially owned.

<TABLE>
<CAPTION>
                                             EQUITY SHARES
                                           BENEFICIALLY OWNED
                                         ----------------------
          BENEFICIAL OWNER               NUMBER         PERCENT
          ----------------               ------         -------
<S>                                      <C>             <C>
R. Ramaraj(1).....................        370,000         1.6
B. Ramalinga Raju.................            100          *
T. H. Chowdary....................             --         --
Donald Peck.......................             --         --
C. Srinivasa Raju.................             --         --
S. Srinivasan.....................             --         --
</TABLE>

--------

*       Less than 1% of total.

(1)     Excludes options to purchase (a) 20,000 equity shares with an exercise
        price of $76.95 per share granted on June 1, 2000, (b) 2,500 equity
        shares with an exercise price of $135.45 per share granted on January
        26, 2000 and (c) 7,500 equity shares with an exercise price of Rs.350
        per share granted on September 20, 1999 to Mr. Ramaraj which expire
        three years and one month from the date of grant.

        The number of outstanding equity shares in the company as of March 31,
2001 was 23,183,103. Approximately 17,249,700 equity shares are held by in
India. As of March 31, 2001, there were approximately 45,000 record holders of
ADRs evidencing 23,733,612 ADSs (representing 5,933,403 equity shares).



                                       49
<PAGE>   52

ASSOCIATE STOCK OPTION PLAN

        We have an Associates Stock Option Plan, or ASOP, which provides for the
grant of options to employees of our company. The ASOP was approved by our Board
of Directors and our shareholders in March 1999. A total of 825,000 equity
shares are reserved for issuance under our Associate Stock Option Plan, or ASOP.
At our 2001 Annual General Meeting, our stockholders will consider a special
resolution to increase the total number of equity shares reserved for issuance
under our ASOP to 1.2 million. As of March 31, 2001, we had outstanding an
aggregate of 565,020 options (net of 95,740 options forfeited by employees and
200 options exercised for equity shares) under our ASOP with a weighted average
exercise price equal to approximately Rs.2,621 per equity share.

        The ASOP is administered by the Compensation Committee of our Board of
Directors. Pursuant to the provisions of the ASOP, the Satyam Infoway Associates
Trust, or Trust, is allotted options to purchase our equity shares pursuant to
resolutions passed at our general meetings. The Trust holds these options for
and on behalf of our employees. The Compensation Committee makes recommendations
to the Trust regarding employees who should be considered for option grants. On
the recommendation of the Compensation Committee, the Trust will advise our
company to transfer the options to identified employees, with the right to
convert the issued options into our equity shares at the rates indicated in the
options. The consideration for transfer of the options will be Rs.1 per option
to be paid by the employee before transfer of the options.

        An employee holding options may apply for conversion of the options on a
date specified therein which is referred to as the conversion date. The options
are not transferable by an employee on or before the conversion date, except to
the Trust should the employee cease to be an employee by reason of resignation,
dismissal or termination of employment due to reasons of non-performance or
otherwise. On exercise of the option, the employee submits a letter of
conversion to the Trust for allotment of our equity shares in his or her name.
The Trust collects the consideration for conversion arrived at as a product of
number of options converted and the conversion price as reduced by the price of
the options paid by the employee for the number of options converted by the
employee. The equity shares transferred to the employee after conversion from
options is the absolute property of the employee and will be held by the
employee. Based on recent changes in government policy in India, we expect that
participants in the ASOP will be able to receive ADSs upon exercise of their
options.

EMPLOYEES

        As of March 31, 2001, we had 1,185 employees. We anticipate maintaining
the current size of our employee base over the next year. We had 622 employees
and 340 employees, respectively, of March 31, 2000 and March 31, 1999. Of our
current employees, 104 are administrative, 466 form our sales and marketing
staffs and 615 are dedicated to technology, technical support and customer care.
None of our employees are represented by a union. We believe that our
relationship with our employees is good.

ITEM 7. MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS

PRINCIPAL STOCKHOLDERS

        The following table sets forth information with respect to the
beneficial ownership of our equity shares as of March 31, 2001 by each person or
group of affiliated persons who is known by us to beneficially own 5% or more of
our equity shares. The table gives effect to equity shares issuable within 60
days of March 31, 2001 upon the exercise of all options and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to equity shares. Unless otherwise
indicated, the persons named in the table have sole voting and sole investment
control with respect to all equity shares beneficially owned. Mr. B. Ramalinga
Raju, the Chairman of our Board of Directors, is the Chief Executive Officer,
Chairman of the Board of Directors and a stockholder of Satyam Computer
Services. Messrs. Satyam Ramnauth and Pierre Guy Noel, directors of
International Venture Capital Management, which manages South Asia Regional
Fund, exercise voting control and dispositive power over the equity shares owned
by South Asia Regional Fund. Mr. Peck, a director of our company, is affiliated
with South Asia Regional Fund.



                                       50
<PAGE>   53

<TABLE>
<CAPTION>
                                              EQUITY SHARES
                                           BENEFICIALLY OWNED
                                         ----------------------
          BENEFICIAL OWNER               NUMBER         PERCENT
          ----------------               ------         -------
<S>                                    <C>               <C>
Satyam Computer Services Limited..     12,182,600        52.5%
    Mayfair Centre, S P Road
    Secunderabad 500 003
    India
South Asia Regional Fund..........      3,600,000        15.5
    Les Cascades Building
    Edith Cavell Street
    Port Louis
    Mauritius
</TABLE>

CONTROL OF REGISTRANT

        Satyam Computer Services beneficially owned approximately 52.5% of our
equity shares as of March 31, 2001. As a result, it is able to exercise control
over many matters requiring approval by our stockholders, including the election
of directors and approval of significant corporate transactions. Under Indian
law, a simple majority is sufficient to control all stockholder action except
for those items which require approval by a special resolution. If a special
resolution is required, the number of votes cast in favor of the resolution must
be not less than three times the number of votes cast against it. Examples of
actions that require a special resolution include:

        -       altering our Articles of Association;

        -       issuing additional shares of capital stock, except for pro rata
                issuances to existing stockholders;

        -       commencing any new line of business; and

        -       commencing a liquidation.

        Circumstances may arise in which the interests of Satyam Computer
Services could conflict with the interest of our other stockholders or holders
of our ADSs. Satyam Computer Services could prevent or delay a change in control
of our company even if a transaction of that sort would be beneficial to our
other stockholders, including the holders of our ADSs.

        On February 5, 1999, we entered into a Share Subscription and
Shareholders' Agreement, or Shareholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. Pursuant to the Shareholders Agreement, Satyam Computer
Services and SARF are entitled to nominate four directors and one director,
respectively, to our Board of Directors so long as they continue to own at least
50.1% and 5.0%, respectively, of our issued ordinary share capital.

INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

        Satyam Computer Services is our parent company. In fiscal 2001, we sold
an aggregate of Rs.83.6 million in services to Satyam Computer Services and its
affiliates. Also in fiscal 2001, we purchased an aggregate of Rs.2.4 million in
software and services from Satyam Computer Services and its affiliates. We
believe that the foregoing transactions with Satyam Computer Services and its
affiliates were on terms no less favorable to our company than could have been
obtained from independent third parties.

        On February 5, 1999, we entered into a Share Subscription and
Stockholders' Agreement, or Stockholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. Pursuant to the Stockholders' Agreement, Satyam Computer
Services and SARF purchased 900,000 and 3,600,000, respectively, of our equity
shares at a price equal to Rs.70 per equity share. The Stockholders' Agreement
contains provisions regarding our directors and management. The Stockholders'
Agreement granted to SARF registration rights and, in the event of a sale of our
equity shares by Satyam Computer Services, "tag-along" rights.



                                       51
<PAGE>   54

ITEM 8. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

        We have elected to provide financial statements pursuant to Item 18 of
Form 20-F.

LEGAL PROCEEDINGS

        We and our subsidiary IndiaWorld Communications are involved in
litigation with a party located in the United States which has alleged, among
other things, that the activities of IndiaWorld Communications infringe a United
States trademark for the term "IndiaWorld" and associated logos and trade dress
purportedly owned by this third party and that the third party has an ownership
interest in the underlying technology. We have been advised by the prior owners
of IndiaWorld Communications that no such infringement or misappropriation has
taken place. This matter is currently pending in federal court in San Diego,
California. Our contract with the prior owners of IndiaWorld Communications
includes an indemnity for past infringement or misappropriation. We and
IndiaWorld Communications have also been contacted by a party that alleges,
among other things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as to
the possible outcome, including whether or not our indemnity will be effective
in protecting us, and also could divert management time and attention away from
our business.

        The charges for international gateways and other services presently
being provided by VSNL are the subject of a dispute pending before the TRAI and
the Telecom Disputes Settlement and Appellate Tribunal between VSNL and private
Internet service providers, including our company. VSNL has priced these
services at levels which we believe are inconsistent with the terms and
conditions on which VSNL has secured the bandwidth for its international
gateways. This is pending matter and, as of the date of this annual report, no
decision has been announced. The resolution of this dispute will have an impact
on our business.

        We are party to additional legal actions arising in the ordinary course
of business. Based on information available to us as of March 31, 2001, we
believe that we have adequate legal defenses or insurance coverage for these
actions and that the ultimate outcome of these actions will not have a material
adverse effect on our company.

DIVIDENDS

        We have not declared or paid any cash dividends on our equity shares
since inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business. Investors seeking cash dividends should not purchase
our ADSs.

        Under Indian law, a corporation may pay dividends upon a recommendation
by its Board of Directors and approval by a majority of its stockholders. Any
future cash dividends on our equity shares represented by ADSs will be paid to
the depositary in rupees and will generally be converted into dollars by the
depositary and distributed to holders of ADSs, net of the depositary's fees and
expenses.

ITEM 9. THE OFFER AND LISTING

TRADING MARKETS

        There is no public market for our equity shares in India, the United
States or any other market. Our ADSs evidenced by American Depositary Receipts,
or ADRs, are traded in the United States on the Nasdaq National Market. Each ADS
represents one-fourth of one equity share. The ADRs evidencing ADSs were issued
by our depositary, Citibank, N.A., pursuant to a Deposit Agreement.

        The number of outstanding equity shares in our company as of March 31,
2001 was 23,183,103. As of March 31, 2001, there were approximately 45,000
record holders of ADRs evidencing 23,733,612 ADSs (representing 5,933,403 equity
shares).

PRICE HISTORY

        Our ADSs commenced trading on the Nasdaq National Market on October 19,
1999. The tables below set forth, for the periods indicated, high and low
trading prices for our ADSs:

    Prior Fiscal Years

<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                                      --------------------
FISCAL YEAR ENDED                                       HIGH        LOW
-----------------                                     --------   ---------
<S>                                                   <C>        <C>
March 31, 2000 (beginning October 19, 1999).........  $ 113.00   $    7.50
March 31, 2001......................................     64.00        2.94
</TABLE>



                                       52
<PAGE>   55

    Quarters of Prior Fiscal Years

<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                                      --------------------
FISCAL YEAR ENDED MARCH 31, 2000                        HIGH        LOW
--------------------------------                      --------   ---------
<S>                                                   <C>        <C>
Third Quarter (beginning October 19, 1999)..........  $  43.75   $    7.50
Fourth Quarter......................................    113.00       35.00
</TABLE>


<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                                      --------------------
FISCAL YEAR ENDED MARCH 31, 2001                        HIGH        LOW
--------------------------------                      --------   ---------
<S>                                                  <C>         <C>
First Quarter........................................ $  64.00   $   15.00
Second Quarter.......................................    23.25       11.75
Third Quarter .......................................    13.63        3.38
Fourth Quarter.......................................     8.25        2.94
</TABLE>

    Months of Prior Fiscal Year

<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                                      --------------------
MONTH                                                   HIGH        LOW
-----                                                 --------   ---------
<S>                                                   <C>        <C>
December 2000........................................ $   7.63   $    3.38
January 2001.........................................     8.25        2.97
February 2001........................................     7.94        4.19
March 2001...........................................     4.72        2.94
April 2001...........................................     4.31        2.50
May 2001.............................................     4.40        3.83
</TABLE>


The initial public offering of our ADSs was priced on October 18, 1999 at a
price of $4.50 per ADS.

ITEM 10. ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

    General

        Our authorized share capital is 25,000,000 shares, par value Rs.10 per
share. At our 2001 Annual General Meeting, our stockholders will consider a
special resolution to increase our authorized share capital to 35,000,000
shares, par value Rs.10 per share. As of March 31, 2001, 23,183,103 equity
shares and options to purchase an additional 565,020 equity shares were issued
and outstanding.

        The equity shares are our only class of share capital. However, our
Articles of Association and the Companies Act permit us to issue classes of
securities in addition to the equity shares. For the purposes of this
prospectus, "shareholder" means a shareholder who is registered as a member in
the register of members of our company.

        A total of 825,000 equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. At our 2001 Annual General Meeting, our
stockholders will consider a special resolution to increase the total number of
equity shares reserved for issuance under our ASOP to 1.2 million. As of March
31, 2001, we had outstanding an aggregate of 565,020 options (net of 95,740
options forfeited by employees and 200 options exercised for equity shares)
under our ASOP with a weighted average exercise price equal to approximately
Rs.2,621 per equity share. We recorded non-cash compensation charges related to
these grants in the aggregate amount of approximately Rs.101 million to be
recognized over a three-year period in accordance with vesting provisions.

        Under our Memorandum of Association, the main objective of our company
include:

        -       developing, servicing and selling or leasing data through direct
                or electronic media, developing a wide area of communications
                network and providing value-added services on the network for
                the development, service, purchase or sale of computers,
                software and related products in order to provide marketing
                services; and



                                       53
<PAGE>   56

        -       designing and developing systems and application software for
                sale in and outside of India, and designing and developing
                systems and applications software for or on behalf of
                manufacturers, owners and users of computer systems and digital
                or electronic equipment.

        On February 5, 1999, we entered into a Share Subscription and
Shareholders' Agreement, or Shareholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. The Shareholders' Agreement grants "tag-along" rights to
SARF in the event of a sale of our equity shares by Satyam Computer Services as
well as customary information and inspection rights. Sterling Commerce has
similar rights pursuant to the stockholders agreement in connection with the
sale of our equity shares to Sterling Commerce. The Shareholders' Agreement with
SARF provides that upon the occurrence of specified events, SARF may require
Satyam Computer Services to repurchase our equity shares owned by SARF. The
Shareholders' Agreements also granted to Satyam Computer Services and SARF
warrants to purchase up to an aggregate of 750,000 of our equity shares. Upon
the completion of our initial public offering in October 1999, Satyam Computer
Services and SARF exercised these warrants for an exercise price equal to
approximately 67% of our initial public offering price, or $12.00 per equity
share, and we issued an aggregate of 150,000 and 600,000 equity shares to Satyam
Computer Services and SARF, respectively.

    Dividends

        Under the Companies Act, unless our Board of Directors recommends the
payment of a dividend, we may not declare a dividend. Similarly, under our
Articles, although the shareholders may, at the annual general meeting, approve
a dividend in an amount less than that recommended by the Board, they cannot
increase the amount of the dividend. In India, dividends generally are declared
as a percentage of the par value of a company's equity shares. The dividend
recommended by the Board, if any, and subject to the limitations described
above, is distributed and paid to shareholders in proportion to the paid up
value of their shares within 30 days of the approval by the shareholders at the
annual general meeting. Pursuant to our Articles, our Board has discretion to
declare and pay interim dividends without shareholder approval. With respect to
equity shares issued during a particular fiscal year (including any equity
shares underlying ADSs issued to the depositary in connection with the offering
or in the future), cash dividends declared and paid for such fiscal year
generally will be prorated from the date of issuance to the end of such fiscal
year. Under the Companies Act, dividends can only be paid in cash to the
registered shareholder at a record date fixed on or prior to the annual general
meeting or to his order or his banker's order.

        Under the 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. Before declaring a dividend
greater than 10% of the par value of its equity shares, a company is required
under the Companies Act to transfer to its reserves a minimum percentage of its
profits for that year, ranging from 2.5% to 10% depending upon the dividend
percentage to be declared in such year. The Companies Act further provides that,
in the event of an 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
the following conditions:

        -       the rate of dividend to be declared may not exceed 10% of its
                paid up capital or the average of the rate at which dividends
                were declared by the company in the prior five years, whichever
                is less;

        -       the total amount to be drawn from the accumulated profits earned
                in the previous years and transferred to the reserves may not
                exceed an amount equivalent to 10% of its paid up capital and
                free reserves, and the amount so drawn is to be used first to
                set off the losses incurred in the fiscal year before any
                dividends in respect of preference or equity shares are
                declared; and

        -       the balance of reserves after withdrawals shall not fall below
                15% of its paid up capital.

        For additional information, please see "Item 8. Financial
Information--Dividends." A tax of 10.2%, including the presently applicable
surcharge, of the total dividend declared, distributed or paid for a relevant
period is payable by our company. For additional information, please see "Item
5. Operating and Financial Review and Prospects--Income Tax Matters."



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<PAGE>   57

    Bonus Shares

        In addition to permitting dividends to be paid out of current or
retained earnings as described above, the Companies Act permits us to distribute
an amount transferred from the general reserve or surplus in our profit and loss
account to our shareholders in the form of bonus shares, which are similar to a
stock dividend. The Companies Act also permits the issuance of bonus shares from
a share premium account. Bonus shares are distributed to shareholders in the
proportion recommended by the Board. Shareholders of record on a fixed record
date are entitled to receive such bonus shares.

    Preemptive Rights and Issue of Additional Shares

        The Companies Act gives shareholders the right to subscribe for new
shares in proportion to their respective existing shareholdings unless otherwise
determined by a special resolution passed by a general meeting of the
shareholders. For approval, a special resolution must be approved by a number of
votes which is not less than three times the number of votes against the special
resolution. At our 2000 Annual General Meeting, our stockholders approved a
special resolution pursuant to which we may issue up to one million equity
shares (equivalent to four million ADSs) in connection with acquisitions,
268,500 of which we issued in connection with our acquisition of IndiaWorld
Communications, 551,180 of which we issued in connection with our acquisition of
a 25% stake in CricInfo Limited and 113,798 of which we issued in connection
with our acquisition of Indiaplaza.com. At our 2001 Annual General Meeting, our
stockholders will consider a special resolution permitting us to issue up to
four million additional equity shares (equivalent to 16 million ADSs) in
connection with acquisitions or capital raising transactions. If this special
resolution is passed, ADS holders will be deemed to have waived their preemptive
rights with respect to these shares and our Board of Directors will be able to
approve the issuance of these shares without further action of our stockholders.
If we issue additional equity shares in the future and a special resolution is
not approved by our stockholders, the new shares must first be offered to our
existing stockholders as of a fixed record date. The offer must include: (1) the
right, exercisable by the shareholders of record, to renounce the shares offered
in favor of any other person; and (2) the number of shares offered and the
period of the offer, which may not be less than 15 days from the date of offer.
If the offer is not accepted it is deemed to have been declined. Our Board is
authorized under the Companies Act to distribute any new shares not purchased by
the preemptive rights holders in the manner that it deems most beneficial to our
company.

        Each of our directors is entitled to receive a sitting fee not exceeding
Rs.2000 for every Board and Committee meeting as well as all traveling and
out-of-pocket expenses incurred in attending such meetings. Our Board of
Directors may from time to time or at any time at its discretion raise or borrow
any sum of money for use by our company. Unless otherwise determined by our
company in a general meeting, our directors are not required to hold any shares
of our company's capital stock to qualify to serve. For additional information,
please see "Item 6. Director, Senior Management and Employees -- Board
Composition," "-- Board Committees" and "-- Director and Officer Compensation."

    Annual General Meetings of Shareholders

        We must convene an annual general meeting of 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 at least 10% of our paid up capital carrying
voting rights. The annual general meeting of the shareholders is generally
convened by our Secretary pursuant to a resolution of the Board. Written notice
setting out the agenda of the meeting must be given at least 21 days (excluding
the days of mailing and receipt) prior to the date of the general meeting to the
shareholders of record. 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 our
registered office 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. Our registered office is located
at Mayfair Trade Center, IInd Floor, 1-8-303/36, S.P. Road, Secunderabad 500
003, India.

        Our Articles provide that a quorum for a general meeting is the presence
of at least five shareholders in person.



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<PAGE>   58
    2001 Annual General Meeting

        Our Annual General Meeting for the 2001 fiscal year is presently
scheduled to be held on August 2, 2001 at 11:00 a.m (local time) at the
registered office of our company, II Floor, Mayfair Centre, 1-8-303/36, S.P.
Road, Secunderabad, 500 003, India The matters expected to be brought in front
of our stockholders at this meeting have been described in a Notice of Fifth
Annual General Meeting which was first mailed to shareholders on or about June
28, 2001 and has also been filed with the Commission as of June 28, 2001 on a
Form 6-K. Please see that filing for a description of the matters to be
considered by our stockholders at the meeting.

    Voting Rights

        At any general meeting, voting is by show of hands unless a poll is
demanded by a shareholder or shareholders present in person or by proxy holding
at least 10% of the total shares entitled to vote on the resolution or by those
holding shares with an aggregate paid up capital of at least Rs.50,000. Upon a
show of hands, every shareholder entitled to vote and present in person has one
vote and, on a poll, every shareholder entitled to vote and present in person or
by proxy has voting rights in proportion to the paid up capital held by such
shareholders. Our Chairman of the Board has a deciding vote in the case of any
tie.

        Any shareholder may appoint a proxy. The instrument appointing a proxy
must be delivered to us at least 48 hours prior to the meeting. A proxy may not
vote except on a poll. A corporate shareholder may appoint an authorized
representative who can vote on behalf of the shareholder, both upon a show of
hands and upon a poll

        Ordinary resolutions may be passed by simple majority of those present
and voting at any general meeting for which the required period of notice has
been given. However, specified resolutions such as amendments to our Articles
and the Memorandum of Association, commencement of a new line of business, the
waiver of preemptive rights for the issuance of any new shares and a reduction
of share capital, require that votes cast in favor of the resolution (whether by
show of hands or poll) are not less than three times the number of votes, if
any, cast against the resolution.

    Register of Shareholders; Record Dates; Transfer of Shares

        We maintain a register of shareholders. For the purpose of determining
the shares entitled to annual dividends, the register is closed for a specified
period prior to the annual general meeting. The date on which this period begins
is the record date.

        To determine which shareholders are entitled to specified shareholder
rights, we may close the register of shareholders. The Companies Act requires us
to give at least seven days' prior notice to the public before such closure. We
may not close the register of shareholders for more than thirty consecutive
days, and in no event for more than forty-five days in a year.

        Following the 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 some circumstances, the
equity shares of a public company are freely transferable, subject only to the
provisions of Section 111A of the Companies Act. Since we are a public company,
the provisions of Section 111A will apply to us. Our Articles currently contain
provisions which give our directors discretion to refuse to register a transfer
of shares in some circumstances. According to our Articles, our directors are
required to exercise this right in the best interests of our company. While our
directors are not required to provide a reason for any such refusal in writing,
they must give notice of the refusal to the transferee within one month after
receipt of the application for registration of transfer by our company. In
accordance with the provisions of Section 111A(2) of the Companies Act, our
directors may exercise this discretion if they have sufficient cause to do so.
If our directors refuse to register a transfer of shares, the shareholder
wishing to transfer his, her or its shares may file a civil suit or an appeal
with the Company Law Board, or CLB. Pursuant to Section 111A(3), if a transfer
of shares contravenes 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 or any other Indian laws, the CLB may,
on application made by the company, a depositary incorporated in India, an
investor, the Securities and Exchange Board of India or other parties, direct
the rectification of the register of records. The CLB may, in its discretion,
issue an interim order suspending the voting rights attached to the relevant
shares before making or completing its investigation into the



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<PAGE>   59

alleged contravention. Notwithstanding such investigation, the rights of a
shareholder to transfer the shares will not be restricted.

        Under the Companies Act, unless the shares of a company are held in a
dematerialized form, a transfer of shares is effected by an instrument of
transfer in the form prescribed by the Companies Act and the rules thereunder
together with delivery of the share certificates.
Our transfer agent is Citibank, N.A.--Mumbai branch.

    Audit and Annual Report

        At least 21 days before the annual general meeting of shareholders
excluding the days of mailing and receipt, we must distribute to our
shareholders a detailed version of our audited balance sheet and profit and loss
account and the related reports of the Board and the auditors, together with a
notice convening the annual general meeting. These materials are also generally
made available at our corporate website, www.sifycorp.com. Under the Companies
Act, we must file the balance sheet and annual profit and loss account presented
to the shareholders within 30 days of the conclusion of the annual general
meeting with the Registrar of Companies in Andhra Pradesh, India, which is the
state in which our registered office is located. We must also file an annual
return containing a list of our shareholders and other information, within 60
days of the conclusion of the meeting.

    Company Acquisition of Equity Shares

        Under the Companies Act, approval of at least 75% of a company's
shareholders voting on the matter and approval of the High Court of the State in
which the registered office of the company is situated is required to reduce a
company's share capital. A company may, under some circumstances, acquire its
own equity shares without seeking the approval of the High Court. However, a
company would have to extinguish the shares it has so acquired within the
prescribed time period. Generally, a company is not permitted to acquire its own
shares for treasury operations. An acquisition by a company of its own shares
(without having to obtain the approval of the High Court) must comply with
prescribed rules, regulations and conditions as laid down in the Companies Act
and the Securities and Exchange Board of India (Buy-back of Securities)
Regulations, 1998, or Buy-back Regulations. However, the Buy-back Regulations
apply only to public companies listed on a recognized Indian stock exchange and
will therefore not apply our company.

    Liquidation Rights

        Subject to the rights of creditors, employees and the holders of any
shares entitled by their terms to preferential repayment over the equity shares,
if any, in the event of our winding-up the holders of the equity shares are
entitled to be repaid the amounts of paid up capital or credited as paid up on
those equity shares. All surplus assets after payments due to the holders of any
preference shares at the commencement of the winding-up shall be paid to holders
of equity shares in proportion to their shareholdings.

MATERIAL CONTRACTS

        You should read the following description of our material contracts in
conjunction with the descriptions of our acquisitions and investments and our
relationships with strategic partners as described under "Item 4.--Information
on the Company."

        Internet Service Provider License. We entered into a license agreement
with the DOT on November 12, 1998 with effect on the same day, under which we
were granted a license to provide national Internet services on a non-exclusive
basis. The terms and conditions of our license are generally consistent with the
policy for licensing Internet service providers. The term of our license is 15
years. Our license can be revoked by the DOT if we breach the terms and
conditions of the license. The DOT retains the right to take over our network
and to modify, revoke, terminate or suspend the terms and conditions of the
license at any time if, in its opinion, it is necessary or expedient to do so in
the interest of general public, or for the proper operation of the
telecommunications sector or for security considerations. The DOT also retains
the right to review the terms of our license based on changes in national
telecommunications policy. We are not allowed to assign or transfer our rights
under our license without the prior written consent of the DOT.



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<PAGE>   60

        Until recently, Government of India policies limited the total foreign
equity in an Internet service provider to 49%. Our license currently provides
that the total foreign equity in our company may not, at any time, exceed 49% of
our total equity. In May 2001, the Department of Commerce and Industry increased
the limit on foreign direct investment for Internet companies, such as our
company, from 49% to 74%. The administrative process to implement this policy
has commenced, and we expect to apply to the DOT to amend our license to
increase the total foreign equity restriction contained therein from 49% to 74%.

        Internet telephony is not permitted by the current regulations. Our
license currently requires us to take measures to ban carriage of telephone
traffic over the Internet. Our license also requires us to ensure that
objectionable, obscene and unauthorized content, or any other content, messages
or communications infringing copyrights, intellectual property rights and
domestic and international cyberlaws or which is inconsistent with the laws of
India, is not carried on our network. Although under the terms of our license we
are free to fix the prices we charge our subscribers, the TRAI may set prices
for the provision of Internet access services generally. We are permitted to use
encryption to safeguard information transmitted over our network. However, if we
use a higher level of encryption than that specified by the Government of India,
our license requires us to deposit a set of keys with the Government of India.
License fees are waived through October 31, 2003, and a nominal license fee of
Rs.1 per annum is payable from November 1, 2003. Our obligations under the
license are secured by a performance bank guarantee in the amount of Rs.20.0
million ($0.4 million).

        Open Market. Open Market is a leading platform provider for Internet
commerce worldwide. In June 1997, we entered into a two-year distribution
agreement with Open Market pursuant to which Open Market made us its distributor
in India of some of its Internet commerce software products, provided we
continue to meet minimum sales thresholds. We purchase copies of software from
Open Market which we resell to our customers. Open Market has granted us a
license to use specified proprietary information and trademarks in connection
with our marketing of Open Market software. Our agreement with Open Market
automatically renewed on a non-exclusive basis at the end of the initial term
and again in September 2000. The agreement will automatically renew at the end
of each subsequent term provided we continue to meet minimum sales thresholds,
subject to each party's right to elect not to renew by providing written notice
to the other party. Open Market may terminate the agreement if we fail to meet
the minimum sales thresholds.

        Sterling Commerce. Sterling Commerce is a leader in the market for
business-to-business electronic commerce software, including communications
software, electronic data interchange, or EDI, software and banking systems
software. In February 1997, we entered into a five-year agreement with Sterling
Commerce pursuant to which Sterling Commerce granted to us the right in India,
subject to minimum sales thresholds, to market, provide, sublicense, install,
facilitate, maintain and support the electronic commerce network services,
support services and other products developed by Sterling Commerce. We pay to
Sterling Commerce an annual maintenance fee and a percentage of invoiced charges
for Sterling Commerce's products purchased by our customers. We also paid a
license fee to Sterling Commerce in 1997. The license permits us to use
specified proprietary information, as well as trademarks, service marks and
trade names, of Sterling Commerce in connection with advertising, promoting and
marketing Sterling Commerce's products in India. Our agreement with Sterling
Commerce terminates in 2002 provided that the parties may agree to renew the
term within 30 days of the end of the term, subject to Sterling Commerce's right
to terminate the agreement if we fail to meet any annual sales threshold. To
date, we have met all contractual obligations under our agreement with Sterling
Commerce.

        UUNet Technologies. UUNet Technologies, a unit of WorldCom, Inc., is a
world-wide provider of data services. We are the exclusive network partner to
UUNet Technologies in India, acting as the access gateway to its global network
from India. UUNet Technologies network business operates, manages and maintains
a global value-added enhanced data network. In April 1997, we entered into a
three-year agreement with Compuserve Network Services, the predecessor of UUNet
Technologies, pursuant to which we provide dial-up access services that are sent
to UUNet via the Internet. Each party surcharges its customers for traffic
originated on the other party's network, bills and collects the amount of such
surcharge and remits a portion to the other party. The cost of the leased line
connection between our network and UUNet Technologies network is shared between
the parties, and each party's proprietary rights remain the sole and exclusive
property of that party. Our agreement with UUNet Technologies automatically
renewed at the end of the initial term and again in April 2001. The agreement
will automatically



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<PAGE>   61

renew at the end of each subsequent term for a period of one year provided there
is no default and the parties have satisfied their respective monetary
obligations, subject to each party's right to elect not to renew the agreement
by providing written notice to the other party at least six months prior to the
end of the initial or any succeeding term.

EXCHANGE CONTROLS

    General

        Prior to June 1, 2000, investment in Indian securities was regulated by
the Indian Foreign Exchange Regulation Act, 1973. Under Section 29(1)(b) of the
Indian Foreign Exchange Regulation Act, 1973, no person or company resident
outside India that is not incorporated in India (other than a banking company)
could purchase the shares of any company carrying on any trading, commercial or
industrial activity in India without the permission of the Reserve Bank of
India. Also, under Section 19(1)(d) of the Indian Foreign Exchange Regulation
Act, 1973, the transfer and issuance of any security of any Indian company to a
person resident outside India required the permission of the Reserve Bank of
India. Under Section 19(5) of the Indian Foreign Exchange Regulation Act, 1973,
no transfer of shares in a company registered in India by a non-resident to a
resident of India was valid unless the transfer was confirmed by the Reserve
Bank of India upon application filed by the transferor or the transferee.
Furthermore, the issuance of rights and other distributions of securities to a
non-resident also requires the prior consent of the Reserve Bank of India.
However, the Reserve Bank of India has issued notifications over the past few
years relaxing the restrictions on foreign investment in Indian companies.

        As of June 1, 2000, the Indian Foreign Exchange Regulation Act, 1973 was
replaced by the Indian Foreign Exchange Management Act, 1999, or FEMA. The
Indian Foreign Exchange Management Act, 1999 contains provisions regarding
current account convertibility and amendments to the definition of a resident of
India. However, some of the preexisting controls and restrictions on capital
account transactions remain in force. While many of the restrictions imposed by
the Indian Foreign Exchange Regulation Act, 1973 have been relaxed under this
new legislation, the RBI continues to exercise control over capital account
transactions, which alter the assets or liabilities, including contingent
liabilities, of persons. The RBI has issued regulations under FEMA to regulate
various kinds of capital account transactions, including aspects of the purchase
and issuance of shares of Indian companies. Therefore, transaction involving
foreign investment in Indian securities is regulated by the provisions of the
Indian Foreign Exchange Management Act, 1999 and continues to be regulated by
the Reserve Bank of India.

    ADR Guidelines

        Shares of Indian companies represented by ADSs are no longer required to
be approved for issuance to foreign investors by the either Ministry of Finance
or the Reserve Bank of India under the Issue of Foreign Currency Convertible
Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993,
as modified from time to time, notified by the Government of India. This change
was effected through the guidelines for ADR and GDR issues by Indian companies
issued by the Ministry of Finance on January 19, 2000 and a notification issued
by the Reserve Bank of India. Hence we do not require the approval of the
Ministry of Finance and the Reserve Bank of India under the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme, 1993. However, we will be required to furnish full
particulars of the issue, including the underlying equity shares representing
the ADRs, to the Ministry of Finance and the Reserve Bank of India within 30
days of the completion of an offering.

        Further, pending utilization of foreign exchange resources raised by
issue of ADRs, Indian companies may invest the proceeds in foreign exchange in:

        (a)     deposits with or certificates of deposit or other instruments
                of banks who have been rated not less than A1+ by Standard and
                Poor or B1 by Moody's for short term obligations;

        (b)     deposits with branches outside India of an authorized dealer
                in India; and

        (c)     treasury bill and other monetary instruments with a maturity or
                unexpired maturity of the instrument of one year or less.

        The Issue of Foreign Currency Convertible Bonds and Ordinary Shares
Scheme 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 Issue of Foreign Currency Convertible Bonds and Ordinary
Shares Scheme also affords to owners of ADSs the benefits of Section 115AC of
the Indian Income-tax Act, 1961 for purposes of the application of Indian tax
law. For additional information, please see "Taxation -- Indian Taxation."

    Foreign Direct Investment

        Currently, due to recent changes in Indian policy, subject to certain
exceptions, foreign direct investment and investment by individuals of Indian
nationality or origin residing outside India, or non-resident Indians, and
overseas corporate bodies at least 60% owned by such persons, or overseas
corporate bodies, in Indian companies do



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not require the approval of the Foreign Investment Promotion Board, or FIPB, a
body formed by the Government of India to negotiate with large foreign companies
interested in making long-term investments in India. Furthermore, henceforth no
prior approval of the Reserve Bank of India is required although a
post-investment declaration in giving details of the foreign investment in the
company pursuant to the ADR issue must be filed with the Reserve Bank of India
within thirty days of our ADR offering. However, the waiver of approval by the
FIPB and the RBI is unavailable in certain industries which have been
identified by the Government of India. The waiver of approval would not apply
in the following cases:

        -       foreign investment in industries that require an industrial
                license;

        -       foreign investment being more than 24.0% in the equity capital
                of manufacturing items reserved for small scale industries;

        -       all proposals in which the foreign collaboration has a previous
                venture/tie-up in India in the relevant sector;

        -       all proposals relating to acquisition of shares in an existing
                company by a foreign investor;

        -       all proposals for investment in the industries specified by the
                Government of India; and

        -       all proposals for investment in specified industries where the
                proposed investment is in excess of the sectoral caps specified
                therein.

        In cases where FIPB approval is obtained, no prior approval of the
Reserve Bank of India is required, although a declaration in the prescribed form
as mentioned above must be filed with the Reserve Bank of India once the foreign
investment is made in the Indian company. In cases where no prior approval of
the FIPB is required, prior approval of the Reserve Bank of India would also not
be required. However, a declaration in the prescribed form giving details of the
foreign investment must be filed with the Reserve Bank of India once the foreign
investment is made in the Indian company.

        In May 1994, the Government of India announced that purchases by foreign
investors of ADSs and foreign currency convertible bonds of Indian companies
will be treated as foreign direct investment in the equity issued by Indian
companies for such offerings.

        In November 1998, the Reserve Bank of India issued a notification to the
effect that foreign investment in preferred shares will be considered as part of
the share capital of a company and the provisions relating to foreign direct
investment in the equity shares of a company discussed above would apply.
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.

        The discussion on the foreign direct investment regime in India set
forth above applies only to a new issuance of shares made by Indian companies,
not to a transfer of shares.

        Notwithstanding the foregoing, until recently Government of India
policies limited the total foreign equity in an Internet service provider to
49%. Our license currently provides that the total foreign equity in our company
may not, at any time, exceed 49% of our total equity. In May 2001, the
Department of Commerce and Industry increased the limit on foreign direct
investment for Internet companies, such as our company, from 49% to 74%. The
administrative process to implement this policy has commenced, and we expect to
apply to the DOT to amend our license to increase the total foreign equity
restriction contained therein from 49% to 74%.

    Investment by Non-Resident Indians and Overseas Corporate Bodies

        A variety of special facilities for making investments in India in
shares of Indian companies is available to individuals of Indian nationality or
origin residing outside India, or non-resident Indians, and to overseas
corporate bodies, or OCBs, at least 60% owned by such persons. These facilities
permit non-resident Indians and overseas corporate bodies 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.

        Apart from portfolio investments in Indian companies, non-resident
Indians and overseas corporate bodies may also invest in Indian companies
through foreign direct investments. For additional information, please see
"--Foreign Direct Investment." Under the foreign direct investment rules,
non-resident Indians and overseas corporate bodies may invest up to 100% in
high-priority industries in which other foreign investors are permitted to
invest only up to 50%, 51%, 74% or 100%, depending on the industry category.

    Investment by Foreign Institutional Investors

        In September 1992, the Government of India 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 make portfolio investments in
the securities of listed and unlisted companies in India. Under the guidelines,
foreign institutional investors must obtain an initial registration from the
Securities and Exchange Board of India to make these investments. Foreign
institutional investors must also comply with the provisions of the Securities
Exchange Board of India Foreign Institutional



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Investors Regulations, 1995. When it receives the initial registration, the
foreign institutional investor also obtains general permission from the Reserve
Bank of India to engage in transactions regulated under the Indian Foreign
Exchange Regulation Act. Together, the initial registration and the Reserve Bank
of India's general permission enable the registered foreign institutional
investor to buy, subject to the ownership restrictions discussed below, and sell
freely securities issued by Indian companies whether or not they are listed, 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, income received by way of interest and any
compensation received towards sale or renunciation of rights offerings of
shares. The foreign institutional investor regulations also set out the general
obligations and responsibilities and investment conditions and restrictions
applicable to foreign institutional investors. One such restriction is that
unless the foreign Institutional Investor is registered as a debt fund with the
Securities Exchange Board of India, the total investment in equity and
equity-related instruments should not be less than 70% of the aggregate of all
investments of a foreign institutional investor in India.

        Apart from making portfolio investments in Indian companies as described
above, foreign institutional investors may direct foreign investments in Indian
companies. For additional information, please see "--Foreign Direct Investment."

    Ownership Restrictions

        The Securities and Exchange Board of India and Reserve Bank of India
regulations restrict portfolio investments in Indian companies by foreign
institutional investors, non-resident Indians and overseas corporate bodies, all
of which we refer to as foreign portfolio investors. The Reserve Bank of India
issued a circular in August 1998 stating that foreign institutional investors in
aggregate may hold no more than 30% of the equity shares of an Indian company
and non-resident Indians and overseas corporate bodies in aggregate may hold no
more than 10% of the shares of an Indian company through portfolio investments.
Under current Indian law, foreign institutional investors in the aggregate may
hold no more than 24% of the equity shares of an Indian company, and
non-resident Indians and overseas corporate bodies in aggregate may hold no more
than 10% of the shares of an Indian company through portfolio investments. The
24% limit referred to above may be increased to 49% if the stockholders of the
company pass a special resolution to that effect. The Reserve Bank of India
circular also states that no single foreign institutional investor may hold more
than 10% of the shares of an Indian company and no single non-resident Indian or
overseas corporate body may hold more than 5% of the shares of an Indian
company.

        Foreign institutional investors are urged to consult with their Indian
legal and tax advisers about the relationship between the foreign institutional
investor regulations and the ADSs and any equity shares withdrawn upon surrender
of ADSs.

        Under the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 approved by the
Securities and Exchange Board of India in January 1997 and notified by the
Government of India in February 1997, which replaced the Securities and Exchange
Board of India (Substantial Acquisition of Shares and Takeovers) Resolutions,
upon the acquisition of more than 5% of the outstanding shares of a public
Indian company, a purchaser is required to notify the company, and the company
is required to notify all the stock exchanges on which the shares of the company
are listed, of the purchaser's shareholdings or voting rights in that company
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. Upon the acquisition
of 15% or more of such shares or a change in control of the company, the
purchaser is required to make annual disclosures of the purchaser's holdings in
the company and to make an open offer to the other stockholders offering to
purchase at least 20% of all the outstanding shares of the company at a minimum
offer price as determined pursuant to the new regulations. A purchaser who holds
between 15.0% and 75.0% of a company's shares cannot acquire additional shares
or voting rights that would entitle the purchaser to exercise an additional 5.0%
of the voting rights in any 12-month period unless such purchaser makes a public
announcement offering to acquire an additional 20% of the company's shares. Upon
conversion of ADSs into equity shares, an ADS holder will be subject to the
Takeover Code. The Takeover Code does not apply to purchases involving the
acquisition of shares (i) by allotment in a public, rights and preferential
issue, (ii) pursuant to an underwriting agreement, (iii) by registered
stockbrokers in the ordinary course of business on behalf of customers, (iv) in
unlisted companies, (v) pursuant to a scheme of reconstruction or amalgamation
or (vi) pursuant to a scheme under Section 18 of the Sick Industrial Companies
(Special Provisions) Act, 1985. The Takeover Code does not apply to purchases in
the ordinary course of business by public financial institutions either on their
own account or as a pledgee. In addition, the Takeover Code does not apply to
the purchase of ADSs so long as they are not converted into equity shares.
However, since we are an unlisted company, the provisions of the new regulations
will not apply to us. If our shares are listed on an Indian stock exchange in
the future, the new regulations will apply to the holders of our ADSs.

        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 Government of India approval on a case-by-case basis.



                                       61
<PAGE>   64

    Voting Rights of Deposited Equity Shares Represented by ADSs

        Holders of ADSs generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the equity shares
represented by the related ADSs.

        At our request, the depositary bank will mail to the holders of ADSs any
notice of stockholders' meeting received from us together with information
explaining how to instruct the depositary bank to exercise the voting rights of
the securities represented by ADSs.

        If the depositary bank timely receives voting instructions from a holder
of ADSs, it will endeavor to vote the securities represented by the holder's
ADSs in accordance with such voting instructions. In the event that voting takes
place by a show of hands, the depositary bank will cause the custodian to vote
all deposited securities in accordance with the instructions received by holders
of a majority of the ADSs for which the depositary bank receives voting
instructions.

        Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that ADS holders will receive
voting materials in time to enable them to return voting instructions to the
depositary bank in a timely manner. Securities for which no voting instructions
have been received will not be voted except as discussed above.

TAXATION

    Indian Taxation

        General. The following relates to the principal Indian tax consequences
for holders of ADSs and equity shares received upon withdrawal of such equity
shares who are not resident in India, whether of Indian origin or not. We refer
to these persons as non-resident holders. The following is based on the
provisions of the Income-tax Act, 1961, including the special tax regime
contained in Section 115AC and the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993. The
Income-tax Act is amended every year by the Finance Act of the relevant year.
Some or all of the tax consequences of the Section 115AC may be amended or
changed by future amendments of the Income-tax Act.

        This section 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. Personal tax
consequences of an investment may vary for non-resident holders 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 Income-tax Act, an individual is
considered to be a resident of India during any fiscal year if he or she is in
India in that year for:

        -       a period or periods amounting to 182 days or more; or

        -       60 days or more and, 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 182 days or more effective April 1, 1995
                and 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 a resident of India if it is registered in India or the control and
the management of its affairs is situated wholly in India. A firm or other
association of persons is resident in India except where the control and
management of its affairs is situated wholly outside India. Individuals,
companies, firms and other associations of persons that are not residents of
India would be treated as non-residents for purposes of the Income-tax Act.

        Taxation of Distributions. There is no withholding tax on dividends paid
to stockholders. However, the company paying the dividend is subject to a
dividend distribution tax of 10.2%, including the presently applicable surcharge
of 2.0%, on the total amount it distributes, declares or pays as a dividend.
This dividend distribution tax is in addition to the normal corporate tax of
39.6%, including the presently applicable surcharge of 2.0%.



                                       62
<PAGE>   65

        Any distributions of additional ADSs, equity shares or rights to
subscribe for equity shares made to non-resident holders with respect to ADSs or
equity shares will not be subject to Indian tax. Similarly, the acquisition by a
non-resident holder of equity shares upon redemption of ADSs will not constitute
a taxable event for Indian income tax purposes. Such acquisition will, however,
give rise to a 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 any non-resident outside India is not
subject to Indian capital gains tax.

        Since our ADS offerings were approved by the Government of India under
the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme,
non-resident holders of the ADSs have the benefit of tax concessions available
under Section 115AC. As a result, gains realized on the sale of ADSs will not be
subject to Indian taxation. The effect of the Scheme in the context of Section
115AC 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 taxation on capital gains as
discussed below. The Issue of Foreign Currency Convertible Bonds and Ordinary
Shares Scheme provides that if the equity shares are sold on a recognized stock
exchange in India against payment in Indian rupees, they will no longer be
eligible for such concessional tax treatment.

        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 which is to be withheld at
the source by the buyer. However, the acquisition by non-resident holders of
equity shares in exchange for ADSs will not be subject to Indian capital gains
tax. Under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
Scheme, the cost of acquisition of equity shares received in exchange for ADSs
will be the cost of the underlying shares on the date that the depositary gives
notice to the custodian of the delivery of the equity shares in exchange for the
corresponding ADSs. In the case of companies listed in India, the cost of
acquisition of the equity shares would be the price of the equity shares
prevailing on the Stock Exchange, Mumbai or the National Stock Exchange on the
date the depositary gives notice to the custodian of the delivery of the equity
shares in exchange for the corresponding ADSs. However, the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares Scheme and Section 115AC do not
provide for determination of the cost of acquisition for the purposes of
computing capital gains tax where the shares of the Indian company are not
listed on the Stock Exchange, Mumbai or the National Stock Exchange in India.
Therefore, in the case of our company, which is not listed on either the Stock
Exchange, Mumbai or the National Stock Exchange, the mode of determination of
the cost of acquisition of equity shares is unclear. Therefore, the original
cost of acquisition of the ADSs may be treated as the cost of acquisition for
the purposes of determining the capital gains tax. According to the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares Scheme, a non-resident
holder's holding period for purposes 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 India-U.S. Treaty does not provide an exemption from the
imposition of Indian capital gains tax.

        Under Section 115AC, taxable gain realized in respect of equity shares
held for more than 12 months, or long-term gain, is subject to tax at the rate
of 10%. Taxable gain realized in respect of equity shares held for 12 months or
less, or short-term gain, is subject to tax at variable rates with a maximum
rate of 48%. In addition, non-corporate foreign assessees are subject to a
surcharge of 2.0%. The actual rate of tax on short-term gain depends on a number
of factors, including the residential status of the non-resident holder and the
type of income chargeable in India.

        Buy-back of Securities. Currently, Indian companies are not subject to
any tax in respect of the buy-back of their shares. However, the stockholders
will be taxed on any gain at the long-term or short-term, as applicable, capital
gains rates. For additional information, please see "--Taxation of Capital
Gains."

        Stamp Duty and Transfer Tax. Upon issuance of the equity shares
underlying our ADSs, we are required to pay a stamp duty of 0.1% of the
aggregate value of the shares issued, provided that the issue of dematerialized
shares is not subject to Indian stamp duty. A transfer of ADSs is not subject to
Indian stamp duty. However, upon the acquisition of equity shares from the
depositary in exchange for ADSs, the non-resident holder will be liable for
Indian stamp duty at the rate of 0.5% of the market value of the equity shares
on the redemption date. Similarly upon a sale of shares in physical form, stamp
duty at the rate of 0.5% of the market value of the equity shares on the



                                       63
<PAGE>   66

trade date is payable, although customarily such duty is borne by the purchaser.
Blocks of 500 or less of our equity shares may be issued and traded in physical
form, and are thus subject to Indian stamp duty. Blocks of more than 500 of our
equity shares must be issued and traded in dematerialized form and are not
subject to Indian stamp duty.

        Wealth Tax. The holding of the ADSs in the hands of non-resident holders
and the holding of the underlying equity shares by the depositary as a fiduciary
will be exempt from Indian wealth tax. Non-resident holders are advised to
consult their own tax advisers in this context.

        Gift Tax and Estate Duty. Indian gift tax was abolished in October 1998.
In India, there is no estate duty law. As a result, no estate duty would be
applicable in India. Non-resident holders are advised to consult their own tax
advisors in this context.

        Service Tax. Brokerage or commissions paid to stockbrokers in connection
with the sale or purchase of shares is subject to a service tax of 5.0%. The
stockbroker is responsible for collecting the service tax and paying it to the
relevant authority.

    United States Federal Taxation

        The following is a summary of the material U.S. federal income and
estate tax consequences that may be relevant with respect to the acquisition,
ownership and disposition of equity shares or ADSs. This summary addresses the
U.S. federal income and estate tax considerations of holders that are U.S.
persons, i.e., citizens or residents of the United States, partnerships or
corporations created in or under the laws of the United States or any political
subdivision thereof or therein, estates, the income of which is subject to U.S.
federal income taxation regardless of its source and trusts for which a U.S.
court exercises primary supervision and a U.S. person has the authority to
control all substantial decisions and that will hold equity shares or ADSs as
capital assets. We refer to these persons as U.S. holders. This summary does not
address tax considerations applicable to holders that may be subject to special
tax rules, such as banks, insurance companies, dealers in securities or
currencies, tax-exempt entities, persons that hold equity shares or ADSs as a
position in a "straddle" or as part of a "hedging" or "conversion" transaction
for tax purposes, persons that have a "functional currency" other than the U.S.
dollar or holders of 10% or more, by voting power or value, of the stock of our
company. This summary is based on the tax laws of the United States as in effect
on the date of this annual report and on United States Treasury Regulations in
effect or, in some cases, proposed, as of the date of this annual report, as
well as judicial and administrative interpretations thereof available on or
before such date and is based in part on representations of the depositary and
the assumption that each obligation in the deposit agreement and any related
agreement will be performed in accordance with its terms. All of the foregoing
are subject to change, which change could apply retroactively and could affect
the tax consequences described below.

        Each prospective investor should consult his, her or its own tax advisor
with respect to the U.S. Federal, state, local and foreign tax consequences of
acquiring, owning or disposing of equity shares or ADSs.

        Ownership of ADSs. For U.S. federal income tax purposes, holders of ADSs
will be treated as the owners of equity shares represented by such ADSs.

        Dividends. Distributions of cash or property (other than equity shares,
if any, distributed pro rata to all stockholders of our company, including
holders of ADSs) with respect to equity shares will be includible in income by a
U.S. holder as foreign source dividend income at the time of receipt, which in
the case of a U.S. holder of ADSs generally will be the date of receipt by the
depositary, to the extent such distributions are made from the current or
accumulated earnings and profits of our company as determined under U.S. federal
income tax principles. Such dividends will not be eligible for the dividends
received deduction generally allowed to corporate U.S. holders. To the extent,
if any, that the amount of any distribution by our company exceeds our company's
current and accumulated earnings and profits, it will be treated first as a
tax-free return of the U.S. holder's tax basis in the equity shares or ADSs and
thereafter as capital gain.

        A U.S. holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Indian dividend distribution taxes paid by
our company, unless it is a U.S. company holding at least 10% of our company.
U.S. holders should be aware that dividends paid by our company generally will
constitute "passive income" for purposes of the foreign tax credit (or, in the
case of certain holders, "financial services income").



                                       64
<PAGE>   67

        If dividends are paid in Indian rupees, the amount of the dividend
distribution includible in the income of a U.S. holder will be in the U.S.
dollar value of the payments made in Indian rupees, determined at a spot
exchange rate between Indian rupees and U.S. dollars applicable to the date such
dividend is includible in the income of the U.S. holder, regardless of whether
the payment is in fact converted into U.S. dollars. Generally, gain or loss, if
any, resulting from currency exchange fluctuations during the period from the
date the dividend is paid to the date such payment is converted into U.S.
dollars will be treated as ordinary income or loss.

        Sale or Exchange of equity shares or ADSs. A U.S. holder generally will
recognize gain or loss on the sale or exchange of equity shares or ADSs equal to
the difference between the amount realized on such sale or exchange and the U.S.
holder's tax basis in the equity shares or ADSs. Subject to special rules
described below governing passive foreign investment companies, such gain or
loss will be capital gain or loss, and will be long-term capital gain or loss if
the equity shares or ADSs were held for more than one year. Gain or loss, if
any, recognized by a U.S. holder generally will be treated as U.S. source gain
or loss for U.S. foreign tax credit purposes. The deductibility of capital
losses may be subject to limitation.

        Estate Taxes. An individual stockholder who is a citizen or resident of
the United States for U.S. 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 U.S. federal estate tax purposes.

        Passive Foreign Investment Company. A non-U.S. corporation will be
classified as a passive foreign investment company for U.S. Federal income tax
purposes if either:

        -       75% or more of its gross income for the taxable year is passive
                income; or

        -       on a quarterly average for the taxable year by value (or, if it
                is not a publicly traded corporation and so elects, by adjusted
                basis) 50% or more of its assets produce or are held for the
                production of passive income.

        We do not believe that we satisfy either of the tests for passive
foreign investment company status. If we were to be a passive foreign investment
company for any taxable year, U.S. holders would be required to either:

        -       pay an interest charge together with tax calculated at maximum
                ordinary income rates on "excess distributions," which is
                defined to include gain on a sale or other disposition of equity
                shares;

        -       if a qualified electing fund election is made, include in their
                taxable income their pro rata share of undistributed amounts of
                our income; or

        -       if the equity shares are "marketable" and a mark-to-market
                election is made, mark-to-market the equity shares each taxable
                year and recognize ordinary gain and, to the extent of prior
                ordinary gain, ordinary loss for the increase or decrease in
                market value for such taxable year.

        Backup Withholding Tax and Information Reporting Requirements. Dividends
paid on equity shares to a holder who is not an "exempt recipient," if any, may
be subject to information reporting and, unless a holder either furnishes its
taxpayer identification number or otherwise establishes an exemption, may also
be subject to U.S. backup withholding tax. In addition, information reporting
will apply to payments of proceeds from the sale or redemption of equity shares
or ADSs by a paying agent, including a broker, within the United States to a
U.S. holder, other than an "exempt recipient." An "exempt recipient" includes a
corporation. In addition, a paying agent within the United States will be
required to withhold 31% of any payments of the proceeds from the sale or
redemption of equity shares or ADSs within the United States to a holder, other
than an "exempt recipient," if such holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with such backup withholding
requirements.

        The above summary is not intended to constitute a complete analysis of
all tax consequences relating to ownership of equity shares or ADSs. You should
consult your own tax advisor concerning the tax consequences of your particular
situation.



                                       65
<PAGE>   68

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Approximately 30% of our revenues are denominated in foreign currency.
Our expenses denominated in foreign currency include the cost of purchasing
software from BroadVision, Open Market and Sterling Commerce.

        Our foreign exchange loss was Rs.0 and Rs.0.01 million in fiscal 1997
and 1998, respectively, and our foreign exchange gain was Rs. 0.6 million,
Rs.5.4 million and Rs.162 million for fiscal 1999, 2000 and 2001, respectively.
Our foreign exchange gain in fiscal 1999, 2000 and 2001 was primarily due to our
short-term investment of the proceeds from our public offerings in high quality,
interest bearing instruments denominated in U.S. dollars.

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

        Under the Companies Act, 1956 of India, or Companies Act, a company
incorporated in India must offer its holders of equity shares preemptive rights
to subscribe and pay for a proportionate number of shares to maintain their
existing ownership percentages prior to the issuance of any new equity shares,
unless the preemptive rights have been waived by adopting a special resolution
by holders of three-fourths of the company's shares which are voted on the
resolution. At our 2000 Annual General Meeting, our stockholders approved a
special resolution permitting us to issue up to one million equity shares
(equivalent to four million ADSs) in connection with acquisitions. We issued
virtually all of these equity shares in connection with our acquisitions of
IndiaWorld Communications and Indiaplaza.com and our investment in CricInfo
Limited. At our 2001 Annual General Meeting, our stockholders will consider a
special resolution permitting us to issue up to four million additional equity
shares (equivalent to 16 million ADSs) in connection with acquisitions or
capital raising transactions. If this special resolution is passed, ADS holders
will be deemed to have waived their preemptive rights with respect to these
shares and our Board of Directors will be able to approve the issuance of these
shares without further action of our stockholders.




ITEM 15. RESERVED

ITEM 16. RESERVED

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

        Not applicable.

ITEM 18. FINANCIAL STATEMENTS



                                       66
<PAGE>   69

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Satyam Infoway Limited

We have audited the accompanying consolidated balance sheets of Satyam Infoway
Limited and subsidiaries as of March 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income, and cash flows, for each of the years in the three-year period ended
March 31, 2001. 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. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Satyam Infoway
Limited and subsidiaries as of March 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 2001, in conformity with accounting principles generally
accepted in the United States.

The United States dollar amounts are presented in the accompanying financial
statements solely for the convenience of the readers and have been translated to
United States dollars on the basis described in Note 2 to the consolidated
financial statements.


KPMG
Chennai, India
June 4, 2001


                                       67
<PAGE>   70

                          CONSOLIDATED BALANCE SHEETS
           (IN THOUSANDS, EXCEPT SHARE DATA AND AS OTHERWISE STATED)


<TABLE>
<CAPTION>
ASSETS                                                                             AS AT MARCH 31,
                                                               -----------------------------------------------------
                                                                    2000                2001                2001
                                                               -------------       -------------         -----------
<S>                                                            <C>                 <C>                   <C>
Current assets:
  Cash and cash equivalents                                    Rs.  7,307,625      RS. 1,444,307        $    30,828
  Accounts receivable                                                245,030             826,273              17,637
  Due from officers and employees                                      6,387              11,487                 245
  Inventories                                                         18,184             110,092               2,350
  Investments                                                         22,611               9,834                 210
  Deferred income taxes                                                  114                  --                  --
  Prepaid expenses                                                   251,537             209,335               4,469
  Other current assets                                               166,431             276,390               5,899
                                                               -------------       -------------         -----------
TOTAL CURRENT ASSETS                                               8,017,919           2,887,718              61,638

Property, plant and equipment--net                                   915,021           2,408,253              51,403
Goodwill and other intangible assets                               1,630,418           4,433,142              94,624
Investments in affiliates                                                 --           1,506,244              32,150
Deferred income taxes                                                    268                  --                  --
Other assets                                                          70,378             266,527               5,689
                                                               -------------       -------------         -----------
TOTAL ASSETS                                                   Rs.10,634,004       Rs.11,501,884         $   245,504
                                                               =============       =============         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

  Current installments of capital lease obligations                 Rs.2,104            Rs.4,807         $       103
  Current installments of long-term debt                              40,267                  --                  --
  Trade accounts payable                                             170,587             136,351               2,911
  Accrued expenses                                                    66,614             369,518               7,887
  Deferred revenue                                                   150,494             189,117               4,037
  Taxes payable                                                        2,285               1,796                  38
  Deferred income taxes                                                5,612                  --                  --
  Advances from customers                                             20,653              99,708               2,128
  Other current liabilities                                           55,785              44,380                 947
                                                               -------------       -------------         -----------
TOTAL CURRENT LIABILITIES                                            514,401             845,677              18,051

NON-CURRENT LIABILITIES:

  Long-term debt, excluding current installments                     168,860                 960                  20
  Capital lease obligations, excluding current installments            4,306               8,028                 171
  Other liabilities                                                   10,299              25,204                 538
                                                               -------------       -------------         -----------
TOTAL LIABILITIES                                                    697,866             879,869              18,780
                                                               -------------       -------------         -----------

Minority interest                                                      8,298              33,677                 719

STOCKHOLDERS' EQUITY

Equity shares at Rs. 10 par value: 25,000,000 shares
  authorized as of March 31, 2000 and 2001; Issued and
  outstanding : 22,249,425 shares as of March 31, 2000
  and 23,183,103 shares as of March 31, 2001                        222,494             231,831               4,948
  Additional paid-in capital                                      10,520,953          13,669,572             291,773
  Deferred stock compensation                                       (120,224)           (101,105)             (2,158)
  Accumulated deficit                                               (696,834)         (3,205,864)            (68,428)
  Accumulated other comprehensive income                               1,451              (6,096)               (130)
                                                               -------------       -------------         -----------
TOTAL STOCKHOLDERS' EQUITY                                         9,927,840          10,588,338             226,005
                                                               -------------       -------------         -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     Rs.10,634,004       Rs.11,501,884         $   245,504
                                                               =============       =============         ===========
</TABLE>


                 See accompanying notes to financial statements



                                       68
<PAGE>   71

                             SATYAM INFOWAY LIMITED
                     CONSOLIDATED STATEMENTS OF OPERATOINS
           (IN THOUSANDS, EXCEPT SHARE DATA AND AS OTHERWISE STATED)

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED MARCH 31,
                                                               -----------------------------------------------------------------
                                                                    1999            2000              2001              2001
                                                               ------------     ------------     -------------      ------------
<S>                                                            <C>              <C>              <C>                <C>
Revenues                                                       Rs.  103,344     Rs.  671,025     Rs. 1,787,076      $     38,145
Cost of revenues (excluding depreciation and amortization)          (63,651)        (293,731)       (1,261,088)          (26,918)
                                                               ------------     ------------     -------------      ------------
GROSS PROFIT (EXCLUDING DEPRECIATION AND AMORTIZATION)               39,693          377,294           525,988            11,227
                                                               ------------     ------------     -------------      ------------

OPERATING EXPENSES:
Selling, general and administrative expenses                        200,213          703,114         2,135,649            45,585
Amortization of goodwill                                                 --          115,992         1,133,299            24,190
Amortization of deferred stock compensation expense                      69           20,627            86,796             1,853
Foreign exchange gain                                                  (615)          (5,414)         (162,136)           (3,461)
                                                               ------------     ------------     -------------      ------------
TOTAL OPERATING EXPENSES                                            199,667          834,319         3,193,608            68,167
                                                               ------------     ------------     -------------      ------------

Operating loss                                                     (159,974)        (457,025)       (2,667,620)          (56,940)
Other (expense)/income, net                                         (27,402)          71,852           242,368             5,173
                                                               ------------     ------------     -------------      ------------
Loss before equity in losses of affiliates,
  income taxes and minority interest                               (187,376)        (385,173)       (2,425,252)          (51,767)
Equity in losses of affiliates                                           --               --           (93,208)           (1,990)
                                                               ------------     ------------     -------------      ------------
Loss before income taxes and minority interest                     (187,376)        (385,173)       (2,518,460)          (53,757)

Income taxes                                                             --            1,478            (1,707)              (36)
Minority interest                                                        --            1,799            11,137               238
                                                               ------------     ------------     -------------      ------------
NET LOSS                                                       Rs.(187,376)     Rs. (381,896)    Rs.(2,509,030)     $    (53,555)
                                                               ============     ============     =============      ============

NET LOSS PER SHARE                                                   (17.31)          (20.59)          (109.79)            (2.34)

Weighted average equity shares used in
  computing loss per share                                       10,824,826       18,545,399        22,852,600        22,852,600
</TABLE>


               See accompanying notes to financial statements



                                       69
<PAGE>   72

                             SATYAM INFOWAY LIMITED
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
           (IN THOUSANDS, EXCEPT SHARE DATA AND AS OTHERWISE STATED)


<TABLE>
<CAPTION>
                                                            Common Stock
                                                  -----------------------------    Additional Paid    Comprehensive
                                                     Shares          Par Value       In Capital          Income
                                                  ------------     ------------    ---------------    ------------
<S>                                               <C>              <C>             <C>                <C>
BALANCE AS OF MARCH 31, 1998                         7,500,230     Rs.   75,002
                                                  ================================================================
Deficit transfer
Common stock issued to the parent Company            4,879,770           48,798     Rs.   44,986
Other issuance of common stock                       3,370,000           33,700          180,000
Compensation related to stock option grants                                                1,650
Amortization of compensation related to stock
option grants
Comprehensive income
Net loss                                                                                                  (187,376)
Other comprehensive income                                                                                      --
                                                                                                      ------------
Comprehensive income                                                                                      (187,376)
                                                                                                      ============
                                                  ----------------------------------------------
BALANCE AS OF MARCH 31, 1999                        15,750,000          157,500          226,636
Common stock issued to the parent Company              150,000            1,500           76,620
Common stock issued during the period                6,349,425           63,494       10,078,427
Compensation related to stock option grants                                              139,270
Amortization of compensation related to stock
option grants
Comprehensive income
Net loss                                                                                                  (381,896)
Other comprehensive income
Unrealized gain on investments, net                                                                   Rs.    1,451
                                                                                                      ------------
Comprehensive income                                                                                  Rs. (380,445)
                                                                                                      ============
                                                  ----------------------------------------------
BALANCE AS OF MARCH 31, 2000                        22,249,425          222,494       10,520,953
Issue of common stock for acquisitions and
investments                                            933,678            9,337        3,122,097
Compensation related to stock option grants                                               67,677
Amortization of compensation related to stock
option  grants
Capital transaction of investee                                                          (41,155)
Comprehensive income
Net loss                                                                                                (2,509,030)
Other comprehensive income
Unrealized loss on investments, net                                                                         (7,547)
                                                                                                      ------------
Comprehensive income                                                                                    (2,516,577)
                                                                                                      ============
                                                  ----------------------------------------------
BALANCE AS OF MARCH 31, 2001                        23,183,103     Rs.  231,831    Rs.13,669,572
                                                  ==============================================
                                                  ----------------------------------------------
BALANCE AS OF MARCH 31, 2001                        23,183,103     $      4,948    $     291,773
                                                  ==============================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                     Deferred
                                                                 Accumulated      Compensation
                                                Accumulated         Other            Employee                             Total
                                               Deficit During   Comprehensive      Stock Offer       Accumulated       Stockholders'
                                             Development Stage      Income             Plan            deficit            Equity
                                             -----------------  -------------     -------------      ------------      ------------
<S>                                          <C>                <C>               <C>                <C>               <C>
BALANCE AS OF MARCH 31, 1998                   Rs. (127,562)                                                           Rs.  (52,560)
                                               ====================================================================================
Deficit transfer                                    127,562                                         Rs.  (127,562)               --
Common stock issued to the parent Company                                                                                    93,784
Other issuance of common stock                                                                                              213,700
Compensation related to stock option grants                                        Rs.   (1,650)                                 --
Amortization of compensation related
  to stock option grants                                                                     69                                  69
Comprehensive income
Net loss                                                                                                 (187,376)         (187,376)
Other comprehensive income

Comprehensive income

                                               ------------------------------------------------------------------------------------
BALANCE AS OF MARCH 31, 1999                             --                --            (1,581)         (314,938)           67,617
Common stock issued to the parent Company                                                                                    78,120
Common stock issued during the period                                                                                    10,141,921
Compensation related to stock option grants                                            (139,270)                                 --
Amortization of compensation related
  to stock option grants                                                                 20,627                              20,627
Comprehensive income
Net loss                                                                                                 (381,896)         (381,896)
Other comprehensive income
Unrealized gain on investments, net                              Rs.    1,451                                                 1,451
Comprehensive income

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

BALANCE AS OF MARCH 31, 2000                             --             1,451          (120,224)         (696,834)        9,927,840
Issue of common stock for acquisitions and
investments                                                                                                               3,131,434
Compensation related to stock option grants                                             (67,677)                                 --
Amortization of compensation related
  to stock option grants                                                                 86,796                              86,796
Capital transaction of investee                                                                                             (41,155)
Comprehensive income
Net loss                                                                                               (2,509,030)       (2,509,030)
Other comprehensive income
Unrealized loss on investments, net                                    (7,547)                                               (7,547)
                                               ------------------------------------------------------------------------------------
Comprehensive income
                                               ------------------------------------------------------------------------------------
BALANCE AS OF MARCH 31, 2001                             --      Rs.   (6,096)     Rs. (101,105)    Rs.(3,205,864)     $ 10,588,338
                                               ====================================================================================
                                               ------------------------------------------------------------------------------------
BALANCE AS OF MARCH 31, 2001                             --      $       (130)     $     (2,158)    $     (68,428)     $    226,005
                                               ====================================================================================
</TABLE>


                 See accompanying notes to financial statements



                                       70
<PAGE>   73


                             SATYAM INFOWAY LIMITED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           (IN THOUSANDS, EXCEPT SHARE DATA AND AS OTHERWISE STATED)


<TABLE>
<CAPTION>
                                                                                      YEAR ENDED MARCH 31
                                                               -----------------------------------------------------------------
                                                                   1999              2000             2001              2001
                                                               -----------       -----------     -------------       -----------
<S>                                                            <C>               <C>             <C>                 <C>
Net loss                                                       Rs.(187,376)      Rs.(381,896)    Rs.(2,509,030)      $   (53,555)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
  PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization                                       49,163           262,509         1,655,656            35,340
Equity in losses of affiliates                                          --                --            93,208             1,990
Deferred taxes                                                          --            (1,693)             (120)               (3)
Gain on sale of investments                                             38               (99)              (28)               (1)
Loss on sale of plant and equipment                                     --                --               661                14
Provision for doubtful receivables                                     502             1,919            31,810               679
Minority interest                                                       --            (1,799)          (11,137)             (238)
Changes in assets and liabilities:
Accounts receivable                                                (43,644)         (195,389)         (608,058)          (12,979)
Due from officers and employees                                       (578)           (5,814)          (83,466)           (1,782)
Inventories                                                         (6,758)          (11,426)          (91,908)           (1,962)
Prepaid expenses                                                   (79,728)         (181,208)           42,203               901
Other assets                                                        (4,200)         (198,392)         (212,922)           (4,545)
Accrued expenses                                                    15,343            46,397           302,129             6,449
Trade accounts payable                                                  --                --           (28,927)             (617)
Deferred revenue                                                    71,506            77,967            38,412               820
Taxes payable                                                           --            (3,171)             (489)              (10)
Advances from customers                                             10,105             7,528            79,056             1,687
Other liabilities                                                    3,520            57,319            (5,411)             (115)
                                                               -----------       -----------     -------------       -----------
NET CASH USED IN OPERATING ACTIVITIES                          Rs.(172,107)      Rs.(527,248)    Rs.(1,308,361)      $   (27,927)
                                                               -----------       -----------     -------------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

Expenditure on  plant and equipment                               (144,331)         (714,135)       (1,914,824)          (40,871)
Proceeds from sale of plant and equipment                              135                --               934                20
Expenditure on  license fee                                             --                --           (28,000)             (598)
Expenditure on investment in affiliates                                 --                --          (163,627)           (3,493)
Purchase consideration for acquisitions, net of cash                    --        (1,738,825)       (2,233,121)          (47,665)
Expenditure on investments                                              --            (5,424)               --                --
Proceeds from sale of investments                                       --                --               147                 3
                                                               -----------       -----------     -------------       -----------
NET CASH USED IN INVESTING ACTIVITIES                          Rs.(144,196)      Rs.(2,458,384)  Rs.(4,338,491)      $   (92,604)
                                                               -----------       -----------     -------------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments of long-term debt                                    --          (157,833)         (208,167)           (4,443)
Proceeds from issuance of long-term debt                           136,500           107,551                --                --
Principal payment of short term loans                                   --                --            (1,800)              (38)
Principal payments under capital lease obligations                 (12,045)           (2,050)           (6,569)             (141)
Net proceeds from issuance of common stock                         307,484        10,220,041                70                 2
                                                               -----------       -----------      ------------       -----------
NET CASH PROVIDED BY/(USED IN)  FINANCING ACTIVITIES            Rs.431,939       Rs.10,167,709    Rs.(216,466)       $    (4,620)
                                                               -----------       -----------      ------------       -----------

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS               115,636         7,182,077        (5,863,318)         (125,151)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR               9,912           125,548         7,307,625           155,979
                                                               -----------       -----------      ------------       -----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR                Rs.125,548       Rs.7,307,625     Rs.1,444,307       $    30,828
                                                               -----------       ===========      ============       ===========

SUPPLEMENTARY INFORMATION
   Cash paid towards interest                                       27,755            26,356            11,695               250
   Cash paid towards taxes                                              --               425               935                20

SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITY
</TABLE>



                                       71
<PAGE>   74

                             SATYAM INFOWAY LIMITED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           (IN THOUSANDS, EXCEPT SHARE DATA AND AS OTHERWISE STATED)


<TABLE>
<S>                                                            <C>               <C>             <C>                 <C>
Additional common stock issued upon conversion
   of amounts payable to parent company                              1,084                --                --                --
   Capital leases                                                      161             7,704            12,994               277
   Additional common stock issued for
     acquisition of business                                            --                --         3,131,364            66,838
</TABLE>



                 See accompanying notes to financial statements


                                       72
<PAGE>   75

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

1.      DESCRIPTION OF BUSINESS

        Satyam Infoway Limited (Satyam) together with its subsidiaries (the
        Company) and its affiliates is engaged in providing various services,
        such as Corporate Network and Technology Services, Internet Access
        Services and Online Portal and Content Offerings.

        Satyam, headquartered in Chennai, India, is a majority owned subsidiary
        of Satyam Computer Services Limited (Satyam Computer Services).

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF PREPARATION OF FINANCIALS STATEMENTS

        The accompanying financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States (US
        GAAP) in Indian Rupees (Rs.), the national currency of India. Solely for
        the convenience of the reader, the financial statements as of and for
        the year ended March 31, 2001 have been translated into United States
        dollars at the noon buying rate in New York City on March 31, 2001 for
        cable transfers in Indian rupees, as certified for customs purposes by
        the Federal Reserve Bank of New York of US$1 = Rs.46.85. No
        representation is made that the Indian rupee amounts have been, could
        have been or could be converted into United States dollars at such a
        rate or at any other certain rate on March 31, 2001 or at any other
        date.

        USE OF ESTIMATES

        In conformity with US GAAP, management of the Company has made a number
        of estimates and assumptions relating to the reporting of assets,
        liabilities, revenues and expenses, and the disclosure of contingent
        assets and liabilities to prepare these consolidated financial
        statements. Some of the more significant estimates include allowances
        for doubtful accounts, depreciation and amortization of long-lived
        assets and the valuation allowance for deferred tax assets. Actual
        results could differ from those estimates.

        PRINCIPLES OF CONSOLIDATION

        The consolidated financial statements of Satyam include financial
        statements of its majority-owned subsidiaries, which are more than 50%
        owned and controlled. All material inter-company accounts and
        transactions are eliminated on consolidation.



                                       73
<PAGE>   76

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        INVESTMENTS IN AFFILIATES

        The Company accounts by the equity method for investments between 20%
        and 50% or where it would be otherwise able to exercise significant
        influence over the operating and financial policies of the investees.
        The excess of cost of the stock of these investees over the Company's
        share of their net assets at the acquisition date is being amortized on
        a straight line basis over 5 years.

        CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

        The Company considers all highly liquid investments with remaining
        maturities, at the date of purchase/investment, of three months or less
        to be cash equivalents. Cash and cash equivalents currently consist of
        cash and cash on deposit with banks.

        REVENUE RECOGNITION

        The operating segments of the Company include:

        -       Internet Access Services, which provides dial-up internet access
                and public internet access through cyber cafes;

        -       Corporate Network/Data Services, which provides private network
                services, messaging services and web hosting to corporates;

        -       E-Business Services, which provides business to business
                e-commerce and web site development;

        -       Online Portal Services; and

        -       Others, which include e-Learning, B2B marketplaces, and IT
                enabled services.

        These segments recognize revenues on the following basis:

        Internet Access Services

        Dial-up Internet access is sold to customers either for a specified
        number of hours or for an unlimited usage within a specified period of
        time. Customers purchase a CD that allows them to access the Internet.
        The amounts received from customers on the sale of these CD are not
        refundable. Satyam recognizes revenue from the sale of the CD based on
        usage by the customer over the specified period. At the end of the
        specified period, the remaining unutilized hours, if any, are recognized
        as revenue. Unlimited internet access and electronic mail access is sold
        to customers for a specified period of time over which the related
        revenue is recognized.

        Corporate Network/Data Services

        Revenues from corporate network/data services are recognized upon actual
        usage of such services by customers and are based on either the time for
        which the network is used or the volume of data transferred, or both.
        Revenues from agreements to provide dial-up access services through the
        Company's internet network are recognized on the basis of usage of the
        network by customers. Revenues from the sale of communication hardware
        and software required to provide the Company's network based services
        are recognized when the sale is complete with the passing of title.



                                       74
<PAGE>   77

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        E-Business Services

        Revenues from website hosting are recognized ratably over the period for
        which the site is hosted. Revenue from development of internet
        networking solutions comprises income from time-and-material contracts
        and fixed-price contracts. Revenues with respect to time-and-material
        contracts are recognized as related services are performed. Revenue with
        respect to fixed-price contracts are recognized in accordance with the
        percentage of completion method of accounting.

        Online Portal Services

        Revenues from banner advertisements and sponsorship contracts are
        recognized ratably over the period in which the advertisements are
        displayed. Revenues from electronic commerce transactions are recognized
        when the transactions are completed.

        INVENTORIES

        Inventories are generally stated at the lower of cost as determined
        using the first-in-first-out method (FIFO), or market value.

        PROPERTY, PLANT AND EQUIPMENT

        Property, plant and equipment are stated at cost. Plant and equipment
        under capital leases are stated at the present value of minimum lease
        payments. The Company computes depreciation for all plant and equipment
        using the straight-line method. Leasehold improvements are amortized on
        a straight-line basis over the shorter of the primary lease period or
        estimated useful life of the asset. The estimated useful lives of assets
        are as follows:

<TABLE>
        <S>                                                          <C>
        Buildings .................................................. 28 years

        Plant and machinery ........................................  5 years

        Computer equipment .........................................  2 years

        Office equipment ...........................................  5 years

        Furniture and fixtures .....................................  5 years

        Vehicles ...................................................  5 years

        System software ............................................  3 years
</TABLE>

        The Company purchases certain application software for internal use. It
        is estimated that such software has a relatively short useful life,
        usually less than one year. The Company, therefore, charges to income
        the cost of acquiring such software, at the time of acquisition.
        Deposits paid towards the acquisition of plant and equipment outstanding
        at each balance sheet date are disclosed under Construction-in-progress.



                                       75
<PAGE>   78

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        INTANGIBLE ASSETS

        Intangible assets consist of goodwill and licensing fees for certain
        rights associated with propriety electronic commerce technology.
        Goodwill is amortized over a 5-year period. Licensing fees are amortized
        over license periods ranging from 3-5 years.

        EARNINGS PER SHARE

        In accordance with Statement of Financial Accounting Standards (SFAS)
        No. 128, basic earnings per share are computed using the weighted
        average number of common shares outstanding during the period. Diluted
        earnings per share is computed using the weighted average number of
        common and dilutive common equivalent shares outstanding during the
        period, using the treasury stock method for options and warrants, except
        when the results would be anti-dilutive.

        INCOME TAXES

        Income taxes are accounted for using the asset and liability method.
        Deferred tax assets and liabilities are recognized for the future tax
        consequences attributable to differences between the financial statement
        carrying amounts of existing assets and liabilities and their respective
        tax bases and operating loss carry-forwards. Deferred tax assets and
        liabilities are measured using enacted tax rates expected to apply to
        taxable income in the years in which those temporary differences are
        expected to be recovered or settled. The effect on deferred tax assets
        and liabilities of a change in tax rates is recognized in income in the
        period that includes the enactment date. The measurement of deferred tax
        assets is reduced, if necessary, by a valuation allowance for any tax
        benefits of which future realization is uncertain.

        RETIREMENT BENEFITS TO EMPLOYEES

        i) Provident fund

        In accordance with Indian law, all employees receive benefits from a
        provident fund, which is a defined contribution plan. Both the employee
        and employer each make monthly contributions to the plan, each equal to
        a specified percentage of each employee's basic salary. The Company has
        no further obligations under the plan beyond its monthly contributions.

        ii) Gratuity

        In addition to the above benefits, the Company provides for gratuity, a
        defined benefit retirement plan (the Gratuity Plan) covering all
        employees. The Gratuity Plan commenced on April 1, 1997. The plan
        provides a lump sum payment to vested employees at retirement or
        termination of employment, which amount is based on the respective
        employee's salary and the years of employment with the Company. The
        Company provides the gratuity benefit through annual contributions to a
        fund managed by the Life Insurance Corporation of India (LIC). Under
        this scheme, the settlement obligation remains with the Company,
        although the LIC administers the scheme and determines the contribution
        premium required to be paid by the Company.



                                       76
<PAGE>   79

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        STOCK-BASED COMPENSATION

        The Company uses the intrinsic value-based method of Accounting
        Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
        Employees, to account for its employee stock-based compensation plan.
        The Company has therefore adopted the pro forma disclosure provisions of
        SFAS No. 123, Accounting for Stock-Based Compensation.

        IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

        The Company reviews its long-lived assets and certain intangibles for
        impairment whenever events or changes in circumstances indicate that the
        carrying amount of an asset may not be recoverable. Recoverability of
        assets to be held and used is measured by a comparison of the carrying
        amount of an asset to future net cash flows expected to be generated by
        the asset. If such assets are considered to be impaired, the impairment
        to be recognized is measured by the amount by which the carrying amount
        of the assets exceeds the fair value of the assets. Assets to be
        disposed of are reported at the lower of the carrying amount or fair
        value less cost to sell.

        GOODWILL

        Goodwill, which represents excess of purchase price over fair value of
        net assets acquired, is amortized on a straight line basis over the
        expected periods to be benefited, generally five years. The Company
        assesses the recoverability of this intangible asset by reference to the
        valuation methodology on the acquisition date, which includes strategic
        and synergistic factors that are expected to enhance enterprise value.
        Accordingly, the Company would consider goodwill to be impaired when, in
        conjunction with its valuation methodology, its expectations with
        respect to the acquisitions it has made deteriorate coupled with adverse
        market conditions. To the extent that future operating cash flows of the
        acquired businesses are not significant factors in the valuation model
        they would not be significant factors in assessing goodwill for
        impairment. The Company would assess impairment, to the extent
        appropriate, at the enterprise level by comparing its market
        capitalization to the carrying value of goodwill. Based on these
        considerations the Company does not currently believe that the carrying
        value of goodwill has been impaired.

        INVESTMENT SECURITIES

        The Company has evaluated its investment policies consistent with the
        provisions of SFAS 115, Accounting for Certain Investments in Debt and
        Equity Securities, and determined that all of its investment securities
        are to be classified as available-for-sale. Accordingly, such securities
        are carried at fair value with unrealized gains and losses, net of
        taxes, reported as other comprehensive income, a separate component of
        shareholders' equity. Realized gains and losses and declines in value
        judged to be other-than-temporary are included in other income. The cost
        of securities sold is based on the first-in-first-out (FIFO) method.
        Interest and dividends on securities classified as available-for-sale
        are included in other income. Other investments that are not marketable
        are carried at cost, subject to tests of permanent impairment.



                                       77
<PAGE>   80

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        RECENT ACCOUNTING PRONOUNCEMENTS

        In June 1998, the Financial Accounting Standards Board (FASB) issued
        SFAS No.133, Accounting for Derivative Instruments and Hedging
        Activities. SFAS No.133, as amended by SFAS No.138, Accounting for
        Certain Derivative instruments and Certain Hedging Activities
        establishes accounting and reporting standards requiring that every
        derivative instrument (including certain derivative instruments embedded
        in other contracts) be recorded in the balance sheet either as an asset
        or as a liability and be measured at its fair value. The Statement
        requires that changes in a derivative's fair value be recognized in the
        current period unless specific hedge accounting criteria are met.
        Special accounting for qualifying hedges allows a derivative's gains and
        losses to offset related results on the hedged item in the income
        statement and requires that the Company must formally document,
        designate and assess the effectiveness of transactions that receive
        hedge accounting. SFAS No.133 is effective for all fiscal periods
        beginning after June 15, 2000. Application of this statement will not
        have a significant impact on the financial statements of the Company.

        RECLASSIFICATIONS

        Certain prior-years' amounts have been reclassified to conform to the
        current year's presentation.

3.      BUSINESS ACQUISITIONS

        INDIAWORLD COMMUNICATIONS PRIVATE LIMITED

        On November 29, 1999, Satyam entered into an agreement with the
        shareholders of IndiaWorld Communications Private Limited (IndiaWorld)
        to acquire 49,000 shares (equivalent to 24.5%) of IndiaWorld for a
        consideration of Rs. 1,222,500. Satyam simultaneously made a
        non-refundable deposit of Rs. 513,100 towards the acquisition of the
        remaining shares of IndiaWorld for Rs. 3,767,400 in conjunction with a
        purchase Option Agreement, expiring on June 30, 2000 that gave control
        of Indiaworld to Satyam over the option period. Accordingly, Satyam
        consolidated its accounts with IndiaWorld from December 1, 1999, and
        completed the acquisition of IndiaWorld on June 30, 2000 upon payment of
        Rs. 2,154,300 in cash and 268,500 equity shares for the balance
        amounting to Rs. 1,100,000.

        The transaction to purchase IndiaWorld has been accounted for, as a
        two-step acquisition under the purchase method of accounting. The
        allocation of purchase price was almost entirely related to goodwill.
        Satyam recognized goodwill of Rs. 1,739,887 on the acquisition of 24.5%
        of IndiaWorld on November 29, 1999 equal to the excess of the
        consideration paid of Rs. 1,735,600 and the related expenses of Rs.
        6,113 over the fair value of that portion of the net assets acquired.
        Upon completion of the acquisition of IndiaWorld on June 30, 2000,
        Satyam recognized additional goodwill of Rs. 3,265,221 equal to the
        excess of consideration of Rs. 3,254,300 paid in cash and equity shares
        of Satyam and other related expenses of Rs. 18,837 over the fair value
        of the net assets acquired at June 30, 2000.



                                       78
<PAGE>   81

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        INDIAPLAZA.COM, INC.

        On July 13, 2000 Satyam entered into a merger agreement to acquire all
        the outstanding equity of IndiaPlaza.com, Inc. (IndiaPlaza), an internet
        company which, through its website operates an on-line internet
        shopping-mall. The consideration amounted to 455,192 ADS's (113,798
        shares) of which 340,192 ADS's (85,048 shares) have been delivered to
        the former stockholders of IndiaPlaza.com and 115,000 ADS's (28,750
        shares) have been placed in escrow until January 1, 2002 to be adjusted
        for any breach of representations or covenants set forth in the merger
        agreement. Management considers the release of the shares held in the
        escrow to be probable and has accordingly included them in the
        computation of the purchase price and net loss per share.

        The acquisition, which was consummated on December 15, 2000 upon
        completion of regulatory formalities, has been accounted for by the
        purchase method. The allocation of the purchase price was as follows:

<TABLE>
<S>                                                      <C>
        Estimated fair value
            Assets acquired .........................  Rs.  22,743
            Liabilities assumed .....................      113,324
            Goodwill ................................      444,585
        Purchase price ..............................      354,004
</TABLE>


        UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS

        The following unaudited consolidated results of operations are presented
        as if the acquisition of IndiaWorld and IndiaPlaza was made at the
        beginning of the periods presented. The pro forma consolidated results
        of operations reflect the amortization of estimated goodwill
        attributable to the acquisitions.

<TABLE>
<CAPTION>
                                                         YEAR ENDED MARCH 31,
                                                    -----------------------------
                                                         2000           2001
                                                    -------------   -------------
<S>                                                 <C>            <C>
        Revenues                                    Rs.   745,161   Rs. 1,840,346
        Net loss                                        1,457,061       2,883,555
        Loss per equity share                               76.98          125.35
                                                    -------------   -------------
        Weighted average equity shares
          used in computing loss per equity share      18,927,697      23,003,331
                                                    -------------    ------------
</TABLE>

        The unaudited pro forma disclosures are not necessarily indicative of
        the actual results that would have occurred had the acquisition been
        made as of the beginning of the periods presented or the future results
        of combined operations.



                                       79
<PAGE>   82

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

4.      CASH AND CASH EQUIVALENTS

        The cost and fair values for cash and cash equivalents consist of:

<TABLE>
<CAPTION>
                                              AS AT MARCH 31,
                                       ------------------------------
                                           2000              2001
                                       ------------      ------------
<S>                                    <C>               <C>
        Cost and fair values
        Cash and cash equivalents      Rs.7,307,625      Rs.1,444,307
                                       ------------      ------------
        CASH AND CASH EQUIVALENTS      Rs.7,307,625      Rs.1,444,307
                                       ============      ============
</TABLE>

        Cash and Cash equivalents include deposits of Rs. 8,423 and Rs. 12,233
        as of March 31, 2000 and March 31, 2001 respectively placed in
        "No-charge-no-lien" accounts as security towards performance guarantees
        issued by the Company's bankers on the Company's behalf. The Company
        cannot utilize these amounts until the guarantees are discharged or
        revoked. Cash and cash equivalents as of March 31, 2000 and March 31,
        2001 also include deposits of Rs. 7,243,242 and Rs. 1,367,735 placed
        with banks as short-term deposits.

5.      ACCOUNTS RECEIVABLE

        Accounts receivable consist of:

<TABLE>
<CAPTION>
                                                     AS AT MARCH 31,
                                                --------------------------
                                                   2000            2001
                                                ----------      ----------
<S>                                             <C>             <C>
        Customers                               Rs.247,450      Rs.860,504
        Less: allowance for doubtful debts           2,420          34,231
                                                ----------      ----------
                                                Rs.245,030      Rs.826,273
                                                ==========      ==========
</TABLE>

        The allowance for doubtful debts is established at amounts considered to
        be appropriate based primarily upon Satyam's evaluation of potential
        losses on the outstanding receivable balances. There have been no write
        offs of accounts receivables in the three years ended March 31, 2001.



                                       80
<PAGE>   83

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

6.      INVESTMENT SECURITIES

        Investment securities consist of:

<TABLE>
<CAPTION>
                                                                     MARCH 31, 2001
                                                  ----------------------------------------------------
                                                                  GROSS          GROSS
                                                                UNREALIZED     UNREALIZED
                                                   CARRYING      HOLDING         HOLDING          FAIR
                                                    VALUE         GAINS           LOSSES          VALUE
                                                  ----------    ----------     ----------        --------
<S>                                               <C>           <C>            <C>               <C>
        Available for sale:
        Equity securities                         Rs.  7,860    Rs.    224      Rs.(2,830)       Rs.5,254
        Mutual fund units                              5,000            --           (420)          4,580
                                                  ----------    ----------      ----------       --------
                                                  Rs. 12,860    Rs.    224      Rs. (3,250)      Rs.9,834
                                                  ==========    ==========      ==========       ========
</TABLE>


<TABLE>
                                                                     MARCH 31, 2000
                                                  ----------------------------------------------------
                                                                  GROSS          GROSS
                                                                UNREALIZED     UNREALIZED
                                                   CARRYING      HOLDING         HOLDING       FAIR
                                                    VALUE         GAINS           LOSSES       VALUE
                                                  ----------    ----------     ----------    ---------
<S>                                               <C>           <C>            <C>           <C>
        Available for sale:
        Equity securities                        Rs. 7,979      Rs.10,297       Rs. (243)    Rs.18,033
        Mutual fund units                            5,000             --           (422)        4,578
                                                 ---------      ---------       --------     ---------
                                                 Rs.12,979      Rs.10,297       Rs. (665)    Rs.22,611
                                                 =========      =========       ========     =========

</TABLE>

7.      INVENTORIES

        Inventories consist of:

<TABLE>
<CAPTION>
                                                 AS AT MARCH 31,
                                      ------------------------------------
                                          2000                    2001
                                      ------------            ------------
<S>                                   <C>                     <C>
        CDs                           Rs.    1,093            Rs.    7,156
        Communication hardware              13,684                  94,157
        Application software                 2,716                   5,907
        Others                                 691                   2,872
                                      ------------            ------------
                                      Rs.   18,184            Rs.  110,092
                                      ============            ============
</TABLE>



                                       81
<PAGE>   84

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

8.      OTHER CURRENT ASSETS

        Other current assets consist of:

<TABLE>
<CAPTION>
                                               AS AT MARCH 31,
                                          -------------------------
                                             2000           2001
                                          ----------     ----------
<S>                                       <C>            <C>
        Vendor advances & deposits        Rs.140,611     Rs.112,176
        Advances for expenses                 18,580        108,699
        Withholding taxes                      6,216         41,259
        Due from parent company                   --         12,926
        Others                                 1,024          1,330
                                          ----------     ----------
                                          Rs.166,431     Rs.276,390
                                          ==========     ==========
</TABLE>

9.      INVESTMENTS IN AFFILIATES

        REFCO-SIFY SECURITIES INDIA PRIVATE LIMITED

        The Company holds 40% interest in Refco-Sify Securities India Private
        Limited (Refco). Refco is engaged in Internet based trading and research
        services. Satyam has accounted for its 40% interest in Refco by the
        equity method. The carrying value of the investment in Refco as of March
        31, 2001 was Rs. 102,807 and Satyam's equity in the losses of Refco-Sify
        for the fiscal 2001 was Rs. 9,883.

        PLACEMENTS.COM LIMITED

        The Company holds a 27% interest in Placements.com Limited (Placements).
        Placements is engaged in establishing and developing a portal on the
        internet for jobs and to carry on the business as a manpower recruitment
        agency. The Company has accounted for its 27% interest in Placements by
        the equity method. The carrying value of the investment in Placements as
        of March 31, 2001 was Rs. 9,193 and Satyam's equity in the losses of
        Placements for the fiscal 2001 was Rs. 16,307.

        CRICINFO LIMITED

        On July 29, 2000, Satyam acquired 25% of the outstanding stock of
        Cricinfo Limited (Cricinfo) a private Company incorporated in England
        and Wales, for US $ 37.5 million by issue of 2,204,720 ADSs (represented
        by 551,180 equity shares of the Company). Cricinfo operates the
        Cricinfo.com, a popular website dedicated to the cricket sport.

        The company has accounted for its interest in Cricinfo by the equity
        method. The difference between the cost of the investment and the amount
        of underlying equity in net assets of Cricinfo resulted in goodwill of
        Rs 1,657,479, which is being amortized over a period of five years. The
        carrying value of the investment in Cricinfo as of March 31, 2001 was
        Rs. 1,394,244 and Satyam's equity in the losses of Cricinfo for the year
        was Rs. 67,018.



                                       82
<PAGE>   85
SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

The summarized financial information as to assets, liabilities and results of
operations of Cricinfo is presented below:

<TABLE>
<CAPTION>
        BALANCE SHEET                                                   AS AT
                                                               MARCH 31, 2001
<S>                                                            <C>
        Current assets                                            Rs.111,741
        Non-current assets                                             6,381

        Current liabilities                                           32,322
        Stockholders' equity                                          85,800
</TABLE>

<TABLE>
<CAPTION>
        STATEMENT OF OPERATIONS                           FOR THE YEAR ENDED
                                                              MARCH 31, 2001
<S>                                                       <C>
        Revenues                                                   Rs.44,877
        Gross profit                                                  37,455
        Net loss                                                    (550,955)
</TABLE>


10.     PROPERTY, PLANT AND EQUIPMENT

        Property, plant and equipment consist of:


<TABLE>
<CAPTION>
                                                         AS AT MARCH 31,
                                           --------------------------------------------
                                                  2000                        2001
        -------------------------------------------------------------------------------
<S>                                        <C>                         <C>
        Land                                Rs.          --             Rs.     167,700
        Building                                    153,222                     480,252
        Leasehold improvements                       22,718                      90,178
        Plant and machinery                         556,509                   1,177,011
        Computer equipment                          158,818                     369,669
        Office equipment                              5,758                      40,481
        Furniture and fixtures                       15,544                      87,524
        Vehicles                                     12,199                      27,466
        System software                              26,389                     301,798
        Construction-in-progress                    157,109                     289,091
        -------------------------------------------------------------------------------
                                            Rs.   1,108,266             Rs.   3,031,170
        Accumulated depreciation                   (193,245)                   (622,917)
        ===============================================================================
                                            Rs.     915,021             Rs.   2,408,253
        ===============================================================================
</TABLE>

        Depreciation expense amounted to Rs. 46,714, Rs. 123,496 and Rs. 429,672
        for the years ended March 31, 1999, 2000 and 2001 respectively.



                                       83
<PAGE>   86

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------



11.     GOODWILL AND OTHER INTANGIBLE ASSETS

        Goodwill and other intangible assets consist of:


<TABLE>
<CAPTION>
                                                                         AS AT MARCH 31,
                                                             ------------------------------------------
                                                                   2000                        2001
        -----------------------------------------------------------------------------------------------
<S>                                                         <C>                        <C>
        Goodwill
          Acquisition of IndiaWorld                          Rs.   1,739,887            Rs.   5,005,107
          Acquisition of India Plaza                                      --                    444,585
          Other                                                           --                      2,775
        License fees                                                  11,898                     39,898
        -----------------------------------------------------------------------------------------------
        Total                                                Rs.   1,751,785            Rs.   5,492,365
        Less: Accumulated amortization                               121,367                  1,059,223
        -----------------------------------------------------------------------------------------------
        GOODWILL AND OTHER INTANGIBLE ASSETS, NET            Rs.   1,630,418            Rs.   4,433,142
        ===============================================================================================
</TABLE>

12.     OTHER ASSETS

        Other assets consist of:


<TABLE>
<CAPTION>
                                                                        AS AT MARCH 31,
                                                             ------------------------------------
                                                                  2000                    2001
        -----------------------------------------------------------------------------------------
<S>                                                         <C>                     <C>
        Deposits                                             Rs.   65,834            Rs.  119,303
        Staff advances recoverable after one year                   4,544                  82,910
        Other advances                                                 --                  64,314
        -----------------------------------------------------------------------------------------
        OTHER ASSETS                                         Rs.   70,378            Rs.  266,527
        =========================================================================================
</TABLE>

        Staff advances include a sum of Rs. 70,000 outstanding as of March 31,
        2001, for which the Company charges interest at 4% per year. Other
        advances include Rs 45,000 towards the acquisition of certain web
        publication rights.



                                       84
<PAGE>   87

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


13.     LEASES

        The gross amounts and related accumulated amortization recorded under
        capital leases are as follows:

<TABLE>
<CAPTION>
                                                            AS AT MARCH 31,
                                                  -----------------------------------
                                                      2000                    2001
        -----------------------------------------------------------------------------
<S>                                              <C>                     <C>
        Computers                                 Rs.   1,650             Rs.      --
        Vehicles                                        7,865                  20,859
        -----------------------------------------------------------------------------
                                                        9,515                  20,859
        Less: Accumulated amortization            Rs.  (2,418)            Rs.  (4,786)
        -----------------------------------------------------------------------------
                                                        7,097                  16,073
        =============================================================================
</TABLE>

        Amortization of assets held under capital leases is included with
        depreciation.

        The following is a schedule of future minimum capital lease commitments
        as at March 31, 2001:


<TABLE>
<CAPTION>
        --------------------------------------------------------------------------------------
        Due for the year ended March 31,
<S>                                                                                <C>
        2002                                                                        Rs.  6,330
        2003                                                                             4,958
        2004                                                                             2,796
        2005                                                                             1,534
        2006                                                                               156
        --------------------------------------------------------------------------------------
        TOTAL MINIMUM LEASE PAYMENTS                                                Rs. 15,774
        Less: Interest portion                                                           2,939
        --------------------------------------------------------------------------------------
        PRESENT VALUE OF NET MINIMUM CAPITAL LEASES PAYMENTS                        Rs. 12,835
        Less: Current installments of obligations under capital leases                   4,807
        --------------------------------------------------------------------------------------
        OBLIGATIONS UNDER CAPITAL LEASES, EXCLUDING CURRENT INSTALLMENTS            Rs.  8,028
        ======================================================================================
</TABLE>


                                       85
<PAGE>   88

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


14.     LONG-TERM DEBT

        Long-term debt outstanding consists of:


<TABLE>
<CAPTION>
                                                                       AS AT MARCH 31,
                                                              ----------------------------------
                                                                  2000                   2001
        ----------------------------------------------------------------------------------------
<S>                                                          <C>                    <C>
        Term loan from Export Import Bank of India            Rs. 100,667            Rs.      --
        Non-convertible debentures                                107,500                     --
        Others                                                        960                    960
        ----------------------------------------------------------------------------------------
        Total debt                                                209,127                    960
        Less: current portion                                      40,267                     --
        ----------------------------------------------------------------------------------------
        LONG TERM DEBT, NET OF CURRENT PORTION                Rs. 168,860            Rs.     960
        ========================================================================================
</TABLE>


15.     INCOME TAX

        The provision for income taxes consists of:


<TABLE>
<CAPTION>
                                                   YEAR ENDED MARCH 31,
                                   -------------------------------------------------------
                                     1999                   2000                   2001
        ----------------------------------------------------------------------------------
<S>                               <C>                    <C>                   <C>
        Current                    Rs.     --            Rs.  3,171             Rs. (1,827)
        Deferred                           --                (1,693)                   120
        ----------------------------------------------------------------------------------
        AGGREGATE TAXES            Rs.     --            Rs.  1,478             Rs. (1,707)
        ==================================================================================
</TABLE>


                                       86
<PAGE>   89

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        The reported income tax expense differed from amounts computed by
        applying the enacted tax rates to income from continuing operations
        before income taxes as a result of the following:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED MARCH 31,
                                                      -------------------------------------------------------------
                                                         1999                     2000                      2001
        -----------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>                       <C>
        Net loss before taxes                         Rs.(187,376)             Rs.(385,175)              (2,518,460)
        Enacted tax rates in India                             35%                    38.5%                   39.55%
        -----------------------------------------------------------------------------------------------------------
        Computed expected tax expense                 Rs. (65,582)             Rs.(148,292)             Rs.(996,051)
        Expenses not benefited                                 24                   52,598                  402,921
        Change in valuation allowance                      64,874                  104,347                  597,267
        Other                                                (684)                      11                    3,039
        Effect of tax rate change                              --                  (10,142)                  (5,469)
        -----------------------------------------------------------------------------------------------------------
        TOTAL INCOME TAX (BENEFIT)/EXPENSE            Rs.      --              Rs.  (1,478)             Rs.   1,707
        ===========================================================================================================
</TABLE>

        In assessing the realizability of deferred tax assets, management
        considers whether it is more likely than not that some portion or all of
        the deferred tax assets will not be realized. The ultimate realization
        of deferred tax assets is dependent upon the generation of future
        taxable income during the periods in which those temporary differences
        become deductible. Management considers the scheduled reversal of
        deferred tax liabilities, projected future taxable income and tax
        planning strategies in making this assessment. Based upon the level of
        historical taxable income and projections for future taxable income over
        the periods in which the deferred tax assets are deductible, management
        believes that it is more likely, than not, the Company will not realize
        the benefit of these deductible differences. Under Indian law, loss
        carry-forwards from a particular year may be used to offset taxable
        income over the next eight years.



                                       87
<PAGE>   90

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


        Significant components of activities that gave rise to deferred tax
        assets and liabilities included in the balance sheet are as follows:

<TABLE>
<CAPTION>
                                                                            YEAR ENDED MARCH 31,
                                                                   -------------------------------------
                                                                       2000                     2001
        ------------------------------------------------------------------------------------------------
<S>                                                               <C>                      <C>
        DEFERRED TAX ASSETS:
        Operating loss carry forwards                              Rs.  241,149             Rs.  702,985
        Provision for accounts receivable and advances                      738                   13,376
        Property, plant and equipment and intangibles                       268                      859
        Expenses currently not allowed for tax purposes                      --                   33,548
        Deferred revenues                                                   114                       --
        Investments in affiliates                                            --                  116,491
        ------------------------------------------------------------------------------------------------
        Total gross deferred tax assets                                 242,269                  867,259
        ------------------------------------------------------------------------------------------------
        Less: valuation allowance                                      (205,744)                (803,011)
        ------------------------------------------------------------------------------------------------
        Total deferred tax assets                                  Rs.   36,525             Rs.   64,248

        DEFERRED TAX LIABILITIES:
        Property, plant and equipment                              Rs.   36,143             Rs.   60,437
        Investments                                                       5,612                      501
        Other                                                                --                    3,310
        ------------------------------------------------------------------------------------------------
        Total deferred tax liabilities                                   41,755                   64,248

        ------------------------------------------------------------------------------------------------
        NET DEFERRED TAX LIABILITY                                 Rs.   (5,230)            Rs.       --
        ================================================================================================
</TABLE>

16.     COMMON STOCK

        Dividends: Should the Company declare and pay dividends, such dividends
        will be paid in Indian rupees. Indian law mandates that any dividend can
        be declared out of distributable profits, only after the transfer of up
        to 10% of net income, computed in accordance with current regulations,
        to a General Reserve. Further, the remittance of dividends outside India
        is governed by Indian law on foreign exchange. Such dividend payments
        are also subject to applicable withholding taxes.



                                       88
<PAGE>   91

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


17.     OTHER INCOME, NET

        Other income consists of:


<TABLE>
<CAPTION>
                                                                FOR THE YEAR ENDED MARCH 31,
                                               -----------------------------------------------------------
                                                   1999                    2000                    2001
        --------------------------------------------------------------------------------------------------
<S>                                           <C>                     <C>                     <C>
        Interest expense                       Rs. (27,755)            Rs. (30,539)            Rs. (11,766)
        Other finance charges                           --                  (1,691)                 (4,707)
        Interest income                                609                 106,182                 246,179
        Others                                        (256)                 (2,100)                 12,662
        --------------------------------------------------------------------------------------------------
        OTHER (EXPENSE)/INCOME, NET            Rs. (27,402)            Rs.  71,852             Rs. 242,368
        ==================================================================================================
</TABLE>

18.     EMPLOYEE BENEFIT PLAN

        The Company contributed Rs. 320, Rs. 352 and Rs. 496 to the defined
        contribution plans during the years ended March 31, 1999, 2000 and 2001
        respectively. The following table sets out the funded status of the
        Gratuity Plan and the amounts recognized in Satyam's balance sheet.


<TABLE>
<CAPTION>
                                                                                      AS OF MARCH 31,
                                                                             ---------------------------------
                                                                                2000                   2001
        ------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                    <C>
        CHANGE IN PROJECTED BENEFIT OBLIGATION
        Projected benefit obligation at the beginning of the year            Rs.    529             Rs.  1,651
        Interest cost                                                                58                    182
        Actuarial (gain)/loss                                                       (33)                   221
        Service cost                                                              1,098                  3,844
        Benefits paid                                                                --                     --
        ------------------------------------------------------------------------------------------------------
        Projected benefit obligation at the end of the year                  Rs.  1,652             Rs.  5,898

        CHANGE IN PLAN ASSETS
        Fair value of plan assets at the beginning of the year                      668                  1,093
        Actual return on plan assets                                                 73                    140
        Employer contributions                                                      352                    496
        Benefits paid from plan assets                                               --                     --
        ------------------------------------------------------------------------------------------------------
        FAIR VALUE OF PLAN ASSETS AT THE END OF THE YEAR                     Rs.  1,093             Rs.  1,729
</TABLE>



                                       89
<PAGE>   92

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

<TABLE>
<S>                                                                         <C>                   <C>
        Funded status of the plans                                                  558                  4,168
        Unrecognized transition obligation (asset)                                   --                     --
        Unrecognized prior service cost (benefit)                                    --                     --
        Unrecognized net actuarial gain/(loss)                                      105                   (116)
        ------------------------------------------------------------------------------------------------------
        ACCRUED BENEFIT COST                                                 Rs.    663             Rs.  4,052
        ======================================================================================================

        THE COMPONENT OF NET GRATUITY COSTS ARE REFLECTED BELOW:
        Service cost                                                              1,098                  3,844
        Interest cost                                                                58                    182
        Expected returns on plan assets                                             (73)                  (140)
        Amortization                                                                 --                     --
        ------------------------------------------------------------------------------------------------------
        NET GRATUITY COSTS                                                   Rs.  1,083             Rs.  3,886
        ======================================================================================================
        PRINCIPAL ACTUARIAL ASSUMPTIONS:

        Discount rate                                                                11%                    11%
        Long-term rate of compensation increase                                      10%                    10%
        Rate of return on plan assets                                                11%                    11%
</TABLE>

        PROVIDENT FUND

        Satyam contributed Rs. 5,999 and Rs. 18,147 towards the Provident fund
        during the years ended March 31, 2000 and 2001 respectively.



                                       90
<PAGE>   93

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------



19.     RELATED PARTY TRANSACTIONS

        Satyam Computer Services

        An analysis of transactions with Satyam Computer Services is set out
        below:

<TABLE>
<CAPTION>
                                                                                     AS AT MARCH 31,
                                                                             ---------------------------------
                                                                                2000                  2001
        ------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                    <C>
        Balance at beginning of the year                                     Rs. (3,981)            Rs.(17,115)
        Advances received towards working capital                                (3,295)                    --
        Advance received against equity                                         (78,120)                    --
        Allocation of facilities costs                                           (5,913)               (17,954)
        Expenses incurred on behalf of the Company                               (3,926)               (47,019)
        Capital expenses incurred on behalf of the Company                           --                (27,541)
        Purchases from Satyam Computer Services                                      --                 (2,381)
        Allotment of equity                                                      78,120                     --
        Sales to Satyam Computer                                                     --                 83,550
        Payment to Satyam Computer                                                   --                 41,386
        ------------------------------------------------------------------------------------------------------
        DUE (TO)/FROM PARENT COMPANY                                         Rs.(17,115)            Rs. 12,926
        ======================================================================================================
</TABLE>

        Advance against equity represents interest free advances received from
        the Company's parent company, Satyam Computer Services to be adjusted
        against subsequent issues of common stock. There are no other terms
        against which such advances have been made. No interest is charged by
        Satyam Computer Services on the balances payable to them.

        Particulars of significant related transactions with other affiliated
        companies are set out below.


<TABLE>
<CAPTION>
                                                          YEAR ENDED MARCH 31,
                                             -------------------------------------------------
                                                1999                 2000              2001
        --------------------------------------------------------------------------------------
<S>                                         <C>                     <C>            <C>
        Sales to affiliates                  Rs.     45               --            Rs. 22,405
        Purchases from affiliates                   800               --                    --
</TABLE>

        Included in other current assets is an amount of Rs. 276 and Rs. Nil
        receivable from affiliates as of March 31, 2000 and 2001 respectively.
        No other amounts were receivable from or payable to affiliates as of
        March 31, 2000 and 2001.

        The Company grants advances to officers and employees. Such loans are
        repayable over fixed periods ranging from one to sixty months. As of
        March 31, 2000 and 2001, the amounts recoverable from officers and
        employees were Rs. 8,349 and Rs. 94,397 respectively, of which, Rs.
        3,805 and Rs. 11,487



                                       91
<PAGE>   94


SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        respectively were recoverable within one year from those dates.

        The required repayments of employee loans as of March 31, 2001 granted
        for purchase of vehicles and property are given below:

        Repayable in the year ending March 31:

<TABLE>
<S>                                         <C>
        2002                                 Rs. 11,487
        2003                                     36,653
        2004                                     36,439
        2005                                      1,183
        2006                                      1,063
        Thereafter                           Rs.  7,572
</TABLE>

        The estimated fair value amounts of the employee loans were Rs. 7,674
        and Rs. 83,164 as of March 31, 2000 & 2001 respectively. These amounts
        have been determined using available market information and appropriate
        valuation methodologies. Considerable judgment is required to develop
        the estimates of fair value. Thus, the estimates provided herein are not
        necessarily indicative of the amounts the Company could realize in the
        market.

20.     STOCK-BASED COMPENSATION PLANS

        In fiscal 1999, the Company established the Employee Stock Offer Plan
        ("ESOP"), which provides for the issuance of 825,000 warrants to
        eligible employees. The warrants were issued to an employee welfare
        trust (the "Trust") at Rs. 1 each on September 28, 1999. The Trust holds
        the warrants and transfers them to eligible employees over a period of
        three years. The warrants, which are to be transferred to eligible
        employees at Rs. 1 each, entitles the holder to purchase one equity
        share at an exercise price determined by the Compensation Committee. The
        warrants and the equity shares received upon the exercise of warrants
        are subject to progressive vesting over a three-year period from the
        date of issue of warrants to employees. Deferred compensation is
        recorded in the event that the exercise price of the warrant is
        determined to be less than the fair market value of the underlying
        shares on the date of the grant. Deferred compensation is amortized over
        the vesting period of the warrants. The warrants allotted and the
        underlying equity shares are not subject to any repurchase obligations
        by the Company.


                                       92
<PAGE>   95

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


        The transactions are summarized below:

<TABLE>
<CAPTION>
                                                                                             WEIGHTED
                                                                  NUMBER                     AVERAGE
                                                                    OF                       EXERCISE
                                                                  SHARES                      PRICE
        ----------------------------------------------------------------------------------------------
<S>                                                              <C>                       <C>
        FOR THE YEAR ENDED MARCH 31, 2000
        Balance at the beginning of the year                        5,000                   Rs.     70
        Granted                                                   313,160                        2,338
        Exercised                                                      --                           --
        Lapsed                                                      5,700                          350
        Balance at the end of the year                            312,460                   Rs.  2,338
        Exercisable at the end of the year                            833                           70

        FOR THE YEAR ENDED MARCH 31, 2001
        Balance at the beginning of the year                      312,460                   Rs.  2,338
        Granted                                                   342,800                        2,821
        Exercised                                                     200                          350
        Lapsed                                                     90,040                        2,409
        Balance at the end of the year                            565,020                   Rs.  2,621
        Exercisable at the end of the year                         43,073                        2,338
</TABLE>


        The following table summarizes information about fixed price options
        outstanding at March 31, 2001:

<TABLE>
<CAPTION>
                                                                               WEIGHTED
                                          NUMBER            WEIGHTED            AVERAGE                NUMBER
            RANGE OF                   OUTSTANDING AT       AVERAGE            REMAINING           EXERCISABLE AT
          EXERCISE PRICE              MARCH 31, 2001     EXERCISE PRICE     CONTRACTUAL LIFE       MARCH 31, 2001
        ---------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>                    <C>                 <C>
        Rs.     70                         5,000           Rs.     70              0.96                 2,500
        Rs.250 -  Rs. 724                135,960           Rs.    400              1.75                18,750
        Rs.940 -  Rs. 2,318              116,560           Rs.  1,351              2.18                 7,867
        Rs.3,436 - Rs. 8,603             307,500           Rs.  4,125              2.08                13,956
        ---------------------------------------------------------------------------------------------------------
        Rs.70 - Rs. 8,603                565,020           Rs.  2,621              2.01                43,073
        ---------------------------------------------------------------------------------------------------------
</TABLE>



                                       93
<PAGE>   96

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

        The Company has adopted pro forma disclosure provisions of SFAS No. 123.
        Had compensation cost been determined in a manner consistent with the
        fair value approach described in SFAS No. 123, the Company's net loss
        would have increased to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                                     YEAR ENDED MARCH 31,
                                                            ----------------------------------------
                                                                 2000                      2001
        --------------------------------------------------------------------------------------------
<S>                                                        <C>                       <C>
        Net Loss - As reported                              Rs.  (381,897)            Rs.(2,509,030)
                 - Pro forma                                     (407,031)               (2,765,966)

        Loss Per Share:
                   Basic & Diluted - As reported                   (20.59)                  (109.79)
                                   - Pro forma                     (21.95)                  (121.03)
</TABLE>

        The fair value of each option is estimated on the date of grant using
        the Black-Scholes model with the following assumptions:

<TABLE>
<CAPTION>
                                                     YEAR ENDED MARCH 31,
                                            -----------------------------------
                                                 2000                  2001
        -----------------------------------------------------------------------
<S>                                        <C>                    <C>
        Dividend yield                                --                    --
        Expected volatility                           65%                  118%
        Risk-free interest rate                     9.50%                 9.50%
        Expected term                       12-36 months           12-36 months
</TABLE>

21.     SEGMENT REPORTING

        SFAS No 131, Disclosures about Segments of an Enterprise and related
        Information, establishes standards for the way that public business
        enterprises report information about operating segments and related
        disclosures about products and services, geographic areas, and major
        customers. The Company's operations predominantly relate to Corporate
        Network/Data Services, co-location and software development for
        Corporates, providing Internet access to retail subscribers (both home
        access and public access). The Company also operates a Portal,
        "sify.com", that provides a variety of India centric content to
        audiences both in India and abroad, and which generates revenue from
        advertisements and other value added services. The company also has
        subsidiaries to exploit other opportunities provided by the internet in
        e-Learning, B2B Marketplaces, IT enabled services and in Digital
        Signatures and Internet Security.

        In the previous year, the Company provided segment disclosures based on
        three operating segments, Internet Access Services, Corporate Services
        and Online Portal Services. Consequent to the growth in the corporate
        business there has been a reorganization of the Company's operating
        segments.



                                       94
<PAGE>   97

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


The Operating segments of the Company now include:

        -       Internet Access Services, which provides dial-up internet access
                and public internet access through cyber cafes;

        -       Corporate Network/Data Services, which provides private network
                services, messaging services and web-hosting to corporates;

        -       E-Business Services, which provides business to business
                e-commerce and web site development;

        -       Online Portal Services; and

        -       Others, which include e-Learning, B2B marketplaces, and IT
                enabled services.

The Chief Operating Decision Maker (CODM) evaluates the Company's performance
and allocates resources to various Strategic Business Units (SBUs) that are
identified based on the products and services that they offered and on the basis
of the market catered to. The measure of loss reviewed by the CODM during the
current year was Losses before Interest, Taxes, Depreciation and Amortization.
Prior to fiscal 2001, the CODM reviewed segment information relating to revenues
only.

Revenue in relation to segments is categorized based on items that are
individually identifiable to that segment. Bandwidth costs, which form a
significant part of the total expenses, are allocated between the corporate and
retail business based on certain norms and assumptions and on total demand of
bandwidth from each of these businesses. Certain expenses such as depreciation
and technology, which form a significant component of total expenses, are not
specifically allocable to specific segments as the underlying services are used
interchangeably. Management believes that it is not practical to provide segment
disclosures to those costs and expenses and accordingly these expenses are
separately disclosed as "unallocated" and adjusted only against the total income
of the Company.

A significant part of the fixed assets used in the Company's business are not
identifiable to any of the reportable segments and can be used interchangeably
between segments. Management believes that it is not practicable to provide
segment disclosures relating to total assets since a meaningful segregation of
the available data is onerous.



                                       95
<PAGE>   98

SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                YEAR ENDED MARCH 31, 2001
                                        -------------------------------------------------------------------------------------------
                                         CORPORATE                      INTERNET
                                        NETWORK/DATA   E-BUSINESS        ACCESS          ONLINE
                                          SERVICES      SERVICES        SERVICES         PORTALS         OTHERS            TOTAL
        ---------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>             <C>             <C>              <C>            <C>
        Revenues                       Rs.   593,310  Rs.   561,500   Rs.   469,705   Rs.   144,417   Rs.    18,144   Rs. 1,787,076
        Operating expenses                  (503,364)      (334,462)     (1,009,793)       (470,621)       (173,753)     (2,491,993)
        Equity in loss of affiliates                                                        (79,494)                        (79,494)
        Minority interest                                                     8,519           2,618                          11,137
        ---------------------------------------------------------------------------------------------------------------------------
        Segment operating
        Income/(loss)                         89,946        227,038        (531,569)       (403,080)       (155,609)       (773,274)
        Corporate expenses                                                                                                 (469,183)
        Foreign exchange gain                                                                                               162,136
        Other income, net                                                                                                     7,955
        ---------------------------------------------------------------------------------------------------------------------------
        Loss before interest, tax,
          depreciation and amortization                                                                                  (1,072,366)
        Depreciation and amortization                                                                                    (1,669,370)
        Interest income                                                                                                     234,413
        Income taxes                                                                                                         (1,707)
        ---------------------------------------------------------------------------------------------------------------------------
        NET LOSS                                                                                                      Rs.(2,509,030)
        ===========================================================================================================================
</TABLE>


        Depreciation and amortization includes Rs. 13,714, which represents that
        portion of the equity loss in investees pertaining to their depreciation
        and amortization expense.

        During fiscal year 2001, the CODM reviewed segments by revenues only in
        which Corporate Network/Data services and E-Business services were
        combined as a single segment under Corporate Services. Segment
        information by revenues on the prior year basis would have been as
        follows:


<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                              -----------------------------------------------------
                                                 1999                  2000                 2001
                                              -------------       -------------       -------------
<S>                                          <C>                 <C>                 <C>
        Internet Access                       Rs.    13,311       Rs.   352,224       Rs.   469,705
        Corporate Network/Data services              89,973             255,684             593,310
        E-Business Services                              --              29,473             561,500
        Online Portal Services                           60              33,644             144,417
        Others                                           --                  --              18,144
                                              -------------       -------------       -------------
        REVENUES                              Rs.   103,344       Rs.   671,025       Rs. 1,787,076
                                              =============       =============       =============
</TABLE>

        Significant Clients

        No clients individually accounted for more than 10 % of the revenues in
        fiscal 1999, 2000 and 2001.



                                       96
<PAGE>   99


SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA AND AS STATED OTHERWISE)
-------------------------------------------------------------------------------

22.     BUSINESS PLANS

        Although the Company expects to continue incurring losses in the near
        future, in view of Satyam's internally available cash, access to other
        resources and the current status of its discussions with potential
        investors, management believes that sufficient funds are available for
        the Company to meet its currently known requirements for the current
        fiscal year.




                                       97
<PAGE>   100

ITEM 19. EXHIBITS


<TABLE>
<CAPTION>
Number        Description
------        -----------
<S>          <C>
1.1           Articles of Association of Satyam Infoway Limited. (1)

1.2           Memorandum of Association of Saytam Infoway Limited. (1)

2.1           Share Subscription and Shareholders' Agreement, dated as of
              February 5, 1999 by and among Satyam Infoway Limited, Satyam
              Computer Services Limited, South Asia Regional Fund and Mr. B.
              Ramalinga Raju. (1)

2.2           Amendment No. 1 to Share Subscription and Shareholders' Agreement,
              dated as of September 14, 1999, by and among Satyam Infoway
              Limited, Satyam Computer Services limited, South Asia Regional
              Fund and Mr. Ramalinga Raju. (1)

2.3           Deposit Agreement, dated as of October 18, 1999, among Satyam
              Infoway Limited, Citibank, N.A. and holders from time to time of
              American Depositary Receipts issued thereunder (including, as an
              exhibit, the form of American Depositary Receipt). (5)

2.4           Amendment No. 1 to Deposit Agreement among Satyam Infoway Limited,
              Citibank, N.A. and holders from time to time of American
              Depositary Receipts issued thereunder (including, as an exhibit,
              the form of American Depository Receipt). (5)

2.5           Rupee Loan Agreement, dated as of July 3, 1998, by and between
              Satyam Infoway Limited and Export-Import Bank of India. (1)

2.6           Letter Agreement, dated as of September 4, 1999, by and between
              Satyam Infoway Limited and Sterling Commerce, Inc. (1)

2.7           Stockholders Agreement, dated as of September 14, 1999, by and
              among Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam
              Computer Services Limited. (1)

2.8           Registration Rights Agreement, dated as of September 14, 1999, by
              and among Satyam Infoway Limited, Sterling Commerce, Inc. and
              South Asia Regional Fund. (1)

4.1           Associate Stock Option Plan (including Deed of Trust). (3)

4.2           Form of Indemnification Agreement. (3)

4.3           License Agreement For Provision of Internet Service, dated as of
              November 12, 1998, by and between Satyam Infoway Limited and the
              Government of India, Ministry of Communications, the Department of
              Telecommunications, Telecom Commission. (1)

4.4           Bank Guarantee, dated as of November 4, 1998. (1)

4.5+          UUNet Technologies Strategic Alliance Agreement, dated as of April
              18, 1997, by and between Satyam Infoway Limited and UUNet
              Technologies. (3)

4.6+          CompuServe Network Services Strategic Alliance Agreement, dated as
              of April 18, 1997, by and between Satyam Infoway Limited and
              CompuServe Incorporated. (3)

4.7+          International Electronic Commerce Provider Agreement, dated as of
              February 14, 1997, by and between Satyam Infoway Limited and
              Sterling Commerce International Inc. (3)

4.8+          Amendment No. 1 to International Electronic Commerce Provider
              Agreement by and between Satyam Infoway Limited and Sterling
              Commerce International Inc. (3)

4.9+          Amendment No. 2 to International Electronic Commerce Provider
              Agreement by and between Satyam Infoway Limited and Sterling
              Commerce International Inc. (3)

4.10          Amendment No. 3 to International Electronic Commerce Provider
              Agreement, dated as of September 14, 1999, by and between Satyam
              Infoway Limited and Sterling Commerce International Inc. (3)

4.11+         Distribution Agreement, dated as of June 1997, by and between
              Satyam Infoway Limited and OpenMarket, Inc. (3)

4.12          User Agreement, effective as of April 1, 1999 by and between
              Satyam Infoway Limited and Satyam Computer Services Limited. (1)

4.13          Share Purchase Agreement, dated November 29, 1999, by and among
              Satyam Infoway Limited, Indiaworld Communications Private Limited,
              Mr. Rajesh Jain and the other shareholders of Indiaworld
              Communications Private Limited listed on the signature pages
              thereto. (4)

4.14          Agreement for Option to Purchase Shares, dated November 29, 1999,
              by and among Satyam Infoway Limited, Indiaworld Communications
              Private Limited, Mr. Rajesh Jain and the other shareholders of
              Indiaworld Communications Private Limited listed on the signature
              paged thereto. (4)

4.15          Share Purchase Agreement, dated as of June 30, 2000, by and among
              Rajesh Jain, Bhavana R. Jain, C.M. Jain Impex and Investments
              Private Limited, Satyam Infoway Limited and Indiaworld
              Communications Private Limited. (7)

4.16          Debenture Subscription Agreement, dated as of March 16, 2000, by
              and between
</TABLE>



                                       98

<PAGE>   101


<TABLE>
<S>          <C>
              Satyam Infoway Limited and IDBI Bank. (6)

4.17          Debenture Subscription Agreement, dated as of March 31, 2000, by
              and between Satyam Infoway Limited and IDBI Bank. (6)

4.18          Agreement for the Sale of Shares in CricInfo Limited by and
              between Indigo Holdings Limited and Satyam Infoway Limited. (8)

4.19          Subscription Agreement by and among CricInfo Limited, Satyam
              Infoway Limited and the Senior Management. (8)

4.20          Agreed Form of Shareholders Agreement by and among CricInfo
              Limited, Satyam Infoway Limited and the Non-SIL Shareholders. (8)

4.21          Letter Agreement between Satyam Infoway Limited and Indigo
              Holdings Limited. (8)

8.1           List of Subsidiaries.
</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.

        (1) Previously filed as an exhibit to Amendment No. 1 to the
Registration Statement on Form F-1 filed with the Commission on October 4, 1999
and incorporated herein by reference.

        (2) Previously filed as an exhibit to the Registration Statement on Form
F-6 filed with the Commission on October 6, 1999 and incorporated herein by
reference.

        (3) Previously filed as an exhibit to Amendment No. 2 to the
Registration Statement on Form F-2 filed with the Commission on October 13, 1999
and incorporated herein by reference.

        (4) Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on December 3, 1999 and incorporated herein by reference.

        (5) Previously filed as an exhibit to the Post-Effective Amendment No. 1
to Form F-6 filed with the Commission on January 5, 2000 and incorporated herein
by reference.

        (6) Previously filed as an exhibit to the Annual Report on Form 20-F
filed with the Commission on June 29, 2000 and incorporated herein by reference.

        (7) Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on July 12, 2000 and incorporated herein by reference.

        (8) Previously filed as an exhibit to the Registration Statement on Form
F-2 filed with the Commission on July 26, 2000 and incorporated herein by
reference.



                                       99
<PAGE>   102


                                   SIGNATURES

        The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and authorized the undersigned to sign this annual
report on its behalf.


                                               SATYAM INFOWAY LIMITED


                                               By: /s/ R. Ramaraj
                                                   ----------------------------
                                               Name:  R. Ramaraj
                                               Title: Chief Executive Officer


                                               By: /s/ T.R. Santhanakrishnan
                                                   ----------------------------
                                               Name:  T.R. Santhanakrishnan
                                               Title: Chief Financial Officer


Date:  June 29, 2001



                                      100
<PAGE>   103

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Number        Description
------        -----------
<S>          <C>
1.1           Articles of Association of Satyam Infoway Limited. (1)

1.2           Memorandum of Association of Saytam Infoway Limited. (1)

2.1           Share Subscription and Shareholders' Agreement, dated as of
              February 5, 1999 by and among Satyam Infoway Limited, Satyam
              Computer Services Limited, South Asia Regional Fund and Mr. B.
              Ramalinga Raju. (1)

2.2           Amendment No. 1 to Share Subscription and Shareholders' Agreement,
              dated as of September 14, 1999, by and among Satyam Infoway
              Limited, Satyam Computer Services limited, South Asia Regional
              Fund and Mr. Ramalinga Raju. (1)

2.3           Deposit Agreement, dated as of October 18, 1999, among Satyam
              Infoway Limited, Citibank, N.A. and holders from time to time of
              American Depositary Receipts issued thereunder (including, as an
              exhibit, the form of American Depositary Receipt). (5)

2.4           Amendment No. 1 to Deposit Agreement among Satyam Infoway Limited,
              Citibank, N.A. and holders from time to time of American
              Depositary Receipts issued thereunder (including, as an exhibit,
              the form of American Depository Receipt). (5)

2.5           Rupee Loan Agreement, dated as of July 3, 1998, by and between
              Satyam Infoway Limited and Export-Import Bank of India. (1)

2.6           Letter Agreement, dated as of September 4, 1999, by and between
              Satyam Infoway Limited and Sterling Commerce, Inc. (1)

2.7           Stockholders Agreement, dated as of September 14, 1999, by and
              among Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam
              Computer Services Limited. (1)

2.8           Registration Rights Agreement, dated as of September 14, 1999, by
              and among Satyam Infoway Limited, Sterling Commerce, Inc. and
              South Asia Regional Fund. (1)

4.1           Associate Stock Option Plan (including Deed of Trust). (3)

4.2           Form of Indemnification Agreement. (3)

4.3           License Agreement For Provision of Internet Service, dated as of
              November 12, 1998, by and between Satyam Infoway Limited and the
              Government of India, Ministry of Communications, the Department of
              Telecommunications, Telecom Commission. (1)

4.4           Bank Guarantee, dated as of November 4, 1998. (1)

4.5+          UUNet Technologies Strategic Alliance Agreement, dated as of April
              18, 1997, by and between Satyam Infoway Limited and UUNet
              Technologies. (3)

4.6+          CompuServe Network Services Strategic Alliance Agreement, dated as
              of April 18, 1997, by and between Satyam Infoway Limited and
              CompuServe Incorporated. (3)

4.7+          International Electronic Commerce Provider Agreement, dated as of
              February 14, 1997, by and between Satyam Infoway Limited and
              Sterling Commerce International Inc. (3)

4.8+          Amendment No. 1 to International Electronic Commerce Provider
              Agreement by and between Satyam Infoway Limited and Sterling
              Commerce International Inc. (3)

4.9+          Amendment No. 2 to International Electronic Commerce Provider
              Agreement by and between Satyam Infoway Limited and Sterling
              Commerce International Inc. (3)

4.10          Amendment No. 3 to International Electronic Commerce Provider
              Agreement, dated as of September 14, 1999, by and between Satyam
              Infoway Limited and Sterling Commerce International Inc. (3)

4.11+         Distribution Agreement, dated as of June 1997, by and between
              Satyam Infoway Limited and OpenMarket, Inc. (3)

4.12          User Agreement, effective as of April 1, 1999 by and between
              Satyam Infoway Limited and Satyam Computer Services Limited. (1)

4.13          Share Purchase Agreement, dated November 29, 1999, by and among
              Satyam Infoway Limited, Indiaworld Communications Private Limited,
              Mr. Rajesh Jain and the other shareholders of Indiaworld
              Communications Private Limited listed on the signature pages
              thereto. (4)

4.14          Agreement for Option to Purchase Shares, dated November 29, 1999,
              by and among Satyam Infoway Limited, Indiaworld Communications
              Private Limited, Mr. Rajesh Jain and the other shareholders of
              Indiaworld Communications Private Limited listed on the signature
              paged thereto. (4)

4.15          Share Purchase Agreement, dated as of June 30, 2000, by and among
              Rajesh Jain, Bhavana R. Jain, C.M. Jain Impex and Investments
              Private Limited, Satyam Infoway Limited and Indiaworld
              Communications Private Limited. (7)

4.16          Debenture Subscription Agreement, dated as of March 16, 2000, by
              and between
</TABLE>



<PAGE>   104


<TABLE>
<S>          <C>
              Satyam Infoway Limited and IDBI Bank. (6)

4.17          Debenture Subscription Agreement, dated as of March 31, 2000, by
              and between Satyam Infoway Limited and IDBI Bank. (6)

4.18          Agreement for the Sale of Shares in CricInfo Limited by and
              between Indigo Holdings Limited and Satyam Infoway Limited. (8)

4.19          Subscription Agreement by and among CricInfo Limited, Satyam
              Infoway Limited and the Senior Management. (8)

4.20          Agreed Form of Shareholders Agreement by and among CricInfo
              Limited, Satyam Infoway Limited and the Non-SIL Shareholders. (8)

4.21          Letter Agreement between Satyam Infoway Limited and Indigo
              Holdings Limited. (8)

8.1           List of Subsidiaries.
</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.

        (1) Previously filed as an exhibit to Amendment No. 1 to the
Registration Statement on Form F-1 filed with the Commission on October 4, 1999
and incorporated herein by reference.

        (2) Previously filed as an exhibit to the Registration Statement on Form
F-6 filed with the Commission on October 6, 1999 and incorporated herein by
reference.

        (3) Previously filed as an exhibit to Amendment No. 2 to the
Registration Statement on Form F-2 filed with the Commission on October 13, 1999
and incorporated herein by reference.

        (4) Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on December 3, 1999 and incorporated herein by reference.

        (5) Previously filed as an exhibit to the Post-Effective Amendment No. 1
to Form F-6 filed with the Commission on January 5, 2000 and incorporated herein
by reference.

        (6) Previously filed as an exhibit to the Annual Report on Form 20-F
filed with the Commission on June 29, 2000 and incorporated herein by reference.

        (7) Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on July 12, 2000 and incorporated herein by reference.

        (8) Previously filed as an exhibit to the Registration Statement on Form
F-2 filed with the Commission on July 26, 2000 and incorporated herein by
reference.