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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



|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934.
|- | -----------------------------------------------------------------------------------------
|  |                                                                                          
|  | For the fiscal year ended March 31, 2014.                                                



Or



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



| ̈ | SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934.
|- | -----------------------------------------------------------------------------------------
|  |                                                                                          
|  | Date of event requiring this shell Company report                                        



Commission file number
000-27663



Sify Technologies
Limited

(Exact name of Registrant
as specified in its charter)



Not Applicable

(Translation at Registrant’s
name into English)



Chennai, Tamil Nadu,
India

(Jurisdiction of incorporation
or organization)



Tidel Park, 2nd Floor

4, Rajiv Gandhi Salai

Taramani, Chennai 600
113 India

(91) 44-2254-0770, Fax
(91) 44 -2254 0771

(Address of principal
executive office)



M.P.Vijay Kumar, Chief
Financial Officer, (91) 44-2254-0770; vijaykumar.mp@sifycorp.com

Tidel Park, 2nd Floor,
4, Rajiv Gandhi Salai, Taramani, Chennai 600113 India

(Name, Telephone,
Email and/or Facsimile number and Address of Company Contact Person)



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



|Title of each class                                                                        |  | Name of each Exchange on which registered
|------------------------------------------------------------------------------------------ |  | -----------------------------------------
|                                                                                           |  |                                          
|American Depository Shares, each represented by One Equity Share, par value ₹ 10 per share |  | NASDAQ Global Select Market              



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



|Title of each class |  | Name of each Exchange on which registered
|------------------- |  | -----------------------------------------
|                    |  |                                          
|None                |  | Not Applicable                           



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



Not Applicable



(Title of class)



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.



178,530,787 Equity Shares.



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



Yes  ̈No þ



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.



Yes  ̈No þ



Note - Checking the box above will not relieve
any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations
under those Sections.



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 þNo  ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).



Yes  ̈No þ



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):



|Large accelerated filer  ̈ | Accelerated filerþ | Non-accelerated filer  ̈
|------------------------- | ------------------ | -----------------------



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



|US GAAP  ̈ | International
                                         Financial Reporting Standards as
        issued by the International Accounting
        Standards Boardþ | Other  ̈
|--------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------



If this is an annual report, indicate by check
mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).



Yes  ̈ No
þ













Table of Contents




Table of Contents



|Item                                               |                                                                              | Page
|-------------------------------------------------- | ---------------------------------------------------------------------------- | ----
|                                                   |                                                                              |     
|Currency of Presentation and Certain Defined Terms | 3                                                                           
|Forward-Looking Statements                         | 4                                                                           
|                                                   |                                                                              |     
|PART I                                             |                                                                              |     
|                                                   |                                                                              |     
|Item 1.                                            | Identity of Directors, Senior Management and Advisers                        | 5   
|Item 2.                                            | Offer Statistics and Expected Timetable                                      | 5   
|Item 3.                                            | Key Information                                                              | 5   
|Item 4.                                            | Information on the Company                                                   | 24  
|Item 4A.                                           | Unresolved Staff Comments                                                    | 38  
|Item 5.                                            | Operating and Financial Review and Prospects                                 | 38  
|Item 6.                                            | Directors, Senior Management and Employees                                   | 63  
|Item 7.                                            | Major Shareholders and Related Party Transactions                            | 70  
|Item 8.                                            | Financial Information                                                        | 74  
|Item 9.                                            | The Offer and Listing                                                        | 76  
|Item 10.                                           | Additional Information                                                       | 76  
|Item 11.                                           | Quantitative and Qualitative Disclosures About Market Risk                   | 93  
|Item 12.                                           | Description of Securities Other Than Equity Securities                       | 93  
|                                                   |                                                                              |     
|PART II                                            |                                                                              |     
|                                                   |                                                                              |     
|Item 13.                                           | Defaults, Dividend Arrearages and Delinquencies                              | 94  
|Item 14.                                           | Material Modifications to the Rights of Security Holders and Use of Proceeds | 94  
|Item 15.                                           | Controls and Procedures                                                      | 95  
|Item 16A.                                          | Audit Committee Financial Expert                                             | 97  
|Item 16B.                                          | Code of Ethics                                                               | 97  
|Item 16C.                                          | Principal Accountant Fees and Services                                       | 97  
|Item 16D.                                          | Exemptions from the Listing Standards for Audit Committees                   | 98  
|Item 16E.                                          | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 98  
|Item 16F.                                          | Change in Registrant’s Certifying Accountant                                 | 98  
|Item 16G.                                          | Corporate Governance                                                         | 98  
|Item 16H.                                          | Mine Safety Disclosure                                                       | 98  
|                                                   |                                                                              |     
|PART III                                           |                                                                              |     
|                                                   |                                                                              |     
|Item 17.                                           | Financial Statements                                                         | 98  
|Item 18.                                           | Financial Statements                                                         | 98  
|Item 19.                                           | Exhibits                                                                     | 195 



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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 Sify Technologies 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. In January 2003, we changed the
name of our Company from Satyam Infoway Limited to Sify Limited. In October 2007, we again changed our name from Sify Limited
to Sify Technologies Limited. “Sify”, “SifyMax.in,”, “Sify e-ports” and “Sify
online” are trademarks used by us for which we have already obtained registration certificates in India. All other trademarks
or trade names used in this Annual Report on Form 20-F for the year ended March 31, 2014 (the “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. References to the “Group” mean Sify Technologies Limited and its subsidiaries.
References to “equity shares” refer to our Indian Equity Shares, which are not traded on an exchange in India or the
United States. References to “ADS’s” or “ADSs” refer to our American Depositary Shares, which are
traded on the NASDAQ Global Select Market under the symbol “SIFY.”



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 reference rate in the City
of Mumbai on March 31, 2014 for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI), which was ₹
60.10 per $1.00.



Our financial statements
are presented in Indian rupees and prepared in accordance with English version of International Financial Reporting Standards
as issued by the International Accounting Standards Board, or IFRS. In this Annual Report, any discrepancies in any table between
totals and the sums of the amounts listed are due to rounding.



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



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Forward-Looking
Statements



This Annual Report contains “forward-looking
statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, that are based on our current expectations, assumptions, estimates and projections about our Company,
our industry, economic conditions in the markets in which we operate, and certain other matters. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as 'anticipate', 'believe', 'estimate', 'expect',
‘may’, 'intend', 'will', 'project', 'seek', 'should' and similar expressions. Those statements include, among other
things, the discussions of our business strategy and expectations concerning our market position, future operations, margins,
profitability, liquidity and capital resources. These statements are subject to known and unknown risks, uncertainties and other
factors, which may cause actual results or outcomes to differ materially from those implied by the forward-looking statements.
Important factors that may cause actual results or outcomes to differ from those implied by the forward-looking statements include,
but are not limited to, those discussed in the “Risk Factors” section in this Annual Report. In light of these and
other uncertainties, you should not conclude that the results or outcomes referred to in any of the forward-looking statements
will be achieved.



We operate in rapidly changing businesses,
and new risk factors emerge from time to time. We cannot predict every risk factor, nor can we assess the impact, if any, of all
such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those projected in any forward-looking statements. All forward-looking statements included in this Annual Report
are based on information available to us, and reflect management’s beliefs, on the date hereof, and we do not undertake
to update these forward-looking statements to reflect future events or circumstances. In addition, readers should carefully review
the other information in this Annual Report and in our periodic reports and other documents filed with the United States Securities
and Exchange Commission (“SEC”) from time to time.



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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



Summary of Consolidated Financial Data



You should read the summary
consolidated financial data below in conjunction with the Company's consolidated financial statements and the related notes, as
well as the section entitled “Operating and Financial Review and Prospects,” all of which are included elsewhere in
this Annual Report. The summary consolidated statements of income data for the five years ended March 31,2014, 2013, 2012, 2011
and 2010 and the summary consolidated Statement of Financial Position as of March 31, 2014, 2013, 2012, 2011 and 2010 have been
derived from our audited consolidated financial statements and related notes to the consolidated financial statements which were
prepared and presented in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting
Standards Board (IASB). Historical results are not necessarily indicative of future results.



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Sify Technologies Limited

Consolidated Statement of Income

(In thousands of Rupees, except share and per share data

and as otherwise stated)



|                                                                     |  | Year
    endedMarch 31, |           
|-------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                     |  | 2014₹                   |           
|                                                                     |  |                         |           
|Revenue                                                              |  |                         | 10,460,229
|Cost of goods sold and services rendered                             |  |                         | (6,136,860
|Other income                                                         |  |                         | 93,461    
|Selling, general and administrative expenses                         |  |                         | (2,739,813
|Depreciation and amortization                                        |  |                         | (1,101,243
|Impairment loss on intangibles including goodwill                    |  |                         | -         
|Income from legal settlement                                         |  |                         | -         
|Profit
    / (loss) from operating activities                        |  |                         | 575,774   
|                                                                     |  |                         |           
|Finance income                                                       |  |                         | 120,248   
|                                                                     |  |                         |           
|Finance expenses                                                     |  |                         | (377,622  
|                                                                     |  |                         |           
|Net finance
    income / (expense)                                   |  |                         | (257,374  
|                                                                     |  |                         |           
|Profit from sale of equity accounted investee
    and rights therein |  |                         | -         
|Share of profit of equity
    accounted investee (net of income tax) |  |                         | -         
|Profit / (loss) before tax                                           |  |                         | 318,400   
|Income tax (expense) / benefit                                       |  |                         | -         
|Profit
    / (loss) for the year                                     |  |                         | 318,400   
|Attributable to:                                                     |  |                         |           
|                                                                     |  |                         |           
|Equity holders of the Company                                        |  |                         | 318,400   
|Non-controlling interest                                             |  |                         |           
|                                                                     |  |                         |           
|                                                                     |  |                         | 318,400   
|Earnings / (loss) per share                                          |  |                         |           
|Basic earnings /(loss) per share                                     |  |                         | 2.33      
|Diluted earnings/(loss) per share                                    |  |                         | 2.33      



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Particulars

(Rupees in thousands, except share and per share
data)

Balance Sheet data



|                                                                |  | March 31, |            |   | Convenience translation
    into US$ in thousands, except share and per share data (see note 1 ) | 
|--------------------------------------------------------------- |  | --------- | ---------- | - | ------------------------------------------------------------------------------------------------ | 
|                                                                |  | 2014      |            |   | 2013                                                                                             | 
|                                                                |  | ₹         |            |   | ₹                                                                                                | 
|Cash and cash equivalents including restricted cash             |  |           | 1,270,127  |   |                                                                                                  | 
|                                                                |  |           |            |   |                                                                                                  | 
|Net current assets                                              |  |           | 1,110,210  |   |                                                                                                  | 
|                                                                |  |           |            |   |                                                                                                  | 
|Total assets                                                    |  |           | 14,114,363 |   |                                                                                                  | 
|                                                                |  |           |            |   |                                                                                                  | 
|Total equity attributable to equity shareholders of the Company |  |           | 6,955,653  |   |                                                                                                  | 
|                                                                |  |           |            |   |                                                                                                  | 
|Cash Flow Data                                                  |  |           |            |   |                                                                                                  | 
|Net cash provided by / (used in):                               |  |           |            |   |                                                                                                  | 
|Operating activities                                            |  |           | 968,441    |   |                                                                                                  | 
|Investing activities                                            |  |           | (806,684   | ) |                                                                                                  | 
|Financing activities                                            |  |           | 114,999    |   |                                                                                                  | 



Notes



| | 1. | The convenience translation to
                                         U.S. Dollars was performed at the reference rate in the City of Mumbai for cable transfers
                                         as published by Reserve Bank of India on March 31, 2014 of ₹ 60.10 per $1.00, 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 this rate or at all.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Reference to shares and per share
                                         amounts refer to our equity shares. Our outstanding equity shares include equity shares
                                         held by a depository underlying our ADSs. Effective September 24, 2002, one ADS represented
                                         one equity share.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Exchange Rates



Our functional currency
is the Indian rupee. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may
fluctuate substantially in the future. Our exchange rate risk primarily arises from our foreign currency revenues, receivables
and payables.



The following table sets forth the high and
low exchange rates for the previous six months and is based on the reference rate in the City of Mumbai on business days during
the period for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI).



|              |  | High |       |  | Low | 
|------------- |  | ---- | ----- |  | --- | 
|Month         |  | Rs.  |       |  | Rs. | 
|June 2014     |  |      | 60.37 |  |     | 
|May 2014      |  |      | 60.34 |  |     | 
|April 2014    |  |      | 61.12 |  |     | 
|March 2014    |  |      | 61.90 |  |     | 
|February 2014 |  |      | 62.69 |  |     | 
|January 2014  |  |      | 62.98 |  |     | 



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
reference rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by the
Reserve Bank of India (RBI). The column titled ‘Average' in the table below is the average of the last business day of each
month during the year.



|                  |  | Period |       |  |         |  |       |      |  |  |       | 
|----------------- |  | ------ | ----- |  | ------- |  | ----- | ---- |  |  | ----- | 
|Fiscal Year Ended |  | end    |       |  | Average |  |       | High |  |  | Low   | 
|March 31          |  | Rs.    |       |  | Rs.     |  |       | Rs.  |  |  | Rs.   | 
|2014              |  |        | 60.10 |  |         |  | 60.49 |      |  |  | 68.36 | 
|2013              |  |        | 54.39 |  |         |  | 54.53 |      |  |  | 57.22 | 
|2012              |  |        | 51.16 |  |         |  | 47.94 |      |  |  | 54.23 | 
|2011              |  |        | 44.65 |  |         |  | 45.58 |      |  |  | 47.57 | 
|2010              |  |        | 45.14 |  |         |  | 47.36 |      |  |  | 50.53 | 



On March 31, 2014, the reference rate in the
City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹60.10.





On July 18, 2014, the reference rate in the
City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹ 60.33



Capitalization and indebtedness



Not applicable.



Reasons for the offer and use of proceeds



Not applicable.



Risk Factors



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 certain factors, including those set forth in the following risk factors and
elsewhere in this Annual Report.



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Risks Related to our Company and Industry



We may incur losses in the future and
we may not achieve or maintain profitability.



We have made a net profit
of ₹ 318 million ($5.31 million) for the year ended March 31, 2014 with an accumulated deficit of ₹ 13,220 million
($219.97 million) as at March 31, 2014.We may in the future incur net losses and suffer negative operating cash flows. We expect
to increase our expenditures as we continue to expand our services, promote our brand, and invest in the expansion of our infrastructure.
We have and in the future may incur expenses in connection with investments in Data Centres and infrastructure. Accordingly, we
will need to generate significant additional revenues in order to become profitable. Our business model is not yet consistently
proven in the Indian Information and Communications Technology (ICT )space, and we cannot assure you that we will improve our
profitability or that we will not incur operating losses in the future. If we are unable to become consistently profitable and
continue to sustain losses, we will be unable to build a sustainable business and our results of operations will be adversely
affected. In this event, the price of our ADSs and the value of your investment may decline



We may fail to meet such obligations
of export under the Export Promotion Capital Goods Scheme (EPCG) and be subjected to penalties.



During the year 2012-13, we availed the duty
benefit for our import of capital goods under the EPCG scheme available for export of services. Under the scheme, we are eligible
to import capital goods without import duty with an obligation to generate export earnings to the extent of 6 times (March 2013:
8 times) the value of such duty benefit availed within a period of 6 years (March 2013: 8 years). Though there are export earnings
at present, we may fail to fulfill such obligation in the future. In the case of a shortfall in fulfilment of such export obligation
as of March 31, 2014, we may be subjected to repay the duty benefit availed along with interest.



The global
economic environment increased pricing pressure and decreased utilization rates could negatively impact our revenues and operating
results.



Spending
on technology products and services in most parts of the world has been rising steadily for the past several years. However, there
was a decline in the growth rate of global IT purchases due to the interim economic slowdown and we believe the market may not
recover in the same pace in the near term.



With
regard to the Indian economy, pricing and competition continue to be under pressure. Lead times for orders or contracts have
become much longer, as we have longer credit periods. These factors have affected and would affect the growth in demand for our
corporate business.



Overseas
economic performance also has a bearing on our Infrastructure and e-Learning businesses. Currency fluctuations will also lead
to variations in revenue. The Infrastructure Managed Services, National Long Distance (‘NLD’) / International Long
Distance (‘ILD’) business and eLearning may be affected in terms of prices and growth.



Reduction
in IT spending and extended credit terms arising from or related to the economic slowdown, and any resulting pricing pressures,
reduction in billing rates, increased credit risk may adversely impact our revenues, gross profits, operating margins and results
of operations.



Currency fluctuations may affect the
results of our operations or the value of our ADSs.



The exchange rate between
the Indian rupee and the U.S. dollar has changed significantly in recent years and may continue to fluctuate substantially in
the future.



We use derivative financial
instruments, such as foreign exchange forward and option contracts, to mitigate the risk of changes in foreign exchange rates
on accounts receivable and payable and forecast cash flows denominated in US dollar. We may not purchase derivative instruments
for a sufficient amount to adequately insulate ourselves from foreign currency exchange risks.



For the year ended March
31, 2014, we have recognized a loss of ₹ 5.28 million ($0.09 million) on foreign exchange translations. If foreign exchange
currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely
affect our results of operations in future periods. Also, the volatility in the foreign currency markets may make it difficult
to hedge our foreign currency exposures effectively and make them expensive.



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Further, the policies
of the Reserve Bank of India (RBI) may change from time to time which may limit our ability to hedge our foreign currency exposures
adequately. On August 2, 2011, the RBI issued Comprehensive Guideline on Derivatives to the banks/dealers with regard to suitability
and appropriateness policy for offering derivative products to users. In addition, a high-level committee appointed by the Reserve
Bank of India had recommended that India move to increased capital account convertibility, and proposed a framework for such increased
convertibility. Full or increased capital account convertibility, if introduced, could result in increased volatility in the fluctuations
of exchange rates between the Indian rupee and US dollar. Our US customers may leave us exposed to fluctuation in revenues based
on currency fluctuations.



In July 2012, the RBI
has mandated conversion of foreign currency balances held in Export Earners Foreign Currency (EEFC) Accounts, before the end of
subsequent month of the transaction. This may force us to convert foreign currency balances to INR at an unfavorable exchange
rate, which will result in loss.



We may encounter legal confrontations
as the Information Technology Act 2000 lacks specificity as to issues on online processes and/or Internet.



We
believe that the Information Technology Act of 2000 as amended in 2011 (the “ITA”), an Indian regulation, does not
address all areas of online processes or the Internet. In exercise of the powers conferred by the ITA, the Government of India
issued rules in April 2011 called Information Technology rules with stringent privacy norms for Internet Service Providers and
the intermediary who is handling sensitive personal information. The ITA has mandated the service providers to maintain transactions,
receipts, vouchers in specific formats. The records should be produced for inspection and audit by a government nominated agency
or person. The Government of India is authorized to audit security and privacy protection measures. We are exposed to risks
relating to unauthorized access and non-compliance of regulations by our business partners. Such events may negatively affect
our reputation, and violations of the Information Act may result in fines, litigation or cause us to incur legal costs, which
may adversely affect our business and results of operations.



Intense competition
in our businesses could prevent us from improving our profitability and we may be required to further modify the rates we charge
for our services in response to new pricing models introduced by new and existing competition which would significantly affect
our revenues.



Our
corporate network services compete with well-established companies, including Bharti Airtel, Tata Communications Limited or TCL,
Reliance Infocomm, Tata Teleservices, and the Government-owned telecom companies, Bharat Sanchar Nigam Limited or BSNL and Mahanagar
Telephone Nigam Limited or MTNL.



A
significant number of competitors have entered India’s Internet service provider industry. The large players, especially
the state run telecommunication companies, may enjoy significant competitive advantages over us, including greater financial resources,
which could allow them to charge prices that are lower than ours in order to attract customers. These factors have resulted in
periods of significant reduction in actual average selling prices for our services. We expect the market for Internet access and
other connectivity services to remain extremely price competitive. Increased competition may result in operating losses, loss
of market share and diminished value in our services, as well as different pricing, service or marketing decisions. In addition,
competition may generally cause us to incur unanticipated costs associated with research and product development. Additionally,
we believe that our ability to compete also depends in part on factors outside our control, such as the availability of skilled
employees in India, the price at which our competitors offer comparable services, and the extent of our competitors’ responsiveness
to their clients’ needs. We cannot assure you that we will be able to successfully compete against current and future competitors,
or that we will not lose key employees or customers to such competitors, which may adversely affect our business and results of
operations.



Margin squeeze may affect the results
of our operations.



Our margins have been
stagnant recently due to competitive pricing pressure. Competition will continue to increase with the entry of new competitors
into the enterprise service category. However, these competitors generally would prefer to operate with a few global customers
who have business interest in India. They may attract customers for managed hosting services with their capability of superior
network and competitive pricing. We expect the market for such services to remain extremely price competitive. Increased competition
may result in the reduction in profit margin which would impact the results of our operations.



Procuring power at lower costs for Data
Centres by the competitors may put us at a disadvantage in terms of pricing for our Data Centre operations.



The single largest operating
cost in Data Centres is power. Currently all Data Centres are now located in proximity to, or at the edge of major urban centers
such as Mumbai, Chennai , Bengaluru and the new facility at Noida. We are also building a facility in Mumbai. Inexpensive land
and labor allow companies to locate new Data Centres in remote locations. We may neither be in a position to develop Data Centres
at remote locations where power is cheap nor procure power at cheaper rates for our Data Centres. If our competitors procure power
at lower cost, they may have an advantage over us with respect to pricing. Our inability to offer competitive pricing may result
in loss of customers and will impact our business and result of operations. The alternate sources of power are also exposed to
inflation, regulation and hence, any undue price increase would affect our energy cost significantly.



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We have added
a number of new business offerings over the years like International Voice and Data, Collaborative tools, DC build on BoT, Managed
services delivery on Cloud platform, Web based solutions among others.



The risks we face
in developing our services include our inability to:



| | • | continuously develop and upgrade our technology;
| | - | ------------------------------------------------



| | • | maintain and develop strategic relationships with
                                         business partners;
| | - | -------------------------------------------------------------------------------------------------------------



| | • | offer compelling online services and content;
| | - | ---------------------------------------------



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/data services and subscribers for our Internet access services
as well as the loss of advertising revenues.



Despite our
best efforts to optimize costs, 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. A significant portion of our investment and cost base is relatively fixed in
the short term. Our revenues in the foreseeable future will depend on many factors, including the following:



| | • | the range of network
                                         services provided by us and the usage thereof by our customers;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | the quantum and nature
                                         of any agreements we enter into with strategic partners for our services;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | • | the services, products or pricing
                                         policies introduced by our competitors;
| | - | ------------------------------------------------------------------------------------------------------------------



| | • | capital expenditure
                                         and other costs relating to our operations;
| | - | --------------------------------------------------------------------------------------------------------



| | • | the timing and quality
                                         of our marketing efforts;
| | - | -----------------------------------------------------------------------------------------



| | • | our ability to successfully
                                         integrate operations and technologies from any acquisitions, joint ventures or other
                                         business combinations or investments;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the introduction of
                                         alternative technologies;
| | - | --------------------------------------------------------------------------------------



| | • | technical difficulties
                                         or system failures affecting the telecommunication infrastructure in India, the Internet
                                         generally or the operation of our websites; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the range of Data centre
                                         services provided by us and its subscription thereof by our customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



We
plan to continue to expand and invest in network 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
and adversely affect our revenue and operating results.



You
should not rely on yearly comparisons of our results of operations as indicators of future performance and operating results may
be below the expectations of public market analysts and investors. In this event, the price of our ADSs may decline.



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



Our
businesses depend on the reliability and security of our information technology systems and infrastructure. They must remain secure,
and be perceived by our corporate and consumer customers to be secure as 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, or cyber-attacks beyond our control. If our security measures are circumvented, it would jeopardize the security
of confidential information stored on our systems, proprietary information could be misappropriated or cause interruptions to
our operations. We may be required to make significant additional investments and efforts to protect against or remedy security
breaches. Unauthorized disclosure of sensitive or confidential client and customer data, whether through breach of our computer
systems, systems failure or otherwise, could damage our reputation and adversely affect our business and results of operations



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 and 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 our ability to attract and retain customers for our service offerings.



We face a competitive
labour 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 including our senior management team, including our CEO and Chairman,
Mr. Raju Vegesna. Each of our employees may voluntarily terminate his or her employment with us. Our success also depends on our
ability to attract and retain such highly qualified technical, marketing and sales personnel. The labour market for skilled employees
in India is extremely competitive, and the process of hiring employees with the necessary skills is time consuming and requires
significant resources. We may not be able to retain or integrate existing personnel or identify and hire additional personnel
in the future. The loss of the services of key personnel or the inability to attract additional qualified personnel could disrupt
the implementation of our business strategy, upon which the success of our business depends.



The failure
to keep our technical knowledge confidential could erode our competitive advantage.



Our
technical know-how is not protected by intellectual property rights such as patents, and is principally protected by maintaining
its confidentiality. We rely on trade secrets, confidentiality agreements and other contractual arrangements. As a result, we
cannot be certain that our know-how will remain confidential in the long run. Employment contracts with certain of our employees
who have special technical knowledge about our products or our business contain a general obligation to keep all such knowledge
confidential. In addition to the confidentiality provisions, these employment agreements typically contain non-competition clauses.



If
either the confidentiality provisions or the non-competition clauses are unenforceable, we may not be able to maintain the confidentiality
of our know-how. In the event that confidential technical information or know-how about our products or business becomes available
to third parties or to the public, our competitive advantage over other companies in the wireless based IP/VPN industry could
be harmed which could have an adverse material effect on our current business, future prospects, financial condition and results
of operations.



Compliance
with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and
increases our costs of compliance.



Changing
laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Dodd–Frank
Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) ,Sarbanes-Oxley Act of 2002 (“SOX”),
new SEC regulations and NASDAQ Stock Market rules are creating uncertainty for companies like ours. These new or changed
laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.



Further,
from the year 2011, there has been an increased focus on corporate governance by the U.S. Congress and by the SEC in response
to the credit and financial crisis in the United States. As a result of this increased focus, additional corporate governance
standards have been promulgated with respect to companies whose securities are listed in the United States, including by way of
the enactment of the Dodd-Frank, and more governance standards are expected to be imposed in the near future on companies whose
securities are listed in the United States.



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Indian
regulatory authorities are increasingly focused on standards of accounting, auditing, public disclosure and corporate governance
and may impose new regulations that can lead to increased general and administrative expenses and a diversion of management time
and attention from revenue-generating activities to compliance activities.



In
addition, it may become more expensive and/or more difficult for us to obtain director and officer liability insurance due to
increase in premium rates. Further, our Board members, Chief Executive Officer, and our Chief Financial Officer could face an
increased risk of personal liability in connection with their performance of duties and our SEC reporting obligations. As
a result, we may face difficulties attracting and retaining qualified board members and executive officers, which could harm our
business. If we fail to comply with new or changed laws or regulations, our business and reputation may be harmed.



The Indian Companies Act,
2013, which replaced the Companies Act, 1956, effective April 1, 2014, has imposed numerous and onerous compliance requirements
on the Corporates in India. The new Act introduced significant provisions relating to governance, e-management, compliance and
enforcement, enhanced disclosure norms, accountability of management, stricter enforcement, investor protection, class action
suits, corporate social responsibility, compulsory appointment of Independent and Woman Directors, rotation of Auditors etc among
others. Compliance with the provisions of the new Act may pose a greater challenge to the Corporates in India both in terms of
responsibility and cost.



We may inadvertently
fail to comply with local laws of other countries in connection with the negotiation and execution of operational agreements.



As
part of our international business, we may negotiate with and enter into contracts with strategic partners, clients, suppliers,
employees and other third parties in various countries. We may inadvertently fail to comply with their laws which may result
in lawsuits or penalties, which could adversely affect our business or results of operations.



Our inter-city
network is leased from other service providers and is dependent on their quality and availability.



We
have provided inter-city connectivity for our Enterprise customers through lease arrangements rather than through capital investment
in assets, Our ability to offer high quality telecommunications services depends, to a large extent, on the quality of the networks
maintained by other operators, and their continued availability, neither of which is under our control. However, the abundance
of inter-city connectivity provides us with the ability of switching to telcos offering better services. Although we always
use more than one service provider where required, there can be no assurance that this dependence on external parties would not
affect our network availability. Any prolonged loss of network availability could adversely affect our business and results of
operations.



The legal system
in India does not protect intellectual property rights to the same extent as the legal system 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. We hold no patents, and our competitors may independently develop
similar technology or duplicate our services. Unauthorized parties may infringe upon or misappropriate our 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 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 service offerings overlap with competitive offerings. Our defences 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 award as damage 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 even obtain a license on commercially reasonable terms.



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Our current
infrastructure may not accommodate increased use while maintaining acceptable overall performance.



Currently,
only a relatively limited number of customers use our corporate network. We must continue to add to our network infrastructure
to 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 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, and numerous customer defections may adversely affect our
results of operations.



Our increasing
work with Governmental agencies may expose us to additional risks.



We
are increasingly bidding for work with Governments and Governmental agencies for Data Centres and other projects. Projects involving
Governments or Governmental agencies carry various risks inherent in the Government contracting process, including the following:





| | • | Such projects may be
                                         subject to a higher risk of reduction in scope or termination than other contracts due
                                         to political and economic factors such as changes in Government, pending elections or
                                         the reduction in, or absence of, adequate funding;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Terms and conditions
                                         of Government contracts tend to be more onerous than other contracts and may include,
                                         among other things, extensive rights of audit, more punitive service level penalties
                                         and other restrictive covenants. Also, the terms of such contracts are often subject
                                         to change due to political and economic factors;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | All Government bids
                                         are subject to Bank Guarantee depending upon the size of the tender. Any shortfall in
                                         service, inability to deliver committed SLA during the project may force the Government
                                         to invoke the bank guarantee leading to huge cash losses;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Government contracts
                                         are often subject to more extensive scrutiny and publicity than other contracts. Any
                                         negative publicity related to such contracts, regardless of the accuracy of such publicity,
                                         may adversely affect our business or reputation;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Participation in Government
                                         contracts could subject us to stricter regulatory requirements, which may increase our
                                         cost of compliance; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Such projects may involve
                                         multiple parties in the delivery of services and require greater project management efforts
                                         on our part. Any failure in this regard may adversely impact our performance.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | In addition, we operate
                                         in jurisdictions in which local business practices may be inconsistent with international
                                         regulatory requirements, including anti-corruption and anti-bribery regulations prescribed
                                         under the U.S. Foreign Corrupt Practices Act (“FCPA”), which, among other
                                         things, prohibits giving or offering to give anything of value with the intent to influence
                                         the awarding of Government contracts. Although we believe that we have adequate policies
                                         and enforcement mechanisms to ensure legal and regulatory compliance with the FCPA, and
                                         other similar regulations, it is possible that some of our employees, subcontractors,
                                         agents or partners may violate any such legal and regulatory requirements, which may
                                         expose us to criminal or civil enforcement actions, including penalties. If we fail to
                                         comply with legal and regulatory requirements, our business and reputation may be harmed.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Our Dividend payment policy is contingent
upon the Company’s profits each year.



We
have not paid cash dividends to date due to the losses in the previous years and availability of divisible profits under the Indian
law. In view of the positive performance of the Company during the year 2013-14, the Board of Directors has recommended a 10%
cash dividend to all the shareholders of the Company for the year ended March 31, 2014, which is subject to the approval of the
shareholders at the ensuing Annual General Meeting to be held on July 28, 2014.



Dividend
payment is a function of profits and the distribution of profit is based on home country laws and the financial statements prepared
under the Indian GAAP.  The Board of Directors after assessing various factors including the future cash flow requirements
of the Company has recommended a dividend payout to the shareholders for approval at the Annual General Meeting.



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The
dividend payment policy of the Company is not certain and is contingent upon the level of performance of the Company and the recommendation
of the Board and the approval of the shareholders.



Risks Related to the ADSs and Our Trading
Market



The interests
of our significant shareholder, Mr Raju Vegesna, our CEO, Chairman and Managing Director may differ from your interests.



Effective
as of October 30, 2010, upon the consummation of the private placement to an entity controlled by Mr Raju Vegesna, our CEO, Managing
Director and Chairman of the Board of Directors of the company, Mr Raju Vegesna beneficially owns approximately 86.27% of our
outstanding equity shares. Mr P.S.Raju serves on our Board of Directors as a nominee of Infinity Capital Ventures, LP, an entity
controlled by Mr Raju Vegesna. As a result, Mr Raju Vegesna will be able to exercise control over many matters requiring approval
by our Board of Directors and / or shareholders, including the election of directors and approval of significant corporate transactions,
such as a sale of our company. Under Indian law, a simple majority is sufficient to control all shareholder action except for
those items, which require approval by a special resolution. If a special resolution is required, the number of votes cast in
favour 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 shareholders;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | commencing any new line
                                         of business; and
| | - | ---------------------------------------------------------------------------------



| | • | commencing a liquidation.
| | - | -------------------------



Circumstances
may arise in which the interests of Mr Raju Vegesna could conflict with the interests of our other shareholders or holders of
our ADSs. Mr. Vegesna, or the entities that he controls, could delay or prevent a change of control of our Company even if a transaction
of that sort would be beneficial to our other shareholders, including the holders of our ADSs. This concentrated control
will limit your ability to influence corporate matters and, as a result, we may take actions that our ADS holders do not view
as beneficial. As a result, the market price of our ADS could be adversely affected.



An investor in our ADSs may not be able
to exercise preemptive rights for additional shares and may thereby suffer dilution of such investor's equity interest in us.



Under the Companies Act,
2013, or the Indian 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 such preemptive rights have been waived by three-fourths of the shares voting on the resolution
to waive such rights.



Holders of ADSs may be
unable to exercise preemptive rights for equity shares underlying ADSs unless a registration statement under the Securities Act
of 1933, as amended, or the Securities Act, is effective with respect to such rights or an exemption from the registration requirements
of the Securities Act is available. 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 us would be reduced.



ADS holders
may be restricted in their ability to exercise voting rights.



At
our request, Citibank N.A, (the “Depository”)will mail to holders of our ADSs any notice of shareholders’
meeting received from us together with information explaining how to instruct the Depository to exercise the voting rights of
the securities represented by ADSs. If the Depository receives voting instructions from a holder of our ADSs in time, relating
to matters that have been forwarded to such holder, it will endeavor to vote the securities represented by such holder’s
ADSs in accordance with such voting instructions. However, the ability of the Depository to carry out voting instructions may
be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that the holders of
our ADSs will receive voting materials in time to enable such holders to return voting instructions to the Depository. Securities
for which no voting instructions have been received will not be eligible to vote.



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Under Indian law, subject
to the presence in person at a shareholder meeting of persons holding equity shares representing a quorum, all resolutions proposed
to be approved at that meeting are voted on by a show of hands unless shareholders present in person and holding (a) not less
than one-tenth of the total voting power entitled to vote on a resolution or (b) shares with an aggregate paid up capital of at
least ₹ 5,00,000 demand that a poll be taken. Equity shares not represented in person at the meeting, including equity shares
underlying ADSs for which a holder has provided voting instructions to the Depository, are not counted in a vote by show of hands.
As a result, only in the event that a shareholder present at the meeting demands that a poll be taken will the votes of ADS holders
be counted. Securities for which no voting instructions have been received will not be voted on a poll. Accordingly, you may not
be able to participate in all offerings, transactions or votes that are made available to holders of our equity shares.



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



The
market price of our ADSs has been and may continue to be highly volatile. Many factors could cause the market price of our ADSs
to rise and fall. Some of these factors include:



| | • | perception of the level
                                         of political and economic stability in India;
| | - | --------------------------------------------------------------------------------------------------------------



| | • | actual or anticipated
                                         variations in our quarterly operating results;
| | - | -------------------------------------------------------------------------------------------------------------



| | • | announcement of technological
                                         innovations;
| | - | -----------------------------------------------------------------------------------



| | • | conditions or trends
                                         in the network/data services, Internet and electronic commerce industries;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| | • | the competitive and
                                         pricing environment for 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;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | • | 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, which may adversely affect the value of your investment and the price
of our ADS’s.



16


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An active or
liquid market for the ADSs is not assured.



We
cannot predict that an active, liquid public trading market for our ADSs will continue to exist. Although ADS holders are entitled
to withdraw the equity shares underlying the ADSs from the Depository at any time, there is no public market for our equity shares
in India or the United States.  The loss of liquidity could increase the price volatility of our ADSs.



The future
sales of securities by us or existing shareholders may reduce the price of our ADSs.



Any
significant sales of our equity shares or ADSs or a perception that such sales may occur might reduce the price of our ADSs and
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 may
issue additional equity shares to raise capital and to fund acquisitions and investments, and the parties to any such future transactions
could also decide to sell them.



Capital and
credit market conditions may adversely affect our access to capital, the cost of capital, and ability to execute our business
plan.



Access
to capital markets is critical to our ability to operate. We may require additional financing in the future for the development
of our business. Declines and uncertainties in the global capital markets over the years have severely restricted raising
new capital and have affected companies’ ability to continue to expand or fund new projects. If these economic conditions
continue or become worse, our future cost of equity or debt capital and access to the capital markets could be adversely affected.  Our
ability to obtain future financing will depend on, among other things, our financial condition and results of operations as well
as the condition of the capital markets or other credit markets at the time we seek financing. In addition, an inability
to access the capital markets on favorable terms due to our low stock price, or upon our delisting from the NASDAQ Global Select
Market if we fail to satisfy a listing requirement, could affect our ability to execute our business plan as scheduled.



We
can give no assurance as to the availability of such additional capital or, if available, whether it would be on terms acceptable
to us. In addition, we may continue to seek capital through the public or private sale of securities, if market conditions are
favorable for doing so. If we are successful in raising additional funds through the issuance of equity securities, stockholders
will likely experience substantial dilution. If we are unable to enter into the necessary financing arrangements or sufficient
funds are not available on acceptable terms when required, either due to market fluctuations or regulations imposed by the Indian
Governmental authorities, we may not have sufficient liquidity and our business may be adversely affected.



We may be required to list our Equity
Shares on an Indian stock exchange. If we were to list our Equity Shares on an Indian stock exchange, conditions in the Indian
securities market may require compliance with new and changing regulations framed by Securities Exchange Board of India, listing
requirements of stock exchange, corporate governance, accounting and public disclosure requirements which might add uncertainty
to our compliance policies and increases our costs of compliance.



The Ministry of Finance of the Government
of India (‘MoF’) issued a press release dated March 31, 2006, making amendments to the ’Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993’ (‘the Scheme’). The
amendments included a statement that unlisted Companies which had accessed FCCBs, ADR/GDRs in terms of guidelines of May 22, 1998
and are not making profit, be permitted to comply with listing condition on the domestic stock exchanges within three years of
having started making profit. Further, the notification states that no fresh issues of FCCBs, ADR/GDRs by such companies will
be permitted without listing first in the domestic exchanges. These regulatory requirements may adversely affect our ability to
raise further capital for funding ongoing and future expansion plans of the company. The Securities and Exchange Board of India
(SEBI) has amended the (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2012 on October 12, 2012. 
In terms of the amended Clause 26 (1) (b), in order to be eligible to conduct an Initial Public Offer, a Company must have a minimum
average pre-tax operating profit of ₹ 150 million, calculated on a restated and consolidated basis, during the three most
profitable years out of the immediately 5 preceding years.



This is in addition to the other requirements
such as a Company must have a track record of distributable profits in terms of Section 123 of the Companies Act, 2013 for at
least three out of the immediately preceding five years; provided that extraordinary items shall not be considered for calculating
distributable profits, for being eligible to conduct an IPO.



As the Company is not in a position to satisfy
the amended condition, it may not be required to comply with the notification of the Ministry of Finance in completing the IPO
in the near future.



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However, in September 2013, the Ministry of
Finance, Government of India, has liberalized the condition for Unlisted Indian Companies to raise capital abroad without the
requirement of prior or simultaneous listing in India initially for a period of two years in order to attract more Foreign Direct
Investment.



We may be required by the Government of India
to list on Indian stock exchange. We may not be able to comply with any timeline for listing and other standards imposed on us,
and we are uncertain as to the consequences to us of any non-compliance. If we were to list our equity shares on an Indian stock
exchange, we have to comply with changing laws, regulations and standards relating to accounting, corporate governance and public
disclosure, including the SEBI rules and regulations and stock exchange listing requirements which may create uncertainty for
companies like ours. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations.
Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could
result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions
to such governance standards.



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, interest rates, Government of India
policies, including taxation policies, as well as political, social and economic developments affecting India.



Changes in
the policies of the Government of India could delay the further liberalization of the Indian economy and adversely affect economic
conditions in India generally, which could impact our business and prospects.



Since
1991, successive Indian Governments have pursued policies of economic liberalization, including significantly relaxing restrictions
on the private sector. Nevertheless, the role of the Central and State Governments in the Indian economy as producers, consumers
and regulators has remained significant. The rate of economic liberalization could change, and specific laws and policies affecting
technology and telecom companies, foreign investment, exchange rate regime 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, disrupt our operations and cause our business to suffer.



South
Asia has, from time to time, experienced instances of civil unrest and hostilities among neighbouring countries, including between
India and Pakistan. Recently, Pakistan has been experiencing significant instability and this has heightened the risks of conflict
in South Asia. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications
and making travel more difficult and such political tensions could create a greater perception that investments in Indian companies
involve higher degrees of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies,
including our equity shares and our ADSs, and the market for our services.



Terrorist attacks
or a war could adversely affect our business, results of operations and financial condition.



Terrorist
attacks, such as the attacks of July 25, 2008 in Bangalore, the attacks of November 26 to 29, 2008 in Mumbai, the attack
at New Delhi High Court on September 7, 2011 and other acts of violence have the potential to affect us or our clients. In addition,
such attacks may destabilize the economic and political situation in India. Furthermore, such attacks could cause a disruption
in the delivery of our services to our clients, and could have a negative impact on our business, personnel, assets and results
of operations, and could cause our clients or potential clients to choose other vendors for the services we provide. Terrorist
threats, attacks or war could make travel more difficult, may disrupt our ability to provide services to our clients and could
delay, postpone or cancel our clients' decisions to use our services.



The markets
in which we operate are subject to the risk of earthquakes, floods and other natural disasters.



Some
of the regions that we operate in, are prone to earthquakes, flooding and other natural disasters. In the event that any of our
business centers are affected by any such disasters, we may sustain damage to our operations and properties, suffer significant
financial losses and be unable to complete our client engagements in a timely manner, if at all. Further, in the event of a natural
disaster, we may also incur costs in redeploying personnel and property. In addition, if there is a major earthquake, flood or
other natural disaster in any of the locations in which a significant number of our customers are located, we face the risk that
our customers may incur losses, or sustained business interruption and/or loss which may materially impair their ability to continue
their purchase of products or services from us. A major earthquake, flood or other natural disaster in the markets in which we
operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.



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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 or elsewhere nor can we assure you that we will take steps to
develop one. Our equity securities are only traded on NASDAQ through the ADSs. Under prior Indian laws and regulations, our Depository
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 has announced fungibility regulations permitting, under limited
circumstances, 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,
under present law, likely will 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. Under current Indian regulations and practice, the approval of the Reserve
Bank of India is not required for the sale of equity shares underlying ADSs by a non-resident Indian to a resident 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.



The Government of
India may change its regulation of our business or the terms of our license to provide Internet access services, Voice over Internet
Protocol (VoIP) and VPN 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 highly
regulated as per extant telecom policy of the Government of India (the “GOI”). Our ISP license issued in the year
1998 was valid for a term of 15 years.We have been issued new licenses under the Unified License dated June 26,2014 with a validity
of 20 years. If we are unable to renew the licenses for any reason, we will not be able to carry on the said business beyond license
term, which may adversely affect our business or results of operations



The GOI has right to revoke,
terminate or suspend or take over entire operations for reasons such as national security or similar reasons without compensation
to us. In view of increasing cyber threats and attacks, the GOI may require telecom licensees (including ISPs) at their costs
to provide monitoring facility across its network, and facilities for capture and retention of data in terms of traffic flow,
usage details, etc. This would result in significant increase in costs and possible lesser usage due to perceived invasion of
privacy by customers.



Certain government departments
have been making queries whether use of Session Initiation Protocol, or SIP, terminal to make calls to phones abroad is permissible
within ISP license. We believe that such overseas phone calls are permitted, since, SIP terminal is a “computer” as
defined in Information Technology Act, 2000. We may have to make a significant investment as capital outlay in SIP terminals to
make it a PC-equivalent, if the government authorities issue regulations governing SIP usage contrary to our beliefs, which would
have a material effect on our results of operations.



Our profits may be impacted due to the
increase in license fee on the NLD/ILD license and inclusion of pure internet service under such license fee by the Department
of Telecommunications, Government of India.



Effective
July 2012, the Government of India amended the NLD/ILD/ISP license agreements with respect to Annual License Fee.



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Under
such amendment, all services under the NLD/ILD license have been subjected to an increased license fee from the existing 6% to
7% from July 2012 to March 2013 and 8% from April 2013 onwards. In addition, the Government has also amended the ISP license and
brought the same under such license fee of 7% from July 2012 till March 2013 and 8% from April 2013 onwards. Our present licence
for Unified License ISP issued on June 2, 2014 provides for payment of Licence fee on pure internet services also. However, the
Company approached its industry body i.e Internet Service Providers Association of India (ISPAI) to challenge the said clause
before Telecom Disputes Settlement & Appellate Tribunal (TDSAT) and ISPAI challenged the same. Presently the matter is before
the Tribunal and the Tribunal has stayed charging the Licence fee on pure internet services.



Such
amendments to the license agreements will significantly impact the financials of the Company by way of additional expense
due to increased license fees.



Increase in
License fees paid for licensed spectrum to Department of Telecommunications (‘DoT’) may adversely affect our cost
and in turn our cash flow and profitability



DoT may increase
significantly the license fees to be paid for using the licensed spectrum. This will adversely affect our profitability. We cannot
assure you that there would not be any increases of license fees in the future.



In the event that the
Government of India or the Government of another country changes its tax policies in a manner that is adverse to us, our tax expense
may materially increase, reducing our profitability.



The statutory corporate
income tax rate in India was 30% during fiscal year 2014 and was subject to a 10% surcharge where the taxable total income exceeds
₹ 10 crore (5% where the taxable total income is less than ₹ 10 crores but greater than ₹ 1 crore), 2% education
cess and 1% secondary and higher education cess, resulting in an effective tax rate of or 33.99% (or 32.45%). 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. We may be subject to tax claims by the Government of India against us in the future. Defending these
claims would be expensive, time consuming and may divert our management's attention and resources from our operations.



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 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
expensive in India, especially when compared to many countries where bandwidth penetration is quite high. Although prices for
international and domestic leased lines were substantially reduced recently, they are still high due to, among other things, capacity
constraints and lack of competition.  If the cost of bandwidth is not further reduced, or increases significantly, our
business and results of operations will be adversely affected.



We may be compelled
to surrender the spectrum that was allotted to us earlier.



The
Government of India has asked us to surrender certain range of spectrum allotted to us and the same was auctioned as BWA spectrum. The
Government also has asked the company to make payment for certain spectrum from the date of allotment or to surrender the same.
The other range of spectrum that we have been allotted, 5.7 GHz, is also close to capacity utilization and will need to be augmented
in the near future. Enterprise connectivity will need licensed bands of spectrum for assured quality and security, so the
non-availability of spectrum would materially adversely affect our business and results of operations. In the event of the
surrender of the spectrum certain frequencies, it may hamper our future plans for expansion of services, and there are no assurances
that we will be able to obtain additional replacement spectrum.



We might not
be able to grow Network Connectivity services due to a declining contribution.



In
the Network Connectivity business, realization could be lower year on year based on the market conditions. Every year when
annual contracts come up for renewal, customers sign up for more bandwidth or more links at a lower unit price. This is offset
somewhat by lower bandwidth costs, which we renegotiate with our service providers. This impacts us in two ways: first, despite
an increase in sales volume, we may not see a commensurate rise in revenues; and secondly, margins in our business are continually
shrinking.  Therefore, our revenue from our connectivity business may stagnate with declining bandwidth costs.



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We may not
be able to retain and acquire customers for our data centres.



In
the field of data centre services, competition from data centre operators may attract customers away from us or make it more difficult
for us to attract new customers. If competitors are more successful than us in the market, it could be difficult for us to retain
and/or acquire customers. Furthermore, once customers cease using our services and choose another service provider, it may require
substantial efforts in terms of cost and time to re-acquire such customers, and despite spending on such customer acquisition
or retention, we may be unsuccessful in retaining such customers.



In
order to improve our competitiveness, we have constructed Data Centres at NOIDA near Delhi, India and are constructing a Data
Centre at Rabale in Mumbai, India. If we are unable to attract adequate customers, we will not be able to achieve the revenues
initially anticipated, which could have an adverse effect on our future results of operations and financial condition.



Our data centres
may not be competitive enough in terms of green features.



We
may fail to convert our existing Data centres and/or build new Data centres under the LEED (Leadership in Energy and Environmental
Design) Commercial Interior (CI) programme of United States Green Building Council (USGBC). LEED certification is an internationally
recognized programme and is considered one of the highest standards for energy efficient constructions. The data centre uses several
green features such as site ecology, water conservation, smart energy meters and equipments, reduction of CO2 emissions, high
recycle content, effective waste management and eco-friendly interiors. Increased demand for green data centre may hamper the
marketing of our existing data centres that are not LEED certified.



Reduction in power supply and non availability
of fuel may affect our Data Centres



There
has been acute power shortage in recent years in India and hence, there could be a reduction in the availability of electricity.
Where there is non availability of power supply in Data Centres, we resort to alternate sources of power (fuel) and the running
of the Data Centres mainly depend on the availability of fuel. Non availability of power/fuel will disrupt our operations and
it would be difficult for our customers to access data during such times.



We may lose
relevance and revenues if we do not position our business models in line with current and future technology trends.



Technology
trends, such as cloud computing and software-as-a-service, allow new business models that could replace current lines of business
unless we are aware of them and position ourselves to take advantage of the transition. The markets for our services are
characterized by rapidly changing technology, evolving industry standards, emerging competition and frequent introduction
of new services. We may not successfully identify new opportunities, develop and bring new services to market in a timely manner. Unless
we are able to adopt and deploy these advancements in technology and infrastructure, we may lose our competitive position in the
marketplace, which would adversely affect our revenues and may lead to increased customer attrition, as our customers switch to
other providers.



We may fail
to augment our skills and capability to best manage our services over Internet Protocol and data networks.



We
have been able to build a reputation and maintain our lead because of our expertise and capability with the delivery and management
of services over Internet Protocol and data networks. With the build-up of the capability and experience of our competitors, we
are at the risk of losing market share, if we do not augment our skills and capabilities to keep our qualitative lead over them.
Infrastructure such as networks are considered by customers as a commodity, and the only differential that we offer is our ability
to manage and monitor services in a superior manner.



It may not
be possible for us to retain our brand equity if we do not resort to huge investments for brand development.



Our
competitors offering similar services are all large telecom companies who make substantial investments in building their brand
image across their services. Conversely, we are focused on IT infrastructure services over data telecom networks and we believe
that we enjoy the reputation of a specialist in these services. However, if we do not build up awareness as well as our brand
and reputation over time, the sheer weight of investments in brand development by the larger telecommunication providers will
dilute our brand recognitions and competitive advantages.



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We may not
meet the selection criteria set for high value contracts by the Governments.



As
we participate in bidding for large Government of India contracts, as well as business from large corporations, we increasingly
come under scrutiny for financial indicators. Unless we leverage our capacity and become consistently profitable, we could be
excluded from major government projects because we fail to meet their selection criteria, which would adversely affect our business
and results of operations.



The success
of our business depends on our capability to develop compatible applications and tools.



As
we offer our Applications Integration services to an increasing base of large corporations, we run the risk of not being able
to meet their needs for scaling and sophistication in future if we do not build the capacity to develop and integrate applications
software to meet with future needs. We may not have adequate resources to develop our capability as a result of emerging sophistication
required for such services. The failure to develop such resources may adversely affect our business and results of operations.



We may fail
to offer end-to-end managed services to sustain our position.



The
telecommunications market is evolving towards service providers who offer end-to-end managed services that include managing everything
down to desktops. If we are to continue to lead the market, we need to extend our bouquet of services to ensure that our portfolio
helps graduate the market to managed services where we can maintain leadership. It may be difficult for us to offer end-to-end
managed services to sustain our leadership in managed services without significant capital expenditures which would adversely
affect our cash position and results of operations.



We may not
get repeat corporate orders to optimize the capacity utilization.



As
we expand the network to small cities and towns (Semi – urban and rural locations), there is an operational cost involved
in both the establishment and operation of these nodes. While the expansion is facilitated by a corporate order, we have to subsequently
get additional business for capacity utilization in these nodes to make them profitable. If we are not able to do this rapidly
by scaling up the business through these towns, we run the risk of overcapacity on the network in new areas, which results in
a higher cost structure and lower margins.



Absence of
policy support will hamper Internet and Data Services.



We
have, and continue to be subject to Indian regulations regarding the VPN license requirements, including the percentage of foreign
holdings to offer VPN services as well the need for NLD/ILD licenses to offer VPN services and carrier voice services. The growth
and development of the data and internet sector is dependent the policy support of Department of Telecommunications. Regulatory
changes, as well as the continuing lack of policy initiatives to revitalize the data and Internet sector continue to be a risk.



We cannot influence policies
that facilitate the growth and development of data and Internet connectivity in India. The absence of policy support for internet
and data services may hamper the growth of such services in future, which would adversely affect our business and results of operations.



Constant improvement
of technology standards/ skills and evolving tools and applications are essential to sustain our position in remote management
of IT infrastructure.



We
are relatively unknown outside India in comparison to other established IT players who have a large base of customers. If we are
not able to constantly upgrade our technology standards and skills, and if we are unable to scale for critical mass in the near
term, our competitive position would be adversely affected.



Management of IT infrastructure is dependent
on sophisticated tools and applications to remotely monitor the IT infrastructure and assets of customers. If we are unable
to retain our competitive advantages in terms of the evolving tools & applications, or the maturity of our processes, we may
lose customers and be at a competitive disadvantage compared with our larger competitors



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The slower
pace of recovery of the United States economy, affects sales of our Remote Infrastructure Managed Services and eLearning services.



The
rate of recovery of the United States may result in reduced demand for our eLearning products, as our customers may reduce their
training budgets and programming.  Additionally, we may not be able to acquire new customers due to the economic situation
prevailing in United States. A prolonged period of reduced customer demand for our eLearning services may adversely affect
our business and results of operations.



Emergence of
Enterprise Software Suites may hamper the growth of our e-Learning stream.



The
emergence of competitors such as Oracle, IBM, SAP, SumTotal and SABA offering Enterprise Software Suites for eLearning for large
organizations to develop their own learning platforms could be a threat to our business in future. We may lose our business
to our competitors, and if we are unable to acquire new customers or retain our existing customers, our revenues and results of
operations may suffer.



If we do not
continue to develop and scale compelling content, products and services, our ability to attract new customers or maintain the
engagement of our existing consumers could be adversely affected.



In
order to increase advertising revenues, we need to continue to increase the number of users of our sports, recipes and entertainment
video contents through our websites. In order to attract consumers and generate increased engagement on our website portals,
we believe we must offer compelling content, products and services. If we are not able to attract and keep new users in a constantly
evolving user base, we are likely to lose page views, and advertisers may reduce or cease publishing advertisements in our websites.  It
is important for us to provide necessary contents through our websites to attract more users.  However, acquiring, developing
and offering new content, products and services, as well as new functionality, features and enhanced performance of our existing
content, products and services, may require significant costs and time to develop. In addition, consumer tastes are difficult
to predict and subject to rapid change.



Risks Related to the Internet



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 in India. Currently, Internet services are accessed
primarily by computers and are delivered by modems using telephone lines. As the Internet is becoming 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. We provide wireless
connectivity on the 5.7 GHz spectrum allotted to us by the Wireless Planning Commission. The spectrum allocation may be inconsistent
with industry standards. The current capacity may be insufficient to offer a breadth of services. The Government may issue instructions
to release the spectrum that we hold. High cost of spectrum acquisition may be inconsistent with our revenue and cost models.
We may not keep up with the pace of change that takes place in wireless technologies.



We are subject to quality of service
(QOS) guidelines issued by TRAI. Failure to comply with one or more applicable guidelines may expose us to fines/penalties.



TRAI has issued the following guidelines to
the ISPs for improving the quality of service:



| | · | All
                                         Internet service providers shall provide adequate information to subscribers regarding
                                         Internet/broadband services being offered and marketed by them.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | All
                                         Internet service providers shall provide information regarding contention ratios or the
                                         number of users competing for the same bandwidth, adopted by them to provide Internet/broadband
                                         service in their tariff plans submitted to TRAI, manual of practice, call centers and
                                         on their websites
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | All
                                         Internet service providers shall publish quarterly contention ratio for different Internet/broadband
                                         services on their website to facilitate subscribers to take informed decision.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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| | · | All
                                         Internet service providers must use the contention ratios better than specified ratios
                                         for different services to ensure sufficient bandwidth for providing good quality of service
                                         to their subscribers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Fixing up a contention
ratio, may put standalone ISPs, at a disadvantage as cost of delivery of Internet bandwidth may increase. Telecom companies offering
similar internet services are tempted to offer significantly lower prices and incentives as they own the last mile. Also by bundling
telephony along with Internet, they can enhance their otherwise idle last mile. Under such circumstances, it will be very difficult
for ISPs providing retail service to compete with big Telcos which can offer broadband services by cross subsidizing with voice/other
services.



| | · | Submission
                                         of Carbon foot print report from the financial year 2011-12 and also to submit a carbon
                                         foot print report twice a year from the financial year 2013-14 , for the six months ending
                                         September 30, before 15th of November and for the six months ending March
                                         31, by 15th of May each year.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In the event of our failure
to comply with one or more of the above guidelines, we may expose ourselves to fines/penalties.



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



We
could become liable if confidential information is disclosed inappropriately on or through our websites. 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. The laws in India relating to the liability of companies
which provide Internet services, like ours, for activities of their users, are still relatively unclear. Investigating and defending
these claims is expensive, even if they do not result in liability 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.



Item 4.Information on the Company



History and Development



We were incorporated on
December 12, 1995 in Andhra Pradesh, India as Satyam Infoway Private Limited, a Company under the Indian Companies Act, 1956 to
develop and offer connectivity-based corporate services in India. Until December 2002, we were a majority-owned subsidiary of
Satyam Computer Services Limited, an Indian information technology Services Company traded on the New York Stock Exchange and
the principal Indian Stock Exchanges. We changed our name from Satyam Infoway Limited to Sify Limited in January 2003 and from
Sify Limited to Sify Technologies Limited in October 2007. We completed our initial public offering of ADSs in the United States
in October 1999. We listed our ADS on the NASDAQ Global Market on October 19, 1999. In February 2000, we completed our secondary
offering of ADS in the United States.



Sify Technologies (Singapore)
Pte. Ltd and Pace Info Com Park Private Limited are our wholly owned and controlled subsidiaries. During the financial year 2013-14,
the subsidiaries, Sify Software Limited and Hermit Projects Private Limited were merged with and into Sify Technologies Limited.
Also, the subsidiary, Sify Empower India Foundation was closed by filing the necessary application with the statutory authorities.



The address of our principal
executive office is Tidel Park, 2nd Floor, 4, Rajiv Gandhi Salai, Taramani, Chennai 600 113 India, and our telephone number is
91-44-2254-0770. Our agent for Investors Relations in the United States is Grayling Global, phone +1-646-284-9400. Our website
address is www.sifycorp.com and the information contained in our website does not constitute a part of this Annual Report.



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 UUNet Technologies, in order to broaden our 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 services included electronic data interchange, e-mail and other messaging services,
virtual private networks and related customer support.



We started development
of www.sify.com, our online portal, and other related content sites for news, travel, finance, health and shopping with
the goal of offering a comprehensive suite of websites offering content specifically tailored to Indian interests worldwide.



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On November 6, 1998, the
Indian Government opened the Internet service provider (ISP) market to private participation. Capitalizing on our existing private
data network, we launched our Internet service provider business, SifyOnline(formerly known as SatyamOnline), on
November 22, 1998 and became the first private national Internet service provider in India. We began offering SifyOnlineInternet
access and related services to India’s consumer market as a complement to the network services offered to our business customers.
Our SifyOnlineservice was the first in India to offer ready-to-use CD-ROMs enabling online registration and immediate
usage.



In March 2000, we launched
our network of public Internet cafés called iwaysto cater to the needs of Indians who do not have access to the
Internet. In September 2000, we commenced our hosting services from our India’s first Tier-III Data Centre at Vashi, Mumbai
to provide co-location and managed services to our clients. In June 2001, we obtained permission to provide wireless connectivity
on the 5.7 GHz spectrum from the Wireless Planning Commission. This enabled us to convert all our iwaysfrom Integrated
Services Digital Network, or ISDN, connectivity on the last mile to wireless connectivity. This technology also enabled us to
commence our high-speed/broadband access to homes, which began in March 2003. To enable quicker access to homes, we developed
a model of partnering with Cable Television Operators, or CTOs, who already interface with households for providing cable television
facilities to millions of households in India.



In April 2002, ISP’s
were permitted to provide restricted VoIP limited to outbound calls to International destinations and personal computer to personal
computer calls in India. We started providing this service through our network of cybercafés, and later on through VoIP
booths located in large commercial areas and corporate office complexes across major cities in India.



From the time we launched
our corporate services in 1997, we have continually upgraded our technology to provide data services to corporate clients. We
were the first Internet service provider in India to make our entire network IP-based and subsequently Multi Protocol Label Switching
(MPLS)-enabled, which permitted us to continue to grow our corporate customer base. As of March 31, 2014, we provide data connectivity
services to over 4000 corporate clients in industries ranging from information technology, manufacturing, banking and financial
services industry, pharmaceuticals, retail distribution and the Government.



Initial Public Offering
and Subsequent Financing Transactions



In October 1999, we completed
our initial public offering on the NASDAQ National Market and issued 4,801,250 ADSs at a price of $18.00 per ADS. We received
proceeds of approximately $79.2 million, net of underwriting discounts, commissions and other offering costs. In connection with
our initial public offering, we received the benefit of exemptions from the NASDAQ corporate governance rules relating to shareholder
meeting quorum, solicitation of proxies and shareholder approval for issue of shares other than in a public offering under NASDAQ
rules. We will continue to avail of the exemptions from the NASDAQ corporate governance rules.



In February 2000, we completed
a secondary offering and issued 467,175 ADSs at a price of $320.00 per ADS. We received proceeds of approximately $141.2 million,
net of underwriting discounts, commissions and other costs.



In October 2002, we agreed
to sell an aggregate of 7,558,140 ADSs to SAIF for consideration of $13.0 million and to sell an aggregate of 2,034,883 equity
shares to VentureTech for consideration of $3.5 million. This transaction was approved by our shareholders at our Extraordinary
General Meeting held on December 9, 2002. In December 2002, we completed the sale of the ADSs to SAIF and the sale of 2,034,883
equity shares to VentureTech. In April 2003, we sold an additional 1,017,442 equity shares to VentureTech. In July 2003, we sold
an additional 1,017,441 ADSs to an affiliate of Venture Tech.



On November 10, 2005,
Infinity Capital Ventures, LP (“Infinity Capital”) acquired 11,182,600 ADS of our Company from Satyam Computer Services
Limited (“Satyam”) for US $5.60 per share in cash through a Sponsored ADR Programme arranged by the Company. The total
purchase price for the Satyam shares was approximately US $62.6 million.



In a separate transaction,
also on November 10, 2005, Infinity Capital entered into a Subscription Agreement with us pursuant to which, upon the terms and
subject to the conditions set forth therein, Infinity Capital agreed to purchase from us approximately 6.7 million newly-issued
equity shares or ADSs at a purchase price of US $5.60 per share in cash. The total purchase price for the newly issued shares
was approximately US $37.5 million. This transaction was approved by our shareholders at our Extraordinary General Meeting held
on December 23, 2005. In January 2006, we completed the transaction. Also on November 10, 2005, Sify, Infinity Capital and Mr.
Raju Vegesna entered into a Standstill Agreement pursuant to which, upon the terms and subject to the conditions set forth therein,
Infinity Capital agreed not to purchase more than 45% of our fully diluted equity. The Board of Directors waived the above clause
in the standstill agreement passed through a Board resolution dated January 22, 2008.



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Following the transactions,
Mr. Raju Vegesna of Infinity Capital was appointed as the Chairman of our Board of Directors. Mr. P. S. Raju is the second nominee
of Infinity Capital to our Board of Directors.



On March 24, 2008, the
Company entered into a Subscription Agreement with Infinity Satcom Universal Private Limited (Infinity Satcom Universal), a private
limited Company in India which is controlled by Ananda Raju Vegesna and brother of Raju Vegesna, CEO, Chairman and Managing Director,
for issuance of 12,817,000 Equity Shares of the Company with face value of ₹ 10/- per share at a premium of ₹ 165/-.
It was approved by the Company’s shareholders at the Extraordinary General Meeting held on March 17, 2008.



On March 24, 2008, we
received a sum of ₹ 112.14 million (comprising of ₹ 12.81 million towards face value and ₹ 99.33 million towards
securities premium). Subsequently, Infinity Satcom Universal communicated to the Company that they would focus their attention
on the business of Sify Communication Limited (erstwhile subsidiary) and hence shall not contribute the balance money towards
the subscription of 12,817,000 Equity Shares on call. On August 29, 2008, the Board of Directors, forfeited the shares allotted
and the application monies collected (₹ 112.14 million including sums towards capital and premium).



On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement to Raju Vegesna Infotech & Industries
Private Limited, our promoter group, and an entity affiliated with our CEO, Managing Director and Chairman, Mr Raju Vegesna. See
note 40 in the notes to the financial statements in this Annual Report.



Acquisition of Minority
Interest in Subsidiary



In January 2008, our Board
of Directors of Sify approved the merger of our subsidiary, Sify Communications Limited (“Sify Comm”) with our Company.
The Boards of each of Sify and Sify Comm determined that a merger would produce cost savings efficiencies and, as a combined entity,
benefit all shareholders. The Board then submitted the proposed merger to the shareholders and to the High Court of Madras for
approval. In August 2008, while approval for the merger was pending, the Indian Government proposed new regulations regarding
the delivery of internet services and was expected to announce changes to the policy governing the spectrum for the delivery of
wireless data. The Board reviewed these regulatory changes and determined that it would be in the best interest of each Company
to remain as separate entities, as opposed to combining the entities as contemplated by the proposed merger. The Company submitted
a petition to the High Court of Madras to withdraw the merger, and such petition was approved.



In October 2008, the Company
again evaluated the feasibility of a merger between Sify and Sify Comm and the Board of Directors of the Company at their meeting
held on November 24, 2008 approved the merger of Sify Comm with retrospective effect from April 1, 2008, subject to approval by
the Shareholders, the Honourable High Court and other statutory authorities. The Board considered the deterioration of the Indian
and global economy, and its effect on the Company’s performance during the first half of fiscal 2009 as well as the impact
of a prolonged economic downturn on the Company during the third and fourth 2009 fiscal quarters. The Board evaluated these issues
and determined that a combined entity would provide cost savings and increased cash flow, and strengthen the Company’s ability
to borrow additional funds, if necessary. Accordingly, the Board of Sify determined that the merger should again proceed and sought
shareholder approval, and submitted the merger to the High Court of Madras for approval. The Honourable High Court approved the
merger on 26th June, 2009. In connection with such merger the Company has issued 10.53 million equity shares to Infinity Satcom
Universal Private Limited, a 26% stake holder in the erstwhile Sify Communications Limited prior to merger.



On July 15, 2009, Infinity
Satcom Universal Private Limited has acquired 4,000,000 shares of the Company from Infinity Capital LP, USA in a private transaction.



Principal Capital Expenditures



In fiscal year 2014, 2013
and 2012, we spent ₹ 930 million (US $15.47 million), ₹ 1,661 million, ₹ 952 million respectively, on capital
expenditures. As of March 31, 2014, we had contractual commitments of approximately ₹ 1,326.44 million (US $22.07 million)
for capital expenditure towards the acquisition of property, plant and equipment. These commitments included approximately ₹
1,256.83 million (US $ 20.91 million) in domestic purchases and ₹69.61 million (US $ 1.16 million) in imports and overseas
commitments for products and spares. All our capital expenditures were financed out of cash generated from operations, equity
infusion and borrowings from banks.



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Investment Strategy



In evaluating investment
opportunities, we consider important factors, such as strategic fit, competitive advantage and financial benefit, through a formal
net present value evaluation.



Sify Software Limited (formerly Sify Networks
Private Limited)



In March 2004, we acquired
E Alcatraz Consulting Private Limited, a Company engaged in the business of providing security services to corporate customers,
for a consideration of ₹ 32.7 million.



During October 2009, Sify
Technologies transferred eLearning, Software Development and other related businesses, which are non-telecom businesses, to the
subsidiary Company for a consideration of ₹ 450 million, which was discharged by way of issue of 4.5 million ordinary shares
in Sify Software Limited. Consequently, the name of E Alcatraz Consulting Private Limited was changed to Sify Software Limited
in order to reflect the activities relating to Software Development business.



Due to continuous losses
and the consequent erosion of the networth, Sify Software Limited was merged with Sify Technologies Limited effective April 1,
2013.



Globe Travels, USA.



In April 2006, we acquired
Globe Travels, USA engaged in the business of selling online airline tickets in the U.S. with a special focus on the U.S.-India
sector along with its Indian arm for a consideration of USD $2.50 million, apart from 125,000 stock options and some conditional
earn out payments. On account of continued decline in business, the company has ceased its travel business operations.



Due to the decline in
business travels on account of global economic environment, the company tested impairment for goodwill and intangibles, and has
recorded ₹ 1,857, ₹ 47,269 and ₹ 15,200 as impairment charge during the years 2010-11, 2009-10 and 2008-09 respectively.



India World Communication Limited



India World Communications
Limited filed an application with the Registrar of Companies, Tamil Nadu in 2008 for the winding up of its business under section
560 of the Indian Companies Act,1956. The Registrar had struck off its name from the register. Since then, India World Communications
Limited ceased to exist from the date of order of the ROC.



Sify International Inc



Sify International Inc
incorporated in the United States of America (US) was a wholly owned subsidiary of Sify. On July 18, 2012, the Company filed a
Certificate of Dissolution with Secretary of the State, State of California, USA for winding up and dissolving the wholly owned
subsidiary in US. The company has since received the dissolution certificate.



Hermit Projects Private Limited & Pace
Info Com Park Private Limited



In November 2011, we acquired Hermit Projects
Private Limited (HERMIT) for the implementation of a state-of-art Data Centre Project at Noida, U.P, along with its wholly owned
subsidiary Pace Info Com Park Private Limited (PACE), the original allottee of the land at Noida, U.P. for a consideration of
₹ 114 crores. As HERMIT was acquired only as a Special Purpose Vehicle for acquiring PACE, HERMIT merged with Sify Technologies
Limited, the holding Company effective April 1, 2013.



It is also proposed to merger PACE with Sify
Technologies Limited, the holding Company effective April 1, 2014 subject to the approval of the shareholders and the Hon’ble
High Court of Madras, India.



Sify Empower India Foundation



Sify Empower India Foundation
(SEIF) was incorporated as a non-profit organisation in November 2010 to carry on the activity of promoting employability, education,
financial inclusion and healthcare for urban and rural consumers through the innovative use of ICT in an integrated and sustainable
manner.



Initially, the Company had a 10% holding in
SEIF and acquired an additional 89.80% in October 2012.





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Due to changes in the Company’s business
model SEIF had not started its commercial activities and hence, SEIF was closed in 2014 by filing the necessary application with
the statutory authorities.



Sify Technologies North America Corporation



Sify Technologies North
America Corporation was incorporated in the State of Delaware, USA on May 7, 2014 as a wholly owned Subsidiary of Sify to pursue
the overseas market for eLearning and International Managed Services in the US region.



Business Overview



We are among the largest integrated ICT Solutions
and Services companies in India, offering end-to-end solutions with a comprehensive range of products delivered over a common
telecom data network infrastructure reaching more than 1241 cities and towns in India. This telecom network also connects 36 Data
Centres across India including Sify’s 5 Tier III Data Centres across the cities of Chennai, Mumbai, Delhi and Bengaluru
and customer data centres.



In late 2012, we reorganised our Business
to enable scale, flexibility and the ability to cross pollinate our business across multiple verticals. The focus of the business
shifted to Solutions and Services from a hitherto infrastructure focus. This, we call Sify 3.0.



Post the re- organization along service lines,
a significant part of the our revenue is derived from Enterprise Services, comprising of Telecom services, Data Centre services,
Cloud and Managed services, Applications Integration services and Technology Integration services. Sify also provides services
that cater to the burgeoning demands of the SMB community, much of it on its Cloud services platform.



| | a) | Telecom services
| | -- | ----------------



The Core service in the
portfolio is the Telecom Services which is also among the most matured, tracing its legacy back to earlier years as India’s
first Private Internet Service Provider. The slower pace of use of private computers led a midway diverge to build networks that
could be used by large Enterprises for their business needs. The early start has helped us to leverage the market potential; we
are today India’s leading network provider offering the highest wireless endpoints and an equal number of wired terminations.



Forecasting the explosive
growth that the telecom market will see, we were the first in the country to offer an IPv6 ready network; a fact underscored by
the Telecom policy of 2012. This network reaches around 1241 towns and cities and gives a prospect of more than 2317 points of
presence.



The focus of the Telecom Services is on the
following lines:-



| | § | India
                                         Data Business– Addressing the Data Communication needs of Large and Emerging
                                         Enterprises in India across each of their distributed points of business. We do this
                                         by leveraging our network span across 1241 towns and cities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | Global
                                         Network Business – Addressing the connectivity needs of Enterprises and Carriers
                                         to connect in and out of India. Our partnerships with multiple international carriers
                                         provides for a seamless integration into and out of the India network.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | Wholesale
                                         Voice – Addressing the ‘India termination’ and several other countries
                                         for Hubbing. Our cable landing station is our strategic investment to address this business
                                         need and currently facilitates three international cables servicing the Middle East and
                                         a majority of Europe. Investments into strategic global assets will continue to address
                                         the opportunity in-and-out India
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Data Centre services
| | -- | --------------------



We are among the earliest to invest in the
Data Centre landscape in the country with our first Data Centre in Vashi, Mumbai in the year 2000. Even in the early days of the
IT revolutions, we set very high benchmarks with each of our subsequent data being Tier III compliant. During 2013, we inaugurated
our first Green Data Centre in Noida near Delhi. We currently have 5 Tier III Data Centres across various geographical locations
in India. This business offers services such as co-location, regular backup, server load balancing, remote backup; Managed Services
like Messaging, shared Hosting, network and security; Storage and Virtualization and Managed Voice services to all resident Enterprises.



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| | c) | Cloud and Managed services
| | -- | --------------------------



The Data explosion witnessed by the country
opened up many opportunities and challenges. This has driven Indian Enterprises towards asset light solutions aiming at lower
Total Cost of Ownership (TCO). Foremost among them were for Managed services, Data Security and cloud services. Cloud services
was a product of the market demand from Enterprises who sought to de-focus themselves from operating cumbersome IT infrastructure
and moving towards an Opex based computing practice. Today, this practice follows both a collaborative and standalone approach
offering Cloud services from industry leaders like Hp and VMware, and also through home grown solutions.



This business provides On-Demand, anywhere,
Flexible, Multi-tenant and Dedicated storage solutions , Public, Private and Hybrid cloud platforms and IaaS, Paas and DR as services.
We are also the only company offering Cloud Delivery solutions on a home grown tool with an objective of reducing the TCO offering
value to customers, on a completely automated platform called Cloudinfinit.



| | d) | Technology Integration services
| | -- | -------------------------------



Strategic investment of time and focus over
a decade to build India’s premier ICT network has resulted in an admirable knowledge base of products and technologies.
With Sify 3.0, we chose to package this into a knowledge offering to the market and thus, emergence of Technology Integration
services. Technology Integration Services (TIS) combines Sify’s IT capabilities with its core telecom and Data Centre products
to provide a converged turn-key ICT solution to the customer.



TIS leverages Sify’s homegrown expertise
in design, implementation and maintenance to deliver end- to-end managed IT services across datacenter, network and security.



Major focus is as follows:



| | • | Service
                                         Desks and Command Centers
| | - | --------------------------------------------------------------------------

| | • | Voice
                                         and Video Conferencing
| | - | ---------------------------------------------------------------------

| | • | Hosted
                                         Contact Centers
| | - | ---------------------------------------------------------------

| | • | Unified
                                         Communication and Unified Access
| | - | ---------------------------------------------------------------------------------

| | • | Virtualization
| | - | --------------

| | • | Data
                                         Centre Build
| | - | ----------------------------------------------------------

| | • | Campus/LAN/Data
                                         Centre Networking
| | - | --------------------------------------------------------------------------

| | • | WAN
                                         Architectures
| | - | ----------------------------------------------------------

| | • | Enterprise
                                         and End Point Security
| | - | --------------------------------------------------------------------------



| | e) | Applications Integration
                                         services
| | -- | --------------------------------------------------------------------------



The third layer of the Sify business is the
Applications Integration services. Aligning to the market opportunity and expectation from our customers on high end value chain
services, Sify’s in house team of application developers have designed and developed a full suite of applications to ride
on top of our network infrastructure. Some of these have been trailblazers like the Supply Chain management application, Forum
and the online assessment tool, iTest. We had invested early on, in the sunrise business eLearning recognizing the demand of Enterprises
to take forward a uniform training platform to all branches and subsidiaries.



Today, this business caters to various verticals
with offerings like Talent management, and automated platform that enables multi city, multiple point recruitments and test platform,
Sales and Distribution platform, eLearning platform primarily for Enterprises outside of India for local and Internet based training,
Web solutions like portals and a SAP integration practice.



Industry Overview



The last decade was significant in the IT
industry landscape because of several reasons. First was the galloping rate at which IT infrastructure grew along with mobile
penetration. Secondly, the emergence of convergence technology and smartphones becoming the defacto’ norm. The third
was the network penetration into the hinterland thereby mitigating the connectivity issues and paring the technology landscape.
Importantly, the recognition of IT as an infrastructure industry, thus helping in access to power and much needed capital investments.



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In the process, India saw the sprouting of
a new breed of business, one that viewed IT more as a productive tool that enhanced their business capability while simultaneously
lowering their TCO. These businesses set in motion the dual benefits of affordable IT and serviceable IT, thus leading it to being
delivered in scalable, flexible and location-agnostic formats.



Today, both Network and device Convergence
has become a necessity in order to reduce the complexity of multiple technology or networks and also because of the increased
use of server virtualization technology. Network Convergence along with virtualization of the server, network and storage infrastructure
are driving the next generation Data Centre towards cloud based service model.



But the Cloud requires a viable eco-system
to thrive. An eco-system that we have been steadily building for two decades for our clients. We have strategized these offerings
in the form of Sify 3.0, Sify’s third phase of growth. The focus shifted from Capex intensive infrastructure to offering
our Solutions and Services as much as on pay per use model.. In order to achieve our Sify 3.0 objective and market orientation,
we have restructured ourselves into five business lines of Telecom Services, Data Centre services, Cloud & Managed Services,
Technology Integration services and Applications Integration Services.



Sify Business Model



Drawing from the Company’s Vision statement,
we endeavour to provide the entire eco-system of ICT services. In doing so, we have to accede to the demands of both the traditional
Telecom and IT markets.



The first few years of growth of the IT and
Telecom industries were driven primarily in garnering maximum market share and an enviable roster of blue chip clients. With changing
dynamics and demands of the market, the two industries have to find a middle ground to retain and expand the market. It was the
time of convergence and the perfect fertile ground for our services.



Until 2012, our primary strategy was to invest
in infrastructure and being ready before the market cycle demanded our services. Once we attained critical mass, we shifted focus
to packaging our products and practices as tangible offerings to the market.



In Sify 3.0, we have restructured our business
segments into 5 distinct lines of business namely,





| | a) | Telecom Services.
| | -- | -----------------





Having invested heavily in building among
India’s best last mile network services, it was time to scale the utilization through cross alignment with traditional telecom
players who were looking to expand our markets to Tier II and Tier III cities and towns and also to IT players who wished to leverage
the cost benefits of relocating to Tier II towns.



We do this by leveraging our state-of-the
art last mile wireless connectivity and the dense spread of network. Enterprise customers who seek to utilise the network have
the choice of being connected to the DC of their choice or any one of our Tier III Data Centres. Today, this multi-mode, multi-mesh
network connects 36 of India’s DCs; a fact that endorses the quality of our offering and our network presence



Our network, reaches 1241 cities and towns
with approximately 2317 Points of Presence. The completion of the flagship project for India Posts will take this penetration
to an estimated 70,000 links thus making us the largest MPLS network in India.



| | b) | Data Centre services.
| | -- | ---------------------



Right from our first Data Centre at Vashi,
Mumbai in 2000, we have invested in the top of the line technologies across all our networks with every new data centre taking
the game forward. The Sify SDA (Sify Data Centre Architecture) 4.0 is an IP that has found acceptance in the several Data Centres
that we have built for our customers.



These DCs also offer a multitude of Value
Added services over the traditional notion of basic collocation and Opex driven storage solutions. At over 2.0 Lakhs sq.ft coverage
today including the new Data Centres, we are among the largest to offer Data Centre space in the market.



| | c) | Cloud and Managed services
| | -- | --------------------------



The last few years saw the emergence of Cloud
or virtual storage as a tangible product offering. Several Emerging Enterprises saw the benefits of buying-space-as-you-go as
against investing in Capex loaded infrastructure. The advent of this business was the quality of high class networks and promise
to remotely store your data immaterial of where it was connected from and plugging into it when the enterprises chose to. This
eliminated the need for cumbersome server monitoring and the associated cost of ownership.



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In order to offer the best-of-breed services,
we chose to tie up with the leaders in the business like Hp and VMware. TOur hosting services are also SAP Gold certified giving
the much needed SLAs to our customers about the level of our offerings.



| | d) | Technology Integration services
| | -- | -------------------------------



The nearly two decades spent maturing into
India’s premier ICT player has led to building an enviable knowledge bank of integrating, monitoring, maintaining and upgrading
every facet of service as demanded by a quickly converging market.

Sify offers turnkey solutions to clients who
are new to both technology and technology refreshes. We do this by leveraging our homegrown expertise in design, implementation
and maintenance to deliver end-to-end managed IT services across datacenter, network and security.



As described, this business takes the knowledge
developed from building Network architecture, Unified Communication and Unified Access, Collaborative tools, Data Centre build,
Virtualization, LAN and WAN Architecture and End Point Security and offers them as a complete solution package to customers.



This business is also responsible for Sify
bagging some of the biggest deals of the year, for grounds-up technology refresh for some of India’s biggest private and
Government clients.



e)	Application Integration services.



As with every industry major who chose to
offer IT and Managed services, Applications were also demanded by several of our clients. While we chose not to be a core Software
player, we do enable the integration of multiple technologies and platforms and the cross breeding of existing ones.



This way, the clients can slowly transition
the maturity cycle with their existing application before switching over to newer ones. That said on our services, some of our
home grown applications, like Forum and iTest have found favour with a large number of our clientele.



We are looking to strengthen
our bouquet of offerings in the years to come.



Strategy



Our vision statement is explicit on our strategy.



We are building a world in which our converged
ICT eco-system and our bring-it-on attitude will be the competitive advantage to our customers.



To build a converged ICT eco-system calls
for a multidisciplinary approach. While maintaining the tempo of investment in infrastructure, we will, in parallel, strengthen
our current offerings of services. The description below provides an explanation on this approach.



•Cover
more of the country with our network, increase the bandwidth support and drive more customer usage.Our network is based on
Internet Protocol, or IP, and we are the first Indian service provider to have made our network Multi-Protocol Label Switching
(MPLS) compliant. We are also the first IPv6 ready network having laid it down as early as 2000. In the fiscal year 2013-14, we
implemented the proprietary CloudCover to connect Data Centres across India with a multi-mode, multi-mesh network. This builds
redundancy at multiple levels across the network. This network connects 36 of India’s Data Centres including 5 of our own.
To ensure undisrupted high quality service and to achieve cost efficiencies, we have invested in a under sea cable consortium.
The capacity went live during the Q1 of 2012-13. We have also leased intercity links from multiple suppliers including BSNL, Bharti,
TATA, Railtel and Power Grid Corporation, such that each one of our nodes is accessible from at least two other nodes, if not
by two long distance operators. We believe that as the size and capacity of our network infrastructure grows, its structure and
national coverage will create economies of scale. Being vendor neutral, we are able to procure bandwidth in a cost effective manner.
In January 2014, we launched India’s truly Green Data Centre at Noida with an industry defining benchmark efficiency.





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•Increase
penetration in our existing markets by expanding awareness of the “Sify” brand name to capitalize on our first
mover advantage in India.Over time, Sify as a brand has expanded it offerings from the retail broadband segment to
the Enterprise buyer in India. But as with every brand’s birth, our first offerings gave us the identity as India’s
most aggressive internet player. We built on those strengths and with time, have built a complete ecosystem of Enterprise offerings.



•Create
pull with newer more efficient technology and hence draw more customers into the Sify fold.In order to transition to being
an Enterprise player, we began by expanding our bouquet of services in line with market demand. A nascent retail broadband gave
rise to data storage and hence our first Data Centre was born; at Vashi Mumbai in 2000. As a brand, we have consciously aligned
with the best-of-breed technology and benchmarks. Hence, right from our first Data Centre, all our subsequent ones were also Tier
III compliant. Our managed services bouquet has been a mix of home grown applications and offerings through tie ups with industry
leaders like Hp, VMware, Akamai, SAP etc.



•Expand
the bouquet of services and cater to an audience that does not mind paying a premium and hence realise better margins.As
competition heats up in the IT and Telecom sector, there will be a squeeze on our margins for the traditional offerings. Hence
it is imperative to create a segment of premium paying customers who see value in the differential on their services. We will
also continuously expand our service offerings and expand into a broader geographical domain. We actively spread to Tier II and
III cities much before we had customers there. This helped us to demonstrate a robust working model of our services in geographically
challenged places as and when the demand arose.



•Expand
our customer distribution channels through strategic alliances to take advantage of the sales and marketing capabilities
of our strategic partners. Each of our business delivers a certain level of legitimacy when aligned with the industry
leaders. Most MNCs see this as a comfort factor and a reassurance of global standards that they have enjoyed. So, whether it is
Telecom business aligning with international carriers, our DC business being Tier III certified and assured by the best of the
global standards, our Managed services having tied up with leaders like HP, VMware, SAP, Hitachi etc or Applications Integration
services or our content delivery assurance with Akamai under our Technology Integration services ambit, the assurance is the same;
global standards, local deliverance. On the delivery front, this doubles our marketing strength while allowing for a cross selling
of products and services to both the partner’s audiences.



•Pursue
selective strategic investments, alliances and acquisitions to expand our customer base, increase utilization of our network
and add new technologies to our service mix. India's financial nerve centre, Mumbai has long been a focus of our expansion
plans given the concentration of Enterprise players. That, along with a stable administration and power supply, well developed
suburbs, and a native market was responsible for us launching our 6th Tier III DC at Rabale, near Navi Mumbai. All along, we have
invested ahead of the demand curve across all our services. That said, the focus has also been to add value by partnering with
the best of breed technology companies. Towards that, our hosting services are now SAP certified giving us the much needed fillip
to pitch it to discerning Enterprise customers. Content delivery for Enterprise customers was underlined with our partnership
with the world leaders, Akamai. We will continue to pursue opportunities to grow both organically and inorganically, in our endeavor
to spread into newer geographies.



•Expand
into international markets for providing managed network services. We are now at a crucial phase in our growth. Over
the years, we have built a substantial knowledge house of services and they are ready to be delivered to clients beyond India’s
borders. We are actively pursuing an agenda of tying up with international IT majors and taking these strengths to customer worldwide,
starting with North America. Our inhouse IP services like eLearning are already being offered to multiple geographies in the US
and Europe.



Service Offerings



Telecom Service .These primarily consist of network service which addresses the domestic connectivity needs of Indian enterprises and international
inward and outward connectivity needs of International Enterprises. We do this by leveraging our national Tier 1 IPv6 network
infrastructure. The services include a comprehensive range of Internet protocol based Virtual Private Network, offerings, including
intranets, extranets and remote access applications to both small and large corporate customers. There is a strong focus on industry
verticals such as IT/ITES (IT enabled services), banking and financial services industry (BFSI), Government, manufacturing, pharmaceutical
and FMCG. We were one of the first service providers in India to provide MPLS-enabled IPVPN’s on our entire network. We
have entered into a strategic partnership with leading Telcos for providing last mile connectivity to customers. Our entire network
is MPLS enabled with built in redundancy with world class design and service standards.



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Our cable landing
station and our investment in a submarine cable consortium are our other assets that we extend to our International partners for
their international inward and outward connectivity needs. Our cable landing station currently lands 2 major submarine cables;
namely Gulf Bridge International (GBI) and the Middle Eastern and North African cable (MENA).



Our
connectivity clients can pick from a range of services; namely the following.



| | · | SecureConnect (TM)is our comprehensive
    offering of secure, reliable and scalable IPVPN solutions that meet both mission- critical data networking and converged voice,
    video and data connectivity needs. It offers a variety of intranet and extranet configurations for connecting offices, remote
    sites, traveling employees and business partners, whether in India or abroad. Our platform of services includes:
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | SiteConnect (TM)which
                                         offers site-to-site managed MPLS-enabled IPVPN solutions for securely connecting regional
                                         and large branch offices within India to the corporate Intranet.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | GlobalSite Connect(TM) , an international
    site-to-site managed MPLS-enabled IPVPN solution, is used for securely connecting international branch offices to the corporate
    offices. It provides connectivity anywhere in the world through Sify’s alliances and partnerships with global overseas
    service providers such as Level 3, KDDI, and PCCW Global to name a few.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | ExpressConnect(TM), which offers
    a premium range of high-performance Internet bandwidth solutions for connecting regional offices, branch offices and remote
    locations to the corporate network. These solutions complement our SiteConnect range of MPLS enabled IPVPN solutions, provide
    high-speed bandwidth in those situations where basic connectivity and cost are the top concerns.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | RoamConnect(TM), is our national
    and international remote access VPN, which is used for securely connecting employees, while they are traveling, to the corporate
    intranet. Roam Connect features “single number access” to SifyNet from anywhere in the country and provides access
    from anywhere in the world through Sify’s alliances with overseas service providers.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | PartnerConnect(TM) is our remote
    access VPN offering, for providing secure and restricted dial-up access to business partners such as dealers, distributors
    and suppliers to the corporate extranet.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our
suite of conferencing tools consist of Audio and Video solutions; most differentiating among being that the video solution in
partnership with a world leader, does not require a room conferencing solution thereby arming the modern enterprise with real
time data straight from the markets.



Data
Centre Services. We operate 5 Tier III Data Centres of which two are located in Mumbai (Bombay), one each at Noida (Delhi),
Chennai (Madras) and Bengaluru, which are designed to act as reliable, secure and scalable facilities to host mission-critical
applications. We offer co-location services which allow customers to bring in their own rack-mountable servers and house them
in shared racks or hire complete racks, and even rent ‘secure cages’ at the hosting facility as per their application
requirements. We also offer a wide variety of managed hosting services, such as storage, back-up and restoration, performance
monitoring and reporting hardware and software procurement and configuration and network configuration.



Cloud
& Managed Services.Our on-demand hosting (cloud) services offers end-customers with the best in class solutions
to Enterprises. We have joined the global program of two world majors and offer their suite of on-demand cloud services giving
them the option to “rent” software licenses on a monthly “pay as you go” basis. This model is aimed at
helping Indian companies, both large and small, to safely tap computing capacity inside and outside their firewalls to help ensure
quality of service for any application they want to run..



Our
Remote and Onsite Infrastructure Management services provides continuous proactive management and support of customer operating
systems, applications and database layers through deploying specialized monitoring tools and infrastructure experts to ensure
that our customers’ infrastructure is performing optimally.



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Our
innovative SLA driven utility-based On-Demand storage service manages the complete lifecycle of enterprise information, from its
inception to its final disposal. The fully managed, utility based, On-Demand, scalable storage platform is powered by global major
in Data Systems. Sify's On-Demand storage service reduces the complexities of deploying and managing multiple storage tiers, and
lowers operational costs by automating management with flexible need based pricing.



Technology
Integration services: Our myriad mix of solutions gives us the scope to band and
extend any or all of these services in multiple formats and scales for client who wish to rest their entire infrastructure with
us. Clients get the benefit of our accumulated knowledge base and technical expertise across all points of the ICT spectrum. In
terms of cost, these translate into better cost efficiencies. In terms of monitoring, the client interacts with a singular service
provider saving them both implementation and documentation efforts.



Applications
Integration services:Our range of web-applications include sales force automation, supply chain management, intranet and
extranets, workflow engine and knowledge management systems.



Our Applications
Integration services operates two of India’s biggest online portals, www.sify.com and www.samachar.com, that function
as principal entry points 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.



Sify.com
provides a gateway to the Internet by offering communication and search tools such as email, chat, travel, online portfolio management
and channels for personal finance, astrology, lifestyle, shopping, movies, sports and news.



| | · | The finance channel of Sify http://sify.com/finance/covers
    the entire spectrum of equity markets, business news, insurance, mutual funds, loans, SME news and a host of paid and free
    financial services.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The sports channel http://sify.com/sports/covers
    the entire gamut of Indian and international sports with special focus on cricket.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | · | We also host WWE updates as a standalone service http://wwe.sify.com/for
    users.
| | - | -----------------------------------------------------------------------------------



| | · | The food channel www.bawarchi.comfocuses
    on Indian recipes and cooking and is especially popular among non-resident Indians (NRIs) audiences with over 90% of its content
    being user generated
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our NRI news portal, www.samachar.comfocuses
    on Indian news and allows NRIs to stay connected to India by aggregating news from across all popular newspapers and other
    news portals. This portal provides a range of news in English and five Indian languages. Apart from Samachar we have another
    India targeted news channel http://sify.com/newswhich offers national and international general, political and
    offbeat news.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Movies channel on Sify http://sify.com/moviesis
    one of the key channels which offer updates from Bollywood/ Hollywood and all regional film industries. The content includes
    movie reviews, industry news, video galleries, photo galleries, downloads (photos) etc.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Games channel of Sify http://games.sify.comoffers multiple scoring and non scoring games. Games include cricketing games, racing games, football specific games.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



We
offer value-added services to organizations such as website design, development, content management, Online assessment tools,
search engine optimization, including domain name management, secure socket layer (SSL) certificate for websites, and server space
in required operating system and database. We provide state of the art messaging and collaboration services and solutions such
as e-mail servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and
services to enable data & access security over the Internet. We also provide infrastructure-based services on demand, including
on-line testing engine and network management. On-line testing services include test management software, required servers and
proctored examination facilities at Sify’s franchisee points. On-line exam engine offered allows a secure and flexible way
of conducting examinations involving a wide range of question patterns.



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Corporate Customers



Our base of corporate
customers spread across information technology enabled services (ITES), banking financial services and Insurance (BFSI), publishing,
retail, pharmaceuticals and manufacturing. The reorganisation of our business has helped us expand our customer base to over 4,000
customers to date. This is not inclusive of customers who have brought piece-meal services from us. A good number of these customers
have matured from our initial set of offerings like Network and Data centre services. With the launch of our cable landing station,
we are able to cater to international carriers as well as domestic voice and data players. Our alliance with world leaders across
our other services is giving us the opportunity to extend our services to customers of our alliance partners.



The Company does not currently
anticipate that it will serve markets in, or have any contacts with, Sudan, Iran or Syria, or any other countries which are designated
as state sponsors of terrorism by the U.S. Department of State. As of the date of this Annual Report, the Company has not provided
into Iran, Sudan, or Syria, or any other countries which are designated as state sponsors of terrorism by the U.S. Department
of State directly or indirectly, any products, equipment, software, technology, information or support, and has no agreements,
arrangements, or other contacts with the governments of those countries or entities they control.



Customer Service and Technical Support



The implementation of the single UAN for all
Enterprise customers across India has centralised all customer enquiries to one point, thus enabling us to pour resources and
efforts into a single minded endeavour. We support both telephonic and email interactions from our clients and support for Enterprises
services is 24x7x365.



Sales and Marketing



From a business standpoint, we have 5 different
lines of business. But on the sales front, the entire team is trained to upsell and cross sell across the entire bandwidth of
services. We believe this is essential and imperative given the space for bundling of our services. The 310 person Sales team
caters to the demand of Enterprises and the growing SMB market.



Technology and Network Infrastructure



Geographic coverage: Our network today
reaches more than 1241 towns and cities and between them have approximately 40,000 links. This network is completely owned giving
us complete control on the technology, traffic and speed over them. These points of presence, or primary nodes, reside at the
core of a larger Internet protocol network with a Star and meshed topology architecture thereby building in redundancy at every
point and translating into minimum or no downtime for customers.

Today we offer the following services to our
Enterprise and consumer customers using our network.



| | · | Internet
                                         access services,
| | - | ------------------------------------------------------------------

| | · | IP/
                                         MPLS Virtual private networks,
| | - | ---------------------------------------------------------------------------

| | · | Internet
                                         based Voice services
| | - | ----------------------------------------------------------------------



Each point of presence contains data communications
equipment housed in a secure facility owned, leased or operated on an infrastructure co-location basis by our Company. The last
mile connecting to the customer can be a leased line, ISDN or point-to-multipoint radio link which we have licensed from the Wireless
Planning Commission. We also use certain frequency radios, which do not require an operating license, in some locations. Our larger
corporate customers access the point of presence directly through leased lines or wireless links.



Network Architecture: We ensure network
reliability through several methods and have invested in proven technologies. We use routers to route traffic between nodes interconnected
using a high speed interface. Most of our applications and network verification servers are manufactured by IBM, Sun and Hewlett-Packard.



The primary nodes on the backbone network
are connected by multiple high-speed fiber optic lines that we lease from long distance operators. The secondary nodes are connected
by lower speed leased lines. A number of nodes are accessible from at least two other nodes, if not, by two long distance operators,
allowing us to reroute traffic in the event of failure on one route. We reduce our exposure to failures on the local loop by usually
locating our points of presence within range of service providers switching equipment and purchasing connectivity from multiple
providers. To further maximize our network uptime, we are almost completely connected on fiber optic cables to the switching points
of our service providers from our POPs.



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In addition to a fundamental emphasis on reliability
and security, our network design philosophy has focused on compatibility, interoperability, scalability and quality of service.
We use Internet protocol with Multi Protocol Label Switching, or MPLS, 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.



Network Operations Centre: We maintain
a network operation centre located in Chennai (Madras) and a backup facility in Mumbai (Bombay). The Chennai facility houses our
central network servers as well as our network staff who monitors network traffic, service quality and equipment at all our points
of presence to ensure a reliable Internet service. These operation centres 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.



Data Centre Infrastructure.We operate
five tier III Internet Data Centres, two in Mumbai, one each at Chennai and Bangalore and the latest one at Noida near Delhi.
We offer managed hosting, security and infrastructure management services from these facilities. These data centres are completely
integrated with our IP / MPLS network which provides seamless connectivity for our customers from their premise to their applications
hosted in the Data Centres. The Data Centres conform to the tier III standards to cater to the security consideration of our customer
servers. We intend to invest in additional Data Centres, and are currently building a world class data centre at Rabale in Mumbai.



Competition



Given our wide spread of services, our competition
is also long and varied. As the markets in India for corporate network/data services, Internet access services and online content
develop and expand, we will continue to see the entry of newer competitors and those with deeper pockets.



Individually, we will see competition intensify
from established players like Reliance, TATA Communications and Bharti for Telecom services, Ctrl S, Reliance and Net Magic for
Data Centres, proprietary leaders like IBM and localized players like Ramco for Cloud services, traditional software majors like
Infosys, HP, Wipro and TCS for Applications Integration services and large entities like Reliance and TCS for our Technology Integration
services.



Intellectual Property



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. We have filed trademark and service mark applications
in India for registering our product and service offerings.



Our efforts to protect
our intellectual property may not be adequate. We hold no patents, and our competitors may independently develop similar technology
or duplicate our services. Unauthorized parties may infringe upon or misappropriate our 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 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 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.



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We also rely on a variety
of technologies that are licensed from third parties. We use software developed by these and other companies 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.



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, the Information
Technology Act, 2000 or IT Act and the terms of our Internet service provider license issued by 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 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 that 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.





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On May 31, 2012, the Union Cabinet approved
the National Telecom Policy-2012 (NTP-2012) and the Cabinet also approved introduction of Unified License (UL), a new regime wherein
all telecom based government approvals are handled under one umbrella and authorized the Department of Telecommunications (DoT)
to finalize the new Unified Licensing regime. DoT issued Guidelines for Grant of Unified License - vide No. 20-281/2010-AS-I (Vol.VI)
dated August 19, 2013 and also notified Unified License agreement on August 2, 2013 with the Corrigendum dated August 29, 2013



As per the new Guidelines, any company applying
for renewal of any license under New Unified License regime, such company has to apply for all the required licenses for such
company from DoT under new Unified License regime. The Company signed Unified License agreement with Government of India on June
2, 2014 valid for 20 years.



Organizational Structure



We are not part of any
group. A list of subsidiaries and relevant information about them is provided in Exhibit 8.1 to this Annual Report.



Property, Plant and Equipment



We own approximately 100,000
square feet corporate headquarters located in Chennai (Madras), India and an approximately 20,000 square feet regional office
in Mumbai (Bombay). We have leased approximately 3,500 square feet network operations center in Chennai, a 27,000 square feet
Data Centre in Vashi, Mumbai, and 95,250 square feet Data Centre in Airoli and 46,600 square feet in Bangalore Data Centre. In
November 2011, we acquired 175,000 square feet of building space for construction of a Data Centre space in Noida, UP on acquisition
of Pace Info Com Park Private Limited, through Hermit Projects Private Limited, its holding company. Construction in the said
Data Centre is completed and was live during the year. We have acquired over 200,000 square feet of building space for construction
of a Data Centre space in Rabale, Mumbai which facility is under construction.



Our Chennai facility houses
our central network servers as well as our network staff who monitors network traffic, service quality and equipment at all our
points of presence, or POPs, to ensure a reliable Internet service. We have POPs in over 1,241 towns/cities across India. Most
of our POPs are staffed 24-hours-a-day, seven-days-a-week. Our POPs average approximately 750 square feet at each location. 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.
Our property, plant and equipment are pledged towards obtaining loans / working capital facilities from banks.



The Company had entered
into a contract with Emirates Integrated Telecom (“the Emirates”) for the construction and supply of undersea cable
capacity from the Europe India Gateway (EIG). The Capacity has gone live during fiscal 2013.This enables significant capacity
on ground leading to ability to service larger customers.



Item 4A. Unresolved
Staff Comments



None.



Item
5. Operating and Financial Review and Prospects



The financial statements
of the Company included in this Annual Report on Form 20-F have been prepared in accordance with English version of International
Financial Reporting Standards as issued by International Accounting Standards Board. The information set forth in Operating and
Financial Review and Prospects is also for the Company's three recent fiscal years. The discussion, analysis and information presented
in this section should be read in conjunction with our financial statements included herein and the notes thereto.



Operating Results



This information is set
forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Further, information relating to any governmental, economic policies or other factors which have materially affected, or could
materially affect, directly or indirectly, the company’s operations is set forth under the caption entitled ‘Risk
Factors’ above.





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Liquidity and Capital Resources



This information is set
forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.



Research and Development



This information is set
forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.



Trend Information



This information is set
forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.



Management’s Discussion and Analysis
of Financial Condition and Results of Operations



Overview

Sify
is among the largest integrated ICT Solutions and Services companies in India, offering end-to-end solutions with a comprehensive
range of products delivered over a common data network infrastructure reaching more than 1241 cities and towns in India. This
telecom network today connects 36 client Data Centres across India, including Sify’s own 5 Tier III Data Centres across
the cities of Chennai, Mumbai, Delhi and Bengaluru.



Most
of the company’s revenue is derived from Telecom services and Data Centre Services.



Sify
is ISO 9001:2008 certified for Enterprise Sales, Provisioning, support and customer relationship management of ICT solutions and
services including VPN, Network, Voice, Data Centre hosting, Integration services, security services and managed services. Sify
has been certified in SSAE16 SOC2 Type II for Cloud Infrastructure. Sify has licenses to operate NLD (National Long Distance)
and ILD (International Long Distance) services and offers VoIP backhaul for international carriers. With the Sify Cable landing
station and partnerships with submarine cable companies globally, Sify is present in almost all the spheres of the ICT eco system.



The company has an
expanding base of Managed Services customers, both in India and overseas, and is India’s first enterprise managed services
provider to launch a Security Operations Center (SOC) to deliver managed security services. Sify Software develops applications
and offers services to improve business efficiencies of its current and prospective client bases. Sify also offers services in
the specialized domains of eLearning, both in India and globally. The business also operates two of the most popular internet
portals in India, Sify.com and Samachar.com.



Telecom
Services: These primarily consist of network service which addresses the domestic connectivity needs of Indian enterprises
and international inward and outward connectivity needs of International Enterprises. We do this by leveraging our national Tier
1 IPv6 network infrastructure. The services include a comprehensive range of Internet protocol based Virtual Private Network,
offerings, including intranets, extranets and remote access applications to both small and large corporate customers. There is
a strong focus on industry verticals such as IT/ITES (IT enabled services), banking and financial services industry (BFSI), Government,
manufacturing, pharmaceutical and FMCG. We were one of the first service providers in India to provide MPLS-enabled IPVPN’s
on our entire network. We have entered into a strategic partnership with leading Telcos for providing last mile connectivity to
customers. Our entire network is MPLS enabled with built in redundancy with world class design and service standards.



Our
cable landing station and our investment in submarine cable consortium are our other assets that we extend to our International
partners for their international inward and outward connectivity needs. Our cable landing station currently lands 2 major submarine
cables; namely Gulf Bridge International (GBI) and the Middle Eastern and North African cable (MENA).





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Data
Centre Service:We operate 5 Tier III Data Centres of which two are
located in Mumbai (Bombay) and one each at Noida (Delhi), Chennai (Madras) and Bengaluru, which are designed to act as reliable,
secure and scalable facilities to host mission-critical applications. We offer co-location services which allow customers to bring
in their own rack-mountable servers and house them in shared racks orhire complete racks, and even rent ‘secure cages’
at the hosting facility as per their application requirements. We also offer a wide variety of managed hosting services, such
as storage, back-up and restoration, performance monitoring and reporting hardware and software procurement and configuration
and network configuration.



Cloud
& Managed Services: Our on-demand hosting (cloud) services offers end-customers
with the best in class solutions to Enterprises. We have joined the global program of two world majors and offer their suite of
on-demand cloud services giving them the option to “rent” software licenses on a monthly “pay as you go”
basis. This model is aimed at helping Indian companies, both large and small, to safely tap computing capacity inside and outside
their firewalls to help ensure quality of service for any application they want to run..



Our
Remote and Onsite Infrastructure Management services provides continuous proactive management and support of customer operating
systems, applications and database layers through deploying specialized monitoring tools and infrastructure experts to ensure
that our customers’ infrastructure is performing optimally.



Our
innovative SLA driven utility-based On-Demand storage service manages the complete lifecycle of enterprise information, from its
inception to its final disposal. The fully managed, utility based, On-Demand, scalable storage platform is powered by global major
in Data Systems. Sify's On-Demand storage service reduces the complexities of deploying and managing multiple storage tiers, and
lowers operational costs by automating management with flexible need based pricing.



Technology
Integration services:Our mix of solutions give us the scope to band and extend any or all of these services
in multiple formats and scales for client who wish to rest their entire infrastructure with us. Clients get the benefit of our
accumulated knowledge base and technical expertise across all points of the ICT spectrum. In terms of cost, these translate into
better cost efficiencies. In terms of monitoring, the client need to interact with a singular service provider saving them both
implementation and documentation efforts.



Applications
Integration service:Our range of web-applications include sales force automation, supply chain management, intranet and
extranets, workflow engine and knowledge management systems.



Our
Applications Integration services operates two of India’s biggest online portals, www.sify.com and www.samachar.com,
that function as principal entry points 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.



Sify.com
provides a gateway to the Internet by offering communication and search tools such as email, chat, travel, online portfolio management
and channels for personal finance, astrology, lifestyle, shopping, movies, sports and news.



We
offer value-added services to organizations such as website design, development, content management, Online assessment tools,
search engine optimization, including domain name management, secure socket layer (SSL) certificate for websites, and server space
in required operating system and database. We provide state of the art messaging and collaboration services and solutions such
as e-mail servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and
services to enable data & access security over the Internet. We also provide infrastructure-based services on demand, including
on-line testing engine and network management. On-line testing services include test management software, required servers and
proctored examination facilities at Sify’s franchisee points. On-line exam engine offered allows a secure and flexible way
of conducting examinations involving a wide range of question patterns.



There are numerous risks
and challenges affecting the business. These risks and challenges are discussed in detail in the section entitled 'Risk Factors'
and elsewhere in this Annual Report.



Revenues



Telecom
Services



These
primarily include revenue from connectivity services, NLD/ILD services and to a lesser extent, revenues from the installation
of the connectivity link. In certain cases, these elements are sold as a package consisting of all or some of the elements. We
sell hardware and software purchased from third party vendors to our high value corporate clients. Our connectivity services include
IPVPN services, Internet connectivity, last mile connectivity (predominantly through wireless). We provide these services for
a fixed period of time at a fixed rate regardless of usage, with the rate for the services determined based on the type of service
and capacity provided, scope of the engagement and the Service Level Agreement, or SLA. We provide NLD (National Long Distance)
and ILD (International Long Distance) services and carry voice traffic for Inter-connect Operators. Revenue is recognized based
upon metered call units of voice traffic terminated on our network.





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Data Centre services



Revenue
from Data Centre services include, revenue from co-location of space, racks, caged racks and on usage of power from large contracts.
The contracts are mainly fixed rate for a period of time based on the space or the racks used and usage revenue is based on consumption
of power on large contracts.



Cloud and Managed
Services



Revenue
from Cloud and Managed services, are primarily from “ Cloud and On demand storage”, “ Domestic managed services
and “ International managed services”. Contracts from Cloud and on demand storage , are primarily fixed and for a
period of time. Revenues from Domestic and International manage services, comprises of value added services, operations and maintenance
of projects and from remote infrastructure management. Contracts from this segment are fixed and could also be based on T&M.



Technology Integration
Service (TIS)



Revenues
from TIS comprises of DC build services, Security services and from sale of Digital certificates. Contracts under TIS are based
on completion of projects and could also be based on T & M.



Applications Integration
Services



Revenue
from Applications Integration Services (Apps SI) comprises of Online Assessment, Web development, supply chain solutions and content
management. Contracts are primarily fixed in nature for a period of time and also could be based on T & M.



Expenses



Cost of goods
sold and services rendered



Telecom Services



Cost
of goods sold and services rendered for the corporate network/data services division consists of telecommunications costs necessary
to provide services and cost of goods in respect of communication hardware and security services sold, commission paid to franchisees
and cable television operators, the cost of voice termination for voice and VoIP services and other direct costs. Telecommunications
costs include the costs of international bandwidth procured from TELCOs and are required for access to the Internet, providing
local telephone lines to our points of presence, the costs of using third-party networks pursuant to service agreements, leased
line costs and costs towards spectrum fees payable to the Wireless Planning Commission or WPC for provision of spectrum to enable
connectivity to be provided on the wireless mode for the last mile. Other costs include cost incurred towards our Annual Maintenance
Contract (AMC), the cost of installation in connectivity business and the costs incurred in providing Hosting services. In addition,
the Government of India levies an annual license fee of 8% of the adjusted gross revenue generated from IP-VPN services and Voice
services under the NLD/ILD license.



Data Centre Services



Cost
of goods sold and services rendered for the Data Centre services consists of cost of electrical power consumed , cost of rental
servers offered to customers and cost of licences used to provide services.



Cloud and Managed
Services



Cost
of goods sold and services rendered for the Cloud and Managed services consists of cost of licences in providing services, cost
of billable resources in case of International Managed services, Third party professionals engaged in providing services, associate
costs of the delivery teams and cost of operations of DC build BOT projects.





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Technology Integration
Services



Cost
of goods sold and services rendered consists of cost of hardware and software supplied for DC build projects, cost of digital
certificates and platform usage, cost of security hardware and software supplied and cost of hardware and software procured for
System integration projects.



Applications Integration
Services



Cost
of goods sold and services rendered consists of professionals charges payable to domain specialists and subject matter experts,
cost of billable associates of e-learning business, cost of operating in third party facility for online assessment including
invigilator costs and cost of procuring and managing content for the websites and other direct costs for the revenue streams.



Selling, general and administrative expenses



Selling, general and administrative
expenses consists 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.



Depreciation and amortization



We depreciate our tangible
assets on a straight-line basis over the useful life of assets, ranging from three to eight years and, in the case of buildings,
28 years. Undersea cable capacity is amortised over a period of 12 years and other intangible assets with finite lives are amortised
over three to five years.



Impairment



The carrying amounts of
the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill, the recoverable amount is estimated each year at December 31.



The recoverable amount
of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units
that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are
allocated to the cash generating units on a reasonable and consistent basis.



An impairment loss is
recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets
in the unit or group of units on a pro rata basis.



Inventories



Inventories comprising
traded hardware and software are measured at the lower of cost (determined using first-in first-out principle) and net realizable
value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.



Deferred tax



Deferred tax is recognized
using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent
that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable
temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred
tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be realized simultaneously.



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Deferred taxation arising on investments in
subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxation arising on the temporary
differences arising out of undistributed earnings of the equity method accounted investee is recorded based on the management's
intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at the capital gains
tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention is to realize
the undistributed earnings through dividend, the Group’s share of the income and expenses of the equity method accounted
investee is recorded in the statement of income, after considering any taxes on dividend payable by the equity method accounted
investee and no deferred tax is set up in the Group's books as the tax liability is not with the group.



Stock compensation expense



A total of 5.73 million
equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). Our ASOP 2007 was adopted at the Eleventh
Annual General Meeting held on September 24, 2007. As of March 31, 2014, we had an aggregate outstanding of 30, 000 options under
our ASOP with a weighted average exercise price equal to approximately ₹ 98.24 ($1.63) per equity share. There is no unamortized
stock compensation expense as at March 31, 2014.



Results of Operations



The following table sets forth certain financial
information as a percentage of revenues:



|                                              |  | Fiscal |      
|--------------------------------------------- |  | ------ | -----
|                                              |  | 2014   |      
|                                              |  | %      |      
|Revenues                                      |  |        | 100  
|Cost of goods sold and services rendered*     |  |        | 58.67
|Other income/(expense)                        |  |        | 0.89 
|Selling, general  and administrative expenses |  |        | 26.19
|Depreciation and amortization expenses        |  |        | 10.53
|Profit /(loss) from operating activities      |  |        | 5.50 
|Finance income                                |  |        | 1.15 
|Finance expenses                              |  |        | (3.61
|Net finance income/(Loss)                     |  |        | (2.46
|Profit on sale of equity accounted investee   |  |        | -    
|Share of profit of equity accounted investee  |  |        | -    
|Profit before tax                             |  |        | 3.04 
|Income tax (expense)/ benefit                 |  |        | -    
|Net profit/(loss) for the year                |  |        | 3.04 



*Power cost which was previously included
under “Selling, general and administrative expenses” has been reclassified to “Cost of goods sold and services
rendered” and the comparative numbers have been restated accordingly.



Results of year ended March 31, 2014 compared
to year ended March 31, 2013



Revenues



The growth in our revenues in fiscal 2014
from fiscal 2013 is given below



|         |  | 2013 - 14 |        |  | 2012-13 |  |       | Increase/ (decrease) |  |  | % Change | 
|-------- |  | --------- | ------ |  | ------- |  | ----- | -------------------- |  |  | -------- | 
|         |  |           |        |  |         |  |       |                      |  |  |          | 
|Revenues |  |           | 10,460 |  |         |  | 8,570 |                      |  |  | 1,890    | 





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We have changed the operating segments of
the company from (i) Enterprise Services and (ii) Software Services to Five business units structure namely:(i) Telecom Services
(ii) Data Centre Services (iii) Cloud and Managed Services (iv) Technology Integration Services and (v)Applications Integration
Services. Consequently we have done the analysis in this section based on the revised operating segments. (Refer Segment Note
33)



Year 2013-14 had a 22% growth with an increase
in revenues of ₹ 1,890 Million ($31.4 Million) contributed largely by Telecom Services with a revenue growth of ₹1,537
Million ($25.5 Million) and Applications Integration Services ₹303 Million ($5 Million).



The revenue by operating segments is as follows:





|                                 |  | Revenue |        |  | Percentage of revenue |  |       | Growth % | 
|-------------------------------- |  | ------- | ------ |  | --------------------- |  | ----- | -------- | 
|                                 |  | 2013-14 |        |  | 2012-13               |  |       | 2013-14  | 
|Telecom Services                 |  |         | 6,875  |  |                       |  | 5,338 |          | 
|Data Centre Services             |  |         | 1,223  |  |                       |  | 1,236 |          | 
|Cloud and Managed Services       |  |         | 515    |  |                       |  | 510   |          | 
|Technology Integration Services  |  |         | 843    |  |                       |  | 785   |          | 
|Application Integration Services |  |         | 1,004  |  |                       |  | 701   |          | 
|Total                            |  |         | 10,460 |  |                       |  | 8,570 |          | 



Revenue from Telecom Service has increased
by ₹ 1,537 Million ($25.50 Million) primarily due to (i) an increase in revenue of ₹ 820 Million ($13.6 Million) in
Voice Services, which is on account of an increase of ₹828 Million from ILD business, contributed by volume increase of
1276 million minutes, partially offset by reduction of ₹8 Million ($ 0.1 million) from VoIP services, and (ii) an increase
in revenue of ₹717 Million ($11.90 Million) from Connectivity Services, contributed by an increase in number of links and
customer engagements.



Revenue from Data Centre Services has marginally
decreased by ₹13 Million ($0.2 Million), due to reduction in usage revenues.



Revenue from Cloud and Managed Services has
increased marginally by ₹5 Million ($0.1 Million), primarily on account of an increase of ₹ 67 Million ($1.11 Million)
cloud based offerings on account of new customer engagements and partially offset by a reduction in Infrastructure management
services by ₹62 Million ($1.04 million) due to reduction in customer engagements.



Revenue from Technology Integration Services
has increased by ₹ 58 Million ($1 Million), on account of increase in revenues from large contracts by ₹107 Million
($1.8 million), which was offset by a decrease in revenue of ₹49 Million ($ .8 million) from digital certification and Security
Business.



Revenue from Applications Integration Services
has increased by ₹303 Million ($5 Million). The increase is primarily attributable to increase in (i) Application services
by ₹ 202 Million, which is on account of an increase in revenue by ₹70 Million from Online Assessment Services, ₹
84 Million from license based opportunities and ₹41 Million from a large government project on Applications integration
(ii) e Learning business increase by ₹ 84 Million on account of new customer engagements and (iii) Portals business by ₹17
Million, on account of new engagements.



The company is expected to benefit from the
ongoing Data Centre projects, undersea cable capacity, cable landing station and the large Government project that is being rolled
out.



Other income



The change in other income is as follows:



|             |  | 2013 -14 |    |  | 2012-13 |  |    | Increase/ (decrease) |  |  | % Change | 
|------------ |  | -------- | -- |  | ------- |  | -- | -------------------- |  |  | -------- | 
|Other income |  |          | 93 |  |         |  | 50 |                      |  |  | 43       | 



The other income for the fiscal year 2014
consists of ₹ 56.60 million ($ 0.94 million) of write back of liabilities no longer payable, ₹ 19 million ($ 0.3 million)
of rental income , ₹ 11 million ($ 0.2 million) towards reimbursement of investor related expenses pursuant to our ADS program
and the balance income from sale of scrap The increase of 86% is on account of write back of liabilities no longer required which
is partially offset by the reduction in rental income by ₹ 4.28 million ($ 0.1 million) and all other incomes remaining
at same level.





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Cost of goods sold and services rendered
(COGS)



Our cost of goods sold and services rendered
in each of the business segment is set forth in the following table:



|                                 |  | 2013-14 |       |  | 2012-13 |  |       | Increase/ (decrease) |  |  | % change |  
|-------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Telecom Services                 |  |         | 4,034 |  |         |  | 3,309 |                      |  |  | 725      |  
|Data Centre Services             |  |         | 627   |  |         |  | 686   |                      |  |  | (59      | )
|Cloud and Managed Services       |  |         | 222   |  |         |  | 166   |                      |  |  | 56       |  
|Technology Integration Services  |  |         | 709   |  |         |  | 671   |                      |  |  | 38       |  
|Application Integration Services |  |         | 545   |  |         |  | 509   |                      |  |  | 36       |  
|Total                            |  |         | 6,137 |  |         |  | 5,341 |                      |  |  | 796      |  



The cost of goods sold has increased by 15%
on overall basis and the movement in COGS by nature of expense is explained in detail below:



|                       |  | 2013-14 |       |  | 2012-13 |  |       | Increase/ (decrease) |  |  | % change |  
|---------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Network Costs          |  |         | 3,392 |  |         |  | 2,703 |                      |  |  | 689      |  
|Revenue share          |  |         | 317   |  |         |  | 179   |                      |  |  | 138      |  
|Cost of goods sold     |  |         | 804   |  |         |  | 787   |                      |  |  | 17       |  
|Direct Resources costs |  |         | 674   |  |         |  | 862   |                      |  |  | (188     | )
|Power costs*           |  |         | 591   |  |         |  | 590   |                      |  |  | 1        |  
|Other direct costs     |  |         | 359   |  |         |  | 220   |                      |  |  | 139      |  
|Total                  |  |         | 6,137 |  |         |  | 5,341 |                      |  |  | 796      |  



* Power costs has been reclassified as a separate
line item as part of “Cost of goods sold and services rendered” against the previous period classification under “Operating
Expenses” as part of “Selling, general and administrative expenses”



Network cost comprises of cost of Bandwidth
leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Increase in Network costs of ₹
689 million ($ 11.46 million) is due to (i) ₹ 292 million increase in Bandwidth costs incurred on account of capacity upgrades
and newer links and (ii) ₹ 397 Million of Inter connect charges due to the increase of 1276 million minutes in the volume
of International Long distance.



Revenue share cost comprises of (i) Revenue
share payable to DOT on licensed services and (ii) Revenue share payable to retail franchisees. Increase in Revenue share is on
account of (i) Increase of ₹ 167 Million in the Revenue share payable to DOT on account of increase in licensed Revenues
and (ii) increase of revenue share percentage of 1% from 7% to 8% effective April 1 , 2013. This was partially offset by reduction
of ₹ 30 Million in the revenue share payable to retail franchisees.



Cost of Goods sold consists of cost of Hardware
and Software including adjustment of stock value for Net realizable value.  The cost of Cost of Hardware and Software sold
is linear on account of engagements remaining at same level.



Direct Resource costs comprise of the cost
of resources deployed on the Network Infrastructure Delivery (Part of Telecom service), and resources involved in delivery of
applications integration services, cost of billable resources of e Learning (Part of Applications Integration services) and Infrastructure
Managed services (Part of Cloud and Managed Services). Decrease of resources costs of ₹ 188 million is primarily on account
of reduction of (i) ₹ 133 million from resource cost of delivery of applications integration services and cost of billable
resources of e learning and (ii) ₹ 60 million in resource cost of Network Infrastructure Delivery (Part of Telecom services).
The reduction in direct resource costs is on account of right sizing of resources and reduction in number of employees.



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Power cost comprises of electricity charges
incurred for our Data Centre operations. Power cost remained at same level due to operating efficiencies and alternate sourcing,
despite increase in per unit tariff rate.



Other direct costs, comprises of Link implementation
and maintenance charges pertaining to Telecom services, direct cost of Applications Integration services business, digital certificate
platform, content costs and subject matter experts for international businesses. The increase in other direct costs of ₹
139 million is primarily on account of increase of (i) ₹ 18 million in Link implementation and maintenance charges (ii)
₹ 40 million on account of operating costs of cloud and managed services and (iii) ₹ 92 million in application integrations
services on account of operating cost of online assessment and cost of delivering large projects.



Selling, General and Administrative expenses



Selling, General and Administrative expenses
of the Company by nature of expenses are set forth as follows:



|                                   |  | 2013-14 |       |  | 2012-13 |  |       | Change |  |  | % change |  
|---------------------------------- |  | ------- | ----- |  | ------- |  | ----- | ------ |  |  | -------- | -
|Operating costs                    |  |         | 827   |  |         |  | 599   |        |  |  | 228      |  
|Selling & Marketing Expenses       |  |         | 114   |  |         |  | 115   |        |  |  | (1       | )
|Associate Expenses                 |  |         | 758   |  |         |  | 763   |        |  |  | (5       | )
|Other Indirect expenses            |  |         | 828   |  |         |  | 781   |        |  |  | 47       |  
|Allowance for doubtful receivables |  |         | 208   |  |         |  | 211   |        |  |  | (3       | )
|Forex (Gain )/ Loss                |  |         | 5     |  |         |  | (18   | )      |  |  | 23       |  
|Total                              |  |         | 2,740 |  |         |  | 2,451 |        |  |  | 289      |  



Operating cost includes Rental, Repairs &
Maintenance charges of our network operating centers, base stations and other co-location sites including the rent and maintenance
for our Data Centres. Operating costs increased by ₹ 228 million ($3.79 million) primarily on account of rent, repairs and
maintenance and network operating cost which is due to increase in number of links and operating locations.



Selling & Marketing costs consist of,
selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. Selling & Marketing
costs remained at the same level.



Associate expenses, consists of cost of the
employees who are part of the Sales and marketing, Business development, General management and support services. Associate expense
has decreased by ₹ 5 million ($ 0.08 million) between two periods on account of optimization of resources and higher attrition
rate during the period.



Other Indirect expense consists of, rental
and electricity cost of office, travel cost, Legal charges, professional charges, communication and others.



Allowance for doubtful receivables consists
of the charge on account of the provisions created during the year against doubtful debtors. Allowance for doubtful receivables
marginally decreased by ₹ 3 million ( $ 0.05 million) between two periods.



Foreign exchange gain or (loss)



A significant portion of the foreign exchange
differences arise on account of the USD movement as around 80% of our export revenues are denominated in dollars. The dollar rates
have fluctuated in the range of ₹53.74 to ₹ 68.36 during the year 2013-14. There has been exchange gain at times of
dollar appreciation from trade receivables which is offset by loss in our dollar denominated working capital borrowing and to
some extent by trade payables.



Depreciation and amortization



Depreciation and amortization is set forth
in the table below:



|                                  |  | 2013 -14 |       |   | 2012-13 |  |     | Increase/ (Decrease) |  |  | % Change | 
|--------------------------------- |  | -------- | ----- | - | ------- |  | --- | -------------------- |  |  | -------- | 
|Depreciation and amortization     |  |          | 1,101 |   |         |  | 848 |                      |  |  | 253      | 
|As a percentage of carrying value |  |          | 20.75 | % |         |  | 27  | %                    |  |  |          | 





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As the business is continuing to expand, the
amount of depreciation is increasing on account of constructing and deploying new facilities by the Company. The Data Centre facility
at Noida and Rabale are each capitalized during the year which has contributed to an increase in depreciation of ₹ 135.90
million. There were also networking assets capitalized during the year for our connectivity business which has increased the depreciation
by ₹ 77.40 million. Apart from depreciation, the amortization on leased assets taken for customer specific contracts has
increased by ₹ 42.50 million during the fiscal 2014.



Taking into account the on-going construction
of our Data Centre at Rabale and the expansion in our connectivity business, the charge of depreciation and amortization is expected
to increase in the near future.



Profit/loss from operating activities



|                           |  | 2013 -14 |      |   | 2012-13 |  |     | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | -------- | ---- | - | ------- |  | --- | -------------------- |  |  | -------- | 
|Operating profit/(loss)    |  |          | 576  |   |         |  | (19 | )                    |  |  | 595      | 
|As a percentage of revenue |  |          | 5.51 | % |         |  | .22 | %                    |  |  |          | 



The increase in operating profit is primarily
contributed by the increase in the gross margin as a percentage of revenue. The percentage of Cost of goods sold and services
rendered on revenue for the fiscal 2014 is 70% as against 80% during the fiscal 2013 thereby showing an increase in gross margin
of 10%. Also selling and Marketing expenses as a percentage of revenue has decreased by 9%.



Finance income/expense



|                           |  | 2013 -14 |      |   | 2012-13 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | -------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Finance Income             |  |          | 120  |   |         |  | 74   |                      |  |  | 46       | 
|Finance expense            |  |          | (377 | ) |         |  | (260 | )                    |  |  | 117      | 
|Net Finance income/expense |  |          | (257 | ) |         |  | (186 | )                    |  |  | 71       | 



Finance income: There has been a capital
infusion by promoters during the year which has helped the company to some extent in funding expansion and also to take advantage
of the investment of surplus available. The company has also received income tax refunds during the year the interest portion
of which has contributed to the increase in finance income. The finance income primarily consists of interest received from bank
deposits of ₹ 61.9 million , interest received on IT refund ₹ 40.4 million and interest income on other deposits of
₹17.7 million. The interest received from bank has increased by ₹ 38.1 million from the last year and interest on
income tax refund was received only during the current year.



Finance expense:The finance expense
primarily consists of ₹ 90.9 million of interest expense on leases, ₹ 61.3 million of interest paid on term loans,
₹ 80.19 million of interest paid on fund based working capital facilities from banks, ₹57.64 million interest paid
to other financial institutions and ₹86.82 million of other borrowing costs paid in respect of utilization of non fund facilities
from the banks and other processing charges. The company has raised a new term loan during the year of ₹ 225 million and
hence, the interest on term loans has increased by ₹ 42.7 million over fiscal 2013. The interest on other borrowings has
increased by ₹ 22.7 million and the interest expense on leases has increased by ₹ 70.1 over fiscal 2013. The increase
in borrowings from other financial institutions is primarily to fund our commitments relating to one of our large customer specific
contract.



Net Profit



|                           |  | 2013-14 |      |   | 2012-13 |  |      | Increase/ (Decrease) |  |  | % Change |  
|-------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | -
|Net Profit                 |  |         | 318  |   |         |  | 452  |                      |  |  | (134     | )
|As a percentage of revenue |  |         | 3.04 | % |         |  | 5.27 | %                    |  |  |          |  



The increase in the Net Profit during the
year 2012-13 was attributable to one-time gain of ₹ 658 million on account of sale of stake in equity accounted investee.
There has been an increase in operating margins during the current year contributing to an increase in operating profit.





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Results of year ended March 31, 2013 compared
to year ended March 31, 2012



Revenues



The growth in our revenues in fiscal 2013
from fiscal 2012 is given below



|         |  | 2012-13 |       |  | 2011-12 |  |      | Change |  |  | % Change | 
|-------- |  | ------- | ----- |  | ------- |  | ---- | ------ |  |  | -------- | 
|         |  |         |       |  |         |  |      |        |  |  |          | 
|Revenues |  |         | 8,570 |  |         |  | 7699 |        |  |  | 871      | 



We have changed the operating segments of
the company from (i) Enterprise Services and (ii) Software Services to Five business units structure namely (i) Telecom Services
(ii) Data Centre Services (iii) Cloud and Managed Services (iv) Technology Integration Services and (v) Application Integration
Services. Consequently we have done the analysis in this section based on the revised operating segments (Refer note 33).



Year 2012-13 had a 11% growth with an increase
in revenues of ₹871 million contributed primarily from Telecom Services with a revenue growth of ₹1,006 Million
and ₹193 million from Data Centre Services, which was partially offset by a revenue decrease of ₹380 million from
Technology Integration Services.



The revenue by operating segments and sub-segments
is as follows:





|                                 |  | Revenue |       |  | Percentage of revenue |  |       | Growth % | 
|-------------------------------- |  | ------- | ----- |  | --------------------- |  | ----- | -------- | 
|                                 |  | 2012-13 |       |  | 2011-12               |  |       | 2012-13  | 
|Telecom Services                 |  |         | 5,338 |  |                       |  | 4,332 |          | 
|Data Centre Services             |  |         | 1,236 |  |                       |  | 1,043 |          | 
|Cloud and Managed Services       |  |         | 510   |  |                       |  | 410   |          | 
|Technology Integration Services  |  |         | 785   |  |                       |  | 1,165 |          | 
|Application Integration Services |  |         | 701   |  |                       |  | 749   |          | 
|Total                            |  |         | 8570  |  |                       |  | 7,699 |          | 



Revenue from Telecom Services increased by
₹1,006 million, primarily attributable to an (i) increase in one time project based implementation revenues of ₹250
million (ii) Increase in recurring revenue of ₹353 Million due to increase in number of customer links and engagements in
network connectivity services and (iii) increase in Voice revenues by ₹458 Million, which is on account of increase
of ₹497 Million from ILD business, contributed by volume increase of 658 million minutes. These increases were
partially offset by (i) ₹39 Million reduction on account of decrease in volumes of VoIP services, (ii) ₹18 Million
reduction in Hardware and Software services on account of reduced opportunities and (iii) reduction in Retail Connectivity services
of ₹36 Million on account of company defocusing this segment.



Revenue from Data Centre Services increased
by ₹193 Million, on account of higher utilization of Data Centre Capacity at 97% utilization.



Revenue from Cloud and Managed Services increased
by ₹100 Million, on account of increase of ₹ 145 Million from new engagements in Cloud based offerings which was partially
offset by decrease of ₹ 43 million from infrastructure managed services due to decrease in customer engagements.



Revenue from Technology Integration Services
decreased by ₹380 Million, on account of a large one time System Integration opportunity serviced in the previous year.



Revenue from Application Integration Services
has decreased by ₹48 Million. The reduction of ₹48 Million is on account of (i) reduction in Hardware & Software
services by ₹41 Million (ii) ₹16 Million in portals on account of lower customer engagement (iii) ₹2 million
in e - Learning business on account of loss of existing customers. These decreases were partially offset by an increase of ₹8
Million from Online Assessment services.



Other income



|             |  | 2012-13 |    |  | 2011-12 |  |    | Increase /(decrease) |  |  | % Change | 
|------------ |  | ------- | -- |  | ------- |  | -- | -------------------- |  |  | -------- | 
|Other income |  |         | 50 |  |         |  | 38 |                      |  |  | 12       | 





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The other income has remained linear between
the periods.



Cost of goods sold and services rendered



|                                 |  | 2012-13 |       |  | 2011-12 |  |       | Increase/ (decrease) |  |  | % change |  
|-------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Telecom Services                 |  |         | 3,309 |  |         |  | 2,827 |                      |  |  | 482      |  
|Data Centre Services             |  |         | 686   |  |         |  | 503   |                      |  |  | 183      |  
|Cloud and Managed Services       |  |         | 166   |  |         |  | 202   |                      |  |  | (36      | )
|Technology Integration Services  |  |         | 671   |  |         |  | 1,057 |                      |  |  | (386     | )
|Application Integration Services |  |         | 509   |  |         |  | 535   |                      |  |  | (26      | )
|Total                            |  |         | 5,341 |  |         |  | 5,124 |                      |  |  | 217      |  



The cost of goods sold increase by 4% on overall
basis, the movement in COGS is explained in detail below:



|                       |  | 2012-13 |       |  | 2011-12 |  |       | Increase/ (decrease) |  |  | % change |  
|---------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Network Costs          |  |         | 2,703 |  |         |  | 2,283 |                      |  |  | 420      |  
|Revenue share          |  |         | 179   |  |         |  | 165   |                      |  |  | 14       |  
|Cost of goods sold     |  |         | 787   |  |         |  | 1,133 |                      |  |  | (346     | )
|Direct Resources costs |  |         | 862   |  |         |  | 863   |                      |  |  | (1)      |  
|Power costs *          |  |         | 590   |  |         |  | 463   |                      |  |  | 127      |  
|Other direct costs     |  |         | 220   |  |         |  | 217   |                      |  |  | 3        |  
|Total                  |  |         | 5,341 |  |         |  | 5,124 |                      |  |  | 217      |  



* Power costs has been reclassified as a separate
line item part of “Cost of goods sold and services rendered” against the previous period classification under “Operating
Expenses” part of “Selling, general and administrative expenses”



Network cost comprises of cost of Bandwidth
leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Increase in Network costs is due to
(i) ₹ 83 Million increase of Bandwidth costs incurred on account of capacity upgrades and newer links (ii) ₹ 379 Million
of Inter connect charges due to the increase in the volume of International Long Distance and (iii) decrease in IP termination
cost by ₹ 41 million on account of reduction in usage minutes.



Revenue share cost comprises of (i) Revenue
share payable to DOT on licensed services and (ii) Revenue share payable to retail franchisees. Increase in Revenue share is on
account of (i) Increase of ₹ 38 Million in the Revenue share payable to DOT on account of increase in licensed Revenues
and increase of 1% from 6% to 7% effective July 1, 2012. This was partially offset by reduction of ₹ 23 Million in the Revenue
share payable to retail franchisees.



Cost of Goods sold consists of cost of Hardware
and Software including adjustment of stock value for Net realizable value.

The decrease in Cost of Hardware and Software
is on account of large one time SI deal pertaining to the year 2011-12.



Direct Resource costs comprises of the cost
of resources deployed on the Network Infrastructure Delivery (Part of Telecom service), and resources involved in delivery of
application integration services, cost of billable resources of e Learning (Part of Application Integration services) and Infrastructure
Managed services (Part of cloud and managed services). Direct resource costs remained at the same level between two periods.



Power costs comprise of electricity charges
incurred for our Data Centre operations. Power costs increased by ₹ 127 million on account of higher capacity utilization
linear to revenue.



Other Direct costs, comprises of Link implementation
and maintenance charges pertaining to Telecom services, direct cost of Application services business, digital certificate platform
, content costs , subject matter experts for international businesses. The Other Direct costs remained at the same level between
two periods.





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|Selling, general and administrative
    expenses |  | 2012-13 |       |   | 2011-12 |  |       | Increase/ (Decrease) |  |  | % change | 
|------------------------------------------------ |  | ------- | ----- | - | ------- |  | ----- | -------------------- |  |  | -------- | 
|Operating costs                                  |  |         | 599   |   |         |  | 452   |                      |  |  | 147      | 
|Selling & Marketing Expenses                     |  |         | 115   |   |         |  | 114   |                      |  |  | 1        | 
|Associate Expenses                               |  |         | 763   |   |         |  | 755   |                      |  |  | 8        | 
|Other Indirect expenses                          |  |         | 781   |   |         |  | 694   |                      |  |  | 87       | 
|Allowance for doubtful receivables               |  |         | 211   |   |         |  | 95    |                      |  |  | 116      | 
|Forex (Gain) / Loss                              |  |         | (18   | ) |         |  | (26   | )                    |  |  | 8        | 
|Total                                            |  |         | 2,451 |   |         |  | 2,084 |                      |  |  | 367      | 



Operating costs includes Rental, Repairs &
Maintenance charges of our network operating centers, base stations and other co-location sites including the rent and maintenance
for our Data Centres. Operating costs increased by ₹147 million primarily on account of rent, repairs and maintenance and
network operating cost which is due to increase in number of links and operating locations.



Selling & Marketing costs consist of,
selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. Selling & Marketing
costs remained at the same level.



Associate expenses, consists cost of the employees
who are part of the Sales and marketing, business development, General management and support services. Associate expenses have
increased by ₹8 Million between two periods on account of fresh recruitments during the period.



Other Indirect expense consists of, rental
and electricity cost of office, travel cost, Legal charges, professional charges, communication and others. Other indirect costs
increased by ₹ 87 million primarily on account of provision for export scrips (SFIS) on account of lower import visibility
and increase in legal, professional and consultancy charges during the year



Allowance for doubtful receivables consists,
of the charge on account of the provisions created during the year against doubtful debtors. Allowance for doubtful receivables
increased by ₹ 116 million on account of provisioning of doubtful debts including certain exposure on large projects.



Forex gain/(loss) consists of unrealized gain
or (loss) on account of restatements at the period end. The current fiscal had a net forex gain on account of favorable currency
fluctuation.



Depreciation and amortization



Depreciation and amortization is set forth
in the table below:



|                                  |  | 2012-13 |     |   | 2011-12 |  |     | Increase/ (decrease) |  |  | % Change | 
|--------------------------------- |  | ------- | --- | - | ------- |  | --- | -------------------- |  |  | -------- | 
|Depreciation and amortization     |  |         | 848 |   |         |  | 692 |                      |  |  | 156      | 
|As a percentage of carrying value |  |         | 27  | % |         |  | 24  | %                    |  |  |          | 



The increase is due to larger capitalization
of assets. The capital work in progress at the end of March 31, 2013 stood at ₹ 2,498. The data centres which are under
construction are expected to be capitalized in the fiscal year 2014.



Profit/loss from operating activities



|                           |  | 2012-13 |     |   | 2011 -12 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | ------- | --- | - | -------- |  | ---- | -------------------- |  |  | -------- | 
|Operating profit/(loss)    |  |         | (19 | ) |          |  | (163 | )                    |  |  | 144      | 
|As a percentage of revenue |  |         | .22 | % |          |  | 2.12 | %                    |  |  |          | 





Due to increase in revenues and controlled
operating costs, operating loss has come down significantly.



Finance income/expense



|                             |  | 2012-13 |      |   | 2011-12 |  |      | Increase/ (decrease) |  |  | % Change | 
|---------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Finance Income               |  |         | 74   |   |         |  | 59   |                      |  |  | 15       | 
|Finance expense              |  |         | (260 | ) |         |  | (307 | )                    |  |  | 47       | 
|Net Finance income/(expense) |  |         | (186 | ) |         |  | (248 | )                    |  |  | 62       | 





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The increase in finance income is due to interest
from deposits and interest income on the income tax refund received. The reduction in finance expense is due to reduction in LC
charges during the current fiscal. The finance expense is expected to increase further with the leasing arrangements entered into
towards the end of the fiscal year 2013.



Net Profit



|                           |  | 2012-13 |      |   | 2011-12 |  |      | Increase/ (decrease) |  |  | % Change | 
|-------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Net Profit/(loss)          |  |         | 452  |   |         |  | (383 | )                    |  |  | 835      | 
|As a percentage of revenue |  |         | 5.27 | % |         |  | 4.98 | %                    |  |  |          | 



The increase is attributable to better operational
margin and one-time gain of ₹ 658 million on account of sale of stake in equity accounted investee. We expect improvements
in operational margins due to change in revenue mix, leading to higher operating margin.



Results of year ended March 31, 2012 compared
to year ended March 31, 2011



|         |  | 2011-12 |       |  | 2010-11 |  |       | Increase/ (decrease) |  |  | Percentage
    change | 
|-------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | --------------------- | 
|         |  |         |       |  |         |  |       |                      |  |  |                       | 
|Revenues |  |         | 7,699 |  |         |  | 6,887 |                      |  |  | 812                   | 



Year 2011-12 had a 12% growth with an increase
in revenues of ₹ 812 Million contributed largely by (i) Technology Integration Services with a revenue growth of ₹
337 Million (ii) Telecom Services with a revenue growth of ₹ 271 Million and (iii) Data Centre Services with a revenue growth
of ₹ 224 Million, which was partially offset by a decrease in revenue of ₹39 Million from Cloud and Managed Services.



We have changed the operating segments of
the company from (i) Enterprise Services and (ii) Software Services to five business unit structure namely (i) Telecom Services
(ii) Data Centre Services (iii) Cloud and Managed Services (iv) Technology Integration Services and (v) Application Integration
Services. Consequently we have done the analysis in this section based on the revised operating segments. (Refer Note 33)



The revenue by operating segments and sub-segments
is as follows:



|SBU                              |  |  |         |  |  |  |         |  | Percentage of revenue |  |         | Growth % | 
|-------------------------------- |  |  | ------- |  |  |  | ------- |  | --------------------- |  | ------- | -------- | 
|                                 |  |  | 2011-12 |  |  |  | 2010-11 |  |                       |  | 2011-12 |          | 
|Telecom Services                 |  |  | 4,332   |  |  |  | 4,061   |  |                       |  | 56      | %        | 
|Data Centre Services             |  |  | 1,043   |  |  |  | 819     |  |                       |  | 14      | %        | 
|Cloud and Managed Services       |  |  | 410     |  |  |  | 449     |  |                       |  | 5       | %        | 
|Technology Integration Services  |  |  | 1,165   |  |  |  | 828     |  |                       |  | 15      | %        | 
|Application Integration Services |  |  | 749     |  |  |  | 730     |  |                       |  | 10      | %        | 
|Total                            |  |  | 7,699   |  |  |  | 6,887   |  |                       |  |         |          | 





Revenue from Telecom Services has increased
by ₹ 271 million. This increase is primarily attributable to an (i) increase of ₹ 104 million from network connectivity
services, which is due to increase in the number of customers and links (ii) increase of ₹ 297 million
revenue from International Long Distance. The increase in International Long Distance is on account of increase in volume by 449 million
minutes. The increase in this segment is off-set by decrease in Revenue of ₹ 130 Million from retail connectivity due to
exit of franchises in e-Port and broadband sub-segment and reduction of connectivity services availed by retail customers and
₹ 3 million on hardware.





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Revenue from Data Centre Services increased
by ₹ 224 million, on account of higher occupancy of Data Centre at an overall utilization ratio of 86%.



Revenue from Cloud and Managed Services decreased
by ₹ 39 million, on account of increase in revenue of ₹ 40 Million in Cloud based offerings, which was set off by
a decrease in revenue of ₹ 79 million in Infrastructure Managed Services, due to lower hardware sales.



Revenue from Technology Integration Services
increased by ₹ 337 million, primarily on account of a one-time large System Integration deal by ₹354 million, which
was marginally offset by a decrease of ₹17 million from Digital certification and Security business.



Revenue from Applications Integration services
increased by ₹19 million. The increase is on account of revenue from (i) ₹34 Million from online assessment services
(ii) ₹28 Million from web application services (iii) increase of 4.6 Million from Document managed services (iv) Increase
of ₹6 Million from Forum services which was offset by (i) decrease of revenue from mail management services by ₹13
Million and (ii) ₹21.5 Million from Hardware & Software services, (iii) ₹12 million reduction in E Learning revenue
of due to reduction in engagement from existing customers and (iv) ₹6 million from portal is on account of exit of customers
and related opportunities.



Other income



|             |  | 2011-12 |    |  | 2010-11 |  |    | Change |  |  | % Change | 
|------------ |  | ------- | -- |  | ------- |  | -- | ------ |  |  | -------- | 
|Other income |  |         | 38 |  |         |  | 73 |        |  |  | 35       | 



The decrease is mainly on account of decrease
in interest on Income Tax refund and from duty credit entitlements under the “Served from India Scheme” (issued by
the Government of India) in respect of the foreign exchange earnings from export of services



Cost of goods sold and services rendered



|                                 |  | 2011-12 |       |  | 2010-11 |  |       | Increase/ (decrease) |  |  | % change |  
|-------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Telecom Services                 |  |         | 2,827 |  |         |  | 2,665 |                      |  |  | 162      |  
|Data Centre Services             |  |         | 503   |  |         |  | 364   |                      |  |  | 139      |  
|Cloud and Managed Services       |  |         | 202   |  |         |  | 288   |                      |  |  | (86      | )
|Technology Integration Services  |  |         | 1,057 |  |         |  | 774   |                      |  |  | 283      |  
|Application Integration Services |  |         | 535   |  |         |  | 424   |                      |  |  | 111      |  
|Total                            |  |         | 5,124 |  |         |  | 4,515 |                      |  |  | 609      |  



The cost of goods sold increase by 13% on
overall basis, the movement in COGS is explained in detail below:



|                       |  | 2011-12 |       |  | 2010-11 |  |       | Increase/ (Decrease) |  |  | % change |  
|---------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Network Costs          |  |         | 2,283 |  |         |  | 2,022 |                      |  |  | 261      |  
|Revenue share          |  |         | 165   |  |         |  | 233   |                      |  |  | (68      | )
|Cost of goods sold     |  |         | 1,133 |  |         |  | 957   |                      |  |  | 176      |  
|Direct Resources costs |  |         | 863   |  |         |  | 779   |                      |  |  | 84       |  
|Power costs*           |  |         | 463   |  |         |  | 307   |                      |  |  | 156      |  
|Others                 |  |         | 217   |  |         |  | 217   |                      |  |  | 0        |  
|Total                  |  |         | 5,124 |  |         |  | 4,515 |                      |  |  | 609      |  





* Power costs has been reclassified as a separate
line item part of “Cost of goods sold and services rendered” against the previous period classification under “Operating
Expenses” part of “Selling, general and administrative expenses”



Network cost of ₹ 261 million consists
of cost of Bandwidth leased out from TELCOS, Inter connect charges payable to carriers, IP termination costs payable to carriers.  Increase
in Network costs is on account of (i) ₹ 51.9 Million increase of Bandwidth costs incurred on account of capacity upgrades
and newer links (ii) ₹ 182 Million of Inter connect charges due to the increase in the volume of International Long distance
and (iii) increase in IP termination costs by ₹ 27.8 Million on account of increase in usage of Minutes.





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Revenue share cost consists of (i) Revenue
share payable to DoT on ISP, ILD & NLD services and (ii) Revenue share payable to retail franchisees.   Decrease
in Revenue share is on account of (i) Increase of ₹ 11.3 Million in the Revenue share payable to DoT on account of increase
in Revenues and (ii) reduction of ₹ 79.3 Million in the Revenue share payable to Retail franchisees.



Cost of Goods sold consists of cost of Hardware
and Software including adjustment of stock value for Net realizable value. The Increase in Cost of Goods sold is on account
of hardware cost involved on a large one time System integration deal and partially offset by decrease in hardware costs from
other System integration business opportunities.



Direct Resources costs consists of (i) the
cost of resources deployed on the Network Infrastructure Delivery (ii) cost of billable resources associated with the e Learning
and Infrastructure Managed services.   During the year, there was an increase of ₹ 84.1 on account (i) increase
of ₹ 68.2 Million on the resources costs of the Network Infrastructure Delivery and an increase of ₹ 15.9 Million
on the cost of billable associates associated with the e Learning and Infrastructure Managed services.



Power costs comprises of electricity charges
incurred for our Data Centre operations. Power costs increased by ₹ 156 million on account of higher capacity utilization.



Other costs, consists of Link maintenance
charges for the Network services, Direct cost of Application services business, digital certificate platform, content costs, subject
matter experts for international business. The decrease in Other costs is on account of (i) ₹ 11 Million on account of Digital
certificates platform changeover to a new platform (ii) ₹ 4 Million reduction in the content costs of Portal business
(iii) ₹ 3 Million reduction in Cost of Server rentals pertaining to Data Centre service (iv) ₹ 3 Million reduction
in the costs of Document Management Services part Application services business (v) increase of ₹ 16 Million in subject
matter experts deployed for Voiceover for international business and (vi) increase of ₹ 3 Million in the Link Maintenance
costs part of Network Services



Selling, general and administrative
expense:



|                                   |  | 2011-12 |       |   | 2010-11 |  |       | Increase/ (decrease) |  |  | % change |  
|---------------------------------- |  | ------- | ----- | - | ------- |  | ----- | -------------------- |  |  | -------- | -
|Operating costs                    |  |         | 452   |   |         |  | 419   |                      |  |  | 33       |  
|Selling & Marketing Expenses       |  |         | 114   |   |         |  | 130   |                      |  |  | (16      | )
|Associate Expenses                 |  |         | 755   |   |         |  | 695   |                      |  |  | 60       |  
|Other Indirect expenses            |  |         | 694   |   |         |  | 798   |                      |  |  | (104     | )
|Allowance for doubtful receivables |  |         | 95    |   |         |  | 158   |                      |  |  | (63      | )
|Forex (Gain) / Loss                |  |         | (26   | ) |         |  | 14    |                      |  |  | (40      | )
|Total                              |  |         | 2,084 |   |         |  | 2,214 |                      |  |  | (130     | )



Operating costs consists of, the electricity
charges incurred on the Data Centre, rental cost of Data Centre, Rent of base station towers, Repairs and Maintenance costs of
the Infrastructure, Annual Maintenance costs of the Infrastructure and insurance cost of the infrastructure. Operating costs
remained at the same level between two periods.



Selling & Marketing costs consists of,
selling commission payable to sales partners, discounts payable to customers, incentive to salesmen and marketing and promotion
costs. Selling & Marketing costs remained flat between the two periods on account of lower marketing spends.



Associate expenses, consists of the annual
cost of the employees who are part of the Sales and marketing function, Business development, General management and support services.
Associate expenses had increased by₹ 60 million on account of new recruitments across verticals and on account of yearly
increase to the existing salary base.





Other Indirect expense consists of cost of
facilities, electricity charges incurred on facilities, travel cost, Legal charges, professional charges, communication and others.
Other indirect expenses decreased by ₹ 104 million primarily on account of lower travel expenditure compensated by increase
in Legal, professional and consultancy charges during the year.



Allowance for doubtful receivables consist
of the charge on account of the provisions created during the year against doubtful debtors. Reduction in Allowance for doubtful
receivables is on account of lower exposure on debtors based on the review.



Forex gain/(loss) consists of unrealized gain
or (loss) on account of restatements at the period end. The current fiscal had a net forex gain on account of favorable currency
fluctuation.





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Depreciation and amortization



Depreciation and amortization is set forth
in the table below:



|                                  |  | 2011-12 |     |   | 2010-11 |  |     | Increase/ (Decrease) |  |  | % Change | 
|--------------------------------- |  | ------- | --- | - | ------- |  | --- | -------------------- |  |  | -------- | 
|Depreciation and amortization     |  |         | 692 |   |         |  | 688 |                      |  |  | 4        | 
|As a percentage of carrying value |  |         | 24  | % |         |  | 18  | %                    |  |  |          | 



There were no huge capitalizations during
the fiscal 2012 as compared to fiscal 2011 and hence, the depreciation is linear.



Profit/loss from operating activities



|                           |  | 2011 -12 |      |   | 2010 -11 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | -------- | ---- | - | -------- |  | ---- | -------------------- |  |  | -------- | 
|Operating profit/(loss)    |  |          | (163 | ) |          |  | (380 | )                    |  |  | 217      | 
|As a percentage of revenue |  |          | 2.12 | % |          |  | 5.51 | %                    |  |  |          | 



There was a reduction in operating margins
because of increase in operating margins.



Finance income/expense



|                             |  | 2011-12 |      |   | 2010-11 |  |      | Increase/ (Decrease) |  |  | % Change | 
|---------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Finance Income               |  |         | 59   |   |         |  | 46   |                      |  |  | 13       | 
|Finance expense              |  |         | (307 | ) |         |  | (259 | )                    |  |  | 48       | 
|Net Finance income/(expense) |  |         | (248 | ) |         |  | (213 | )                    |  |  | 35       | 



This increase was caused by higher utilization
of borrowing limits



Share of profit in equity accounted investee



|                |  | 2011-12 |    |  | 2010-11 |  |    | Increase/ (Decrease) |  |  | % Change |  
|--------------- |  | ------- | -- |  | ------- |  | -- | -------------------- |  |  | -------- | -
|Share of profit |  |         | 27 |  |         |  | 73 |                      |  |  | (46      | )



The decrease was due to drop in net profits
due to unfavorable market conditions for MF Global Sify Securities India Private Limited.



Net Profit



|                           |  | 2011-12 |      |   | 2010-11 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Net Profit/(loss)          |  |         | (383 | ) |         |  | (519 | )                    |  |  | 136      | 
|As a percentage of revenue |  |         | 4.98 | % |         |  | 7.54 | %                    |  |  |          | 



Reduction in losses is on account of higher
revenues and incremental operating margins.



Foreign Exchange Fluctuations and Forwards



We enter into foreign
exchange derivative contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in U.S. dollars.
We enter into forward contracts where the counter party is a bank. These contracts generally mature between one to six months.
These contracts do not qualify for hedge accounting under IFRS. Foreign exchange contracts are marked to market as at the balance
sheet date and recognized in the consolidated income statement.





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Liquidity and capital resources



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



|                                                             |  | 2014      |            |   | 2013      |  |          | 2012      |  |  | 2014         |  
|------------------------------------------------------------ |  | --------- | ---------- | - | --------- |  | -------- | --------- |  |  | ------------ | -
|                                                             |  | ₹ In ‘000 |            |   | ₹ In ‘000 |  |          | ₹ in ’000 |  |  | US $ in ’000 |  
|Profit / (loss) before tax                                   |  |           | 318,400    |   |           |  | 451,569  |           |  |  | (383,337     | )
|                                                             |  |           |            |   |           |  |          |           |  |  |              |  
|Other adjustments including non-cash items                   |  |           | 1,615,640  |   |           |  | 660,516  |           |  |  | 1,061,744    |  
|Income tax (paid)/ refund received                           |  |           | 53,519     |   |           |  | (98,937  | )         |  |  | (121,676     | )
|Net decrease (increase) in working capital                   |  |           | (1,019,118 | ) |           |  | (549,741 | )         |  |  | 43,483       |  
|Net cash from / (used in) operating activities               |  |           | 968,441    |   |           |  | 463,407  |           |  |  | 600,214      |  
|Net cash from / (used in) investing activities               |  |           | (806,684   | ) |           |  | (212,748 | )         |  |  | (901,971     | )
|Net cash from / (used in) financing activities               |  |           | 114,999    |   |           |  | 11,232   |           |  |  | 536,407      |  
|Effect of exchange rate changes on cash and cash equivalents |  |           | (422       | ) |           |  | (33      | )         |  |  | (4,258       | )
|Net increase / (decrease) in cash and cash equivalents       |  |           | 276,756    |   |           |  | 261,891  |           |  |  | 234,650      |  



Our growth has been financed
largely by cash generated from operations, from the proceeds from the issuance of equity and bank borrowings.



As of March 31, 2014,
we had cash and cash equivalents of ₹ 633 million ($10.53 million), that included cash and bank balances of ₹ 1,270
million ($21.13million) and bank overdraft of ₹ 637 million ($10.60 million). We have utilized a working capital facility
of ₹ 448 million ($ 7.45 million) and bank borrowings of ₹ 544 million ($9.05 million). Based on the projected cash
flows, available lines of credit and promoter group capital infusion, we will have sufficient resources to meet capital expenditure
needs and working capital requirements over the course of the next 12 months.



On October 22 2010, the
company entered into a subscription agreement with Mr Ananda Raju Vegesna, acting as representative (the “Representative”)
of the purchasers in connection with the offering. Pursuant to the terms of this subscription agreement, the company issued and
allotted 125,000,000 equity shares to an entity affiliated and controlled by Mr. Raju Vegesna, our Chairman and Managing Director.
In accordance with Indian law, the purchase price is to be paid at such time as determined by Board of Directors of the company.
During the fiscal year 2014, the Company has received an aggregate of ₹ 300 million, in connection with this private placement,
resulting in an aggregate of ₹ 2,800 million received till date. Although all 125,000,000 shares are deemed issued and outstanding,
the unpaid portion of the equity shares issued pursuant to the subscription agreement do not have any voting rights and are not
entitled to dividends, if declared. As of the date of this Annual Report, Mr. Vegesna has paid for 70% of the shares of the subscription.The balance of the proceeds from the allotment of the equity shares to our promoter group, or ₹ 1,200 million, will
take place in tranches as per the amended subscription agreement and the Board of Directors assessment from time to time of the
Company’s capital requirements, as regards both timing and amount. See note 40 in the notes to the financial statements
included in this Annual Report.



Our cash and cash equivalents
comprise of cash and bank deposits. The restricted cash balance ₹ 210.23 million ($3.50 million) primarily represents fixed
deposits as margins with bankers.



Our external sources of
credit include facilities sanctioned to us by Indian banks. We have working capital facilities in the form of short term loans,
cash credit and overdraft facilities of an aggregate of ₹1,150 million ($ 19.13 million) of which ₹ 637 million ($
10.6 million) was utilized as of March 31, 2014. Further, we were provided non-funded limits of ₹2,750 million ($ 45.76
million) (primarily in the form of bank guarantees and letters of credit) which was fully utilized as of the reporting date. Our
ongoing working capital requirements are significantly affected by the profitability of our operations and we continue to periodically
evaluate existing and new sources of liquidity and financing.



We are taking steps to
improve the cash position to meet our currently known requirements at least over the next twelve months. 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.





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Net cash generated from
operating activities for the year ended March 31, 2014 was ₹ 968 million ($16.1 million). This is mainly attributable to
cash generated during the year and partially offset by increase in trade and other receivables by ₹ 1347.4 million ($22.4
million), increase in other assets by ₹ 491 million ($8.2 million) , increase in inventories by ₹ 14 ($0.23 million)
and increase in trade and other payables by ₹ 677 million ($11.26 million) , and increase in deferred revenue of ₹145.57
million ($ 2.42 million) on account of increase in advance billing in long term projects.



Net cash generated from
operating activities for the year ended March 31, 2013 was ₹ 463 million .This is mainly attributable to cash generated
during the year and partially offset by increase in trade and other receivables by ₹ 600 million , decrease in other assets
by ₹ 100 million , increase in inventories by ₹205 on account of inventories procured for large project and reduction
in trade and other payables by ₹8.08 million due to settlement of creditors, and increase in deferred revenue of ₹
138.42 million.



Net cash generated from
operating activities for the year ended March 31, 2012 was ₹600 million. This is mainly attributable to cash generated during
the year and partially offset by increase in trade and other receivables by ₹ 105 million million), increase in other assets
by ₹ 326 million due to acquisition of leasehold land at Noida, India, increase in inventories by ₹5 and increase
in trade and other payables by ₹472 million due to extended credit from vendors.



Net cash used in investing
activities for the year ended March 31, 2014 was ₹ 807 million ($13.43 million) primarily on account of expenditure on Data
Centre construction at Noida, India and purchase of routers, modems, ports, servers, other capital equipments for our ongoing
expansion plans and for large project implementation . The increase was partly offset by increase in finance income by ₹
117 million ($1.94 million).



Net cash used in investing
activities for the year ended March 31, 2013 was ₹ 213 million primarily on account of expenditure on Data Centre construction
at Noida, India and purchase of routers, modems, ports, servers, other capital equipments for our ongoing expansion plans and
for large project implementation. The increase was partly offset by increase in finance income by ₹ 57 million.



Net cash used in investing
activities for the year ended March 31, 2012 was ₹902 million primarily on account of expenditure on Data Centre construction
at Noida, India and purchase of routers, modems, ports, servers, other capital equipments for our ongoing expansion plans and
advance payments towards undersea cable arrangement with EIG amounting to ₹ 460 million. The increase was partly offset
by increase in finance income by ₹ 49 million.



Net cash generated from
financing activities for fiscal year 2014 was ₹115 million. The increase is mainly due to infusion of funds of ₹ 300
million by the promoters and increase in borrowings by ₹ 187 million. This was offset by payment of finance expenses of
₹ 372 million.



Net cash generated from
financing activities for fiscal year 2013 was ₹ 11 million. We have taken a loan of ₹ 380 million. This was offset
by decrease in finance expenses of ₹ 265million



Net cash generated from
financing activities for fiscal year 2012 was ₹ 536 million mainly on account of capital infusion from promoter group amounting
to ₹ 1,500 million. This was partly offset by decrease in bank borrowings by ₹ 600 million and payment of finance
expenses of ₹ 312 million.



Capital expenditure



We incurred ₹ 930
million ($15.47 million) towards capital expenditure for the year ended March 31, 2014. We expect further capital expenditure
to be incurred during the fiscal year 2015 to strengthen our infrastructure capabilities. The capital expenditure was funded out
of internal accruals, bank borrowings and finance leasing arrangements.



Research and development



The Company does not have
research and development activities and has also not undertaken any sponsored research and development activities.



Trends



The information is set
forth under the caption ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’
- ‘Operating and Financial review and Prospects’.





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Off-balance sheet arrangements



We have not entered into
any off-balance sheet arrangements as defined by SEC Final Rule 67 (FR-67), “Disclosure in Management’s Discussion
and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations”.



Contractual obligations



Set forth below are our contractual obligations
as of March 31, 2014:



|Payments due by period
    (₹ 000s)        
|-------------------------------------------
|Contractual Obligations                    
|Long Term Debt Obligations                 
|Short Term  Borrowings                     
|Finance Lease Obligations                  
|Non-cancellable Operating Lease obligations
|Purchase Obligations                       
|                                           
|Total                                      



Recent Accounting Pronouncements



| | (i) | IFRS 9 Financial Instruments:In
                                         November 2009, the International Accounting Standards Board issued IFRS 9, Financial
                                         Instruments: Recognition and Measurement, to reduce the complexity of the current rules
                                         on financial instruments as mandated in IAS 39. The effective date for IFRS 9 is annual
                                         periods beginning on or after January 1, 2015 with early adoption permitted. IFRS 9 has
                                         fewer classification and measurement categories as compared to IAS 39 and has eliminated
                                         the categories of held to maturity, available for sale and loans and receivables. Further
                                         it eliminates the rule-based requirement of segregating embedded derivatives and tainting
                                         rules pertaining to held to maturity investments. For an investment in an equity instrument
                                         which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition,
                                         on an individual share-by-share basis, to present all fair value changes from the investment
                                         in other comprehensive income. No amount recognized in other comprehensive income would
                                         ever be reclassified to profit or loss. IFRS 9 was further amended in October 2010, and
                                         such amendment introduced requirements on accounting for financial liabilities. This
                                         amendment addresses the issue of volatility in the profit or loss due to changes in the
                                         fair value of an entity’s own debt. It requires the entity, which chooses to measure
                                         a liability at fair value, to present the portion of the fair value change attributable
                                         to the entity’s own credit risk in the other comprehensive income. The company
                                         is required to adopt IFRS 9 from accounting year commencing April 1, 2015.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Amendment to IAS 32 Offsetting
                                         of Financial Assets and Financial Liabilities:In December 2011, the International
                                         Accounting Standards Board issued amendments to IAS 32, Offsetting Financial Assets and
                                         Financial Liabilities. The amendments clarify that an entity has a legally enforceable
                                         right to set-off if that right is not contingent on future event and enforceable both
                                         in the normal course of business and in the event of default, insolvency or bankruptcy
                                         of the entity and all counterparties. The amendments also clarified that gross settlement
                                         is equivalent to net settlement if and only if the gross settlement mechanism has features
                                         that eliminate or result in insignificant credit and liquidity risk and process receivables
                                         and payables in a single settlement process or cycle. The Company is required to adopt
                                         the amendment from accounting year commencing April 1, 2014 and currently evaluating
                                         impact on the consolidated financial statements.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | IFRS 15 Revenue from Contracts
                                         with Customers:During May 2014, the International Accounting Standards Board issued
                                         IFRS 15, Revenue from Contracts with Customers. The core principle of the new Standard
                                         is for companies to recognise revenue to depict the transfer of goods or services to
                                         customers in amounts that reflect the consideration (that is, payment) to which the company
                                         expects to be entitled in exchange for those goods or services.  The new Standard
                                         will also result in enhanced disclosures about revenue, provide guidance for transactions
                                         that were not previously addressed comprehensively and and improve guidance for multiple-element
                                         arrangements. The effective date of application is January 1, 2017and the entity is evaluating
                                         the impact on consolidated financial statements.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Narrow scope amendments to IAS
                                         16 and IAS 38: Clarification of Acceptable methods of Depreciation and Amortization:IAS 16 and IAS 38 both establish the principle for the basis of depreciation and
                                         amortization as being the expected pattern of consumption of the future economic benefits
                                         of an asset. The IASB has clarified that the use of revenue-based methods to calculate
                                         the depreciation of an asset is not appropriate because revenue generated by an activity
                                         that includes the use of an asset generally reflects factors other than the consumption
                                         of the economic benefits embodied in the asset. The IASB also clarified that revenue
                                         is generally presumed to be an inappropriate basis for measuring the consumption of the
                                         economic benefits embodied in an intangible asset. This presumption, however, can be
                                         rebutted in certain limited circumstances. This will not affect the entity when adopted.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Critical Accounting Policies



Our accounting policies
affecting our financial condition and results of operations are more fully described in Note 3 to our Consolidated Financial Statements
included in Item 18 of this Annual Report on Form 20-F. Certain of our accounting policies require the application of judgment
by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of
uncertainty. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets
and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.



We believe the following
are the critical accounting policies and related judgments and estimates used in the preparation of the company’s Consolidated
Financial Statements. Management has discussed the application of these critical accounting estimates with our Board of Directors
and Audit Committee.



Revenue Recognition



Various streams of revenue
are described below:



Revenue from the sale
of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume
rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing
management involvement with the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary
depending on the individual terms of the contract of sale.



Revenue from services
rendered is recognized in the consolidated income statement in proportion to the stage of completion of the transaction at the
reporting date. Revenue is recognized when the following conditions are met:



| | o | the
                                         amount of revenue can be measured reliably;
| | - | ----------------------------------------------------------------------------------------

| | o | it
                                         is probable that the economic benefits will flow to the seller;
| | - | -----------------------------------------------------------------------------------------------------------

| | o | the
                                         stage of completion at the balance sheet date can be measured reliably; and
| | - | ------------------------------------------------------------------------------------------------------------------------

| | o | the
                                         costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



The
revenue recognition in respect of the various streams of revenue is described below:



| | (i) | Telecom
                                         Services
| | --- | ---------------------------------------------------------



Revenue
from Telecom services include Data network services and Voice services. Telecom services primarily include revenue from connectivity
services, NLD/ILD services and to a lesser extent, revenues from the installation of connectivity links. The Company provides
connectivity for a fixed period of time at a fixed rate regardless of usage.  The revenue attributable to connectivity services
is recognized rateably over the period of the contract. The revenue attributable to the installation of the link is recognised
on completion of the installation work.The
Company provides NLD (National Long Distance) and ILD (International Long Distance) services through Company’s network. 
The Company carries voice traffic, both national and international, using the network back-bone and delivers voice traffic to
Inter-connect Operators.  Revenue is recognized based upon metered call units of voice traffic terminated on the Company’s
network.









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| | (ii) | Data Centre Services:
| | ---- | ---------------------



Revenues from DC services consist of hosting
and power charges. Data Centre services primarily include revenue from co-location of racks, caged racks and on usage of power
from large contracts. The contracts are mainly for a fixed rate for a period of time and are recognised over the period during
which the service is provided.



| | (iii) | Cloud and Managed Services:
| | ----- | ---------------------------



Revenue from Cloud and managed services include
revenue from “Cloud and storage solutions, managed services, value added services and Remote Infrastructure Management.
Revenues from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenues from domestic and international
managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure management.
Contracts from this segment are fixed and could also be based on time and material.



| | (iv) | Technology Integration Services:
| | ---- | --------------------------------



Revenue from Technology Integration Services
include system integration services, revenue from construction of Data Centres, network services, security solutions, digital
certificate based authentication services and to a lesser extent, revenue from hardware and software.



Revenue from construction contracts represent
revenue from construction of data centres to the specific needs and design of the customer. Such contract revenue includes the
initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that
it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract
can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract.
Contract expenses are recognised as incurred unless they create an asset related to future contract activity. The stage of completion
is assessed by reference to the cost incurred till date to the total estimated costs. When the outcome of a construction contract
cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to
be recoverable. An expected loss on a contract is recognised immediately in the statement of profit or loss.



Digital Certification revenues include income
received on account of Web certification. Generally the Company does not hold after sale service commitments after the activation
of the Digital Certificates sold and accordingly, revenue is recognised fully on the date of activation of the respective certificate.
Billing towards one time installation / training is recognised upon completion thereof.



| | (v) | Applications Integration
                                         Services:
| | --- | ---------------------------------------------------------------------------



Revenues from Applications Integration services
include online assessment, document management services, web development, mailing solutions, supply chain software and e-learning
software development services. E-learning software development services consists of structuring of contents, developing modules,
delivery and training users in the modules developed. Revenue from Applications Integration Services is recognised based on percentage
of completion method. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by
the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract.



The Company enters into contracts with customers
to serve advertisements in the portal and the Company is paid on the basis of impressions, click-throughs or leads and in each
case the revenue is recognised rateably over the period of the contract based on actual impressions/click throughs / leads delivered. 
Revenues from commissions earned on electronic commerce transactions are recognised when the transactions are completed.



In certain cases, some elements belonging
to the services mentioned above are sold as a package consisting of all or some of the elements. In these cases it is necessary
to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance
of the transaction with different revenue allocations for each component. These multiple element arrangements are recognised as
separable elements because each element constitutes a separate earning process, each element has a fair value that is reliable,
verifiable and objectively determinable, and the undelivered element is not essential to functionality of the delivered elements.



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Income from operating leases:



Lease rentals arising on assets given on operating
leases are recognised over the period of the lease term on a straight line basis.



Indefeasible Right of Use (IRU)



The Company has entered into IRU arrangements
through which it entitles its customers to right of use of specified bandwidth capacity for a specified period of time. The upfront
payment received towards right of use of bandwidth capacities under such agreements have been treated as deferred revenue and
is recognised on a straight line basis over the term of the arrangement.



Accounting Estimates



While preparing financial
statements we make estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent
liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period.



Our estimate of liability
relating to pending litigation is based on currently available facts and our assessment of the probability of an unfavorable outcome.
Considering the uncertainties about the ultimate outcome and the amount of losses, we re-assess our estimates as additional information
becomes available. Such revisions in our estimates could materially impact our results of operations and our financial position.
Management believes that the estimates used in the preparation of the Consolidated Financial Statements are prudent and reasonable.
The actual results could differ from these estimates.



Allowance for accounts receivable



The receivables primarily
constitute dues from corporate and government customers. We maintain allowances for doubtful accounts receivable for estimated
losses resulting from the inability of our customers to make contractually agreed payments. We also make allowances for a specific
account receivables if the facts and circumstances indicate that such account receivable is unlikely to be collected.



We estimate the amount
of uncollectible receivables each period and establish an allowance for uncollectible amounts. The amount of the allowance is
based on the age of unpaid amounts, information about the creditworthiness of customers, current economic trends and other relevant
information. The assessments reflect management’s best assumptions and estimates. Significant management judgment is involved
in estimating these factors, and they include inherent uncertainties. Management periodically evaluates and updates the estimates
based on the conditions that influence these factors. The variability of these factors depends on a number of conditions, including
uncertainty about future events, and thus our accounting estimates may change from period to period. Estimates of uncollectible
amounts are revised each period, and changes are recorded in the period they become known.



Business Combinations, Goodwill and Intangible
Assets



Business combinations
are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent
consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities
of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible
assets. These valuations are conducted by independent valuation experts.



Business combinations
have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised). The cost of acquisition is measured
at the fair of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition.
The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.



Transactions costs that
the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other
professional and consulting fees are expenses as incurred.



We amortize intangible
assets on straight line basis over their respective individual estimated useful lives. Our estimates of the useful lives of identified
intangible assets are based on a number of factors including the effects of obsolescence, demand, competition, and other economic
factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required
to obtain the expected future cash flows from the asset.



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Estimated Useful Lives of Property, Plant
and Equipment



In accordance with IAS
16, Property, Plant and Equipment, we estimate the useful lives of plant and equipment in order to determine the amount
of depreciation expense to be recorded during any reporting period. If technological changes were to occur more rapidly than anticipated
or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the
recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur
more slowly than expected, the useful lives could be extended. This could result in a reduction of depreciation expense in future
periods.



Impairment



Financial assets:



A financial asset is assessed
at each reporting date to determine whether there is any objective evidence that a financial asset or group of financial assets
is impaired. A financial asset is considered to be impaired and impairment losses are recognized if objective evidence indicates
that one or more events such as a loss event, the significant financial difficulty of the issuer, a breach of contract, the disappearance
of an active market, which have had a negative effect on the estimated future cash flows of that asset. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.



Financial assets measured at amortized
cost:



An impairment loss in
respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present
value of the estimated future cash flows discounted at the original effective interest rate.



Available-for-sale financial assets:



Significant or prolonged
decline in the fair value of the security below its cost and the disappearance of an active trading market for the security are
objective evidence that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated
by reference to its fair value. The cumulative loss that was recognized in the equity is transferred to the income statement upon
impairment.



Loans and receivables:



Impairment loss in respect
of loans and receivables measured at amortized cost are calculated as the difference between their carrying amount, and the present
value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognized
in the income statement.



Reversal of impairment loss:



An impairment loss is
reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial
assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized
in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized in other comprehensive
income and presented within equity.



Non-financial assets:



The carrying amounts of
the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill, the recoverable amount is estimated each year at 31 December.



The recoverable amount
of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units
that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are
allocated to the cash generating units on a reasonable and consistent basis.



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An impairment loss is
recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets
in the unit or group of units on a pro rata basis.



Reversal of impairment loss:



An impairment loss in
respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortization, if no impairment loss had been recognized.



Income taxes:



Income
tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.



Current
tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting
date.



Deferred
tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized
for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.



A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.



Deferred
taxation arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal
of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred
taxation arising on the temporary differences arising out of undistributed earnings of the equity method accounted investee is
recorded based on the management’s intention. If the intention is to realize the undistributed earnings through sale, deferred
tax is measured at the capital gains tax rates that are expected to be applied to temporary differences when they reverse. However,
when the intention is to realize the undistributed earnings through dividend, the Group’s share of the income and expenses
of the equity method accounted investee is recorded in the statement of income, after considering any taxes on dividend payable
by the equity method accounted investee and no deferred tax is set up in the Group's books as the tax liability is not with the
Group.



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Item 6. Directors,
Senior Management and Employees



Directors and Executive Officers



The following table sets
forth the name, age and position of each director and senior management executive officer of our Company as of March 31, 2014:



|Name                           |  | Age |  | Designation                                                          
|------------------------------ |  | --- |  | ---------------------------------------------------------------------
|Raju Vegesna (4)  *            |  | 54  |  | CEO, Chairman & Managing Director                                    
|Ananda Raju Vegesna  (4)       |  | 54  |  | Executive Director                                                   
|C B Mouli (1)                  |  | 67  |  | Director,
    Chairman & Financial Expert of Audit Committee         
|S K Rao (1) (2) (3)            |  | 70  |  | Director                                                             
|T H Chowdary (2) (3)           |  | 82  |  | Director & Chairman of Compensation & Nominating Committees          
|P S Raju  (2)                  |  | 60  |  | Director                                                             
|C E S Azariah  (1) (2) (3) (4) |  | 66  |  | Director                                                             
|Kamal Nath                     |  | 49  |  | Chief Executive Officer - Sify Technologies Limited, India           
|M P Vijay Kumar                |  | 44  |  | Chief Financial Officer                                              
|C R Rao                        |  | 54  |  | Chief Operating Officer                                              
|Ravi Shelvankar *              |  | 45  |  | Chief Executive Officer,  Sify Technologies North America Corporation



| | * | Consequent to the incorporation of
                                         Sify Technologies North America Corporation, a wholly owned US subsidiary of the Company,
                                         Mr Ravi Shelvankar was appointed as the Chief Executive Officer of the US entity and
                                         responsible for the US business. Mr Kamal Nath will be the Chief Executive Officer of
                                         the Indian business. Both will be reporting to Mr Raju Vegesna, the CEO of the Company
                                         effective April 2014.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (1) | Member of the Audit Committee.
| | --- | ------------------------------



| | (2) | Member of the Compensation Committee.
| | --- | -------------------------------------



| | (3) | Member of the Nominating Committee.
| | --- | -----------------------------------



| | (4) | Member of the Corporate Social Responsibility
                                         Committee
| | --- | ------------------------------------------------------------------------------------------------



Mr. Raju Vegesna, CEO,
Chairman & Managing Director, has served as a Director of our Company since November 2005. He was appointed as the Chief Executive
Officer and Managing Director of the Company effective July 18, 2006. Mr. Vegesna is a Silicon Valley entrepreneur who founded
several leading edge technology companies, including Server Works Corporation, acquired by Broadcom in 2001. After that acquisition
and he had a brief stint with Broadcom. He holds a BS in Electrical Engineering from the University of Bangalore and holds an
MS in Computer Engineering from Wayne State University, USA, and holds several patents in Microprocessor and Multiprocessor technology.
He is also a Director of Sify Software Limited, Server Engines LLC, Nulife Corp, USA. and Raju Vegesna Infotech & Industries
Private Limited.



Mr Ananda Raju Vegesna,
brother of Mr Raju Vegesna, CEO, Chairman and Managing Director, has served as an Executive Director of our Company since June
2007. He is the Director of Infinity Satcom Universal Private Limited, Village Inns (India) Limited, Raju Vegesna Infotech &
Industries Limited, Raju Vegesna Developers Private Limited, Ramanand Core Investment Company Private Limited, Hermit Projects
Private Limited, Pace Info Com Park Private Limited and Server Engines India (Private) Limited.



C.B. Mouli has served
as a Director of our Company since July 2005. Mr. Mouli is a member of the Institute of Chartered Accountants of India and also
holds a Bachelor of Law Degree. Mr Mouli, a partner of C.B. Mouli & Associates, a Chartered Accountants firm. He is a Director
of Ammana Bio Pharma Limited and Ammana Equity Fund Private Limited.



S.K. Rao has served as
a Director of our Company since July 2005. Mr Rao, currently is the Director General, Administrative Staff College of India, Hyderabad.
Mr Rao previously worked at the Commonwealth Secretariat in London in various diplomatic capacities. He also acted as the Consultant
for the United Nations and represented the Commonwealth Secretariat as an Observer at the meetings of the UN General Assembly.
Mr. Rao holds a MA and a PhD in Economics from Trinity College, Cambridge, U.K.



T.H. Chowdary has served
as a Director of our Company since February 1996. Dr. Chowdary retired as the Chief Executive Officer of VSNL. He has held key
positions in the ITU, Intelsat and other international telecommunications organizations during the course of his career, and was
involved in the establishment of the Centre for Telecommunications Management Studies (CTMS) at Hyderabad. Dr. Chowdary is also
a director in Softsol India Limited and Tera Software Limited.



P. S. Raju has served
as a Director of our Company since February 2006. Mr P S Raju is a member of the Institute of Chartered Accountants of India.
Mr Raju is an independent Practising Chartered Accountant. He is also a Director of Suryashakti Agro Tech Private Limited and
Suryashakti Estates and Developers Private Limited.



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C E S Azariah has served
as a Director of our Company since March 2013. Prior to joining the Company, he served as CEO of Fixed Income Money Market and
Derivatives Association of India (FIMMDA). He has vast experience of more than 35 years in different segments of operations in
State Bank of India and retired as Chief General Manager.



Kamal Nath has served
as the Chief Executive Officer of Sify Technologies Ltd. India operations since August 2012. He is a Graduate in Electronics & Communications
from BIT, Sindri. He has an overall experience of 26 years in reputed organizations. Prior to joining Sify, he was with HCL Technologies
Limited, a major IT company, responsible for the Infrastructure Services Division. He was with Larsen & Toubro Limited and
Uptron India Limited in the early part of his career. He is responsible for the business operations in India.



M P Vijay Kumar has served
as Chief Financial Officer since October 2007 and has over 20 years of experience in corporate audits, financial/management consulting,
legal advisory services, management audit and investment banking. He is a Chartered Accountant and a Fellow Member of the Institute
of Chartered Accountants of India, Fellow Member of the Institute of Company Secretaries of India and Associate member of the
Institute of Cost and Works Accountants of India.



C R Rao, the Chief Operating
Officer, has served as Vice President - Head HR & Administration since March 2009. He is a Graduate in Commerce and Law and
also holds an MBA.  He comes with an overall experience of 26 years with around 16 years of rich experience in Strategic
Planning and Operations Management.  Prior to joining Sify, he was with GSA Lufthansa as Vice President, responsible
for Tamil Nadu and Andhra Pradesh.  His key responsibilities included Strategic Planning, Business Development, Sales and
Marketing for the Cargo division.



Ravi Shelvankar has joined
the services of the Company in April 2014 as Chief Executive Officer of the wholly owned US Subsidiary. He is a Post Graduate
in Mechanical Engineering from Birla University. He has more than 20 years of experience in the field of Information Technology,
Manufacturing and Product Engineering Sales. Before joining Sify, he was associated with Wipro as General Manager & Global
Head for IP sales and solutions based in USA and  was successful in launching cloud based Products and Solutions. His prior
experience includes working with iGATE and Infosys. He is responsible for the business operations in the US.



Infinity Capital Ventures,
LP beneficially owned 7.79 % of our equity shares as of March 31, 2014. This shareholder is a party to the Subscription Agreement
dated November 10, 2005 with our Company. The Subscription Agreement provides that, among other things, the Company shall appoint
Mr Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of
Directors and so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the
Company shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company
securities, without the consent of Infinity Capital. In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures,
LP, was appointed as Chairman of our Board of Directors. In February 2006, the Company also appointed Mr. P S Raju as the second
nominee of Infinity Capital to the Board of Directors.



We believe Infinity Satcom
Universal Private Limited beneficially owned 8.14% of our equity shares as of March 31, 2014. Mr Ananda Raju Vegesna, Executive
Director of the Company and brother of Mr Raju Vegesna, is the Director of Infinity Satcom. Infinity Satcom is presently controlled
by Mr Raju Vegesna.



Director Compensation



Our Articles of Association
provide that each of our directors may receive a sitting fee not exceeding the maximum limits prescribed under the provisions
of the Indian Companies Act, 2013. Accordingly, our Directors, other than the Chairman and Managing Director and Executive Director,
have been receiving ₹ 20,000 for each Board meeting and Committee meetings attended by them, effective October 2005. Since
May 2014, the Directors have been receiving ₹ 50,000 for each Board Meeting attended by them. However, there is no increase
in the sitting fee for the Committee meetings.



Mr Raju Vegesna, who is
our CEO, Chairman and Managing Director, does not receive any compensation for his service on our Board of Directors. Similarly,
Mr Ananda Raju Vegesna, who is employed as our Executive Director, also does not receive any 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. T. H. Chowdary, a Director of our Company, has been receiving ₹ 20,000 per month effective February
1, 2004 for the technical services rendered by him to us, after obtaining requisite Governmental permission for the same.



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Officer Compensation



The following table sets
forth all compensation paid by us during the fiscal year ended March 31, 2014 to our executive officers:



|                |  | Summary Compensation
    Table (₹ Million) |      
|--------------- |  | ------------------------------------------ | -----
|Name            |  | Salary(1)                                  |      
|                |  |                                            |      
|Kamal Nath      |  |                                            | 11.33
|M P Vijay Kumar |  |                                            | 8.67 
|C R Rao         |  |                                            | 5.32 



(1)  Includes provident fund contributions.



As per the service contracts
entered into with the employees (including executive officers), the Company provides the following retirement benefits: (a) Provident
fund contributions and (b) Gratuity.



Provident fund contribution
is a defined contribution plan governed by a statute in India. Under this, both employer and employee make monthly contributions
(determined in relation to the basic salary of the respective employees) to a fund administered by the Government of India.



Gratuity is a defined
benefit retirement plan covering all employees and provides for lump sum payment to employees at retirement or termination (computed
based on the respective employees last drawn basic salary and years of employment with the Company). Liability for gratuity is
accrued based on an actuarial valuation on an overall Company basis.



The Directors (who are
not executive officers) are not entitled for any remuneration including any pension, retirement or similar benefit schemes.



The details of our contribution to provident
fund in respect of the executive officers are set out below:



|Name            |  | ₹  in Million |     
|--------------- |  | ------------- | ----
|Kamal Nath      |  |               | 0.58
|M P Vijay Kumar |  |               | 0.41
|C R Rao         |  |               | 0.27



Gratuity expense is determined
at an overall Company level based on an actuarial valuation performed by an independent actuary. Thus, the cost for the year ended
March 31, 2014 in respect of gratuity and compensated absences towards executive officers of the Company was not separately determined.
Gratuity cost relating to such executive officers is not estimated to be material.



We make bonus payments
to employees including executive officers upon satisfactory achievement of the following two performance criteria.



(i) Performance of the
Company: Represents bonus payable on achievement of overall revenue and net profit targets for the Company. These performance
targets were not achieved for the year ended March 31, 2014 and no bonus was paid under this category.



(ii) Performance of the
individual: Represents bonus payable on achievement of the individual’s Key Responsibility Areas (KRA) and Key Performance
Indicators (KPI). These KRAs and KPIs vary in relation to each employee including executive officers and include both financial
and non-financial parameters.



We have provided for ₹
34.1 million towards bonus payable for the year ended March 31, 2014 to employees including executive officers who have achieved
the KRAs and KPIs.



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Board
Composition



Our Articles of Association
sets the minimum number of directors at three and the maximum number of directors at twelve. We currently have seven directors.
The Indian 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 shareholders; 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 shareholders.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On July 15, 2005, we appointed
Messrs. S.K. Rao and C.B. Mouli as independent Directors of the Board to comply with the applicable NASDAQ rules.



Mr C E S Azariah was appointed
as an independent Director effective March 25, 2013.



Dr T H Chowdary is also
an independent Director of the Board.



Each of these Directors
(Messrs S K Rao, C B Mouli, C E S Azariah, T H Chowdary) continue to remain independent in accordance with NASDAQ rules.



In addition, the Board of Directors has recommended
the appointment of the above four Directors as the Independent Directors of the Board for a term of five consecutive years from
the conclusion of the ensuing Annual General Meeting under the provisions of the Indian Companies Act, 2013. This matter will
be subject to the shareholders’ approval at the Annual General Meeting scheduled on July 28, 2014.



Term of Directors



|Mr Raju Vegesna, CEO, Chairman & Managing Director                  |  | Appointed as Chairman & Managing Director for a period of five years effective
    July 18, 2009.  Pursuant to the recommendation of the Nomination & Remuneration Committee and the Board, he
    is reappointed as the Chairman & Managing Director for a further period of five years effective July 18, 2014 which is
    subject to the approval of the shareholders at the ensuing Annual General Meeting scheduled on July 28, 2014 and the Ministry
    of Corporate Affairs, Government of India.  As per Articles of Association of the Company, he is not required to
    retire by rotation and hence shall hold office for the full term.
|------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Mr Ananda Raju Vegesna, Executive Director                          |  | Appointed as Executive Director for a period of five years effective June 22, 2010.  As
    per the Indian Companies Act, 2013, he is liable to retire by rotation along with other Directors and is eligible for reelection
    by the shareholders at the Annual General Meeting.  His retirement is due in July 2014.                                                                                                                                                                                                                                                                                                                              
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Dr T H Chowdary, Chairman of Compensation and Nominating Committees |  | Appointed as a Director in February 1996.  As per the Indian Companies Act, 2013,
    the Board of Directors recommended his appointment as an Independent Director for a term of five consecutive years from the
    conclusion of the ensuing Annual General Meeting under the provisions of the Indian Companies Act, 2013. This matter will
    be subject to the shareholders’ approval at the Annual General Meeting scheduled on July 28, 2014.                                                                                                                                                                                                
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Dr S K Rao                                                          |  | Appointed as a Director in July 2005.  As per the Indian Companies Act, 2013, the
    Board of Directors recommended his appointment as an Independent Director for a term of five consecutive years from the conclusion
    of the ensuing Annual General Meeting under the provisions of the Indian Companies Act, 2013. This matter will be subject
    to the shareholders’ approval at the Annual General Meeting scheduled on July 28, 2014.                                                                                                                                                                                                    
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Mr P S Raju                                                         |  | Appointed as a Director in February 2006.  As per the Indian Companies Act, 2013,
    he is liable to retire by rotation along with other Directors and is eligible for reelection by the shareholders at the Annual
    General Meeting.  His retirement is due in 2015.                                                                                                                                                                                                                                                                                                                                                                             
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Mr C B Mouli, Chairman and Financial Expert of Audit Committee      |  | Appointed as a Director in July 2005.  As per the Indian Companies Act, 2013, the
    Board of Directors recommended his appointment as an Independent Director for a term of five consecutive years from the conclusion
    of the ensuing Annual General Meeting under the provisions of the Indian Companies Act, 2013. This matter will be subject
    to the shareholders’ approval at the Annual General Meeting scheduled on July 28, 2014.                                                                                                                                                                                                    
|                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Mr C E S Azariah                                                    |  | Appointed as a Director by the Board of Directors in March 2013.  As per the Indian
    Companies Act, 2013, the Board of Directors recommended his appointment as an Independent Director for a term of five consecutive
    years from the conclusion of the ensuing Annual General Meeting under the provisions of the Indian Companies Act, 2013. This
    matter will be subject to the shareholders’ approval at the Annual General Meeting scheduled on July 28, 2014.                                                                                                                                                                         



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The Company has service
contracts with Mr. Raju Vegesna, Chairman and Managing Director and Mr. Ananda Raju Vegesna, Executive Director. The service contracts
with Mr. Raju Vegesna and Mr. Ananda Raju Vegesna do not provide for any remuneration or benefits either during or upon termination
of employment.



For other non-executive
Directors, the Company does not have any service contract and such directors’ term is governed by the Indian Companies Act,
2013.



The Company does not have
any service contract with the other Senior Executives of its administrative, supervisory or management bodies. Such senior executives’
appointment does not have any specific term and can be terminated by either party based on the terms of the contract.



Board Committees



Details relating to Audit, Compensation, Corporate
Social Responsibility and Nominating Committees of our board are provided below:



Audit Committee



Our Audit Committee is comprised of three
independent directors, as determined under applicable NASDAQ rules. They are:



Mr C B Mouli;



Dr S K Rao; and



Mr C E S Azariah



The primary objective of the audit committee
is to monitor and provide effective supervision of our financial reporting process with a view towards ensuring accurate, timely
and proper disclosures and the transparency, integrity and quality of financial reporting. Our audit committee oversees the work
carried out in the financial reporting process by our management, including the internal auditors and the independent auditor
and reviews the processes and safeguards employed by each. In addition, our audit committee has the responsibility of oversight
and supervision over our system of internal control over financial reporting, audit process, and process for monitoring the compliance
with related laws and regulations. The audit committee recommends to our Board the appointment of our independent registered auditors
and approves the scope of both audit and non-audit services. All members of the Audit Committee meet the independence requirements
and majority of them meet financial literacy requirements as defined by applicable NASDAQ and SEC rules.



The Audit Committee held four meetings in
person during fiscal 2014.



The Audit Committee has adopted a Charter
and it is reviewed annually.



The Audit Committee has also adopted the Internal
Audit Charter under the proposed NASDAQ Rule 5645 for Listed Companies on July 18, 2013.



Compensation Committee



Our Compensation Committee consists entirely
of non-executive, independent directors as determined under applicable NASDAQ rules, and consists of:



Dr T H Chowdary;



Dr S K Rao;



Mr C E S Azariah and



Mr P S Raju



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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 Compensation Committee held four meetings
in person during fiscal 2014.



The Compensation Committee has adopted a Charter
and reviewed annually.



The Compensation Committee Charter was amended
by the Board of Directors on June 24, 2013 in line with the amendments envisaged under NASDAQ Rule 5605(d)(3) applicable for NASDAQ
listed companies.



Corporate Social Responsibility Committee



As per Section 135 of the Indian Companies
Act, 2013, the Company is required to spend 2% of the average net profits from the three preceding financial years to Corporate
Social Responsibility (CSR) activities. For this purpose, the Board has constituted the Corporate Social Responsibility Committee
(CSR).



The CSR Committee of the board consists of
the following Directors:



Mr Raju Vegesna



Mr Ananda Raju Vegesna



Mr C E S Azariah



The purpose of the CSR Committee is to monitor
the implementation of the CSR projects or programs or activities undertaken by the Company and a responsibility statement shall
be signed by the CSR Committee confirming compliance with the CSR objectives and Policy of the Company. The Committee shall submit
its report to the Board and the Board shall report the same in its report to the shareholders annually.



Nominating Committee



The Nominating Committee of the board consists
exclusively of the following non-executive, independent directors as determined under applicable NASDAQ rules:



Dr T H Chowdary;



Dr S K Rao; and



Mr C E S Azariah



The purpose of our Nominating Committee is
to oversee our nomination process for our top level management and specifically to identify, screen and review individuals qualified
to serve as our Executive Directors, Non Executive Directors and Independent Directors consistent with criteria approved by our
board and to recommend, for approval by our board, nominees for election at our annual general meeting of shareholders.



On April 22, 2014, the Nominating Committee
has reviewed and recommended the reappointment of Mr Raju Vegesna as the Chairman and Managing Director of the Company for a further
period of five years effective July 18, 2014.



The Nominations Committee has adopted a charter.



Employees



As of March 31, 2014,
we had 1,782 employees, compared with 1,829 as of March 31, 2013. Of our current employees, 98 are administrative, 310 form our
sales and marketing, 25 are in product and content development, 1,314 are dedicated to technology and technical support, and 35
are in business process and customer care. None of our employees are represented by a union. We believe that our relationship
with our employees is good.



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Stock Ownership



The following table sets
forth information with respect to the beneficial ownership of our equity shares as of June 30, 2014 by each director and our senior
management executives. 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.



|                    |  | Equity Shares Beneficially
    Owned |            
|------------------- |  | ------------------------------------ | -----------
|Beneficial Owner    |  | Number                               |            
|Raju Vegesna *      |  |                                      | 154,011,051
|Ananda Raju Vegesna |  |                                      | -          
|T. H. Chowdary      |  |                                      | -          
|C B Mouli           |  |                                      | -          
|P S Raju            |  |                                      | -          
|S K Rao             |  |                                      | -          
|C E S Azariah       |  |                                      | -          



All 125,000,000 shares have been allotted
to Mr. Vegesna and his affiliated entities, as all shares are issued and outstanding. However, pursuant to Indian law, Mr. Vegesna
does not have full voting power for the shares until such shares have been fully paid. As of June 30, 2014, the entities affiliated
with Mr. Vegesna had paid for 70% of the shares sold pursuant to the subscription agreement described elsewhere in this Annual
Report, and his beneficial ownership is approximately 83%. As only 87,500,000 shares have the right to vote at this time, he may
only vote those 87,500,000 shares.



The balance amount of 30% on the 125,000,000
shares shall be paid by the affiliated entities of Mr Vegesna as and when the same is called by the Board of Directors of the
Company based on the fund requirements of the Company. When such shares are fully paid, Mr Vegesna shall have full voting rights
on the 125,000,000 shares.



* Other than the above, none of the Directors
or Executive Officers of the Company holds any shares in the Company.



Employee Stock Option Plan



We have an Associate Stock
Option Plan, or ASOP, which provides for the grant of options to employees of our Company. The ASOP 2007 was approved by our Board
of Directors and our shareholders in September 2007 and 2,000,000 shares were reserved for issuance under the plan. This was in
addition to the earlier ASOP Plans of 2000, 2002 and 2005. A total of 5.73 million equity shares are currently reserved for issuance
under our ASOP Plans. As of March 31, 2014, we had outstanding an aggregate of 30,000 options under our ASOP Plans with a weighted
average exercise price equal to approximately ₹ 98.24 ($1.63) per equity share.



The ASOP Plans are administered
by the Compensation Committee of our Board of Directors. On the recommendation of the Compensation Committee, we issue option
letters 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 is ₹ 1 per option to be paid by the employee before transfer
of the options.



An employee holding options may apply for
exercise of the options on a date specified therein which is referred to as the conversion date. The options are not transferable
by an employee. The options lapse in the event of cessation of employment due to reasons of non-performance or otherwise. 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.



Associate Stock Option Plan 2014



The Company proposed to
introduce a new Stock Option Plan under Associate Stock Option Plan 2014 (ASOP 2014) for granting as Equity Shares and/or ADSs
linked warrants to the eligible Associates of the Company and its Holding/Subsidiaries/Associates. For this purpose, it is planned
to allocate 25 million Equity Shares of ₹ 10/- each under ASOP 2014. The proposal is subject to the approval of the shareholders
of the Company at the ensuing Annual General Meeting scheduled on July 28, 2014.



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Item 7. Major
Shareholders and Related Party Transactions



Principal Shareholders



The following table sets
forth information with respect to the beneficial ownership of our equity shares as of June 30, 2014 by each person or group of
affiliated persons who is known by us based on our review of public filings to beneficially own 5% or more of our equity shares.
The table gives effect to equity shares issuable within sixty days upon the exercise of all options and other rights beneficially
owned by the indicated shareholders 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 as well as the power to receive the economic benefits of ownership
of securities. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect
to all equity shares beneficially owned. The information below is based on a review of filings made by such persons with the SEC.



Mr Raju Vegesna, the Co-Trustee
of the Vegesna Family Trust, which is the owner of Infinity Capital Venture Management LLC, which is the general partner of Infinity
Capital Ventures, LP, exercise voting control and dispositive power over the equity shares owned by Infinity Capital Ventures,
LP. Mr Raju Vegesna, Chairman and Managing Director of our Company, is affiliated with Infinity Capital Ventures, LP.



Infinity Satcom Universal
Private Limited is owned and controlled by Mr Raju Vegesna, Managing Director of the Company. .



Ramanand Core Investment
Company Private Limited is a wholly owned subsidiary company of Raju Vegesna Infotech and Industries Private Limited which is
owned and controlled by Infinity Satcom Universal Private Limited, which in turn is owned and controlled by Mr Raju Vegesna, CEO,
Chairman and Managing Director of the Company.



As of March 31, 2014,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.27% of
our outstanding equity shares, which includes the 125,000,000 shares (partly paid with proportionate voting rights) issued in
connection with the private placement described below.



|                                                                                               |  | Equity
                                         Shares Beneficially
                                         owned |            
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | -----------
|Shareholder                                                                                    |  | Number                                                                                                             |            
|Infinity Capital Ventures, LP, 11601 Wilshire
    Boulevard, Suite 1900, Los Angeles, CA 90025 |  |                                                                                                                    | 13,902,860 
|Vegesna Family Trust, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA, 90025         |  |                                                                                                                    | 578,191    
|Infinity Satcom Universal Private Limited, Visakhapatnam
    *                                 |  |                                                                                                                    | 14,530,000 
|Ramanand Core Investment Company Private Limited,
    Visakhapatnam                            |  |                                                                                                                    | 125,000,000



* Ramanand Core Investment Company Private
Limited is controlled by Raju Vegesna Infotech and Industries Private Limited, which is in turn, controlled by Infinity Satcom
Universal Private Limited and therefore Infinity Satcom Universal Private Limited holds the beneficial interest in Ramanand Core
Investment Company Private Limited.



Details of significant change in the percentage
ownership held by the major shareholders:



|Name of the shareholder                                 |  | 2011-12       |             |  | 2012-13 |  |       | 2013-14       | 
|------------------------------------------------------- |  | ------------- | ----------- |  | ------- |  | ----- | ------------- | 
|                                                        |  | No. of shares |             |  | %       |  |       | No. of shares | 
|Infinity Capital Ventures, LP, USA                      |  |               | 13,902,860  |  |         |  | 7.79  |               | 
|Vegesna Family Trust, USA                               |  |               | 578,191     |  |         |  | 0.32  |               | 
|Infinity Satcom Universal Private Limited               |  |               | 14,530,000  |  |         |  | 8.14  |               | 
|*  Raju Vegesna Infotech and Industries Private Limited |  |               | -           |  |         |  | -     |               | 
|**  Ramanand Core Investment Company Private Ltd.       |  |               | 125,000,000 |  |         |  | 70.02 |               | 



* 125,000,000 shares were issued to Raju Vegesna
Infotech and Industries Private Limited at a discount of 50% to the prevailing American Depositary Share market price since the
allotment of shares was for unlisted Indian equity shares. The shareholders of the Company approved the unregistered offering
through voting in a general meeting where the promoter group beneficially owned 86.27% of the equity shares eligible to vote in
the meeting.



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** Raju Vegesna Infotech and Industries Private
Limited transferred its entire 125,000,000 shares to Ramanand Core Investment Company Private Ltd., its wholly owned subsidiary
company.



Reference is drawn to
note 40 to the Consolidated Financial Statement as regards the shareholding of Ramanand Core Investment Company Private Limited.
As of such date, these shares are partly paid up to the extent of 70 % of the face value and hence carry voting rights proportionate
to the paid up value of these shares. The Company has lien on these shares till such shares are fully paid up.



The Company has not issued
any shares having differential voting rights and hence the Company’s major shareholders do not have differential voting
rights except for proportionate voting rights on the partly paid up shares.



United States Shareholders



As of March 31, 2014,
39,000,135 of our ADSs were held in the United States and we had approximately 15,610 shareholders in the United States. Each
ADS represents one equity share.



Host country Shareholders



As on March 31, 2014,
139,530,652 of our equity shares were held in India and we had 24 shareholders on record in India. Each equity share has a par
value of ₹ 10/- each. Of the above, 125,000,000 shares were partly paid up to the extent of ₹ 7.00 per share.



Control of Registrant



Based on our review of
filings made with the SEC, we believe Infinity Capital Ventures, LP beneficially owned 7.79 % of our equity shares as of March
31, 2014. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our Company. The Subscription
Agreement provides that, among other things, the Company shall appoint Mr Raju Vegesna as the Chairman of the Board of Directors,
Infinity Capital shall also nominate another person to the Board of Directors and for so long as Infinity Capital continues to
own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into any agreement pursuant to
which it would provide a third party with registration rights for Company securities, without the consent of Infinity Capital.
In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed as Chairman of our Board of Directors.
In February 2006, the Company also appointed Mr. P S Raju as the second nominee of Infinity Capital to the Board of Directors.



Infinity Satcom Universal
Private Limited, India also beneficially owned 8.14% of our equity shares as of March 31, 2014.



As of March 31, 2014,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.27% of
our outstanding equity shares, which includes the 125,000,000 shares issued in connection with the private placement described
below.



These shareholders are
presently able to exercise control over many matters requiring approval by our shareholders, including the election of directors
and approval of significant corporate transactions. Under Indian law, a simple majority is sufficient to control all shareholder
actions 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 shareholders;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | commencing any new
                                         line of business; and
| | - | ---------------------------------------------------------------------------------



| | • | commencing a liquidation.
| | - | -------------------------



Circumstances may arise
in which the interests of Infinity Capital Ventures, LP or Infinity Satcom Universal Private Limited or a subsequent purchaser
of their shares could conflict with the interest of our other shareholders or holders of our ADSs. These shareholders could prevent
or delay a change in control of our Company even if a transaction of that sort would be beneficial to our other shareholders,
including the holders of our ADSs.



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On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our CEO, Chairman and Managing Director, Mr Raju Vegesna. See note 40 in the notes to the financial
statements in this Annual Report.



Forfeiture of equity shares issued in a
private placement



During the year ended
March 31, 2008, Sify proposed a scheme of amalgamation to merge Sify Communications Limited (erstwhile subsidiary) with the Company
and made applications to the appropriate authorities in India for approval of the proposed scheme of amalgamation to take over
the IP-VPN services from Sify Communications Limited ( erstwhile subsidiary) upon the consummation of the merger. Under the provisions
of the local telecom regulations, a Company engaged in the business of providing IP-VPN services was required to maintain Indian
shareholding at least 26% of the total paid up share capital of the Company. In order to maintain the Indian shareholding at 26%
in Sify consequent to the approval of the proposed scheme of amalgamation, Sify and Infinity Satcom Universal, an Indian entity
(the Purchaser) entered into a Subscription Agreement (effective March 24, 2008), whereby the Company agreed to sell, and Infinity
agreed to purchase, 12,817,000 equity shares of the Company (herein after referred to as ‘the Share Purchase’), at
a per share purchase price of USD $4.46/ - per share (referred to as ‘the Purchased Shares’), equivalent to ₹
175/- per share in Indian Rupees.



In connection with the
private placement of shares to Infinity Satcom Universal, the independent directors of the Board of the Directors waived the provision
of the Standstill Agreement dated November 10, 2005 prohibiting Infinity Capital Ventures, Raju Vegesna and any Affiliate from
acquiring additional shares of the Company. Each of Messrs. Raju Vegesna and Ananda Raju Vegesna abstained from voting on
the waiver.



The Company received a
sum of ₹ 112,149 (comprising of ₹ 12,817 towards face value and ₹ 99,332 towards securities premium) and called
up a sum of ₹ 448,595 (comprising of ₹ 25,634 towards face value and ₹ 422,961 towards securities premium).
Subsequent to fiscal 2008, the Company withdrew its applications made to appropriate authorities for the approval of the proposed
scheme of amalgamation with Sify Communications Limited (erstwhile subsidiary). Consequent upon the withdrawal of the merger,
Infinity Satcom Universal communicated to Sify that they would not contribute to calls already made and any balance monies which
would become payable under the Subscription Agreement. Hence, the Board of Directors forfeited the shares allotted and the monies
collected (₹ 112,149 including sums towards capital and premium) at the meeting held on August 29, 2008.



Sale of shares in a private transaction



Pursuant to a Share Purchase
Agreement dated May 31, 2009 between Infinity Capital Venture Management and Infinity Satcom Universal Private Limited, a Company
owned and controlled by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO & MD of the
Company, Raju Vegesna has sold 4,000,000 Equity Shares of ₹ 10/- each of the Company to Infinity Satcom for a consideration
of USD 3,000,000 in a private transaction.



Merger of Sify Communications Limited with
Sify Technologies Limited



In November 2008, the
Board of Directors of Sify Technologies Limited and Sify Communications limited decided to merge Sify Communications with Sify
Technologies in view of the benefits accruing due to synergy of combined operations, availing of tax benefits, maximizing the
utilization of the infrastructural facilities, human, financial and other resources etc. Based on a petition for the Scheme of
Amalgamation filed with the High Court of Madras, India, the Court has approved the Scheme vide its order dated June 26, 2009.
Consequent upon the consummation of merger, the Company has taken over the assets and liabilities of Sify Communications (erstwhile
subsidiary) and Sify Communications ceased to exist and got dissolved without winding up.



As per the Scheme, Sify Technologies has issued
and allotted 10,530,000 Equity Shares of ₹ 10/- each to Infinity Satcom, the only outside shareholder, towards the consideration
for the assets and liabilities taken over by the Company



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Issuance of Equity Shares in private placement
to the promoter group:



On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our Chairman and Managing Director, Mr Raju Vegesna. See note 40 in the notes to the financial statements
in this Annual Report.



The proceeds from the
proposed issue will be utilized for the ongoing capital expenditure and future expansion plans of the Company. As of March 31,
2014, we had received an aggregate of $46.59 million approximately of proceeds from the issuance.



Related Party Transactions



The related parties where
control / significant influence exist are subsidiaries and associates. Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any
director whether executive or otherwise.



In addition to the transactions
described above regarding Mr. Raju Vegesna and Mr. Ananda Raju Vegesna, we engaged in the following transaction with the following
entities affiliated with Mr. Raju Vegesna and Mr. Ananda Raju Vegesna.



VALS Developers Private
Limited (“VALS”) is owned and controlled by Raju Vegesna Infotech & Industries Private Limited, in which Mr. Raju
Vegesna, our principal share holder and CEO, Chairman, Managing Director, was holding 94.66% equity in his personal capacity.
During the year ended March 31, 2009, Sify entered into a memorandum of understanding with VALS Developers Private Limited to
obtain land and building which is in the process of being constructed on a long term lease. The lease agreement, when final and
executed, is expected to have an initial non-cancellable term of 5 years, with a further option for Sify to renew or cancel the
lease for the incremental five year terms. In connection with this memorandum of understanding, Sify has paid a security deposit
of ₹ 125,700 and advance rental of ₹ 157,125 to VALS. The security deposit will be refunded at the end of lease term
and the advance rental would be adjusted over 15 months from the commencement of lease term. It is customary in India that whenever
a premises is taken up on lease for commercial purpose, a rental advance is paid in multiple months of rent (e.g.) 10 months of
rent, which shall be refunded at the time of vacating the premises without any interest.



During the year, on October
30, 2010, the Board of Directors had approved to cancel the MoU for lease arrangement and had decided to acquire the property
which is under construction from the third party directly. On 12th January 2011, through a Memorandum of Amendment, the company
with the intention to acquire the said land, had substituted its name with that of VALS and through such amendment VALS had agreed
to assign all rights, responsibilities, obligations, title etc. in favour of the company, thus making the company eligible to
acquire PACE through HERMIT and subsequently the land and also making liable to pay the entire consideration of ₹ 1,140,000.
Hence the Company had paid VALS an amount of ₹ 2,175 i.e., difference between the amount paid by the Company to VALS and
the amount paid by VALS to AIPL. During the previous year, the Company acquired the leasehold rights along with the building under
construction through acquisition of entire shares HERMIT which in turn holds the entire shares of PACE, the original allottee
of the land. As of March 31, 2014, the Company had paid a sum of ₹ 180,779 as an advance to AIPL towards construction of
the building and any further sum it has to advance as per the commitment shall be adjusted towards value of investment in PACE
after settling further debts and liabilities relating to construction of the said Data Centre.



The Company had entered
into a lease agreement with Ms Radhika Vegesna, Daughter of Mr Anand Raju Vegesna, Executive Director of the company, to lease
the premises owned by her for a period of three years effective June 1, 2010 on a rent of ₹ 256 per month and payment of
refundable security deposit of ₹ 2,558. This arrangement will be automatically renewed for a further period of two blocks
of three years with all the terms remaining unchanged. Also refer note 36.



The Company had entered
into a lease agreement with Raju Vegesna Developers (P) Limited, in which Mr Ananda Raju Vegesna, the Executive Director of the
Company is a Director, to lease the premises owned by such Company for a period of three years effective February 1, 2012 for
₹ 30 per month. Subsequently, the Company entered into an amendment agreement on April 1, 2013, providing for the automatic
renewal for further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three
years. See note 36 in the notes to the financial statements in this annual report.



The Company had entered
into a lease agreement with Raju Vegesna Infotech and Industries Private Limited, in which Mr Raju Vegesna, Managing Director
and Mr Ananda Raju Vegesna, the Executive Director of the Company are also Directors, to lease the premises owned by the above
Company for a period of three years effective February 1, 2012 for ₹ 75 per month. Subsequently, the Company entered into
an amendment agreement on April 1, 2013, providing for automatic renewal for a further period of two blocks of 3 years with an
escalation of 15% on the last paid rent after the end of every three years. See note 36 in the notes to the financial statements
in this annual report.



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Loans to employees



We provide salary advances
to our employees in India who are not executive officers or directors. The annual rate of interest for these loans is 0 %. As
of March 31, 2014, the loan outstanding from employees is ₹ 0.53 million.



Item 8.
Financial Information



Financial Statements



We have elected to provide
financial statements pursuant to Item 18 of Form 20-F. No significant change has occurred since the date of our annual financial
statements for fiscal year 2014.



Legal Proceedings



| | a) | The Company and certain of its officers
                                         and directors are named as defendants in a securities class action lawsuit filed in the
                                         United States District Court for the Southern District of New York. This action, which
                                         is captioned In re Satyam Infoway Ltd. Initial Public Offering Securities Litigation,
                                         also names several of the underwriters involved in Company’s initial public offering
                                         of American Depository Shares as defendants. This class action is brought on behalf of
                                         a purported class of purchasers of Company’s ADSs from the time of Company’s
                                         Initial Public Offering (“IPO”) in October 1999 through December 2000. The
                                         central allegation in this action is that the underwriters in Company’s IPO solicited
                                         and received undisclosed commissions from, and entered into undisclosed arrangements
                                         with, certain investors who purchased Company’s ADSs in the IPO and the aftermarket.
                                         The complaint also alleges that Company violated the United States Federal Securities
                                         laws by failing to disclose in the IPO prospectus that the underwriters had engaged in
                                         these allegedly undisclosed arrangements. More than 300 issuers have been named in similar
                                         lawsuits.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On April 2, 2009, the parties lodged
with the Court a motion for preliminary approval of a proposed settlement between all parties, including the Company and its former
officers and directors.  The proposed settlement provides the plaintiffs with $586 million in recoveries from all defendants.
 Under the proposed settlement, the Issuer Defendants collectively would be responsible for $100 million, which would be
paid by the Issuers’ insurers, on behalf of the Issuer Defendants and their officers and directors.



Accordingly, any direct financial
impact of the proposed settlement is expected to be borne by the Company’s insurers.  On June 12, 2009, the Federal
District Court granted preliminary approval of the proposed settlement. On October 6, 2009, the District Court issued an order
granting final approval of the settlement.  Subsequent to the final approval of Settlement agreement by the District court,
there were several notices of appeal filed.  Most were filed by the same parties that objected to the settlement in front
of the District Court.  These appeals were consolidated into a single appeal and briefing schedule was held. On January 9,
2012 the class counsel and objectors counsel entered into a settlement agreement, which includes an agreement to dismiss the above
appeal. Thus the above Appeal has been dismissed with prejudice confirming the Settlement agreement entered before the District
Court.



During the year ending March 31,2013,
the exposure under this settlement has been settled by the insurer as per the settlement agreement.



| | b) | Proceedings before Department of Telecommunications
| | -- | ---------------------------------------------------



| | (i) | License fees
| | --- | ------------



| | · | On
                                         October 12, 2009 (as later clarified by the DoT), the Department of Telecommunications
                                         (‘DOT’) raised a demand on Sify Technologies for ₹ 14 million after
                                         correcting the arithmetical error in the assessment letter.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On
                                         February 26, 2010 DOT raised a demand on Sify Communications (erstwhile subsidiary merged
                                         with Sify Technologies Limited) for ₹ 26 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The above demands were made by
the DoT on the premise that all amounts of income (whether direct or indirect) including certain items like other income, interest
on deposits, gain on foreign exchange fluctuation, profit on sale of assets & provision written back, that have got anything
to do with telecom operations of the Company or arise in connection with the Telecom business of the Company, are to be considered
as income for the purpose of calculation of the license fee. The Company has replied suitably on the above demand notice.



The service providers had approached
Telecom Disputes Settlement & Appellate Tribunal (‘TDSAT’) on what items of income are liable for calculation
of license fee and what all items of income on which license fees are not liable to be paid. TDSAT by its order clarified on the
above. The TDSAT order was challenged by DoT in Supreme Court of India and the Supreme Court has set aside the TDSAT order. The
service providers through their associations are contemplating further appeal in Supreme Court by way of review petition. Sify
believes that in spite of the Supreme Court order, the above demands are not tenable under law nor fit into the definition of
Adjusted Gross Revenue as defined by DoT. The Company believes it has adequate defenses for these demands and the ultimate outcome
of these actions may not have a material adverse effect.



| | (ii) | In November 2009, the Company received
                                         a demand notice pertaining to the allocation of spectrum in the 3.3-3.4 GHz frequency,
                                         from DoT, demanding ₹ 345 million (US $ 7.05 million) towards spectrum charges
                                         payable from the date of issue of allocation letter for 170 Base Stations.  As per
                                         the notice, in case no payment is received within 15 days from the date of issue of the
                                         notice, then it would be presumed that the Company is no longer interested for the frequency
                                         assignments in 3.3-3.4 GHz band.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Whilst the Company received allotment
letter for Spectrum in 3.3 GHz band (3303.5/3353.5 MHz) (Total 12 MHz) the Company had neither started any operations in this
frequency band nor had applied for any Operating License from DOT/ Wireless Planning Commission (WPC). The Company believes that
the obligation to make payment will arise only after obtaining the operating license from DOT/WPC.  The Company also believes
that it has adequate legal defenses for these demands, as the Company has not yet obtained any operative license, hence such
demand is not tenable Nevertheless, the Company has as a commitment to hold and use the spectrum in the above band has paid ₹
11.56 million towards 40 Base Stations and has surrendered the remaining 130 Base Stations.  The Company believes that the
ultimate outcome of these actions will not have a material adverse effect.



| | c) | The Company is party to additional
                                         legal actions arising in the ordinary course of business. Based on the available information
                                         as at March 31, 2014, the Company believes that it has adequate legal defenses for these
                                         actions and that the ultimate outcome of these actions will not have a material adverse
                                         effect. However in the event of adverse judgment in all these cases, the maximum financial
                                         exposure would be ₹ 26.6 millions (March 31, 2013: ₹ 10.6 million)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Dividends



We have not declared or
paid any cash dividends on our equity shares since inception. During the financial year, the Company has set off the accumulated
losses against the Securities Premium. In view of the good performance of the Company and availability of divisible profits ,
the Board of Directors has recommended 10% cash dividend to all the shareholders of the Company for the year ended March 31, 2014,
which is subject to the approval of the shareholders at the ensuing Annual General Meeting.



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



However, the dividend
payment policy of the Company is not certain and is contingent upon the each year’s profits of the Company. Investors seeking
cash dividends should consider this at the time of purchase of our ADRs.



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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 Depository Receipts, or
ADRs, are traded in the United States only on the NASDAQ Global Market. Each ADS represents one equity share. The ADRs evidencing
ADSs were issued by our depository, Citibank, N.A., pursuant to a Deposit Agreement.



Price History



Our ADSs commenced trading
on the NASDAQ Market on October 19, 1999. The tables below set forth, for the periods indicated, high and low trading prices for
our ADSs in United States dollars:



Prior Fiscal Years



|                  |  | High |      |  | Low | 
|----------------- |  | ---- | ---- |  | --- | 
|Fiscal year ended |  | $    |      |  | $   | 
|March 31, 2014    |  |      | 2.73 |  |     | 
|March 31, 2013    |  |      | 3.35 |  |     | 
|March 31, 2012    |  |      | 8.25 |  |     | 
|March 31, 2011    |  |      | 3.68 |  |     | 
|March 31, 2010    |  |      | 2.69 |  |     | 



|                                 |  | High |      |  | Low | 
|-------------------------------- |  | ---- | ---- |  | --- | 
|Fiscal year ended March 31, 2014 |  | $    |      |  | $   | 
|First Quarter                    |  |      | 2.03 |  |     | 
|Second Quarter                   |  |      | 2.05 |  |     | 
|Third Quarter                    |  |      | 2.73 |  |     | 
|Fourth Quarter                   |  |      | 2.41 |  |     | 



|                                 |  | High |      |  | Low | 
|-------------------------------- |  | ---- | ---- |  | --- | 
|Fiscal year ended March 31, 2013 |  | $    |      |  | $   | 
|First Quarter                    |  |      | 3.35 |  |     | 
|Second Quarter                   |  |      | 2.65 |  |     | 
|Third Quarter                    |  |      | 2.71 |  |     | 
|Fourth Quarter                   |  |      | 2.40 |  |     | 



Most recent six months



|              |  | High |      |  | Low | 
|------------- |  | ---- | ---- |  | --- | 
|Month         |  | $    |      |  | $   | 
|              |  |      |      |  |     | 
|June 2014     |  |      | 2.55 |  |     | 
|May 2014      |  |      | 2.19 |  |     | 
|April 2014    |  |      | 2.17 |  |     | 
|March 2014    |  |      | 2.13 |  |     | 
|February 2014 |  |      | 2.11 |  |     | 
|January 2014  |  |      | 2.41 |  |     | 



Item 10. Additional
Information



Pursuant to the approval
of the scheme of merger of the Company with its subsidiaries Sify Software Limited and Hermit Projects Private Limited, by the
Shareholders at the Honourable High Court of Madras,India, the authorized share capital of the Company was enhanced by an amount
of ₹ 51,000,000. Hence, our authorized share capital is increased to ₹ 1851,000,000, divided into 185,100,000 Equity
Shares, having a par value ₹ 10 per share. As of March 31, 2014, 178,530,787 Equity Shares were issued, outstanding, of
which 125,000,000 Equity Shares were partly paid and the balance fully paid, compared to 178,513,589 Equity Shares as of March
31, 2013.



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The equity shares are
our only class of share capital. Some of the share capital, 39,000,135 shares, is represented by American Depository Shares issued
by our Company in accordance with applicable laws and regulations. Our Articles of Association and the Indian Companies Act permit
us to issue classes of securities in addition to the equity shares. For the purposes of this annual report, “shareholder”
means a shareholder who is registered as a member in the register of members of our Company. The term shareholders and ADSs holders
have the same meaning in this annual report since the Indian Companies Act only defines a shareholder.



A total of 5.73 million
equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). As of March 31, 2014, we had outstanding
an aggregate of 30,000 options under our ASOP with a weighted average exercise price equal to approximately ₹ 98.24 ($1.63)
per equity share. There is no unamortized stock compensation expense relating to these grants as of March 31, 2014.



During the fiscal year
ended March 31, 2004, Venture Tech, who had subscribed for the shares of our Company in terms of an Investor Rights Agreement,
sold 2,017,641 shares reducing their holding from 15.9% to 10.1% and SAIF sold 4,750,000 shares reducing their holding from 21.6%
to 8%.



During the fiscal year
ended March 31, 2005, Venture Tech sold an additional 783,326 shares reducing their holding from 10.1% to 7.7% and SAIF sold an
additional 800,000 shares reducing their holding from 8% to 5.68%.



At the Extraordinary General
Meeting of our shareholders held on December 23, 2005, the shareholders had approved by a Special Resolution the issue and allotment
of 4.97 million equity shares of the par value of ₹10/- per share at such price as may be determined to the public in India
as the initial public offer to comply with the statutory requirement of domestic listing of the shares of our Company, as and
when announced by the Government of India.



During the fiscal year
ended March 31, 2006, Venture Tech sold the remaining 2,750,000 shares of our Company and SAIF sold the remaining 2,008,140 shares
of our Company. Satyam Computer Services had divested their entire holding of 11,182,600 shares in the Company to Infinity Capital
Ventures, LP through a sponsored ADS programme arranged by us. Further, Infinity Capital, pursuant to the Subscription Agreement
dated November 10, 2005 acquired another 6,720,260 shares of the Company in a private transaction. On conclusion of this transaction,
the issued and outstanding share capital of our Company was 42,389,514 equity shares, with a par value of ₹10/- per share.



During the fiscal year
ended March 31, 2008, Infinity Satcom Universal Private Limited has entered into a Subscription Agreement for the subscription
of 12,817,000 additional equity shares of the Company with par value of ₹10/- per share at a premium of ₹ 165/- per
share.



On March 24, 2008 , the
Company received a sum of ₹ 112.14 million (comprising of ₹ 12.81 towards face value and ₹ 99.33 million towards
securities premium / share premium) .Subsequently, Infinity Satcom Universal communicated to the Company vide their letter dated
August 27, 2008 that consequent to the merger petition of Sify Communications Limited amalgamating with Sify Technologies Limited
has been withdrawn from the High Court of Madras, that they would focus their attention on the business of Sify Communication
Limited and hence shall not contribute the balance money towards the subscription of 12,817,000 Equity Shares on call. On August
29, 2008, the Board of Directors, forfeited the shares allotted and the application monies collected (₹ 112.14 million including
sums towards capital and premium).



Pursuant to a Share Purchase
Agreement dated May 31, 2009 between Raju Vegesna and Infinity Satcom Universal Private Limited, a Company owned and controlled
by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO & MD of the Company, Raju Vegesna
has sold 4,000,000 Equity Shares of ₹10/- each of the Company to Infinity Satcom for a consideration of USD 3,000,000 in
a private transaction.



In November 2008, the
Board of Directors of Sify Technologies Limited and Sify Communications limited decided to merge Sify Communications with Sify
Technologies. Based on a petition for the Scheme of Amalgamation filed with the High Court of Madras, India, the Court has approved
the Scheme vide its order dated June 26, 2009. Consequent upon the consummation of merger, the Company has taken over the assets
and liabilities of Sify Communications (erstwhile subsidiary) and has issued and allotted 10,530,000 Equity Shares of ₹10/-
each to Infinity Satcom, the only outside shareholder, towards the consideration for the assets and liabilities taken over by
the Company.



On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our Chairman and Managing Director, Mr. Raju Vegesna. These shares carry voting rights proportionate
to the amount paid up on these shares. Further company has a lien on these shares till the shares are fully paid up. Also refer
note 40 to the Consolidated Financial statements.



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Companies Act, 2013



The Companies Act, 1956, which dealt with
the Management and Administration of the Corporates in India for more than five decades, has been replaced with a new Act, viz.
Companies Act, 2013, effective April 1, 2014.  Of the 470 Sections, the Ministry of Corporate Affairs (MCA), Government of
India, has notified 283 Sections till date through various Notifications.  Till such time the remaining Sections of the new
Act are also notified by the MCA , the relevant provisions of the Companies Act, 1956 will also be in force.



Memorandum and Articles of Association



Set forth below is the material information
concerning our share capital and a brief summary of the material provisions of our Articles of Association, Memorandum of Association
and the Indian Companies Act, all as currently in effect. The following description of our equity shares and the material provisions
of our Articles of Association and Memorandum of Association does not purport to be complete and is qualified in its entirety
by our Memorandum of Association and Articles of Association that are incorporated by reference to this Annual Report on Form
20-F.



Objects of Memorandum
of Association



The following is a summary
of our Objects as set forth in Section 3 of our Memorandum of Association:



| | 1. | To develop and provide Internet service,
                                         Internet Telephony, Infrastructure based services, Virtual Private Network and other
                                         related data, voice and video services, wide area communication network, value added
                                         services on the network, lease or other transfers of network, software, peripherals and
                                         related products, and to provide marketing services.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | To provide security products for corporate,
                                         carry on the business of consulting, software and hardware, integrated platform(s) for
                                         the e-commerce solutions, applications, information technology, security and all other
                                         kinds of technology solutions or services, and to acquire, maintain, operate, manage
                                         and undertake technology and infrastructure for this purpose.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3 | To develop, service & sell/lease
                                         data based through direct or electronic media, to develop a wide area communication network
                                         of sell / lease the network or provide value added services on the network to develop,
                                         service, buy / sell computers, software, peripherals and related products to provide
                                         marketing services rising direct as well as electronic media;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4 | To undertake the designing and development
                                         of systems and applications software either for its own use or for sale in India or for
                                         export outside India and to design and develop such systems and application software
                                         for or on behalf of manufacturers, owners and users of computer systems and digital /
                                         electronic equipment's in India or elsewhere in the world;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5 | To set up and run electronic data processing
                                         centres and to carry on the business of data processing, word processing, software consultancy,
                                         system studies, management consultancy, techno-economic feasibility studies of projects,
                                         design and development of management information systems, share / debenture issues management
                                         and / or registration and share/debenture transfer agency;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | To undertake and execute feasibility
                                         studies for Computerization, setting up of all kind of computer systems and digital/electronic
                                         equipment's and the selection, acquisition and installation thereof whether for the Company
                                         or its customers or other users;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7 | To conduct, sponsor or otherwise participate
                                         in training programmes, courses, seminar conferences in respect of any of the objects
                                         of the Company and for spreading or imparting the knowledge and use of computers and
                                         computer programming languages including the publication of books, journals, bulletins,
                                         study / course materials, circulars and news-letters; and to undertake the business as
                                         agents, stockist, distributors, franchise holders or otherwise for trading or dealing
                                         in computer systems, peripherals, accessories, parts and computer consumables, continuous
                                         and non-continuous stationery, ribbons and other allied products and things and standard
                                         software packages.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8 | To conduct e-commerce for sale of all
                                         kinds of products and services through direct or electronic media as well as on and off
                                         line e-commerce including travel related services, buying and selling of products and
                                         services / merchandise, software, data information etc., in India and abroad.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our Articles of Association
provide that the minimum number of directors shall be 3 and the maximum number of directors shall be 12. Presently, we have 7
directors. Our Articles of Association provide that at least two-thirds of our directors shall be subject to re-election by our
shareholders; and. at least one-third of our directors who are subject to re-election shall be up for re-election at each Annual
General Meeting of the shareholders.



Our Articles of Association
do not require that our directors have to hold shares of our Company in order to serve on our board of directors.



Our Articles of Association
provide that any director who has a personal interest in a transaction must disclose such interest, must abstain from voting on
such a transaction and may not be counted for the purposes of determining whether a quorum is present at the meeting. Such director's
interest in any such transaction shall be reported at the next meeting of shareholders. The remuneration payable to our directors
may be fixed by the board of directors in accordance with provisions prescribed by the Government of India. Our Articles of Association
provide that our board of directors may generally borrow or secure the payment of any sum of money for our business purposes,
provided, however, where any amounts are to be borrowed, that when combined with any already outstanding debt, exceed the aggregate
of our paid-up capital and free reserves, we cannot borrow such amounts without the consent of our shareholders.



Board of Directors



In terms of the provisions
of the Articles of Association of the Company and the Indian Companies Act, 1956 & 2013:



| | (a) | no director of the Company can
                                         vote on a proposal, arrangement or contract in which he is materially interested;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the directors of the Company cannot
                                         vote on a proposal in the absence of an independent quorum for compensation to themselves
                                         or their body;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | each of our directors is entitled
                                         to receive a sitting fee not exceeding ₹ 100,000 for every meeting of the Board
                                         of Directors and each meeting of a Committee of the Board of Directors, as well as all
                                         traveling and out-of-pocket expenses incurred in attending such meetings; however, effective
                                         May 2014, the Company has been paying ₹ 50,000 to the directors for each Board
                                         Meeting attended by them. However, there is no increase in the sitting fee for the Committee
                                         meetings.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | the directors are empowered to
                                         borrow moneys through board meetings up to the prescribed limit and beyond that with
                                         the approval of the shareholders through a General Meeting;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | retirement of directors are determined
                                         by rotation and not based on age limit; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------



| | (f) | no director is required to hold
                                         any qualification shares.
| | --- | --------------------------------------------------------------------------------------------------



For additional information,
please see “Item 6. Director, Senior Management and Employees – Board Composition,” “-Board Committees”
and “-Director Compensation,” and “-Officer Compensation” of this Annual Report on Form 20-F.



Dividends



Under the Indian Companies
Act, unless our Board of Directors recommends the payment of a dividend which is then declared by our shareholders in a general
meeting. However, the board is not obliged to recommend a dividend. Similarly, under our Articles of Association and the Indian
Companies Act, although the shareholders may, at the annual general meeting, approve a dividend by an amount less than that recommended
by the Board of Directors, 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 of Directors, and thereafter declared
by the shareholders in general meeting and subject to the limitations described above, is required to be distributed and paid
to shareholders in proportion to the paid up value of their shares within 30 days of the declaration by the shareholders at the
annual general meeting. Pursuant to our Articles, our Board of Directors has the discretion to declare and pay interim dividends
without shareholder approval. Under the Indian Companies Act, dividends can only be paid in cash to the registered shareholder,
the shareholder's order or the shareholder's banker's order, at a record date fixed on or prior to the date of the Annual General
Meeting. We must inform the stock exchanges on which our equity shares and ADSs are listed on the record date for determining
the shareholders who are entitled to receive dividends.



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The Indian Companies Act
provides that any dividends that remain unpaid or unclaimed after the 30-day period from the date of declaration of a dividend
are to be transferred to a special bank account opened by the Company at an approved bank. We have to transfer any dividends that
remain unclaimed for seven years from the date of the transfer to an Investor Education and Protection Fund established by the
Government of India under the provisions of the Indian Companies Act. Under the Companies Act, 2013, after the transfer to this
fund, such unclaimed dividends may be claimed on submission of such documents and in accordance with the procedures as may be
prescribed by the Government.



With respect to equity
shares issued during a particular fiscal year (including any equity shares underlying ADSs issued to the depository), 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 Indian Companies
Act 1956, 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 after providing for depreciation. Before declaring a dividend greater than 10% of the par value
of its equity shares, a Company is required under the Indian Companies Act, 1956 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. However,
under the Companies Act, 2013, it is not mandatory for the Company to transfer such percentage of its profits to reserves.



The Indian Companies Act,
2013 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 fulfillment of the following conditions:



| | · | the
                                         rate of dividend to be declared may not exceed the average of the rate at which dividends
                                         were declared by it in the three years immediately preceding that year provided that
                                         this sub-rule shall not apply to a company, which has not declared any dividend in each
                                         of the three preceding financial years.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         total amount to be drawn from the accumulated profits shall not exceed one-tenth of the
                                         such sum of its paid up capital and free reserves as appearing in the last audited financial
                                         statement,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         amount so drawn shall first be utilised to set off the losses incurred in the financial
                                         year in which a dividend is declared before any dividend in respect of equity shares
                                         is declared.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the
                                         balance of reserves after such withdrawal shall not fall below fifteen per cent of its
                                         paid up share capital as appearing in the latest audited financial statement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | No
                                         company shall declare dividends unless carried over previous losses and depreciation
                                         not provided in previous year or years are set off against profit of the company of the
                                         current year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 (a)
not less than one-tenth of the total voting power entitled to vote on a resolution or (b) shares with an aggregate paid up capital
of at least ₹ 500,000. 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. The Chairperson has a casting vote in the case of any tie.



Any shareholder of the
Company entitled to attend and vote at a meeting of the Company may appoint a proxy. The instrument appointing a proxy must be
delivered to us at least 48 hours prior to the meeting. Unless the articles of association otherwise provide, 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. An authorized representative is also entitled to appoint a proxy.



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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 on a poll) are not less than three times the number
of votes, if any, cast against the resolution by members so entitled and voting. As per the Indian Companies Act, unless the articles
of association of a Company provide for all directors to retire at every annual general meeting, not less than two-third of the
directors of a public Company must retire by rotation, while the remaining one-third may remain on the board until they resign
or are removed. Our Articles of Association require two thirds of our Directors to retire by rotation. One-third of the directors
who are subject to retirement by rotation must retire at each Annual General Meeting. Further, the Indian Companies Act requires
certain resolutions such as those listed below to be voted on only by a postal ballot:



| | · | (a)
                                         alteration of the objects clause of the memorandum and in the case of the company in
                                         existence immediately before the commencement of the Act, alteration of the main objects
                                         of the memorandum;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (b)
                                         alteration of articles of association in relation to insertion or removal of provisions
                                         which, under sub-section (68) of section 2, are required to be included in the articles
                                         of a company in order to constitute it a private company;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (c)
                                         change in place of registered office outside the local limits of any city, town or village
                                         as specified in sub-section (5) of section 12;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (d)
                                         change in objects for which a company has raised money from public through prospectus
                                         and still has any unutilized amount out of the money so raised under sub-section (8)
                                         of section 13;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (e)
                                         issue of shares with differential rights as to voting or dividend or otherwise under
                                         sub-clause (ii) of clause (a) of section 43;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (f)
                                         variation in the rights attached to a class of shares or debentures or other securities
                                         as specified under section 48;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (g)
                                         buy-back of shares by a company under sub-section (1) of section 68;
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | (h)
                                         election of a director under section 151 of the Act;
| | - | -------------------------------------------------------------------------------------------------



| | · | (i)
                                         sale of the whole or substantially the whole of an undertaking of a company as specified
                                         under sub-clause (a) of sub-section (1) of section 180;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (j)
                                         giving loans or extending guarantee or providing security in excess of the limit specified
                                         under sub-section (3) of section 186.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Bonus Shares



In addition to permitting
dividends to be paid out of current or retained earnings as described above, the Indian Companies Act permits us to distribute
an amount transferred from the 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 Indian 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.



Consolidation and Subdivision
of Shares



The Indian Companies Act
permits a Company to split or combine the par value of its shares, provided such split or combination is not made in fractions.
Shareholders of record on a fixed record date are entitled to receive the split or combination.



Preemptive Rights and Issue of Additional
Shares



The Indian 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. Under the Indian Companies Act, in the event
of an issuance of securities, subject to the limitations set forth above, a Company must first offer the new shares to the shareholders
on a fixed record date. The offer must include: (i) the right, exercisable by the shareholders of record, to renounce the
shares offered in favor of any other person; and (ii) 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 and thereafter
the board of directors is authorized under the Indian Companies Act to distribute any new shares not purchased by the preemptive
rights holders in the manner that it deems most beneficial to the Company.



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Annual General Meetings of Shareholders



We must convene an annual
general meeting of shareholders each year within 15 months of the previous annual general meeting or within six months of the
end of previous fiscal year, whichever is earlier and may convene an extraordinary general meeting of shareholders when necessary
or at the request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights.
In certain circumstances a three month extension may be granted by the Registrar of Companies to hold the Annual General Meeting.
The Annual General Meeting of the shareholders is generally convened by our Company Secretary pursuant to a resolution of the
board of directors. In addition, the Board may convene an Extraordinary General Meeting of shareholders when necessary or at the
request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights. Written
notice setting out the agenda of any meeting must be given at least 21 days prior to the date of the General Meeting to the
shareholders of record, excluding the days of mailing and date of the meeting. 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, and meetings
other than the Annual General Meeting may be held at any other place if so determined by the board of directors.



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



2014 Annual General Meeting



Our Annual General Meeting
for the fiscal year 2014 will be held on July 28, 2014 as decided by the Board of Directors at the registered office of our Company,
2nd Floor, Tidel Park, 4 Rajiv Gandhi Salai, Taramani, Chennai 600 113, India.



At the Annual General
Meeting, the shareholders shall approve the following items:



| | · | Adoption
                                         of audited financials for the fiscal year ended March 31, 2014 as per Indian GAAP.
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | · | Declaration
                                         of Dividend for the year ended March 31, 2014.
| | - | ---------------------------------------------------------------------------------------------------

| | · | Reappointment
                                         of Mr Ananda Raju Vegesna as director.
| | - | ---------------------------------------------------------------------------------------------

| | · | Reappointment
                                         of ASA & Associates as the statutory auditors.
| | - | -----------------------------------------------------------------------------------------------------

| | · | Appointment
                                         of Dr T H Chowdary as an Independent Director for a term of Five consecutive years from
                                         the conclusion of the 2014 Annual General Meeting.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Appointment
                                         of Dr S K Rao as an Independent Director for a term of Five consecutive years from the
                                         conclusion of the 2014 Annual General Meeting.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Appointment
                                         of Mr C B Mouli as an Independent Director for a term of Five consecutive years from
                                         the conclusion of the 2014 Annual General Meeting.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Appointment
                                         of Mr C E S Azariah as an Independent Director for a term of Five consecutive years from
                                         the conclusion of the 2014 Annual General Meeting.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Limitations on the Rights to Own Securities



The limitations on the
rights to own securities of Indian companies, including the rights of non-resident or foreign shareholders to hold securities,
are discussed in the section entitled “Ownership Restrictions” below.



Register of Shareholders; Record
Dates; Transfer of Shares



We maintain a register
of shareholders as required under the Indian Companies Act, 2013. 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 such as dividend, we may close the register of shareholders. The Indian 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 58 of the Indian Companies Act, 2013 and the listing agreement entered into between
the Company and relevant stock exchange on which the shares of the Company are listed. Since we are a public Company under Indian
law, the provisions of Section 58 will apply to us. Our Articles currently contain provisions that 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 30 days after receipt of the application for registration
of transfer by our Company. In accordance with the provisions of Section 58 of the Indian 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 National Company Law Tribunal.



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Pursuant to Section 58,
if a transfer of shares contravenes any of the provisions of the Indian Companies Act and Securities and Exchange Board of India
Act, 1992 or the regulations issued there under or the Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian
laws, the Tribunal may, on application made by the relevant Company, a depository incorporated in India, an investor, a participant,
or the Securities and Exchange Board of India or other parties, direct the rectification of the register, record of members and/or
beneficial owners. Pursuant to Section 58, the CLB/Tribunal 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 alleged contravention. Notwithstanding
such investigation, the rights of a shareholder to transfer the shares will not be restricted.



Under the Indian 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 Indian Companies Act and the rules there under together with delivery of the share certificates.
Our transfer agent is Citibank, N.A. - Mumbai branch.



Disclosure of Ownership Interest



Section 89 of the
Indian Companies Act requires holders on record who do not hold beneficial interests in shares of Indian companies to declare
to the Company certain details, including the nature of the holder's interest and details of the beneficial owner. Any person
who fails to make the required declaration within 30 days may be liable for a fine which may extend to ₹50 and where
the failure is a continuing one with a further fine which may extend to ₹ 1 for every day after the first during which
the failure continues.



Audit and Annual Report



Under the Indian Companies
Act, a Company must file its annual report with the Registrar of Companies within 7 months from the close of the accounting
year or within 30 days from the date of the Annual General Meeting, whichever is earlier. 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, profit and loss account and cash flow statement 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 Indian 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
Tamil Nadu, 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.



As per the directive of
the Ministry of Corporate Affairs, Government of India, effective fiscal year ended March 31, 2011 onwards, the Company is required
to file the audited financials in Extensible Business Reporting Language (XBRL) mode by using XBRL taxonomy.



Company Acquisition of Equity Shares



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 Indian Companies Act and the Securities
and Exchange Board of India (Buy-back of Securities) Regulations, 1998, or Buy-back Regulations.



Any ADS holder may participate
in a Company's purchase of its own shares by withdrawing his or her ADSs from the depository facility, acquiring equity shares
upon the withdrawal and then selling those shares back to the Company.



There can be no assurance
that equity shares offered by an ADS investor in any buyback of shares by us will be accepted by us. The regulatory approvals
required for ADS holders to participate in a buyback are not entirely clear. ADS investors are advised to consult their legal
advisors for advice prior to participating in any buyback by us, including advice related to any related regulatory approvals
and tax issues.



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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
and taxes, if any, as may be prescribed under the Indian Companies Act, 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.



Redemption of Equity Shares



Under the Indian Companies
Act, equity shares are not redeemable.



Discriminatory Provisions in Articles



There are no provisions
in our Articles of Association discriminating against any existing or prospective holder of such securities as a result of such
shareholder owning a substantial number of shares.



Alteration of Shareholder Rights



Under the Indian Companies
Act, and subject to the provisions of the articles of association of a Company, the rights of any class of shareholders can be
altered or varied (i) with the consent in writing of the holders of not less than three-fourths of the issued shares of that
class; or (ii) by special resolution passed at a separate meeting of the holders of the issued shares of that class. In the
absence of any such provision in the articles, such alteration or variation is permitted as long as it is not prohibited by the
agreement governing the issuance of the shares of that class.



Under the Indian Companies
Act, the articles of association may be altered by a special resolution of the shareholders



Provisions on Changes in Capital



Our authorized capital
can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares is subject to
the preemptive rights of the shareholders. In addition, a Company may increase its share capital, consolidate its share capital
into shares of larger face value than its existing shares or sub-divide its shares by reducing their par value, subject to an
ordinary resolution of the shareholders in a General Meeting.



Material Contracts



See the agreements listed
in Item 7, “Major Shareholders and Related Party Transactions” regarding our material contracts involving certain
of our officers and directors.



Exchange Controls



General



The subscription, purchase
and sale of shares of an Indian Company by Person Resident outside India (non-residents) are governed by various Indian laws regulating
the transfer or issue of Securities by the Company to non-residents. These regulations have been progressively relaxed in recent
years. Set forth below is a summary of various forms of investment, and the regulations applicable to each, including the requirements
under Indian law applicable to the issuance of ADSs.



Foreign Direct Investment



Foreign Direct Investment
(FDI) in India is governed by the FDI Policy announced by the Government of India and the provisions of the Foreign Exchange Management
Act (FEMA), 1999. Reserve Bank has issued Notification No. FEMA 20 /2000-RB dated May 3, 2000 which contains the Regulations in
this regard. This Notification has been amended from time to time. The various amendments are compiled every year in Master Circulars.
In terms of Master Circular issued in July 1, 2009, FDI is freely permitted in almost all sectors. Under the FDI Scheme, investments
can be made by non-residents in the shares / convertible debentures / preference shares of an Indian Company, through two routes;
the Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian Company does not require
any approval from the Reserve Bank or Government of India (RBI) for the investment. Under the Government Route, prior approval
of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required. The details of FDI are
contained in the policy and procedures in respect of FDI in India are available in "the Manual on Investing in India - Foreign
Direct Investment, Policy & Procedures".



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In terms of Master Circular
issued in April 2014, in most manufacturing / service sectors do not require prior approval of the FIPB, or the RBI, if the activity
of the investee-Company fulfill the conditions prescribed for Automatic Route. These conditions include certain eligibility norms,
pricing requirements, subscription in foreign exchange, compliance with the Takeover Code (as described below), and ownership
restrictions based on the nature of the foreign investor (as described below). Purchases by foreign investors of ADSs are treated
as direct foreign investment in the equity issued by Indian companies for such offerings. Foreign investment up to 100 % of our
share capital is currently permitted in telecom industry.



Subsequent Transfers



Restrictions for subsequent
transfers of shares of Indian companies between residents and non-residents were relaxed significantly as of October 2004. As
a result, for a transfer between a resident and a non-resident of securities of an Indian Company in the Telecom sector, such
as ours, no prior approval of either the RBI or the Government of India is required, as long as the terms and conditions set out
in A.P. (DIR Series) Circular No. 16 of October 4, 2004 is complied with. These conditions / procedure include compliance with
pricing guidelines, Consent letters from the Transaction Parties, applicability of regulatory requirements such as FDI and the
Takeover Code, filing Form FC TRS with Authorized Dealers (authorized bankers) with relevant enclosures and so on.



Transfers of shares or
convertible debenture, by way of sale or gift, between two non-residents are not subject to RBI approvals or pricing restrictions,
provided the buying non-residents do not have investment in similar business / collaboration / commercial arrangements in India.
If the buying non-residents have similar investment / collaboration / commercial arrangements in India, prior Government Approval
is required for such transaction.



Issue of shares by Indian companies
under ADR / GDR



i) Depository Receipts
(DRs) are negotiable securities issued outside India by a Depository bank, on behalf of an Indian Company, which represent the
local Rupee denominated equity shares of the Company held as deposit by a Custodian bank in India. DRs are traded on Stock Exchanges
in the US, Singapore, Luxembourg, etc. DRs listed and traded in the US markets are known as American Depository Receipts (ADRs)
and those listed and traded elsewhere are known as Global Depository Receipts (GDRs). In the Indian context, DRs are treated as
Foreign Direct Investment (FDI).



ii) Indian companies can
raise foreign currency resources abroad through the issue of ADRs/GDRs, in accordance with the Scheme for issue of Foreign Currency
Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government
of India thereunder from time to time.



iii) A Company can issue
ADRs / GDRs if it is eligible to issue shares to persons resident outside India (non-resident) under the FDI Scheme. However,
an Indian listed Company, which is not eligible to raise funds from the Indian Capital Market including a Company which has been
restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue
ADRs/GDRs.



iv) Unlisted companies,
which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous
listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued
ADRs/GDRs in the international market, have to list in the domestic market within three years of having started making profit.
Further, they are prohibited to issue further ADRs/GDRs till the listing in the domestic market is completed.



However, in September
2013, the Ministry of Finance, Government of India, liberalized the condition for Unlisted Indian Companies to raise capital abroad
without the requirement of prior or simultaneous listing in India initially for a period of two years in order to attract more
Foreign Direct Investment.



Takeover Code



Upon conversion of ADSs
into equity shares, a holder of ADSs will be subject to the Takeover Code as prescribed by the Securities and Exchange Board of
India.



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Reduction of limit for Overseas Direct
Investment



In terms of the extant provisions under the
Foreign Exchange Management Act, 1999 (FEMA, 1999) on overseas direct investments, the total overseas direct investment (ODI)
of an Indian Party in all its Joint Ventures (JVs) and / or Wholly Owned Subsidiaries (WOSs) abroad engaged in any bonafide business
activity should not exceed 400 per cent of the net worth of the Indian Party as on the date of the last audited balance sheet
under the Automatic Route.



As of September 2013, however, the Ministry
of Finance has decided,



| | a) | To reduce the existing limit of 400
                                         per cent of the net worth of the Indian Party to 100 per cent of its net worth under
                                         the Automatic Route (no pre-approval required). Accordingly, AD Category - I banks may
                                         allow overseas direct investments under the Automatic Route up to 100 per cent of the
                                         net worth of the Indian party, as on the date of the last audited balance sheet;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | To reduce the existing limit of 400
                                         per cent of the net worth of the Indian company, investing in the overseas unincorporated
                                         entities in the energy and natural resources sectors, under the automatic route, to 100
                                         per cent of the net worth of the Indian company investing in the overseas unincorporated
                                         entities in the energy and natural resources sectors, as on the date of last audited
                                         balance sheet; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Any ODI in excess of 100% of the net
                                         worth shall be considered under the Approval Route by the Reserve Bank of India.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



Fungibility of ADSs



A limited two-way fungibility
scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered
with SEBI, can purchase shares of an Indian Company from the market for conversion into ADRs/GDRs based on instructions received
from overseas investors. Re-issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which have been redeemed into
underlying shares and sold in the Indian market.



Currently, there is no
public trading market for our equity shares in India or elsewhere nor can we assure you that we will take steps to develop one.
Our equity securities are only traded on NASDAQ through the ADSs as described in this report. Under prior Indian laws and regulations,
our Depository 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 has announced fungibility regulations permitting,
under limited circumstances, 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, under present law, likely will 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. Under current Indian regulations and practice, the approval of the Reserve Bank of India is not required
for the sale of equity shares underlying ADSs by a non-resident India to a resident 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. The shareholders who intend transferring their equity shares shall
comply with the procedural requirements set out under the head ‘subsequent transfers’ above.



Transfer of ADSs and Surrender
of ADSs



A person resident outside
India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. An ADS holder
is permitted to surrender the ADSs held by him in an Indian Company and to receive the underlying equity shares under the terms
of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the Depository for ADSs may not
be permitted.



Government of India Approvals



Pursuant to the RBI's
regulations relating to sponsored ADS offerings, an issuer in India can sponsor the issue of ADSs through an overseas depository
against underlying equity shares accepted from holders of its equity shares in India. The guidelines specify, among other conditions,
that:

| | · | the
                                         ADSs must be offered at a price determined by the lead manager of such offering;
| | - | -----------------------------------------------------------------------------------------------------------------------------

| | · | all
                                         equity holders may participate;
| | - | ----------------------------------------------------------------------------



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| | · | the
                                         issuer must obtain special shareholder approval; and
| | - | -------------------------------------------------------------------------------------------------

| | · | the
                                         proceeds must be repatriated to India within one month of the closure of the issue.
| | - | --------------------------------------------------------------------------------------------------------------------------------



Ownership Restrictions



The Securities and Exchange
Board of India and Reserve Bank of India regulate Portfolio Investments in Indian Companies by Foreign Institutional Investors
and Non-Resident Indians, both 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, the aggregate of the investment by the Foreign Institutional
Investors can’t be more than 24% of the equity share capital of an Indian Company, and the aggregate of the investment by
the Non-Resident Indians can’t be more than 10% of the equity share capital of an Indian Company through Portfolio Investments.
The 24% and 10% limit referred above may be increased to 49% and 24% respectively on passing of a Special Resolution by the Shareholders
to that effect. Moreover, no single Foreign Institutional Investor may hold more than 10% of the shares of an Indian Company and
no single Non-Resident Indian 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, Every purchaser who acquires (directly
or indirectly) more than 5% of the equity share capital at any point of time (the aggregate of the existing shares and the newly
acquired shares) of a Listed Public Indian Company, is required to notify the Company within four days of such acquisition or
receipt of allotment information and the Company in turn is required to notify all the stock exchanges on which the shares of
the Company are listed with seven days.



Any purchaser whose proposed
acquisition entitled him to hold 15% (the aggregate of the existing shares and the newly acquired shares) or more of such shares
or a change in control of the Company, either by himself or with others acting in concert is required to make annual disclosures
of the purchaser’s holdings in the Company and to make an Open Offer to the other Shareholders offering to purchase at least
20% of all the outstanding shares of the Company at a minimum offer price as determined pursuant to the provisions of the regulations.
A purchaser who holds between 15 % and 75 % of a Company’s shares cannot acquire additional shares or voting rights that
would entitle the purchaser to exercise an additional 5.% 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 and rights 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 and foreign institutional
investors above the ownership levels set forth above require Government of India approval on a case-by-case basis.



Voting Rights of Deposited
Equity Shares Represented by ADSs



Holders of ADSs generally
have the right under the deposit agreement to instruct the depository bank to exercise the voting rights for the equity shares
represented by the related ADSs. At our request, the depository bank will mail to the holders of ADSs any notice of shareholders’
meeting received from us together with information explaining how to instruct the depository bank to exercise the voting rights
of the securities represented by ADSs.



If the depository 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 depository 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 depository bank receives voting instructions.



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Please note that the ability
of the depository 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 depository bank in a timely manner. Securities for which no voting instructions have been received will not
be voted except as discussed above.



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



Under Indian law, the
ADS holders have the right to vote on any general meetings either by show of hands or by poll only on becoming the Shareholder
of the Company by converting the ADS into equity shares of the Company.



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 summary is based on the law and practices of the Income-tax Act,1961, or Income-tax Act including the special tax regime
contained in Sections 115AC and 115 ACA of the Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares (through Depository Receipt Mechanism) Scheme, 1993 or the Scheme, as amended. The Income-tax Act is amended every year
by the Finance Act of the relevant year. Some or all of the tax consequences of Sections 115AC and 115ACA may be amended
or changed by future amendments to the Income-tax Act



This 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 at least 182 days; or at least 60 days and, within the four preceding years has been
in India for a period or periods amounting to at least 365 days.



The period of 60 days
referred to above shall be read as 182 days (i) in case of a citizen of India who leaves India in a previous year for
the purposes of employment outside of India or (ii) in the case of a citizen of India or a person of Indian origin living
abroad who visits India or (iii) a member of crew of Indian ship.



Taxation of Distributions.
The Finance Act, 2003 has inserted with effect from April 1, 2003, dividend income from domestic Company will be exempt
from tax in the hands of shareholders as the domestic companies will be liable to pay a dividend distribution tax at the rate
of 16.995 % inclusive of applicable surcharge and education cess. The Finance Act, 2008 introduced Section 115 O (1A) effective
April 1, 2008 under which a domestic Company, subject to certain conditions, can set off the dividend income received from its
subsidiary from the amount of dividend income declared by it to its shareholders and would therefore be liable to dividend distribution
tax only on the balance dividend after such set-off. Any distributions of additional ADSs or equity shares to resident or non-resident
holders 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 as it is not regarded as transfer under sec 47(xa)
of the Indian Income tax laws . Such acquisition will, however, give rise to a stamp duty as described below under “Stamp
Duty and Transfer Tax.”



Minimum Alternate Tax.
The Indian Government had introduced Section 115JA to the Income Tax Act which came into effect in April 1, 1997, to bring certain
zero tax companies under the ambit of a Minimum Alternative Tax, or MAT. If the taxable income of a Company computed under this
Act, in respect of a previous year was less than 30% of its book profits, the total income of such Company chargeable to tax for
the relevant previous year shall be deemed to be an amount equal to 30% of such book profits. Effective April 1, 2001, Finance
Act, 2000 introduced Section 115JB, pursuant to which the income of companies eligible for tax holiday under sections 10A or 10AA
of the Act was exempted from MAT. The amount of income to which any of the provisions of section 10A or section 10AA apply, was
reduced from the book profit for the purposes of calculation of income tax payable under the aforesaid section. The Finance Act,
2007 included income eligible for deductions under sections 10A and 10B of the Act in the computation of book profits for the
levy of MAT. The rate of MAT for domestic companies, effective April 1, 2007, was 11.33% (inclusive of applicable surcharge and
education cess) and levied on its book profits. The Income tax Act provides that the MAT paid by the companies can be adjusted
against its tax liability under the normal provisions of the Indian Income tax laws but limited to the extent that is over and
above the tax computed under MAT provisions over the next seven years which is being increased to 10 years by the Finance (No
2) Act 2009.The Finance Act (No 2) 2009 has increased the rate of MAT to 16.995%(inclusive of applicable surcharge and education
cess) and increased the number of years to 10 years to carry forward the MAT credit. The rate was increased to 20.96% by the Finance
Act 2013.



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Taxation of Capital
Gains. Any gain realized on the sale of ADSs by a non-resident holder to any non-resident outside India is not subject to
Indian capital gains tax as it is not regarded as transfer by virtue of section 47(viia) of Indian Income tax laws which is prerequisite
for taxing as capital gains.



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. However, the acquisition by non-resident holders of equity shares
in exchange for ADSs will not be subject to Indian capital gains tax. .When the sale of equity shares is liable to capital gain
tax the cost of acquisition for computing the tax is taken as the original cost of acquisition of the ADSs by virtue of the section
49(2A) of the Indian Income tax laws. 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 depository
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 10.30%.
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 41.20%. The actual rate of tax on short-term gain depends on a number of factors, including the country
of residence of the non-resident holder and the type of income chargeable in India.



Withholding Tax on
Capital Gains. Any taxable gain realized by a non-resident on the sale of ADSs or equity shares is to be withheld at the source
by the buyer. However, as per the provisions of Section 196D(2) of the Income Tax Act, no withholding tax is required to
be deducted from any income by way of capital gains arising to Foreign Institutional Investors as defined in Section 115AD
of the Income Tax Act on the transfer of securities defined in Section 115AD of the Income Tax Act.



Buy-back of Securities.
Indian companies are not subject to any tax on the buy-back of their shares. However, the shareholders will be taxed on any resulting
gains. We would be required to deduct tax at source according to the capital gains tax liability of a non-resident shareholder



Stamp Duty and Transfer
Tax. Upon issuance of the equity shares underlying our ADSs, we are 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 depository in exchange for ADSs,
the non-resident holder will be liable for Indian stamp duty at the rate of 0.25% 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 0.25% of the market value of
the equity shares on the trade date is payable, although customarily such duty is borne by the purchaser. Our equity shares, if
and when issued and traded in dematerialized form, 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 depository as
a fiduciary will be exempt from Indian wealth tax. Non-resident holders are advised to consult their own tax advisers in this
context.



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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. However, gift receipt
by non-relatives or firms or closely held companies would be taxed as income in the hands of the recipient under the Income tax
Act. Yet, gifts between non-residents (being transfers outside India) would not get taxed in India.



Service Tax. Brokerage
or commission paid to stock brokers in connection with the sale or purchase of shares is subject to a service tax of 12.36%. The
stock broker is responsible for collecting the service tax from the shareholder and paying it to the relevant authority



Income Tax Matters



The statutory corporate
income tax rate and the surcharge thereon are subject to change in line with the changes announced in the Union Budget each year.
For fiscal year 2014, the corporate income tax rate is 30%, subject to a surcharge of 10% where the taxable total income exceeds
₹ 10 crores (5% of the taxable total income is less than ₹ 10 crores but exceeds ₹ 1 crore) and education cess
of 2 % and 1% secondary and higher education cess, resulting in an effective tax rate of 33.99% (or 32.445%). We cannot assure
you that the current income tax rate will remain unchanged in the future. We also cannot assure you that the surcharge will be
in effect for a limited period of time or that additional surcharges will not be levied by the Government of India. Until April
1, 2002, dividends declared, distributed or paid by an Indian corporation were subject to a dividend tax of 10.2%, including the
applicable surcharge for fiscal 2002, of the total amount of the dividend declared, distributed or paid. This tax is not paid
by shareholders nor is it a withholding requirement, but rather it is a direct tax payable by the corporation before distribution
of a dividend. Effective April 1, 2002, Indian companies were no longer to be taxed on declared dividends. The Finance Act, 2003
proposed that after April 1, 2003, dividend income will be exempt from tax for shareholders and those domestic companies will
be liable to pay a dividend distribution tax at the rate of 12.5% plus a surcharge and education cess at the time of the distribution.
The Finance Act 2013 has increased the rate of dividend distribution tax to 15% plus applicable surcharge and education cess resulting
in an effective rate of 16.995%.



Material United States Federal Tax Consequences



The following is a summary
of certain material U.S. federal income tax consequences that may be relevant with respect to the acquisition, ownership and disposition
of equity shares or ADSs and is for general information only. This summary addresses the U.S. federal income tax considerations
of holders that are U.S. holders. U.S. holders are beneficial holders of equity shares or ADSs who are citizens or residents of
the U.S., or corporations (or other entities treated as corporations for U.S. federal tax purposes) created in or under the laws
of the U.S. 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 (a) for which a U.S. court exercises primary supervision and a U.S. person has the authority
to control all substantial decisions or (b) that was in existence on August 20, 1996 and has a valid election under applicable
U.S. Treasury regulations to be treated as a U.S. person. This summary is limited to U.S. holders who will hold equity shares
or ADSs as capital assets for U.S. federal income tax purposes (generally, assets held for investment). In addition, this summary
is limited to U.S. holders who are not resident in India for purposes of the Convention between the Government of the United States
of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income, the ‘Treaty’. If a partnership, including any entity treated as a partnership for
U.S. federal income tax purposes, holds the equity shares or ADSs, the tax treatment of a partner generally will depend upon the
status of the partner and upon the activities of the partnership. A partner in a partnership holding equity shares or ADSs should
consult his, her or its own tax advisor.



This summary does not
address tax considerations applicable to holders that may be subject to special tax rules, such as banks, insurance companies,
financial institutions, dealers in securities or currencies, tax-exempt entities, persons that will 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 shares 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 U.S. 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 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. We have not requested and will not request a
ruling from the Internal Revenue Service (the ‘IRS’) with respect to any of the U.S. federal income tax consequences
as described above, and as a result there can be no assurance that the IRS will not disagree with or challenge any conclusions
we have reached and described herein.



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EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS,
HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. 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 holders of equity shares represented by such ADSs



Dividends. Subject
to the discussion of the passive foreign investment company rules below, the gross amount of any distributions of cash or property
with respect to ADSs or equity shares (before reduction for any Indian withholding taxes) generally will be included 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
should be the date of receipt by the Depository, to the extent such distributions are made from the current or accumulated earnings
and profits (as determined under U.S. federal income tax principles), of our Company. 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 (as determined under U.S. federal income tax
principles) such excess will be treated first as a tax-free return of capital to the extent of the U.S. holder's tax basis in
the equity shares or ADSs, and thereafter as capital gain.



Subject to certain limitations,
including certain limitations based on taxable income and filing status, and subject to certain minimum holding period requirements,
dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are
deemed to be a 'qualified foreign corporation' for U.S. federal income tax purposes. A qualified foreign corporation includes
a foreign corporation if (1) its shares (or, according to legislative history, its ADSs) are readily tradable on an established
securities market in the U.S. or (2) it is eligible for the benefits under a comprehensive income tax treaty with the U.S.. In
addition, a corporation is not a qualified foreign corporation if it is a passive foreign investment company (as discussed below).
The ADSs are traded on the NASDAQ Global Market. Due to the absence of specific statutory provisions addressing ADSs, however,
there can be no assurance that we are a qualified foreign corporation solely as a result of our listing on NASDAQ Global Market.
Nonetheless, we may be eligible for benefits under the Treaty. Each U.S. holder should consult its own tax advisor regarding the
treatment of dividends and such holder's eligibility for a reduced rate of taxation.



U.S. holders that are
eligible for the benefits under the Treaty, may be able to claim a reduced rate of Indian withholding tax. U.S. holders should
consult their own tax advisor with respect to the eligibility for reduction of Indian withholding tax. U.S. holders may claim
a deduction or a foreign tax credit, subject to other applicable limitations, only for tax withheld at the appropriate tax rate.
U.S. holders should not be allowed to a foreign tax credit for withholding tax for any portion of the tax that could have been
avoided by claiming benefits under the Treaty. The rules governing the foreign tax credits are complex and involve the application
of rules that depend on the particular circumstances of each U.S. holder. Therefore, each U.S. holder should consult his, her
or its own tax advisor with respect to the availability of the foreign tax credit rules applicable to such U.S. holder’s
particular circumstances.



If dividends are paid
in Indian rupees, the amount of the dividend distribution included 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 included 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 U.S. source ordinary income or loss



Sale or Exchange of
Equity shares or ADSs. Subject to the discussion of the passive foreign investment company rules below, 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 U.S. dollar value
of the amount realized and the U.S. holder’s tax basis, determined in U.S. dollars, in the equity shares or ADSs. 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 limitation purposes. Therefore, U.S. holders may not be able to use any foreign tax credit arising from any
Indian tax imposed on the sale or exchange of equity shares or ADSs unless the credit can be applied (subject to applicable limitations)
against tax due on other foreign source income. The deductibility of capital losses may be subject to limitation.



U.S. holders who receive
any foreign currency on the sale or exchange of equity shares or ADSs may recognize ordinary income or loss as a result of currency
fluctuations between the date of the sale or exchange of the equity shares or ADSs and the date the sale proceeds are converted
into U.S. dollars.



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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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the purposes of this
test, such non-U.S. corporation will be treated as owning its proportionate share of the assets and earning its proportionate
share of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock.



We do not believe that
we satisfy either of the tests for passive foreign investment company status. Since this determination is made on an annual basis,
however, no assurance can be given that we will not be considered a passive foreign investment company in future taxable years.
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”
                                         (as that term is defined in relevant provisions of the U.S. tax laws), and on any gain
                                         on a sale or other disposition of equity shares or ADSs;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | if a “qualified
                                         electing fund” election is made (as that term is defined in relevant provisions
                                         of the U.S. tax laws), include in their taxable income their pro rata share of undistributed
                                         amounts of our income; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | if the equity shares
                                         are “marketable” (as that term is defined in relevant provisions of the U.S.
                                         tax laws), 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If a U.S. holder holds
equity shares or ADSs in any year in which we are a passive foreign investment company, that U.S. holder will be required to file
IRS Form 8621 (or similar such form) regarding distributions received on equity shares or ADSs and any gain realized on the disposition
of equity shares or ADSs.



Backup Withholding
Tax and Information Reporting Requirements. Dividends paid, if any, on equity shares of ADSs to a U.S. holder who is not an
“exempt recipient,” may be subject to information reporting and, unless a U.S. 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, exchange, redemption or other disposition of equity shares
or ADSs by a paying agent, including a broker, within the U.S. to a U.S. holder, other than an “exempt recipient.”
An “exempt recipient” includes a corporation. In addition, a paying agent within the U.S. will be required to backup
withhold 28% of any payments of the proceeds from the sale or redemption of equity shares or ADSs within the U.S. 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. Backup withholding is not an additional tax and may be refunded (or
credited against the U.S. holder’s U.S. federal income tax liability, if any), provided that certain required information
is furnished to the IRS. The information reporting requirements may apply regardless of whether withholding is required.



Certain U.S. holders
who are individuals may be required to report information relating to their ownership of an interest in certain foreign financial
assets, including stock of a non-U.S. person, generally on IRS Form 8938, subject to exceptions (including an exception for stock
held through a U.S. financial institution). U.S. holders should consult their tax advisors regarding their reporting obligations
with respect to our equity shares or ADSs.



The above summary is
not intended to constitute a complete analysis of all tax consequences relating to ownership of equity shares or ADSs. U.S. holders
should consult their own tax advisor concerning the tax consequences to them under U.S. federal State, local and applicable foreign
tax laws of the acquisition, ownership and disposition of equity shares or ADSs.



Documents on Display



This report and other
information filed or to be filed by us can be inspected and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549. Copies of these materials can also be obtained from the Public Reference Section of
the SEC, 100 F Street, NE., Washington, DC 20549, at prescribed rates. Additionally, all of our publicly filed SEC reports are
available at the SEC’s website, www.sec.gov, which contains all the public filings and other information regarding
registrants that make electronic filings with the SEC using its EDGAR system.



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Additionally, documents
referred to in this Annual Report may be inspected at our corporate offices which are located at Tidel Park. No, 4, Rajiv Gandhi
Salai, Taramani, Chennai, 600 113 India.



Item 11. Quantitative
and Qualitative Disclosures About Market Risk



General



Market risk is the risk
of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument.
The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates,
commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable
to all market risk sensitive financial instruments including investments, foreign currency receivables, payables and debt. Our
exposure to market risk is a function of our investment and borrowing activities and our revenue generating activities in foreign
currency. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss.



Risk Management Procedures



We manage market risk
through a corporate treasury department, which evaluates and exercises independent control over the entire process of market risk
management. Our corporate treasury department recommends risk management objectives and policies which are approved by senior
management and our Audit Committee. The activities of this department include management of cash resources, implementing hedging
strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies
on a daily basis.



Refer to note 38 of the
notes to consolidated financial statements to this Annual Report for further analysis and exposure arising out of credit risk,
liquidity risk and currency risk.



Item 12. Description
of Securities Other Than Equity Securities



Item 12(d).
American Depositary Shares



Citibank,
N.A. (the “Depositary”) serves as the depositary for our ADSs, pursuant to that certain Deposit Agreement by and between
the Company and the Depositary, dated as October 18, 1999, as amended from time to time. ADS holders are required to pay various
fees to the Depositary and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee
has been paid. For purposes of this section, “Shares” means the Company’s equity shares.



The fees and charges payable
by holders of our ADSs include the following:



| | (i) | a fee not in excess of US $5.00
                                         per 100 ADSs is charged for each issuance of ADS upon deposit of Shares, excluding certain
                                         issuances described below;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | a fee not in excess of US
                                         $5.00 per 100 ADSs is charged for each surrender of ADSs, property and cash in exchange
                                         for the underlying deposited securities;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | a fee not in excess of US
                                         $2.00 per 100 ADSs for each distribution of cash dividend or other cash distribution
                                         pursuant to the deposit agreement;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | a fee not in excess of US
                                         $2.00 per 100 ADSs for the distribution of ADSs pursuant to stock dividends or other
                                         free distributions or an exercise of rights; and
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | a fee not in excess of $5.00
                                         per 100 ADSs for depositary services.
| | --- | -----------------------------------------------------------------------------------------------------------



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Additionally, under the
terms of our deposit agreement, the depositary is entitled to charge each registered holder, beneficial owner, persons depositing
Shares and person surrendering ADS for cancellation and for the purpose of withdrawing deposited securities the following:



(i)   taxes
(including applicable interest and penalties) and other governmental charges;



(ii)  such
registration fees as may from time to time be in effect for the registration of shares or other deposited securities on the share
register and applicable to transfers of shares or other deposited securities to or from the name of the custodian, the Depositary
or any nominees upon the making of deposits and withdrawals, respectively;



(iii) such cable,
telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense
of the person depositing shares or holders and beneficial owners of ADSs;



(iv)  the expenses
and charges incurred by the Depositary in the conversion of foreign currency;



(v)  such fees
and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory
requirements applicable to shares, deposited securities, ADSs and ADRs; and



(vi)  the fees
and expenses incurred by the Depositary in connection with the delivery of deposited securities.



If any tax or other governmental charge is
payable by the holders and/or beneficial owners of ADSs to the depositary, the depositary, the custodian or the Company may withhold
or deduct from any distributions made in respect of deposited securities and may sell for the account of the holder and/or beneficial
owner any or all of the deposited securities and apply such distributions and sale proceeds in payment of such taxes (including
applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any
deficiency.



Direct and Indirect Payments by the Depositary
to Sify



Pursuant to the Deposit
Agreement with Citibank N.A, we received the following payments from Citibank during the fiscal year ended March 31, 2014 in connection
with our ADS Program:



|Fee                                    |  | Amount
    in $USD |           
|-------------------------------------- |  | ------------------ | ----------
|Financial Audit Fees                   |  | $                  | 72,599.89 
|Legal Counsel Fees                     |  | $                  | 46,389.28 
|Investor  Relations                    |  | $                  | 63,310.12 
|Internet , telephone  and mail charges |  | $                  | 296.68    
|Printing/mailing/processing            |  | $                  | 58,625.66 
|Text Conversion charges & others       |  | $                  | 900.00    
|Total amount reimbursed                |  | $                  | 242,121.63



PART II



Item 13. Defaults,
Dividend Arrearages and Delinquencies



Not applicable.



Item 14. Material
Modifications to the Rights of Security Holders and Useof Proceeds



None



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Item 15. Controls
and procedures



Disclosure Controls and Procedures



As of the end of the period
covered by this Annual Report on Form 20-F, our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, has carried out an evaluation of the effectiveness of our disclosure controls and procedures. The term “disclosure
controls and procedures” means controls and other procedures that are designed to ensure that information required to be
disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded,
processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by
us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our chief
executive officer and chief financial officer, as appropriate to allow timely decisions regarding our required disclosure. In
designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter
how well conceived and operated, can only provide reasonable assurance that the objectives of the disclosure controls and procedures
are met.



Based on their evaluation
as of March 31, 2014, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities
and Exchange Commission rules and forms and that material information related to us and our consolidated subsidiaries is accumulated
and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions about required disclosure



Management’s annual report on internal
control over financial reporting





|1) | Our management is responsible for establishing and maintaining adequate internal control over
    financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial
    reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation
    of financial statements for external purposes in accordance with International Financial Reporting Standards, as issued by
    the International Accounting Standards Board. Our internal control over financial reporting includes those policies and procedures
    that:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | pertain
                                         to the maintenance of records that, in reasonable detail, accurately and fairly reflect
                                         the transactions and dispositions of our assets.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | provide
                                         reasonable assurance that transactions are recorded as necessary to permit preparation
                                         of financial statements in accordance with applicable accounting principles, and that
                                         our receipts and expenditures are being made only in accordance with authorizations of
                                         our management and directors; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | provide
                                         reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
                                         use or disposition of our assets that could have a material effect on the financial statements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | 2) | Management assessed the effectiveness
                                         of our internal control over financial reporting as of March 31, 2014. In conducting
                                         its assessment of internal control over financial reporting, management based its evaluation
                                         on the framework in Internal Control — Integrated Framework issued by the Committee
                                         of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment,
                                         management has concluded that our internal control over financial reporting was effective
                                         as of March 31, 2014.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | Our independent registered public accounting
                                         firm, ASA & Associates LLP, has audited the consolidated financial statements included
                                         in this Annual Report on Form 20-F, and as part of their audit, has issued their report,
                                         included herein, on the effectiveness of our internal control over financial reporting
                                         as of March 31, 2014.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Report of Independent Registered Public Accounting
Firm



The Board of Directors and Stockholders



Sify Technologies Limited



We have audited Sify Technologies Limited’s
(“the Company”) internal control over financial reporting as of March 31, 2014, based on criteria established
in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.



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



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



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



In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of March 31, 2014, based on criteria established
in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.



We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of
the Company as of March 31, 2014 and March 31, 2013 and the related consolidated statements of income, comprehensive
income, changes in equity and cash flows for each of the years in the three-year period ended March 31, 2014 and our report
dated July 18, 2014 expressed an unqualified opinion on those consolidated financial statements.



ASA & Associates LLP

Independent Registered Public Accounting Firm

Chennai,India
July 18, 2014



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Changes in
internal control over financial reporting



During the period covered by this Annual Report,
there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely
to materially affect our internal control over financial reporting.



Item 16A.
Audit Committee financial expert



Mr. C. B. Mouli, a member
of our audit committee, has been deemed “independent” per the applicable SEC and NASDAQ rules. The Board of Directors
has determined that Mr Mouli is the “audit committee financial expert” as defined by the applicable rules of the SEC.



Item
16 B. Code of Ethics



The Company has adopted
a Code of Conduct and Conflict of Interest Policy that is applicable to all employees. The text of the policy was filed as an
Exhibit under Item 19 to the Annual Report for the year ended March 31, 2005. This policy is available on our corporate website
www.sifycorp.com.



We have also adopted a written Code of Ethics,
as defined in Item 406 of Regulation S-K, applicable to our principal executive officer, principal financial officer, principal
accounting officer and all officers working in our finance, accounting, treasury, tax, legal, purchase, investor relations functions,
disclosure committee members, and senior management, as well as members of the audit committee and the board of directors. This
policy is available in our www.sifycorp.com. We will post any amendments to, or waivers from, our Code of Ethics at that location
on our website.



Our Audit Committee has
also adopted a Whistleblower Policy wherein it has established procedures for receiving, retaining and treating complaints received,
and procedures for the confidential, anonymous submission by employees of complaints regarding questionable accounting or auditing
matters, conduct which results in a violation of law by Sify or in a substantial mismanagement of Company resources. Under this
policy, our employees are encouraged to report questionable accounting matters, any reporting of fraudulent financial information
to our shareholders, the government or the financial markets any conduct that results in a violation of law by Sify to our management
(on an anonymous basis, if employees so desire). Under this policy, we have prohibited discrimination, retaliation or harassment
of any kind against any employee who, based on the employee's reasonable belief that such conduct or practices have occurred or
are occurring, reports that information or participates in an investigation.



We have also adopted a
Code of Conduct, applicable to all officers, directors and employees. The Code of Conduct is available on our website, www.sifycorp.com.



Item 16C. Principal
Accountant Fees and Services



The following table sets
forth for the fiscal years indicated the fees paid to our principal accountant and its associated entities for various services
provided us in these periods.



|Type
    of Service    |  | Fiscal
    year ended |               
|---------------------- |  | --------------------- | --------------
|                       |  | march
    31,  2014   |               
|(a) Audit Fees         |  |                       | ₹ 4.50 million
|(b) Audit Related Fees |  |                       | Nil           
|(c) Tax Fees           |  |                       | Nil           
|(d) All Other Fees     |  |                       | Nil           



Our Audit Committee requires
pre-approval of all audit and permissible non-audit services to be performed for the Company by its independent auditors, subject
to the de-minims exception for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange act of 1934.



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Item 16D. Exemptions
from the Listing Standards for Audit Committees



We have not sought any
exemption from the listing standards for audit committees applicable to us as foreign private issuer, pursuant to Rule 10(A)-3(d)
of the Securities Exchange Act of 1934.



Item 16E. Purchase
of Equity Securities by the Issuer and AffiliatedPurchasers



None.



Item 16F : Change
in Registrant’s Certifying Accountant



None.



Item 16 G. Corporate
Governance



NASDAQ Marketplace Rule
5615(a) (3) provides that a foreign private issuer may follow its home country practice in lieu of the requirements of Rule 5600
series, provided such foreign private issuer shall disclose in its annual reports filed with SEC or on its website each requirement
that it does not follow and describe the home country practice followed by the issuer in lieu of such requirements.



Under the NASDAQ Marketplace
Rule 5620 (c), companies, other than limited partnerships, that maintain a listing on NASDAQ are required to provide for
a quorum as specified in its by-laws for any meeting of its stockholders, and in no case shall the quorum be less than 33-1/3%
of the outstanding shares of a Company's common voting stock. In India, the requirement for a quorum is the presence of at least
five shareholders in person. Our Articles of Association provide that a quorum for a General Meeting of our shareholders is constituted
by the presence of at least five shareholders in person. Hence, we do not meet the quorum requirements under Rule 5620 (c),
and instead we follow our home country practice. Under the NASDAQ Marketplace Rule 5620 (b), companies, other than limited
partnerships, that maintain a listing on NASDAQ are required to solicit proxies and provide proxy statements for all meetings
of shareholders and also provide copies of such proxy solicitation to NASDAQ. However, the SEC proxy rules are not applicable
to us, since we are a foreign private issuer, and Section 176 of the Indian Companies Act prohibits a Company incorporated
under that Act from soliciting proxies. Because we are prohibited from soliciting proxies under Indian law, we will not meet the
proxy solicitation requirement of Rule 5620 (b). However, as described above, we give written notices of all our shareholder
meetings to all the shareholders and we also file such notices with the SEC. With regard to issuance of securities, we also comply
with the home country regulations.



Item 16 H. Mine
safety disclosure



Not Applicable



PART
III



Item 17.
Financial Statements



See Item No 18



Item 18.
Financial Statements



Consolidated Statements and other Financial
Information



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Report of Independent Registered Public
Accounting Firm



The Board of Directors and Stockholders

Sify Technologies Limited



We have audited the accompanying consolidated
statement of financial position of Sify Technologies Limited and its subsidiaries(‘the Company’) as of March 31,
2014 and 2013 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each
of the years in the three-year period ended March 31,2014. These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements, based
on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 audit provides a reasonable basis for our opinion.



In our opinion, based on our audit, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of Sify Technologies Limited
and its subsidiaries as of March 31, 2014 and 2013 and the results of their operations and their cash flows for each of the
years in the three-year period ended March 31, 2014, in conformity with the International Financial Reporting Standards as
issued by the International Accounting Standards Board.



We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), Sify Technologies Limited’s internal control
over financial reporting as of March 31, 2014, based on criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated July 18, 2014
expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.



|ASA & Associates LLP                          | 
|--------------------------------------------- | 
|Independent Registered Public Accounting Firm | 
|Chennai,India                                 | 
|July 18, 2014                                 | 



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Sify Technologies Limited

Consolidated Statement of Financial Position



(In thousands of Rupees, except share data and
as 
otherwise stated)



|                                                           |  |      |  | As at March 31, |             |   | As at March 31, | 
|---------------------------------------------------------- |  | ---- |  | --------------- | ----------- | - | --------------- | 
|                                                           |  | Note |  | 2014 ₹          |             |   | 2013 ₹          | 
|                                                           |  |      |  |                 |             |   |                 | 
|Assets                                                     |  |      |  |                 |             |   |                 | 
|Property, plant and equipment                              |  | 5    |  |                 | 5,603,130   |   |                 | 
|Intangible assets                                          |  | 6    |  |                 | 559,436     |   |                 | 
|Lease prepayments                                          |  | 9    |  |                 | 835,635     |   |                 | 
|Other assets                                               |  | 10   |  |                 | 603,940     |   |                 | 
|Other investments                                          |  | 15   |  |                 | 1,710       |   |                 | 
|Deferred tax assets                                        |  | 11   |  |                 | -           |   |                 | 
|Total non-current assets                                   |  |      |  |                 | 7,603,851   |   |                 | 
|                                                           |  |      |  |                 |             |   |                 | 
|Inventories                                                |  | 12   |  |                 | 200,829     |   |                 | 
|Trade and other receivables, net                           |  | 13   |  |                 | 4,875,533   |   |                 | 
|Prepayments for current assets                             |  | 14   |  |                 | 164,023     |   |                 | 
|Restricted cash                                            |  | 8    |  |                 | 210,223     |   |                 | 
|Cash and cash equivalents                                  |  | 8    |  |                 | 1,059,904   |   |                 | 
|Total current assets                                       |  |      |  |                 | 6,510,512   |   |                 | 
|Non-current assets held for sale                           |  |      |  |                 | -           |   |                 | 
|Total assets                                               |  |      |  |                 | 14,114,363  |   |                 | 
|                                                           |  |      |  |                 |             |   |                 | 
|Equity                                                     |  | 16   |  |                 |             |   |                 | 
|Share capital                                              |  |      |  |                 | 1,423,125   |   |                 | 
|Share premium                                              |  |      |  |                 | 18,474,481  |   |                 | 
|Share based payment reserve                                |  |      |  |                 | 224,196     |   |                 | 
|Other components of equity                                 |  |      |  |                 | 54,070      |   |                 | 
|Accumulated deficit                                        |  |      |  |                 | (13,220,219 | ) |                 | 
|Total equity attributable to equity holders of the Company |  |      |  |                 | 6,955,653   |   |                 | 



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Sify Technologies Limited

Consolidated Statement of Financial Position

(In thousands of Rupees, except share data and
as 
otherwise stated)



|                                                           |  |      |  | As at March 31, |            |  | As at March 31, | 
|---------------------------------------------------------- |  | ---- |  | --------------- | ---------- |  | --------------- | 
|                                                           |  | Note |  | 2014 ₹          |            |  | 2013 ₹          | 
|                                                           |  |      |  |                 |            |  |                 | 
|Liabilities                                                |  |      |  |                 |            |  |                 | 
|Finance lease obligations, other than current installments |  | 17   |  |                 | 701,164    |  |                 | 
|Borrowings                                                 |  | 20   |  |                 | 586,558    |  |                 | 
|Employee benefits                                          |  | 18   |  |                 | 38,635     |  |                 | 
|Other liabilities                                          |  | 19   |  |                 | 432,051    |  |                 | 
|Total non-current liabilities                              |  |      |  |                 | 1,758,408  |  |                 | 
|                                                           |  |      |  |                 |            |  |                 | 
|Finance lease obligations, current installments            |  | 17   |  |                 | 352,688    |  |                 | 
|Borrowings                                                 |  | 20   |  |                 | 846,511    |  |                 | 
|Bank overdraft                                             |  | 8    |  |                 | 637,347    |  |                 | 
|Trade and other payables                                   |  | 21   |  |                 | 2,895,978  |  |                 | 
|Deferred income                                            |  | 22   |  |                 | 667,778    |  |                 | 
|Total current liabilities                                  |  |      |  |                 | 5,400,302  |  |                 | 
|                                                           |  |      |  |                 |            |  |                 | 
|Total liabilities                                          |  |      |  |                 | 7,158,710  |  |                 | 
|Total equity and liabilities                               |  |      |  |                 | 14,114,363 |  |                 | 



The accompanying notes form an integral part
of these consolidated financial statements



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Sify Technologies Limited

Consolidated Statement of Income

(In thousands of Rupees, except share data and
as 
otherwise stated)



|                                                                 |  |       |  | Year ended March 31, |            |   | Year ended March 31, | 
|---------------------------------------------------------------- |  | ----- |  | -------------------- | ---------- | - | -------------------- | 
|                                                                 |  | Note  |  | 2014 ₹               |            |   | 2013 ₹               | 
|                                                                 |  |       |  |                      |            |   |                      | 
|Revenue                                                          |  |       |  |                      |            |   |                      | 
|- Rendering of services                                          |  |       |  |                      | 9,966,404  |   |                      | 
|- Sale of products                                               |  |       |  |                      | 493,825    |   |                      | 
|Total                                                            |  | 23    |  |                      | 10,460,229 |   |                      | 
|Cost of goods sold and services rendered                         |  |       |  |                      |            |   |                      | 
|- Rendering of services                                          |  |       |  |                      | (5,643,940 | ) |                      | 
|- Sale of products                                               |  |       |  |                      | (492,920   | ) |                      | 
|Total                                                            |  | 25    |  |                      | (6,136,860 | ) |                      | 
|Other income                                                     |  | 26    |  |                      | 93,461     |   |                      | 
|Selling, general and administrative expenses                     |  | 27    |  |                      | (2,739,813 | ) |                      | 
|Depreciation and amortization                                    |  | 5 & 6 |  |                      | (1,101,243 | ) |                      | 
|Impairment loss on intangibles including goodwill                |  | 6     |  |                      | -          |   |                      | 
|Profit / (loss) from operating activities                        |  |       |  |                      | 575,774    |   |                      | 
|Finance income                                                   |  | 30    |  |                      | 120,248    |   |                      | 
|Finance expenses                                                 |  | 30    |  |                      | (377,622   | ) |                      | 
|Net finance income / (expense)                                   |  | 30    |  |                      | (257,374   | ) |                      | 
|Profit from sale of equity accounted investee and rights therein |  | 7     |  |                      | -          |   |                      | 
|Share of profit of equity accounted investee                     |  | 7     |  |                      |            |   |                      | 
|Profit / (loss) before tax                                       |  |       |  |                      | 318,400    |   |                      | 
|Income tax (expense) / benefit                                   |  | 11    |  |                      | -          |   |                      | 
|Profit / (loss) for the year                                     |  |       |  |                      | 318,400    |   |                      | 
|Attributable to:                                                 |  |       |  |                      |            |   |                      | 
|Equity holders of the Company                                    |  |       |  |                      | 318,400    |   |                      | 
|Non-controlling interest                                         |  |       |  |                      | -          |   |                      | 
|                                                                 |  |       |  |                      | 318,400    |   |                      | 
|Earnings / (loss) per share                                      |  | 31    |  |                      |            |   |                      | 
|Basic earnings /(loss) per share                                 |  |       |  |                      | 2.33       |   |                      | 
|Diluted earnings/(loss) per share                                |  |       |  |                      | 2.33       |   |                      | 



The accompanying notes
form an integral part of these consolidated financial statements



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Sify Technologies Limited

Consolidated Statement of Comprehensive Income

(In thousands of Rupees, except share data and
as 
otherwise stated)



|                                                                           |  |      |  | Year ended March 31, |         |  |        | 
|-------------------------------------------------------------------------- |  | ---- |  | -------------------- | ------- |  | ------ | 
|                                                                           |  | Note |  | 2014 ₹               |         |  | 2013 ₹ | 
|                                                                           |  |      |  |                      |         |  |        | 
|Profit  / (loss) for the year                                              |  |      |  |                      | 318,400 |  |        | 
|                                                                           |  |      |  |                      |         |  |        | 
|Other comprehensive income                                                 |  |      |  |                      |         |  |        | 
|Items that will not be reclassified to profit or loss                      |  |      |  |                      |         |  |        | 
|Re-measurement of defined benefit plans                                    |  |      |  |                      | 23,806  |  |        | 
|Items that will be reclassified to profit or loss                          |  |      |  |                      |         |  |        | 
|Foreign currency translation differences for foreign operations            |  |      |  |                      | 850     |  |        | 
|Share of gains and (losses) from equity accounted investees (net of taxes) |  |      |  |                      | -       |  |        | 
|Other comprehensive income for the year, net of income
    tax             |  |      |  |                      | 24,656  |  |        | 
|                                                                           |  |      |  |                      |         |  |        | 
|Total comprehensive income for the year                                    |  | 16   |  |                      | 343,056 |  |        | 
|                                                                           |  |      |  |                      |         |  |        | 
|Attributable to:                                                           |  |      |  |                      |         |  |        | 
|Equity holders of the Company                                              |  |      |  |                      | 343,056 |  |        | 
|Non-controlling interest                                                   |  |      |  |                      | -       |  |        | 
|Total comprehensive income/(expense) for the year                          |  |      |  |                      | 343,056 |  |        | 



The accompanying notes form an integral part
of these consolidated financial statements



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Sify Technologies Limited

Consolidated Statement of Changes in Equity

(In thousands of Rupees, except share data and
as otherwise stated)



For year ended March 31, 2014



|Particulars                                               |  | Sharecapital |           |  | Sharepremium |  |            | Sharebasedpaymentreserve |  |  | Othercomponentsof equity |   |  | Retainedearnings /(accumulateddeficit) |        |  | Total |  |             | Non-controllinginterest |  |  | Total equity | 
|--------------------------------------------------------- |  | ------------ | --------- |  | ------------ |  | ---------- | ------------------------ |  |  | ------------------------ | - |  | -------------------------------------- | ------ |  | ----- |  | ----------- | ----------------------- |  |  | ------------ | 
|Balance at April 1, 2013                                  |  |              | 1,329,203 |  |              |  | 18,267,148 |                          |  |  | 224,276                  |   |  |                                        | 29,414 |  |       |  | (13,538,619 | )                       |  |  | 6,311,422    | 
|Total comprehensive income for the year                   |  |              | -         |  |              |  | -          |                          |  |  | -                        |   |  |                                        | 24,656 |  |       |  | 318,400     |                         |  |  | 343,056      | 
|Transactions with owners, recorded directly in
    equity |  |              |           |  |              |  |            |                          |  |  |                          |   |  |                                        |        |  |       |  |             |                         |  |  |              | 
|Issue of share capital                                    |  |              | 93,922    |  |              |  | 207,208    |                          |  |  | -                        |   |  |                                        | -      |  |       |  | -           |                         |  |  | 301,130      | 
|Share-based payment transactions                          |  |              | -         |  |              |  | 125        |                          |  |  | (80                      | ) |  |                                        | -      |  |       |  | -           |                         |  |  | 45           | 
|Balance at March 31, 2014                                 |  |              | 1,423,125 |  |              |  | 18,474,481 |                          |  |  | 224,196                  |   |  |                                        | 54,070 |  |       |  | (13,220,219 | )                       |  |  | 6,955,653    | 



For year ended March 31, 2013



|Particulars                                               |  | Sharecapital |           |  | Sharepremium |  |            | Sharebasedpaymentreserve |  |  | Othercomponentsof equity |  |  | Retainedearnings /(accumulateddeficit) |        |  | Total |  |             | Non-controllinginterest |  |  | Total equity | 
|--------------------------------------------------------- |  | ------------ | --------- |  | ------------ |  | ---------- | ------------------------ |  |  | ------------------------ |  |  | -------------------------------------- | ------ |  | ----- |  | ----------- | ----------------------- |  |  | ------------ | 
|Balance at April 1, 2012                                  |  |              | 1,329,203 |  |              |  | 18,267,148 |                          |  |  | 221,710                  |  |  |                                        | 22,781 |  |       |  | (13,990,188 | )                       |  |  | 5,850,654    | 
|Total comprehensive income for the year                   |  |              | -         |  |              |  | -          |                          |  |  | -                        |  |  |                                        | 6,633  |  |       |  | 451,569     |                         |  |  | 458,202      | 
|Transactions with owners, recorded directly in
    equity |  |              |           |  |              |  |            |                          |  |  |                          |  |  |                                        |        |  |       |  |             |                         |  |  |              | 
|Issue of share capital                                    |  |              | -         |  |              |  | -          |                          |  |  | -                        |  |  |                                        | -      |  |       |  | -           |                         |  |  | -            | 
|Share-based payment transactions                          |  |              | -         |  |              |  | -          |                          |  |  | 2,566                    |  |  |                                        | -      |  |       |  | -           |                         |  |  | 2,566        | 
|Balance at March 31, 2013                                 |  |              | 1,329,203 |  |              |  | 18,267,148 |                          |  |  | 224,276                  |  |  |                                        | 29,414 |  |       |  | (13,538,619 | )                       |  |  | 6,311,422    | 



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Sify Technologies Limited

Consolidated Statement of Changes in Equity

(In thousands of Rupees, except share data and
as otherwise stated)



For year ended March 31, 2012



|Particulars                                               |  | Sharecapital |           |  | Sharepremium |  |            | Sharebasedpaymentreserve |  |  | Othercomponentsof equity |  |  | Retainedearnings /(accumulateddeficit) |        |  | Total |  |             | Non-controllinginterest |  |  | Total equity |  
|--------------------------------------------------------- |  | ------------ | --------- |  | ------------ |  | ---------- | ------------------------ |  |  | ------------------------ |  |  | -------------------------------------- | ------ |  | ----- |  | ----------- | ----------------------- |  |  | ------------ | -
|Balance at April 1, 2011                                  |  |              | 858,832   |  |              |  | 17,216,121 |                          |  |  | 190,325                  |  |  |                                        | 7,365  |  |       |  | (13,606,851 | )                       |  |  | 4,665,792    |  
|Total comprehensive income for the year                   |  |              | -         |  |              |  | -          |                          |  |  | -                        |  |  |                                        | 15,416 |  |       |  | (383,337    | )                       |  |  | (367,921     | )
|Transactions with owners, recorded directly in
    equity |  |              |           |  |              |  |            |                          |  |  |                          |  |  |                                        |        |  |       |  |             |                         |  |  |              |  
|Issue of share capital                                    |  |              | 470,371   |  |              |  | 1,051,027  |                          |  |  | -                        |  |  |                                        | -      |  |       |  | -           |                         |  |  | 1,521,398    |  
|Share-based payment transactions                          |  |              | -         |  |              |  | -          |                          |  |  | 31,385                   |  |  |                                        | -      |  |       |  | -           |                         |  |  | 31,385       |  
|Balance at March 31, 2012                                 |  |              | 1,329,203 |  |              |  | 18,267,148 |                          |  |  | 221,710                  |  |  |                                        | 22,781 |  |       |  | (13,990,188 | )                       |  |  | 5,850,654    |  



The accompanying notes form an integral part
of these consolidated financial statements.



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Sify Technologies Limited

Consolidated Statements of Cash Flows

For the fiscal years ended March 31,

(In thousands of Rupees, except share data and
as otherwise stated)



|                                                                   |  | Year ended March 31, |            |   |        | 
|------------------------------------------------------------------ |  | -------------------- | ---------- | - | ------ | 
|                                                                   |  | 2014 ₹               |            |   | 2013 ₹ | 
|                                                                   |  |                      |            |   |        | 
|Profit/(loss) for the year                                         |  |                      | 318,400    |   |        | 
|Adjustments for:                                                   |  |                      |            |   |        | 
|Depreciation and amortization                                      |  |                      | 1,101,243  |   |        | 
|Customs duty credit entitlement written off                        |  |                      | 26,391     |   |        | 
|Share of profit of equity accounted investee                       |  |                      | -          |   |        | 
|Profit on sale of equity accounted investee                        |  |                      | -          |   |        | 
|(Gain) / loss on sale of property, plant and equipment             |  |                      | (1,115     | ) |        | 
|Provision for doubtful receivables                                 |  |                      | 208,993    |   |        | 
|Stock compensation expense                                         |  |                      | 45         |   |        | 
|Net finance (income) / expense                                     |  |                      | 257,374    |   |        | 
|Write down in value of inventory to NRV                            |  |                      | -          |   |        | 
|Unrealized (gain)/ loss on account of exchange differences         |  |                      | 8,433      |   |        | 
|Amortization of leasehold prepayments                              |  |                      | 14,276     |   |        | 
|Cash flow from operating activities before working capital changes |  |                      | 1,934,040  |   |        | 
|                                                                   |  |                      |            |   |        | 
|Change in trade and other receivables                              |  |                      | (1,347,378 | ) |        | 
|Change in inventories                                              |  |                      | (14,163    | ) |        | 
|Change in other assets                                             |  |                      | (490,856   | ) |        | 
|Change in trade and other payables                                 |  |                      | 677,501    |   |        | 
|Change in employee benefits                                        |  |                      | 10,212     |   |        | 
|Change in deferred income                                          |  |                      | 145,566    |   |        | 
|Cash generated from operations                                     |  |                      | 914,922    |   |        | 
|Income taxes (paid)/ refund received                               |  |                      | 53,519     |   |        | 
|Net cash from / (used in) operating activities                     |  |                      | 968,441    |   |        | 



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Sify Technologies Limited

Consolidated Statements of Cash Flows

For the fiscal years ended March 31,

(In thousands of Rupees, except share  and
per 
share data and as otherwise stated)



|                                                                                    |  | Year ended March 31, |          |   |        | 
|----------------------------------------------------------------------------------- |  | -------------------- | -------- | - | ------ | 
|                                                                                    |  | 2014 ₹               |          |   | 2013 ₹ | 
|                                                                                    |  |                      |          |   |        | 
|Cash flows from / (used in) investing activities                                    |  |                      |          |   |        | 
|Acquisition of property, plant and equipment                                        |  |                      | (890,594 | ) |        | 
|Expenditure on intangible assets                                                    |  |                      | (38,918  | ) |        | 
|Proceeds from sale of property, plant and equipment                                 |  |                      | 5,833    |   |        | 
|Proceeds from sale of share in associate and rights therein                         |  |                      | -        |   |        | 
|Payment towards purchase of unquoted equity shares                                  |  |                      | -        |   |        | 
|Finance income received                                                             |  |                      | 116,995  |   |        | 
|Short term investments (net)                                                        |  |                      | -        |   |        | 
|Net cash from / (used in) investing activities                                      |  |                      | (806,684 | ) |        | 
|                                                                                    |  |                      |          |   |        | 
|Cash flows from / (used in) financing activities                                    |  |                      |          |   |        | 
|Proceeds from issue of share capital (including share premium)                      |  |                      | 300,000  |   |        | 
|Proceeds from issue of shares on exercise of ASOP (including share premium)         |  |                      | 1,131    |   |        | 
|Proceeds from / (repayment) of  borrowings (net)                                    |  |                      | 297,009  |   |        | 
|Finance expenses paid                                                               |  |                      | (373,137 | ) |        | 
|Proceeds from / (repayment of) finance lease liabilities                            |  |                      | (110,004 | ) |        | 
|Net cash from / (used in) financing activities                                      |  |                      | 114,999  |   |        | 
|                                                                                    |  |                      |          |   |        | 
|Net increase / (decrease) in cash and cash equivalents                              |  |                      | 276,756  |   |        | 
|Cash and cash equivalents at April 1                                                |  |                      | 356,446  |   |        | 
|Effect of exchange fluctuations on cash held                                        |  |                      | (422     | ) |        | 
|Cash and cash equivalents at March 31                                               |  |                      | 632,780  |   |        | 
|                                                                                    |  |                      |          |   |        | 
|Refer note 3 (c) and note 8 for the composition of cash and cash equivalents.       | 
|                                                                                    |  |                      |          |   |        | 
|Supplementary information                                                           |  |                      |          |   |        | 
|Additions to property, plant and equipment represented by finance lease obligations |  |                      | 691,855  |   |        | 



The
accompanying notes form an integral part of these consolidated financial statements



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SIFY TECHNOLOGIES
LIMITED

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

(In thousands of
Rupees, except share data and as stated otherwise)



| | 1. | Reporting entity
| | -- | ----------------



Sify Technologies Limited, (‘Sify’
or ‘the Company’) formerly known as Sify Limited and Satyam Infoway Private Limited, is a leading internet services
provider headquartered in Chennai, India. These Consolidated Financial Statements comprise the Company and its subsidiaries Sify
Technologies (Singapore) Pte. Limited and Pace Info Com Park Private Limited) (together referred to as the ‘Group’
and individually as ‘Group entities’). The subsidiaries, Sift Software Limited and Hermit Projects Private Limited
were merged with the Company during the year. The Group is primarily involved in providing services Network and IT services. Sify
is listed on the NASDAQ Global Select Market in the United States.



| | 2. | Basis of preparation
| | -- | --------------------



| | a. | Statement of compliance
| | -- | -----------------------



The accompanying Consolidated Financial Statements
of the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and its interpretations
as issued by the International Accounting Standards Board (IASB).



These Consolidated Financial Statements have
been approved for issue by the Board of Directors on July 18, 2014.



| | b. | Basis of measurement
| | -- | --------------------



These Consolidated Financial Statements have
been prepared on the historical cost basis except for the following:



| | · | Available
                                         for sale financial assets are measured at fair value
| | - | -------------------------------------------------------------------------------------------------------

| | · | Non-current
                                         asset held for sale measured at lower of carrying value and fair value less costs to
                                         sell.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Derivative
                                         financial instruments are measured at fair value
| | - | ----------------------------------------------------------------------------------------------------

| | · | Financial
                                         instruments at fair value through profit or loss are measured at fair value.
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | The
                                         defined benefit asset is recognized as the net total of the plan assets, plus unrecognized
                                         past service cost and unrecognized actuarial losses, less unrecognized actuarial gains
                                         and the present value of the defined benefit obligation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | In
                                         relation to lease prepayments, the initial fair value of the security deposit is estimated
                                         as the present value of the refundable amount, discounted using the market interest rates
                                         for similar instruments. The difference between the initial fair value and the refundable
                                         amount of the deposit is recognized as a lease prepayment.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The above items have been measured at fair
value and the methods used to measure fair values are discussed further in Note 4.



| | c. | Functional and presentation
                                         currency
| | -- | -----------------------------------------------------------------------------



Items included in the financial statements
of each Group entity are measured using the currency of the primary economic environment in which the entity operates (“the
functional currency”). Indian rupee is the functional currency of Sify, its domestic subsidiaries and affiliates. The U.S.
dollar is the functional currency of Sify’s foreign subsidiary located in Singapore.



The Consolidated Financial Statements are
presented in Indian Rupees which is the Group’s presentation currency. All financial information presented in Indian Rupees
has been rounded up to the nearest thousand except where otherwise indicated.



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Convenience translation (unaudited):
Solely for the convenience of the reader, the financial statements as of and for the year ended March 31, 2014 have been translated
into United States dollars (neither the presentation currency nor the functional currency of the Group) based on the reference
rate in the City of Mumbai on March 31, 2014, for cable transfers in Indian rupees as published by the Reserve Bank of India which
was ₹ 60.10 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted
into United States dollar at such a rate or at any other rate on March 31, 2014 or at any other date.



| | d. | Use of estimates
| | -- | ----------------



The preparation of Consolidated Financial
Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, the disclosures of contingent assets and contingent liabilities
at the date of financial statements, income and expenses during the period. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimates are revised and in future periods which are affected.



Application of accounting policies that require
critical accounting estimates and assumption having the most significant effect on the amounts recognized in the financial statements
are:



| | · | Measurement
                                         of the recoverable amounts of cash-generating units containing goodwill (Note 6)
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| | · | Useful
                                         lives of property, plant and equipment (Note 3 e and Note 5)
| | - | ------------------------------------------------------------------------------------------------------------

| | · | Useful
                                         lives of intangible assets (Note 3 f and Note 6)
| | - | ------------------------------------------------------------------------------------------------

| | · | Lease
                                         classification (Note 3 h, 9, 17 and 32)
| | - | --------------------------------------------------------------------------------------

| | · | Utilization
                                         of tax losses (Note 11)
| | - | ----------------------------------------------------------------------------

| | · | Measurement
                                         of defined employee benefit obligations (Note 18)
| | - | ------------------------------------------------------------------------------------------------------

| | · | Measurement
                                         of share-based payments (Note 29 and Note 36)
| | - | --------------------------------------------------------------------------------------------------

| | · | Valuation
                                         of financial instruments (Note 3 c, 4, 37 and 38)
| | - | ----------------------------------------------------------------------------------------------------

| | · | Provisions
                                         and contingencies (Note 3 n and 34)
| | - | ---------------------------------------------------------------------------------------

| | · | Determination
                                         of percentage completion in construction contracts (Note 3 j)
| | - | --------------------------------------------------------------------------------------------------------------------



| | 3. | Significant accounting policies
| | -- | -------------------------------



The accounting policies set out below have
been applied consistently to all periods presented in these Consolidated Financial Statements.



| | a. | Basis of consolidation
| | -- | ----------------------



The financial statements of the Group companies
are consolidated on a line-by-line basis. Intra-group balances and transactions, and any unrealized income and expenses arising
from intra-group transactions, are eliminated. These financial statements are prepared by applying uniform accounting policies
in use at the Group.



| | (i) | Subsidiaries
| | --- | ------------



Subsidiaries are entities controlled by the
Company. Control exists when the Company has the power directly/indirectly to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable
are taken into account. The financial statements of subsidiaries are consolidated from the date that control commences until the
date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies
adopted by the Group.



| | (ii) | Associates
                                         (equity accounted investees)
| | ---- | --------------------------------------------------------------------------------



Associates are those entities where the Group
has significant influence, but not control, over the financial and operating policies. Associates are accounted for using the
equity method (equity accounted investees) and are initially recognized at cost. The Group’s investment includes goodwill
identified on acquisition, net of any accumulated impairment losses. The Consolidated Financial Statements include the Group’s
share of the income and expenses and equity movements of equity accounted investees from the date that significant influence commences
until the date that significant influence ceases. The investment would be classified as ‘held for sale’ when the carrying
amount of the investment will be recovered through a sale transaction rather than through its continued use and such sale is highly
probable.Such investments are measured at the lower of its carrying amount and fair value less cost to sell. When the
Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including
any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the
Group has an obligation or has made payments on behalf of the investee.



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|b. | Foreign
    currency
|-- | --------------------





(i) Foreign currency transactions



Transactions
in foreign currencies are initially recognized in the financial statements using exchange rates prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated to the relevant functional currency at the exchange
rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured
at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange
rate prevalent at the date of transaction. Foreign currency differences arising on translation are recognized in the income statement
for determination of net profit or loss during the period.



(ii)
Foreign operations



The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates
at the reporting date. The income and expenses of foreign operations and cash flows are translated to using average exchange rates
during the period. Any differences arising on such translation are recognized in other comprehensive income. Such differences
are included in the foreign currency translation reserve “FCTR” within other components of equity. When a foreign
operation is disposed off, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.



| | c. | Financial instruments
| | -- | ---------------------



| | (i) | Non-derivative financial instruments
| | --- | ------------------------------------



Non-derivative financial instruments comprise
investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade
and other payables.



Non-derivative financial instruments are recognized
initially at fair value plus any directly attributable transaction costs. However if the instrument is recognized as at fair value
through profit or loss then any directly attributable transaction costs are recognized in profit or loss as incurred. Subsequent
to initial recognition non-derivative financial instruments are measured as described below:



Non-derivative financial assets



| | a) | Available-for-sale financial
                                         assets
| | -- | ----------------------------------------------------------------------------



Available-for-sale (AFS) financial assets
are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables,
(b) held-to-maturity investments or (c) financial assets at fair value through profit or loss in accordance with IAS 39.



Investments in equity and certain debt securities
are initially recognized at fair value and classified as available-for-sale financial assets. Subsequent to initial recognition,
they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale
monetary items are recognized directly in other comprehensive income. When an investment is de-recognized, the cumulative gain
or loss in equity is transferred to profit or loss. These are presented as current assets unless the management intends to dispose
of the assets after 12 months from the balance sheet date.



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| | b) | Loans and receivables
| | -- | ---------------------



Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market. These are presented as current assets, except
for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables
are initially measured at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest
method, less any impairment loss. Loans and receivables are represented by trade receivables, unbilled revenue, cash and cash
equivalents. Cash and cash equivalents comprise cash balances and demand deposits. Bank overdrafts that are repayable on demand
and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.



| | c) | Others
| | -- | ------



Other non-derivative financial instruments
are measured at amortized cost using the effective interest method, less any impairment losses.



Non-derivative financial liabilities



The Group classifies non-derivative financial
liabilities to the other financial liabilities category. Such financial liabilities are recognized initially at fair value plus
any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized
cost using the effective interest method.



Offsetting of Financial assets and Financial
Liabilities



Financial assets and liabilities are offset
and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset
the amounts and intends either to settle on a net basis or to realize the assets and settle the liability simultaneously.



| | (ii) | Derivative financial instruments
| | ---- | --------------------------------



Foreign exchange forward contracts and options
are entered into by the Group to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables
and forecasted transactions denominated in certain foreign currencies. The group also enters into cross currency interest rate
swaps for hedging the risk against variability in cash flows of its term loan.



These derivative contracts do not qualify
for hedge accounting under IAS 39, and are initially recognized at fair value on the date the contract is entered into and subsequently
re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized
immediately in profit or loss. Embedded derivatives are separated from the host contract and accounted for separately if the economic
characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with
the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured
at fair value through profit or loss.



| | d. | Share capital
| | -- | -------------



Ordinary
shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or share options
are recognized as a deduction from equity, net of any tax effects.



| | e. | Property, plant and equipment
| | -- | -----------------------------



Property, plant and equipment is stated at
cost less accumulated depreciation and where applicable accumulated impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the asset. The cost of self-constructed assets includes
the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for
its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.Purchased
software that is integral to the functionality of the related equipment is capitalized as part of that equipment.



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When parts of an item of property, plant and
equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.



Gains and losses on disposal of an item of
property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant
and equipment and are recognized net within “other income / other expenses” in statement of income.



(i) Subsequent costs



The cost of replacing part of an item of property,
plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized.
The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.



(ii)
Depreciation



Depreciation is recognized in the consolidated
statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the
Group will obtain ownership by the end of the lease term. Management’s estimated useful lives for the years ended March
31, 2014, 2013 and 2012 were as follows:



|                                                       | Estimate of  useful life
    in years
|------------------------------------------------------ | -------------------------------------
|Buildings                                              | 28                                   
|Plant and machinery comprising computers, servers etc. | 3 – 5                                
|Plant and machinery comprising other items             | 8                                    
|Furniture and fittings                                 | 5                                    
|Office equipment                                       | 5                                    
|Motor vehicles                                         | 3 – 5                                



The
depreciation method, useful lives and residual value are reviewed at each of the reporting date



| | f. | Business combinations
| | -- | ---------------------



(i) Business combinations



Business combinations are accounted for using
IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be
fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree.
Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These
valuations are conducted by independent valuation experts.



Business combinations have been accounted
for using the acquisition method under the provisions of IFRS 3(Revised). The cost of acquisition is measured at the fair value
of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. The cost
of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.



Transactions costs that the group incurs in
connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and
consulting fees are expensed as incurred.



The acquisition of an asset or a group of
assets that does not constitute a ‘business’ as per IFRS 3 is accounted for by identifying and recognizing the individual
identifiable assets acquired and liabilities assumed. The cost of the group is allocated to such individual identifiable assets
and liabilities on the basis of their relative fair values on the date of purchase.



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(ii) Goodwill



Goodwill represents the cost of a business
acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities
of the acquiree. When the excess is negative (negative goodwill), the Group reassesses the identification and measurement of identifiable
assets, liabilities and contingent liabilities, and the measurement of the cost of acquisition, and recognizes any remaining excess
in profit or loss immediately on acquisition.



Subsequent measurement



Goodwill is measured at cost less accumulated
impairment losses.



g. Other intangible assets



Other intangible assets that are acquired
by the Group, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the intangible asset.



(i)
Subsequent expenditure



Subsequent expenditure is capitalized only
when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including
expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.



(ii)
Amortization of intangible assets with finite useful lives



Amortization is recognized in profit or loss
on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are
available for use. The estimated useful lives for the current and previous year are as follows:



|                                 | Estimate of  useful life in
    years
|-------------------------------- | -------------------------------------
|Software                         | Not exceeding 3 years                
|Technical know-how               | 5 years                              
|License fees                     | 20 years                             
|Bandwidth Capacity               | 12 years                             
|Portals and web development cost | 5 years                              
|Customer related intangibles     | 5 years                              



Amortization methods, useful lives and residual
values are reviewed at each reporting date and adjusted if appropriate.



| | h. | Leases
| | -- | ------



At the inception of a lease, the lease arrangement
is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.



Assets taken on finance lease:



A finance lease is recognized as an asset
and a liability at the commencement of lease, at lower of the fair value of leased asset or the present value of the minimum lease
payments. Initial direct costs, if any, are also capitalized and subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned
between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.



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Assets taken on operating lease:



Other leases are operating leases and the
leased assets are not recognized on the Group’s statement of financial position. Payments made under operating leases are
recognized in profit or loss on a straight-line basis over the term of the lease.



Assets given on finance lease:



The Group is a dealer lessor for leasing various
types of products sold to its customers. Profit or loss on sale of such products is recognized in accordance with the policy on
outright sales. Finance income i.e., excess of gross minimum lease payments and normal selling price is recognized over the lease
period.



Deposits provided to lessors:



The Group is generally required to pay refundable
security deposits in order to obtain property leases from various lessors. Such security deposits are financial assets and are
recorded at fair value on initial recognition. The difference between the initial fair value and the refundable amount of the
deposit is recognized as a lease prepayment. The initial fair value is estimated as the present value of the refundable amount
of security deposit, discounted using the market interest rates for similar instruments.



Subsequent to initial recognition, the security
deposit is measured at amortized cost using the effective interest method with the carrying amount increased over the lease period
up to the refundable amount. The amount of increase in the carrying amount of deposit is recognized as interest income. The lease
prepayment is amortized on a straight line basis over the lease term as a lease rental expense.



Indefeasible Right of Use (IRU)



The Company has entered into IRU arrangements
which entitle the company to right of use of specified bandwidth capacity for a specified period of time. Such right is being
treated as operating lease since the risks and rewards are not transferred to the Company. Hence, the upfront payments made towards
right of use of bandwidth capacities under such agreements have been treated as prepayments and is amortized over the term of
the contract.



| | i. | Inventories
| | -- | -----------



Inventories comprising traded hardware and
software are measured at the lower of cost (determined using first-in first-out method) and net realizable value. Cost comprises
cost of purchase and all directly attributable costs incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.



| | j. | Construction contracts in progress
| | -- | ----------------------------------



Construction contracts in progress represent
the gross unbilled amount expected to be billed to customers for contract work performed to date. It is measured at cost plus
profit recognized to date less progress billing and recognized losses. Cost includes all expenditure related directly to specific
projects and an allocation of fixed and variable overheads incurred in the Group’s contracts and activities based on normal
operating capacity.



Construction contract in progress is presented
as part of trade and other receivable in statement of financial position for all contracts in which costs incurred plus recognized
profit exceed progress billings. If progress billings exceeds cost incurred plus recognized profits, then the difference is presented
as deferred income / revenue in the statement of financial position.



| | k. | Impairment
| | -- | ----------



Financial assets



A financial asset is assessed at each reporting
date to determine whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial
asset is considered to be impaired and impairment losses are recognized, if objective evidence indicates that one or more events
such as a loss event, the significant financial difficulty of the issuer, a breach of contract, the disappearance of an active
market, which have had a negative effect on the estimated future cash flows of that asset. The remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics.



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Financial assets measured at amortized
cost

An impairment loss in respect of a financial
asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated
future cash flows discounted at the original effective interest rate.



Available-for-sale financial assets

Significant or prolonged decline in the fair
value of the security below its cost and the disappearance of an active trading market for the security are objective evidence
that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated by reference
to its fair value. The cumulative loss that was recognized in the equity is transferred to the consolidated income statement upon
impairment. Such impairment loss is recognized in the consolidated income statement.



Loans and receivables

Impairment loss in respect of loans and receivables
measured at amortized cost are calculated as the difference between their carrying amount, and the present value of the estimated
future cash flows discounted at the original effective interest rate. Such impairment loss is recognized in the consolidated income
statement.



Reversal of impairment loss

An impairment loss is reversed if the reversal
can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized
cost and available-for-sale financial assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale
financial assets that are equity securities, the reversal is recognized directly in other comprehensive income and presented within
equity.



Non-financial assets



The carrying amounts of the Group’s
non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For goodwill, the recoverable amount is estimated each year at December 31.



The recoverable amount of an asset or cash-generating
unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or groups of assets (the “cash-generating unit”).



The goodwill acquired in a business combination,
for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of
the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating units on a reasonable
and consistent basis.



An impairment loss is recognized if the carrying
amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit
or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of
any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on
a pro rata basis.



Reversal of impairment loss



An impairment loss in respect of goodwill
is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date
for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized directly in other comprehensive income and presented within equity.



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| | l. | Employee benefits
| | -- | -----------------



Employee benefits are accrued in the period
in which the associated services are rendered by employees of the Group, as detailed below:



| | (a) | Defined contribution plan (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 make monthly contributions
to the plan, each equal to a specified percentage of employee’s basic salary. The Group has no further obligations under
the plan beyond its monthly contributions. The Group does not have any legal or constructive obligation to pay further contributions
if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior
periods. Obligation for contributions to the plan is recognized as an employee benefit expense in profit or loss when incurred.



| | (b) | Defined benefit plans (Gratuity)
| | --- | --------------------------------



In accordance with applicable Indian laws,
the Group provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering all employees. The Gratuity Plan
provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective
employee’s last drawn salary and the years of employment with the Group. The Company’s net obligation in respect of
the gratuity plan is calculated by estimating the amount of future benefits that the employees have earned in return for their
service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service
cost and the fair value of plan assets are deducted. The discount rate is the yield at the reporting date on risk free government
bonds that have maturity dates approximating the terms of the Company’s obligations. The calculation is performed annually
by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized
asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the
form of any future refunds from the plan or reductions in future contributions to the plan.



The Group recognizes all actuarial gains and
losses arising from defined benefit plans directly in other comprehensive income and presented within equity. The Company has
an employees’ gratuity fund managed by the Life Insurance Corporation of India (LIC).



| | (c) | Short term benefits
| | --- | -------------------



Short-term employee benefit obligations are
measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount
expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.



| | (d) | Compensated leave of absence
| | --- | ----------------------------



The employees of the Group are entitled to
compensated absence. The employees can carry forward a portion of the unutilized accrued absence and utilize it in future periods
or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence. The Group
recognizes an obligation for compensated absences in the period in which the employee renders the services. The Group provides
for the expected cost of compensated absence as the additional amount that the Group expects to pay as a result of the unused
entitlement that has accumulated based on actuarial valuations at the balance sheet date, carried out by an independent actuary.



| | m. | Share-based payment transactions
| | -- | --------------------------------



The grant date fair value of options granted
to employees is recognized as an employee expense, with a corresponding increase in equity, over the period in which the options
are vested. The increase in equity recognized in connection with a share based payment transaction is presented as a separate
component in equity. The amount recognized as an expense is adjusted to reflect the actual number of share options that vest.
In respect of options whose terms and conditions are modified, the Group includes the incremental fair value of the options in
the measurement of the amounts recognized for services received from the employees. The incremental fair value is the difference
between the fair value of the modified option and that of the original option both estimated as at the date of the modification.
If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the
amount recognized for services received over the period from the modification date until the date when the modified equity instruments
vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over
the remainder of the original vesting period. If the modification occurs after vesting date, the incremental fair value granted
is recognized immediately, or over the vesting period if the employee is required to complete an additional period of service
before becoming unconditionally entitled to those modified equity instruments.



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| | n. | Provisions
| | -- | ----------



Provisions are recognized if, as a result
of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material,
provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.



A provision for onerous contracts is recognized
when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations
under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract
and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment
loss on the assets associated with that contract.



| | o. | Revenue
| | -- | -------



Revenue from the sale of goods is measured
at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is
recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration
is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement
with the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual
terms of the contract of sale.



Revenue from services rendered is recognized
in the consolidated income statement in proportion to the stage of completion of the transaction at the reporting date.



Revenue Recognition



Various streams of revenue are described
below:



Revenue from the sale
of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume
rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing
management involvement with the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary
depending on the individual terms of the contract of sale.



Revenue from services
rendered is recognized in the consolidated income statement in proportion to the stage of completion of the transaction at the
reporting date. Revenue is recognized when the following conditions are met:



| | o | the
                                         amount of revenue can be measured reliably;
| | - | ----------------------------------------------------------------------------------------

| | o | it
                                         is probable that the economic benefits will flow to the seller;
| | - | -----------------------------------------------------------------------------------------------------------

| | o | the
                                         stage of completion at the balance sheet date can be measured reliably; and
| | - | ------------------------------------------------------------------------------------------------------------------------

| | o | the
                                         costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



The revenue recognition
in respect of the various streams of revenue is described below:



(i) Telecom Services



Revenue from Telecom services include Data
network services and Voice services. Telecom services primarily include revenue from connectivity services, NLD/ILD services and
to a lesser extent, revenues from the installation of connectivity links. The Company provides connectivity for a fixed period
of time at a fixed rate regardless of usage.  The revenue attributable to connectivity services is recognised rateably over
the period of the contract. The revenue attributable to the installation of the link is recognised on completion of the installation
work.



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The Company provides NLD (National Long Distance)
and ILD (International Long Distance) services through Company’s network.  The Company carries voice traffic, both
national and international, using the network back-bone and delivers voice traffic to Inter-connect Operators.  Revenue is
recognised based upon metered call units of voice traffic terminated on the Company’s network



Data Centre Services:



Revenues from DC services consist of hosting
and power charges. Web hosting services primarily include revenue from co-location of racks, caged racks and on usage of power
from large contracts. The contracts are mainly for a fixed rate for a period of time and are recognised over the period during
which the service is provided.



Cloud and Managed Services:



Revenue from Cloud and managed services include
revenue from “Cloud and storage solutions, managed services, value added services and International managed services. Revenues
from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenues from domestic and international
managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure management.
Contracts from this segment are fixed and could also be based on time and material.



Technology Integration Services:



Revenue from Technology Integration Services
include system integration Services , revenue from construction of Data Centres , network services, security solutions, digital
certificate based authentication services and to a lesser extent, revenue from hardware and software.



Revenue from construction contract represents
revenue from construction of data centres to the specific needs and design of the customer. Such contract revenue includes the
initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that
it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract
can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract.
Contract expenses are recognised as incurred unless they create an asset related to future contract activity. The stage of completion
is assessed by reference to the cost incurred till date to the total estimated costs. When the outcome of a construction contract
cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to
be recoverable. An expected loss on a contract is recognised immediately in the statement of profit or loss.



Digital Certification revenues include income
received on account of Web certification. Generally the Company does not hold after sale service commitments after the activation
of the Digital Certificates sold and accordingly, revenue is recognised fully on the date of activation of the respective certificate.
Billing towards one time installation / training is recognised upon completion thereof.



Applications Integration Services:



Revenues from Applications Integration services
include online assessment, document management services, web development, mailing solutions, supply chain software and e-learning
software development services. E-learning software development services consist of structuring of contents, developing modules,
delivery and training users in the modules developed. Revenue from Applications Integration Services is recognised based on percentage
of completion method. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by
the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract.



The Company enters into contracts with customers
to serve advertisements in the portal and the Company is paid on the basis of impressions, click-throughs or leads and in each
case the revenue is recognised rateably over the period of the contract based on actual impressions/click throughs / leads delivered. 
Revenues from commissions earned on electronic commerce transactions are recognised when the transactions are completed.



In certain cases, some elements belonging
to the services mentioned above are sold as a package consisting of all or some of the elements. In these cases it is necessary
to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance
of the transaction with different revenue allocations for each component. These multiple element arrangements are recognized as
separable elements because each element constitutes a separate earning process, each element has a fair value that is reliable,
verifiable and objectively determinable, and the undelivered element is not essential to functionality of the delivered elements.



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Income from operating leases:



Lease rentals arising on assets given on operating
leases are recognized over the period of the lease term on a straight line basis.



Indefeasible Right of Use (IRU)



The Company has entered into IRU arrangements
through which it entitles its customers to right of use of specified bandwidth capacity for a specified period of time. The upfront
payment received towards right of use of bandwidth capacities under such agreements have been treated as deferred revenue and
is recognized on a straight line basis over the term of the arrangement.



(iii) Deferred income



Deferred income represents unserviced portion
of billed contracts.



| | p. | Finance income and expense
| | -- | --------------------------



Finance income comprises interest income on
funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial
assets, fair value gains on financial assets at fair value through profit or loss . Interest income is recognized as it accrues
in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date when the Group’s
right to receive payment is established, which in the case of quoted securities is the ex-dividend date.



Finance expense comprises interest expense
on loans and borrowings, bank charges, unwinding of the discount on provision, losses on disposal of available-for-sale financial
assets, fair value losses on financial assets at fair value through profit or loss that are recognized in statement of income.



| | q. | Borrowing costs
| | -- | ---------------



Borrowing costs that are directly attributable
to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other
borrowing costs are recognized as expenses in the period in which they are incurred. To the extent the Group borrows funds generally
and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowings costs eligible for
capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined
based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding during the period,
other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Group
capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.



| | r. | Income taxes
| | -- | ------------



Income
tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Minimum Alternate Tax (MAT)
is accounted as current tax when the Company is subjected to such provisions of the Income Tax Act. However, credit of such MAT
paid is available when the Company is subjected to tax as per normal provisions in the future. Credit on account of MAT is recognized
as an asset based on the management’s estimate of its recoverability in the future.



Deferred
tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized
for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.



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A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.



Deferred taxation arising on investments in
subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxation arising on the temporary
differences arising out of undistributed earnings of the equity method accounted investee is recorded based on the managment's
intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at the capital gains
tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention is to realize
the undistributed earnings through dividend, the Group’s share of the income and expenses of the equity method accounted
investee is recorded in the statement of income, after considering any taxes on dividend payable by the equity method accounted
investee and no deferred tax is set up in the Group's books as the tax liability is not with the group.



| | s. | Earnings / (loss) per share
| | -- | ---------------------------



The Group presents basic and diluted earnings
/ (loss) per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Where ordinary shares are
issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share
to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share. Diluted
EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, which includes share options granted to employees.
To the extent that partly paid shares are not entitled to participate in dividends during the period they are treated as the equivalent
of warrants or options in the calculation of diluted earnings per share.



| | t. | Recent accounting pronouncements
| | -- | --------------------------------



| | (i) | IFRS 9 Financial Instruments:In
                                         November 2009, the International Accounting Standards Board issued IFRS 9, Financial
                                         Instruments: Recognition and Measurement, to reduce the complexity of the current rules
                                         on financial instruments as mandated in IAS 39. The effective date for IFRS 9 is annual
                                         periods beginning on or after January 1, 2015 with early adoption permitted. IFRS 9 has
                                         fewer classification and measurement categories as compared to IAS 39 and has eliminated
                                         the categories of held to maturity, available for sale and loans and receivables. Further
                                         it eliminates the rule-based requirement of segregating embedded derivatives and tainting
                                         rules pertaining to held to maturity investments. For an investment in an equity instrument
                                         which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition,
                                         on an individual share-by-share basis, to present all fair value changes from the investment
                                         in other comprehensive income. No amount recognized in other comprehensive income would
                                         ever be reclassified to profit or loss. IFRS 9, was further amended in October 2010,
                                         and such amendment introduced requirements on accounting for financial liabilities. This
                                         amendment addresses the issue of volatility in the profit or loss due to changes in the
                                         fair value of an entity’s own debt. It requires the entity, which chooses to measure
                                         a liability at fair value, to present the portion of the fair value change attributable
                                         to the entity’s own credit risk in the other comprehensive income. The company
                                         is required to adopt IFRS 9 by accounting year commencing April 1, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Amendment to IAS 32 Offsetting
                                         of Financial Assets and Financial Liabilities:In December 2011, the International
                                         Accounting Standards Board issued amendments to IAS 32, Offsetting Financial Assets and
                                         Financial Liabilities. The amendments clarify that an entity has a legally enforceable
                                         right to set-off if that right is not contingent on future event and enforceable both
                                         in the normal course of business and in the event of default, insolvency or bankruptcy
                                         of the entity and all counterparties. The amendments also clarified that gross settlement
                                         is equivalent to net settlement if and only if the gross settlement mechanism has features
                                         that eliminate or result in insignificant credit and liquidity risk and process receivables
                                         and payables in a single settlement process or cycle. The company is required to adopt
                                         the amendment by accounting year commencing April 1,2014 and currently evaluating impact
                                         on the consolidated financial statements.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (iii) | IFRS 15 Revenue from Contracts
                                         with Customers:During May 2014, the International Accounting Standards Board issued
                                         IFRS 15, Revenue from Contracts with Customers. The core principle of the new Standard
                                         is for companies to recognise revenue to depict the transfer of goods or services to
                                         customers in amounts that reflect the consideration (that is, payment) to which the company
                                         expects to be entitled in exchange for those goods or services.  The new Standard
                                         will also result in enhanced disclosures about revenue, provide guidance for transactions
                                         that were not previously addressed comprehensively and improve guidance for multiple-element
                                         arrangements. The effective date of application would be January 1, 2017.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Narrow scope amendments
                                         to IAS 16 and IAS 38: Clarification of Acceptable methods of Depreciation and Amortization:
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



IAS 16
and IAS 38 both establish the principle for the basis of depreciation and amortization as being the expected pattern of consumption
of the future economic benefits of an asset. The IASB has clarified that the use of revenue-based methods to calculate the depreciation
of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors
other than the consumption of the economic benefits embodied in the asset. The IASB also clarified that revenue is generally presumed
to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption,
however, can be rebutted in certain limited circumstances. The effective date of the amendment is July 1, 2014.



The company
is currently evaluating the requirements of above pronouncements and has not yet determined the impact on the consolidated financial
statements.



| | 4. | Determination of fair values
| | -- | ----------------------------



A number of the Group’s accounting policies
and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values
have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information
about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.



| | (i) | Property, plant and equipment
| | --- | -----------------------------



The fair value of property, plant and equipment
recognized as a result of a business combination is an estimated amount for which a property could be exchanged on the date of
acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the
parties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market
approach and cost approach using quoted market prices for similar items when available and replacements costs when appropriate.



| | (ii) | Inventories
| | ---- | -----------



The fair value of inventories acquired in a business
combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of
completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.



| | (iii) | Intangible assets
| | ----- | -----------------



The fair value of intangible assets acquired
in the business combinations is based on discounted cash flows expected to be derived from the use and eventual sale of assets
(terminal value).



| | (iv) | Investments in equity and
                                         debt securities
| | ---- | ----------------------------------------------------------------------------------



The fair value of available-for-sale financial
assets is determined by reference to their quoted price at the reporting date. When the fair value of the financial asset cannot
be measured reliably, it is measured at cost.



| | (v) | Trade and other receivables
| | --- | ---------------------------



The fair value of trade and other receivables,
excluding construction contracts in progress, is estimated as the present value of future cash flows, discounted at the market
rate of interest at the reporting date. However in respect of such financial instruments, fair value generally approximates the
carrying amount due to the short term nature of such assets. This fair value is determined for disclosure purposes or when acquired
in a business combination.



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| | (vi) | Derivatives
| | ---- | -----------



The fair value of forward exchange contracts
is based on their quoted price, if available. If a quoted price is not available, the fair value is estimated by discounting the
difference between the contractual forward price and the current forward price for the residual maturity of the contract using
a risk free interest rate (based on government bonds). The fair value of foreign currency option contracts is determined based
on the appropriate valuation techniques, considering the terms of the contract. Fair values reflect the credit risk of the instrument
and include adjustments to take account of the credit risk of the Group entity and the counter party when appropriate. The fair
value of the cross currency swaps (principal only swaps) is determined based on the discounting of the future cash flows at the
market rates existing on the reporting date.



| | (vii) | Non
                                         derivative financial liabilities
| | ----- | -----------------------------------------------------------------------------



Fair value, which is determined for disclosure
purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate
of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease
agreements.



| | (viii) | Share-based
                                         payment transactions
| | ------ | -------------------------------------------------------------------------



The fair value of employee stock options is
measured using the Black-Scholes method. Measurement inputs include share price on grant date, exercise price of the instrument,
expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information),
expected term of the instrument (based on historical experience and general option holder behavior), expected dividends, and the
risk free interest rate (based on government bonds).



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|5. | Property,
    plant and equipment
|-- | ---------------------------------





The following
table presents the changes in property, plant and equipment during the year ended March 31, 2014



|                              |  | Cost                   |           |  | Accumulated
    depreciation |  |           | Carrying  | 
|----------------------------- |  | ---------------------- | --------- |  | ---------------------------- |  | --------- | --------- | 
|Particulars                   |  | As
    atApril 01,2013 |           |  | Additions                    |  |           | Disposals | 
|Building                      |  |                        | 777,419   |  |                              |  | 1,214,084 |           | 
|Plant and machinery           |  |                        | 6,113,788 |  |                              |  | 1,894,902 |           | 
|Computer equipments           |  |                        | 689,245   |  |                              |  | 49,421    |           | 
|Office equipment              |  |                        | 240,449   |  |                              |  | 8,987     |           | 
|Furniture and fittings        |  |                        | 745,058   |  |                              |  | 33,081    |           | 
|Vehicles                      |  |                        | 2,456     |  |                              |  | -         |           | 
|Total                         |  |                        | 8,568,415 |  |                              |  | 3,200,475 |           | 
|Add: Construction in progress |  |                        |           |  |                              |  |           |           | 
|Total                         |  |                        | 8,568,415 |  |                              |  | 3,200,475 |           | 



The following
table presents the changes in property, plant and equipment during the year ended March 31, 2013



|                              |  | Cost                   |           |  | Accumulated
    depreciation |  |         | Carrying  | 
|----------------------------- |  | ---------------------- | --------- |  | ---------------------------- |  | ------- | --------- | 
|Particulars                   |  | As
    atApril 01,2012 |           |  | Additions                    |  |         | Disposals | 
|Building                      |  |                        | 777,419   |  |                              |  | -       |           | 
|Plant and machinery           |  |                        | 5,731,924 |  |                              |  | 415,512 |           | 
|Computer equipments           |  |                        | 629,605   |  |                              |  | 59,926  |           | 
|Office equipment              |  |                        | 237,347   |  |                              |  | 3,297   |           | 
|Furniture and fittings        |  |                        | 739,994   |  |                              |  | 5,209   |           | 
|Vehicles                      |  |                        | 4,747     |  |                              |  | -       |           | 
|Total                         |  |                        | 8,121,036 |  |                              |  | 483,944 |           | 
|Add: Construction in progress |  |                        |           |  |                              |  |         |           | 
|Total                         |  |                        | 8,121,036 |  |                              |  | 483,944 |           | 



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The following
table presents the changes in property, plant and equipment during the year ended March 31, 2012



|                              |  | Cost               |           |  | Accumulated depreciation |  |         | Carrying  | 
|----------------------------- |  | ------------------ | --------- |  | ------------------------ |  | ------- | --------- | 
|Particulars                   |  | As atApril 01,2011 |           |  | Additions                |  |         | Disposals | 
|Building                      |  |                    | 777,419   |  |                          |  | -       |           | 
|Plant and machinery           |  |                    | 5,433,359 |  |                          |  | 350,204 |           | 
|Computer equipments           |  |                    | 563,776   |  |                          |  | 66,303  |           | 
|Office equipment              |  |                    | 234,125   |  |                          |  | 3,304   |           | 
|Furniture and fittings        |  |                    | 713,359   |  |                          |  | 27,985  |           | 
|Vehicles                      |  |                    | 2,929     |  |                          |  | 2,907   |           | 
|Total                         |  |                    | 7,724,967 |  |                          |  | 450,703 |           | 
|Add: Construction in progress |  |                    |           |  |                          |  |         |           | 
|Total                         |  |                    | 7,724,967 |  |                          |  | 450,703 |           | 



Leased assets

The Group’s leased assets include certain
buildings, plant and machinery acquired under finance leases. As at March 31, 2014 the net carrying amount of buildings, plant
and machinery and vehicles acquired under finance leases is ₹ 213,974 (March 31, 2013: ₹ 224,291), ₹ 809,335
(March 31, 2013: ₹ 233,193) and ₹ 161 (March 31, 2013: ₹ 1,130) respectively. During the year, the Group acquired
leased assets of ₹ 691,855 (March 31, 2013: ₹ 404,307).



In case prepayments are made towards buildings
accounted for as finance leases, such prepayments are capitalized as ‘Leasehold Buildings’ (included in buildings)
on the commencement of the lease term under the head ‘Property, plant and equipment’ and depreciated in accordance
with the depreciation policy for similar owned assets.



Capital Commitments

As of March 31, 2014 and March 31, 2013, the
Company was committed to spend approximately ₹ 1,326,435 and ₹ 412,698 respectively, under agreements to purchase
property, plant and equipment.



Construction in progress

Amounts paid towards acquisition of property,
plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment that are not ready to
be put into use are disclosed under construction-in-progress. As of March 31, 2014, Construction work in progress includes ₹
1,483 (March 31, 2013 : ₹ 808,785) paid towards acquisition of building under construction on a leasehold land belonging
to Pace Info Com Park Private Limited by way of acquisition of the entire shareholding of its holding company M/s Hermit Projects
Private Limited. Also refer note 36.



Capitalisation of expenses

The Company has capitalized expenses amounting
to ₹ 3,103 (March 31, 2013: ₹ 8,300) which are directly attributable to the construction of building.



Security

As at March 31, 2014 property, plant and equipment
with a carrying amount of ₹ 3,723,146 (March 31, 2013: ₹2,113,301) are subject to a registered charge to secure bank
borrowings.



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| | 6. | Intangible assets
| | -- | -----------------



Intangible assets comprise the following:



|                        |  | March 31, 2014 |         |  | March 31, 2013 |  |         | March 31, 2012 | 
|----------------------- |  | -------------- | ------- |  | -------------- |  | ------- | -------------- | 
|Goodwill                |  |                | 14,595  |  |                |  | 14,595  |                | 
|Other intangible assets |  |                | 544,841 |  |                |  | 586,027 |                | 
|                        |  |                | 559,436 |  |                |  | 600,622 |                | 



| | (i) | Goodwill
| | --- | --------



The following table presents the changes in goodwill
during the years ended March 31, 2014 and 2013



|                                           |  | March 31, 2014 |        |  | March 31, 2013 | 
|------------------------------------------ |  | -------------- | ------ |  | -------------- | 
|Balance at the beginning of the year       |  |                | 14,595 |  |                | 
|Effect of movement in exchange rates       |  |                | -      |  |                | 
|Impairment loss recognized during the year |  |                | -      |  |                | 
|Net carrying amount of goodwill            |  |                | 14,595 |  |                | 



The amount of goodwill as at March 31, 2014
and March 31, 2013 has been allocated to the Applications Integration Services segment.



| | (ii) | Other intangibles
| | ---- | -----------------



The following table presents the changes in
intangible assets during the years ended March 31, 2014, 2013 and 2012.



|                               |  | Technical know-
    how |        |  | Bandwidth Capacity |  |         | Customer related
    intangibles |  |  | Software |  |  | License fees |         |  | Total | 
|------------------------------ |  | ----------------------- | ------ |  | ------------------ |  | ------- | -------------------------------- |  |  | -------- |  |  | ------------ | ------- |  | ----- | 
|(A) Cost                       |  |                         |        |  |                    |  |         |                                  |  |  |          |  |  |              |         |  |       | 
|Balance as at March 31, 2011   |  |                         | 82,753 |  |                    |  | -       |                                  |  |  | 200,570  |  |  |              | 394,080 |  |       | 
|Acquisitions during the year   |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | 44,603  |  |       | 
|Disposals during the year      |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31, 2012   |  |                         | 82,753 |  |                    |  | -       |                                  |  |  | 200,570  |  |  |              | 438,683 |  |       | 
|Acquisitions during the year   |  |                         | -      |  |                    |  | 553,302 |                                  |  |  | -        |  |  |              | 21,182  |  |       | 
|Disposals during the year      |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31, 2013   |  |                         | 82,753 |  |                    |  | 553,302 |                                  |  |  | 200,570  |  |  |              | 459,865 |  |       | 
|Acquisitions during the year   |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | 38,918  |  |       | 
|Disposals during the year      |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31, 2014   |  |                         | 82,753 |  |                    |  | 553,302 |                                  |  |  | 200,570  |  |  |              | 498,783 |  |       | 
|                               |  |                         |        |  |                    |  |         |                                  |  |  |          |  |  |              |         |  |       | 
|(B) Amortization               |  |                         |        |  |                    |  |         |                                  |  |  |          |  |  |              |         |  |       | 
|Balance as at March 31, 2011   |  |                         | 82,753 |  |                    |  | -       |                                  |  |  | 200,570  |  |  |              | 343,143 |  |       | 
|Amortization for the year      |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | 41,002  |  |       | 
|Impairment loss on intangibles |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31, 2012   |  |                         | 82,753 |  |                    |  | -       |                                  |  |  | 200,570  |  |  |              | 384,145 |  |       | 
|Amortization for the year      |  |                         | -      |  |                    |  | 46,090  |                                  |  |  | -        |  |  |              | 30,999  |  |       | 
|Impairment loss on intangibles |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31,2013    |  |                         | 82,753 |  |                    |  | 46,090  |                                  |  |  | 200,570  |  |  |              | 415,144 |  |       | 
|Amortization for the year      |  |                         | -      |  |                    |  | 46,090  |                                  |  |  | -        |  |  |              | 31,514  |  |       | 
|Impairment loss on intangibles |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | -       |  |       | 
|Balance as at March 31,2014    |  |                         | 82,753 |  |                    |  | 92,180  |                                  |  |  | 200,570  |  |  |              | 446,658 |  |       | 
|                               |  |                         |        |  |                    |  |         |                                  |  |  |          |  |  |              |         |  |       | 
|(C) Carrying amounts           |  |                         |        |  |                    |  |         |                                  |  |  |          |  |  |              |         |  |       | 
|As at March 31, 2012           |  |                         | -      |  |                    |  | -       |                                  |  |  | -        |  |  |              | 54,538  |  |       | 
|As at March 31, 2013           |  |                         | -      |  |                    |  | 507,212 |                                  |  |  | -        |  |  |              | 44,719  |  |       | 
|As at March 31, 2014           |  |                         | -      |  |                    |  | 461,122 |                                  |  |  | -        |  |  |              | 52,125  |  |       | 



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Capital commitments

The Company had not committed to spend any
amount under agreements to purchase intangible assets during the year ending March 31, 2014 and 2013.



Capitalized borrowing costs

The Company had not capitalized any interest
cost during years ended March 31, 2014 and 2013. It had capitalized interest cost of ₹ 13,541 for the year ended March 31,
2012. The rate of capitalization of interest cost for the year ended March 31, 2012 was approximately 13.79% respectively.



| | 7. | Investment in equity accounted investees
| | -- | ----------------------------------------



In March 2006, MF Global Overseas Limited
(MFG), a group incorporated in United Kingdom acquired 70.15% of equity share capital of MF Global Sify Securities Private Limited
(MF Global), formerly Man Financial-Sify Securities India Private Limited (‘MF Global) from Refco Group Inc., USA (‘Refco’).
As at March 31, 2012, 29.85% of MF Global equity shares is held by the Company. The remaining 70.15% is owned by MFG, an unrelated
third party. MFG is a subsidiary of MF Global Limited, Bermuda.A summary of key
financial information of MF Global and its subsidiaries which is not adjusted for the percentage ownership held by the Group is
presented below:



|Balance sheet                              |  | March 31, 2012 |          
|------------------------------------------ |  | -------------- | ---------
|Total assets                               |  |                | 3,506,913
|                                           |  |                |          
|Total liabilities                          |  |                | 1,052,325
|Shareholders’ equity                       |  |                | 2,454,588
|Total Liabilities and shareholders’ equity |  |                | 3,506,913



|Statement of operations |  | For the year ended |          
|----------------------- |  | ------------------ | ---------
|                        |  | March 31, 2012     |          
|Revenues                |  |                    | 1,169,577
|Net profit              |  |                    | 92,622   



During October 2010, Sify Technologies Ltd,
the minority shareholder of MF Global holding 29.85 percent of the outstanding shares of the MF Global, requested MF Global’s
Board of Directors to reconsider certain costs charged to the MF Global by MF Global Holdings Ltd and its affiliated and associated
group companies, who hold 70.15 percent of the outstanding shares of the MF Global. These charges are currently recorded in the
financial statements of the MF Global for the year ended March 31, 2008 aggregating to ₹ 43, 478,911 and March 31,2009 aggregating
to ₹ 15, 374,528. The resolution of this matter between the shareholders of MF Global remains uncertain and any financial
adjustment that may arise is not presently known and accordingly no adjustment related to this matter has been provided for in
MF Global’s consolidated financial statements. Any financial adjustment that may arise for resolution of the said matter
would be expected to be handled prospectively and therefore would be reported in the period in which it is resolved. Consequently,
no adjustment related to the said matter was considered by Sify for equity method of accounting for MF Global. The auditors of
MF Global have included an emphasis of matter with an explanatory paragraph in their audit report issued on the consolidated financial
statements of MF Global for the three years ended March 31, 2012 in connection with such recorded cross charges. The effect of
such recorded cross charge is not material to the financial statements of Sify.



On October 31, 2011, MF Global Holding Limited,
USA, sought bankruptcy protection through a chapter 11 filing in the U.S. Bankruptcy Court in New York. Consequent to this, MFG
also filed for bankruptcy proceedings in the United Kingdom and 3 individual administrators were appointed as Joint administrators
(the “Joint administrators”) for MFG which holds the shares in the Joint Venture Company.



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The Company was informed by the Joint Administrators
that they were in the process of seeking bids for the stakes held by MFG in the Joint Venture Company. The Company believes that
the auction process is in violation of the share holders’ agreement entered between MFG and the Company.



Hence, the Company filed a petition under
section 9 of the Arbitration and Conciliation Act 1996 in Bombay High Court, seeking interim relief by restraining the Joint Administrators
and MFG from proceeding with the proposed auction in respect of the sale of shares held by MFG in the Joint Venture Company in
violation of share holders agreement dated November 25, 2005.  A hearing on the petition was held on December 16, 2011. The
Hon’ble High Court granted an ad-interim injunction restraining MFG Overseas Limited through its Joint Administrators from
disposing off its shares in MF Global in violation of the Shareholder Agreement. The petition was adjourned for further proceedings.
In parallel, the Company without prejudice to its legal rights under the petition was in discussion with the Joint Administrators
of MFG for an early amicable settlement in this regard.



On March 23, 2012, the Board of Directors
of the Company, approved to realize the value of the investment by sale to prospective buyers.



On March 27, 2012, the Company entered into
an agreement relating to the sale and purchase of shares in MF Global Sify Securities India Private Limited by and among Sify,
MF Global Sify Securities Pvt Ltd., MF Global Overseas Limited, the joint administrators of MF Global Overseas and entities affiliated
with the Phillip Capital Group, whereby the Company agreed to sell its entire 29.85% interest in MF Global to Phillip Capital
Group.



The consummation of the transaction was subject
to certain closing conditions, including regulatory and statutory approvals from the Government of India and the stock exchanges
in India.



Additionally, in connection with the execution
of the Agreement, on March 27, 2012, the Company, MF Global Sify Securities Private Limited, MF Global Overseas Limited and the
Joint Administrators entered into a settlement and release agreement pursuant to which the Company and MF Global Overseas Limited
agreed to settle, effective upon the closing of the transactions contemplated by the Agreement, their pending dispute in the Bombay
High Court, India regarding certain matters, including the termination of shareholders agreement governing their respective interests
in MF Global.



Hence, effective March 23, 2012, the above
investment was classified as held for sale and measured accordingly as per IFRS 5. The above investment does not form part of
any of the operating segments of the Company.



Subsequently, on August 2, 2012, in pursuance
of the Agreement dated March 27, 2012 and after obtaining all the statutory and regulatory approvals, the Company completed the
sale of its entire stake and the rights therein in MF Global for a cash consideration of ₹ 1,390,270 (USD 25 million) to
Phillip Capital Group, Singapore and MF Global Management Employees Trust, India.  Consequently, with effect from such
date, MF Global ceased to be an associate of the Company.  Further, as per the settlement and release agreement, the Company
has initiated steps to withdraw the arbitration proceedings filed against MFG and others in the Bombay High Court, India and any
other existing disputes also stand resolved. Consequently, no financial adjustments would arise in the future in the Consolidated
financial statements of the Company on account of disputes relating to cross charges.



| | 8. | Cash and cash equivalents
| | -- | -------------------------



Cash and cash equivalents as per consolidated
statement of financial position, as at March 31, 2014 amounted to ₹1,059,904 (March 31, 2013: ₹ 849,854). This excludes
cash-restricted of ₹210,223 (March 31, 2013: ₹ 151,198), representing deposits held under lien against working capital
facilities availed and bank guarantees given by the Group towards future performance obligations.



(a) Restricted cash



|                                                                                                      |  | March 31, 2014 |         |  | March 31, 2013 |  |         | March 31, 2012 | 
|----------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | -------------- |  | ------- | -------------- | 
|Current                                                                                               |  |                |         |  |                |  |         |                | 
|Bank deposits held under lien against borrowings / guarantees
    from banks / Government authorities |  |                | 210,223 |  |                |  | 151,198 |                | 
|Total restricted cash                                                                                 |  |                | 210,223 |  |                |  | 151,198 |                | 



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|(b) Non restricted cash                                       |  |  |           |   |  |  |                                                     |   | 
|------------------------------------------------------------- |  |  | --------- | - |  |  | --------------------------------------------------- | - | 
|Current                                                       |  |  |           |   |  |  |                                                     |   | 
|Cash and bank balances                                        |  |  | 1,059,904 |   |  |  | 849,854                                             |   | 
|                                                              |  |  |           |   |  |  |                                                     |   | 
|Total cash (a+b)                                              |  |  | 1,270,127 |   |  |  | 1,
                                         001,052 |   | 
|Bank overdraft used for cash management purposes              |  |  | (637,347  | ) |  |  | (644,606                                            | ) | 
|Less: Non - current restricted cash                           |  |  | -         |   |  |  | -                                                   |   | 
|Cash and cash equivalents for the statement of cash
    flows |  |  | 632,780   |   |  |  | 356,446                                             |   | 



| | 9. | Lease prepayments
| | -- | -----------------



|                            |  | March 31, 2014 |         |  | March 31, 2013 | 
|--------------------------- |  | -------------- | ------- |  | -------------- | 
|Towards land and buildings* |  |                | 835,635 |  |                | 
|                            |  |                | 835,635 |  |                | 



* Includes ₹ 787,664 and (March 2013:
₹ 302,509) paid for acquiring leasehold rights of land for construction of Data Centers. Also refer note 36.



The prepayment towards land is amortized over
the period of the lease on a straight line basis. In respect of buildings under operating lease, prepayments are amortized over
the lease term on a straight line basis.



| | 10. | Other assets
| | --- | ------------



|Non current                                     |  | March 31, 2014 |         |  | March 31, 2013 | 
|----------------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Other deposits and receivables (see note below) |  |                | 603,940 |  |                | 
|                                                |  |                | 603,940 |  |                | 
|                                                |  |                |         |  |                | 
|Financial assets included in other assets       |  |                | 226,607 |  |                | 



| | 11. | Deferred tax assets and liabilities
| | --- | -----------------------------------



The tax effects of significant temporary differences
that resulted in deferred tax assets and a description of the items that created these differences is given below



|Recognized deferred tax assets / (liabilities)     |  | Assets / (liabilities) |         
|-------------------------------------------------- |  | ---------------------- | --------
|                                                   |  | March 31, 2014         |         
|Deferred tax assets                                |  |                        |         
|Tax loss carry forwards                            |  |                        | 139,960 
|                                                   |  |                        | 139,960 
|Deferred tax liabilities                           |  |                        |         
|Property, plant and equipment                      |  |                        | (64,181 
|Intangible assets                                  |  |                        | (75,779 
|Investment in equity accounted investees           |  |                        | -       
|                                                   |  |                        | (139,960
|Net deferred tax asset recognized in balance sheet |  |                        | -       



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In assessing the realizability of the deferred
income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The
ultimate realization of the deferred income tax assets and tax loss carry forwards is dependent upon the generation of future
taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals
of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the
level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets
are deductible, management believes that the Company will realize the benefits of those recognized deductible differences. The
amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable
income are reduced.



Movement in temporary differences during
the year



|                                         |  | Balance as at
    April 1, 2012 |         |   | Recognized in
    income statement |  |         | Recognized in
    Equity |  |  | Balance as at
    March 31, 2013 |  |  | Recognized in
    income statement |        |   | Recognized in
    Equity |  |         | Balance as at
    March 31, 2014 | 
|---------------------------------------- |  | ------------------------------- | ------- | - | ---------------------------------- |  | ------- | ------------------------ |  |  | -------------------------------- |  |  | ---------------------------------- | ------ | - | ------------------------ |  | ------- | -------------------------------- | 
|Property, plant and equipment            |  |                                 | (1,060  | ) |                                    |  | (544    | )                        |  |  | -                                |  |  |                                    | (1,604 | ) |                          |  | (62,577 | )                                | 
|Intangible assets                        |  |                                 | (327    | ) |                                    |  | (152    | )                        |  |  | -                                |  |  |                                    | (479   | ) |                          |  | (75,300 | )                                | 
|Tax loss carry forwards                  |  |                                 | 97,409  |   |                                    |  | (95,326 | )                        |  |  | -                                |  |  |                                    | 2,083  |   |                          |  | 137,877 |                                  | 
|Investment in equity accounted investees |  |                                 | (96,022 | ) |                                    |  | 96,022  |                          |  |  | -                                |  |  |                                    | -      |   |                          |  | -       |                                  | 
|                                         |  |                                 | -       |   |                                    |  | -       |                          |  |  | -                                |  |  |                                    | -      |   |                          |  | -       |                                  | 



Unrecognized deferred
tax assets / (liabilities)



|                                 |  | As at March 31, 2014 |           |  | As at March 31, 2013 | 
|-------------------------------- |  | -------------------- | --------- |  | -------------------- | 
|Deductible temporary differences |  |                      | 290,295   |  |                      | 
|Unrecognized tax losses          |  |                      | 3,981,506 |  |                      | 
|                                 |  |                      | 4,271,801 |  |                      | 



Considering the probability
of availability of future taxable profits in the period in which tax losses expire, deferred tax assets have not been recognized
in respect of tax losses carried forward by the Group. The above tax losses expire at various dates until 2025.



Deferred tax liabilities
as at March 31, 2014 and March 31, 2013 have not been recognized on undistributed profits of its subsidiaries since the group
expects to realize the same in a tax free manner.



Sec.79 of the Indian Income
Tax Act denies carry forward of losses incurred in earlier years in case of change in the beneficial interest in the shares outstanding
by more than 51%. As a result of the private placement of shares during the year ended March 31, 2011, there was a change in the
registered shareholders by more than 51%. The above provision is not applicable to companies in which public are substantially
interested. Sec. 2(18) of the Indian Income Tax Act, among other things, defines a company listed in a recognized Stock Exchange
in India as a Company in which public are substantially Interested. Based on the non-discrimination clause available in the India
- United States of America tax treaty, when the capital of the company is wholly or partly owned or controlled, directly or indirectly,
by one or more residents of the other Country, the company shall not be subjected to more burdensome position than the similar
enterprises of the Contracting Country. Based on the above clause, the Company being listed in US Stock Exchange should not be
discriminated for being not listed in India and be treated on par with a Company listed in India. Hence, the Company believes
that it is out of the purview of Sec.79 of the Indian Income Tax Act. Further as disclosed in Item 7 of this Annual Report, there
has been no change in the beneficial ownership of Shares by more than 51% compared to earlier years and the Board of Directors
of the Company have continued to be the same. Hence based on the advice, the Company believes that it can carry forward and set-off
the above losses incurred by it in earlier years.



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Income tax expense recognized in profit or
loss



|                                                  |  | March 31, 2014 |          |   | March 31, 2013 |  |         | March 31, 2012 | 
|------------------------------------------------- |  | -------------- | -------- | - | -------------- |  | ------- | -------------- | 
|Current tax expense / (benefit)                   |  |                |          |   |                |  |         |                | 
|Current period                                    |  |                | -        |   |                |  | -       |                | 
|                                                  |  |                | -        |   |                |  | -       |                | 
|Deferred tax expense                              |  |                |          |   |                |  |         |                | 
|Origination and reversal of temporary differences |  |                | (137,877 | ) |                |  | (95,326 | )              | 
|Recognition of previously unrecognized tax losses |  |                | 137,877  |   |                |  | 95,326  |                | 
|Reversal of previously recognized tax losses      |  |                | -        |   |                |  | -       |                | 
|                                                  |  |                | -        |   |                |  | -       |                | 
|Total income tax expense / (benefit)              |  |                | -        |   |                |  | -       |                | 



There are no income taxes directly recognized
in other comprehensive income.



Reconciliation of effective tax rate



A reconciliation of the
income tax provision to the amount computed by applying the statutory income tax rate to the income before taxes is summarized
below:



|                                                                                                               |  | Year ended March 31, 2014 |         |   | Year ended March 31, 2013 |  |          | Year ended March 31, 2012 | 
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------------- |  | -------- | ------------------------- | 
|Profit / (loss) before income taxes                                                                            |  |                           | 318,400 |   |                           |  | 451,569  |                           | 
|Enacted tax rates in India                                                                                     |  |                           | 33.99   | % |                           |  | 32.45    | %                         | 
|Computed expected tax expense / (benefit)                                                                      |  |                           | 108,224 |   |                           |  | 146,512  |                           | 
|Effect of:                                                                                                     |  |                           |         |   |                           |  |          |                           | 
|Share based payment expense not deductible for tax purposes                                                    |  |                           | 15      |   |                           |  | 814      |                           | 
|Unrecognized deferred tax assets on losses incurred during the year (net of temporary differences,
    if any) |  |                           | (23,020 | ) |                           |  | (190,987 | )                         | 
|Unrecognized deferred tax asset on temporary differences                                                       |  |                           | 6,863   |   |                           |  | (143,801 | )                         | 
|Profit on sale of equity accounted investee                                                                    |  |                           | -       |   |                           |  | 88,702   |                           | 
|Profit on sale of equity accounted investee taxed at a lower rate                                              |  |                           | -       |   |                           |  | 44,351   |                           | 
|Share of profit of equity accounted investee taxed at a lower rate                                             |  |                           | -       |   |                           |  | -        |                           | 
|Expenses/income not taxable                                                                                    |  |                           | 8,300   |   |                           |  | 296,797  |                           | 
|Recognition of previously unrecognized  tax losses                                                             |  |                           | 100,382 |   |                           |  | (242,388 | )                         | 
|                                                                                                               |  |                           | -       |   |                           |  | -        |                           | 



| | 12. | Inventories
| | --- | -----------



Inventories comprise:



|                       |  | March 31, 2014 |         |  | March 31, 2013 | 
|---------------------- |  | -------------- | ------- |  | -------------- | 
|Communication hardware |  |                | 187,369 |  |                | 
|Application software   |  |                | 13,460  |  |                | 
|                       |  |                | 200,829 |  |                | 



The entire
carrying amount of inventories as at March 31, 2014 and 2013 are secured in connection with bank borrowings.



| | 13. | Trade and other receivables
| | --- | ---------------------------



Trade and other receivables comprise:



|                                             |  | March 31, 2014 |           |  | March 31, 2013 | 
|-------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|(i)   Trade receivables, net                 |  |                | 3,520,587 |  |                | 
|(ii)  Other receivables including deposits   |  |                | 1,267,264 |  |                | 
|(iii) Construction contract related accruals |  |                | 87,682    |  |                | 
|                                             |  |                | 4,875,533 |  |                | 



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| | (i) | Trade receivables as of March 31,
                                         2014 and March 31, 2013 are stated net of allowance for doubtful receivables. The Group
                                         maintains an allowance for doubtful receivables based on its age and collectability.
                                         Trade receivables are not collateralized except to the extent of refundable deposits
                                         received from cybercafé franchisees and from cable television operators. The Group’s
                                         exposure to credit and currency risks and impairment losses related to trade and other
                                         receivables, excluding construction work in progress is disclosed in note 38. Trade receivables
                                         consist of:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                         |  | March 31, 2014 |           |   | March 31, 2013 | 
|---------------------------------------- |  | -------------- | --------- | - | -------------- | 
|Trade receivables from related parties   |  |                | -         |   |                | 
|Other trade receivables                  |  |                | 3,693,984 |   |                | 
|                                         |  |                | 3,693,984 |   |                | 
|Less: Allowance for doubtful receivables |  |                | (173,397  | ) |                | 
|Balance at the end of the year           |  |                | 3,520,587 |   |                | 



|The activity in the allowance for doubtful accounts receivable is given
    below: |  | For the year ended |         
|---------------------------------------------------------------------------------- |  | ------------------ | --------
|                                                                                   |  | March 31, 2014     |         
|Balance at the beginning of the year                                               |  |                    | 210,559 
|Add :  Additional provision, net                                                   |  |                    | 177,581 
|Less :  Bad debts written off                                                      |  |                    | (214,743
|Balance at the end of the year                                                     |  |                    | 173,397 



| | (ii) | Other receivables comprises of the
                                         following items:
| | ---- | --------------------------------------------------------------------------------------------



|                                                   |  | March 31, 2014 |           |  | March 31, 2013 | 
|-------------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Advances and other deposits (Refer Note (a) below) |  |                | 758,270   |  |                | 
|Withholding taxes (Refer Note (b) below)           |  |                | 508,994   |  |                | 
|                                                   |  |                | 1,267,264 |  |                | 
|Financial assets included in other receivables     |  |                | 56,936    |  |                | 



Notes:



| | a) | Advances and other deposits primarily
                                         comprises of receivables in the form of deposits, service tax and other advances given
                                         in the ordinary course of business.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Includes withholding taxes recoverable
                                         from the Department of Income-tax for which the Company has filed tax returns for refund.
                                         The Company expects to realize such refund of withholding taxes within the next 12 months.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 14. | Prepayments for current assets
| | --- | ------------------------------



Prepayments for current assets comprise of
the following:



|                                      |  | March 31, 2014 |         |  | March 31, 2013 | 
|------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Prepayments for purchase of bandwidth |  |                | 21,769  |  |                | 
|Prepayments related to insurance      |  |                | 1,100   |  |                | 
|Prepayments-others                    |  |                | 126,801 |  |                | 
|Lease prepayments                     |  |                | 14,353  |  |                | 
|                                      |  |                | 164,023 |  |                | 



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| | 15. | Other investments
| | --- | -----------------



Other Investments comprise investment in unquoted
equity instruments classified as available for sale financial assets which are carried at cost. The details of such investments
are given below:



|                                                                                     |  | March 31, 2014 |       |  | March 31, 2013 | 
|------------------------------------------------------------------------------------ |  | -------------- | ----- |  | -------------- | 
|Investment in equity shares of  Vashi Railway Station Commercial Complex
    Limited |  |                | 150   |  |                | 
|Investment in equity shares of Sify Empower India Foundation                         |  |                | -     |  |                | 
|Less: Impairment of investments                                                      |  |                | -     |  |                | 
|Investment in equity shares of Sarayu Clean Gen Private Limited                      |  |                | 1,560 |  |                | 
|                                                                                     |  |                | 1,710 |  |                | 



| | 16. | Share capital and share
                                         premium
| | --- | ------------------------------------------------------------------------



No of shares



|                                         |  | Year ended March 31, |            
|---------------------------------------- |  | -------------------- | -----------
|                                         |  | 2014                 |            
|Issued as at April 01                    |  |                      | 178,513,589
|Issued for cash*                         |  |                      | -          
|Issued for consideration other than cash |  |                      | -          
|Exercise of share options                |  |                      | 17,198     
|Issued as at March 31                    |  |                      | 178,530,787



*Paid up ₹7 (March 31, 2013: ₹
6.25) per share



Pursuant to the approval of the scheme of
merger of the Company with its subsidiaries Sify Software Limited and Hermit Projects Private Limited, by the Shareholders at
the Honourable High Court of Madras,India, the authorized share capital of the Company was enhanced by an amount of ₹ 51,000,000.
Hence, our authorized share capital is increased to ₹ 1851,000,000, divided into 185,100,000 Equity Shares, having a par
value ₹ 10 per share. The holders of ordinary shares are entitled to receive dividends from time to time and are entitled
to vote at meetings of the Group. All shares rank equally with regard to Group’s residual assets.



Also refer
note 40 – Issue of share on private basis to existing promoter group



Further
during the year ended March 31, 2014, 17,198 ordinary shares have been issued consequent to exercise of options under the Associate
stock option plan.



Translation reserve



The translation reserve comprises all foreign
currency differences arising from the translation of the financial statements of foreign operations.



Share based payment reserve



Share based payment reserve represents the
stock compensation expense recognized in the statement of changes in equity.



Fair value reserve



The fair value reserve comprises the cumulative
net change in the fair value of available-for-sale securities until the investments are derecognized or impaired.



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Recognized actuarial gain / loss



Recognized actuarial gain / loss represent
the cumulative actuarial gain / loss recognized in other comprehensive income and presented within equity.



| | 17. | Finance lease obligations
| | --- | -------------------------



The Group leases routers and other equipments
under finance lease arrangements. The following is a schedule of future minimum finance lease commitments as at March 31, 2014:



|                           |  | March 31, 2014                    |           |  | March 31, 2013 | 
|-------------------------- |  | --------------------------------- | --------- |  | -------------- | 
|                           |  | Future minimum
    lease payments |           |  | Interest       | 
|Less than one year         |  |                                   | 467,448   |  |                | 
|Between one and five years |  |                                   | 798,082   |  |                | 
|Total                      |  |                                   | 1,265,530 |  |                | 



| | 18. | Employee benefits
| | --- | -----------------



|                     |  | March 31, 2014 |        |  | March 31, 2013 | 
|-------------------- |  | -------------- | ------ |  | -------------- | 
|Gratuity payable     |  |                | 12,744 |  |                | 
|Compensated absences |  |                | 25,891 |  |                | 
|                     |  |                | 38,635 |  |                | 



Gratuity cost



The components of gratuity costs recognized
in the consolidated income statement for the years ending March 31, 2014, March 31, 2013 and March 31, 2012 consist of the following:



|                              |  | March 31, 2014 |        |   | March 31, 2013 |  |        | March 31, 2012 | 
|----------------------------- |  | -------------- | ------ | - | -------------- |  | ------ | -------------- | 
|Service cost                  |  |                | 16,016 |   |                |  | 15,900 |                | 
|Interest cost                 |  |                | 4,879  |   |                |  | 4,876  |                | 
|Expected return on plan asset |  |                | (3,199 | ) |                |  | (3,295 | )              | 
|                              |  |                | 17,696 |   |                |  | 17,481 |                | 



Details of employee benefit obligation and
plan asset are as follows:



|                                                                     |  | March 31, 2014 |         |   | March 31, 2013 | 
|-------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|Present value of projected benefit obligation at the end of the year |  |                | 53,370  |   |                | 
|Funded status of the plans                                           |  |                | (40,626 | ) |                | 
|Recognized (asset) / liability                                       |  |                | 12,744  |   |                | 



The following
table set out the status of the gratuity plan:



|Change in defined benefit obligation                      |  | March 31, 2014 |         |   | March 31, 2013 |  |         | March 31, 2012 | 
|--------------------------------------------------------- |  | -------------- | ------- | - | -------------- |  | ------- | -------------- | 
|Projected benefit obligation at the beginning of the year |  |                | 65,723  |   |                |  | 62,610  |                | 
|Service cost                                              |  |                | 16,016  |   |                |  | 15,900  |                | 
|Interest cost                                             |  |                | 4,879   |   |                |  | 4,876   |                | 
|Actuarial (gain) / loss                                   |  |                | (23,806 | ) |                |  | (5,835  | )              | 
|Benefits paid                                             |  |                | (9,443  | ) |                |  | (11,828 | )              | 
|Projected benefit obligation at the end of the  year      |  |                | 53,369  |   |                |  | 65,723  |                | 



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|Change in plan assets                                  |  | March 31, 2014 |        |   | March 31, 2013 |  |         | March 31, 2012 | 
|------------------------------------------------------ |  | -------------- | ------ | - | -------------- |  | ------- | -------------- | 
|Fair value of plan assets at the beginning of the year |  |                | 42,563 |   |                |  | 43,095  |                | 
|Expected return on plan assets                         |  |                | 3,199  |   |                |  | 3,296   |                | 
|Actuarial gain / (loss)                                |  |                | -      |   |                |  | -       |                | 
|Employer contributions                                 |  |                | 4,307  |   |                |  | 8,000   |                | 
|Benefits paid                                          |  |                | (9,443 | ) |                |  | (11,828 | )              | 
|Fair value of plan assets at the end of the year       |  |                | 40,626 |   |                |  | 42,563  |                | 
|                                                       |  |                |        |   |                |  |         |                | 
|Actual return on plan assets                           |  |                | 3,199  |   |                |  | 3,296   |                | 



Actuarial assumptions at end of the year:



The principal actuarial assumptions as on March
31, 2014, 2013 and 2012 were as follows:



|                                                 |  | March
    31, 2014 |  | March
    31, 2013 |  | March
    31, 2012
|------------------------------------------------ |  | ------------------ |  | ------------------ |  | ------------------
|Discount rate                                    |  | 8.80% P.a          |  | 8.60% P.a          |  | 8.00% P.a         
|Long-term rate of compensation increase          |  | 6.00% P.a          |  | 8.00% P.a          |  | 8.00% P.a         
|Expected long term rate of return on plan assets |  | 8.00% P.a          |  | 8.00% P.a          |  | 8.00% P.a         
|Average future working life time                 |  | 4.90
    years     |  | 8.40
    years     |  | 8.60
    years    



Discount rate: The discount rate is
based on prevailing market yields of Indian Government securities as at the end of the year for the estimated term of the obligations.



Long term rate of compensation increase:The estimates of future salary increases considered take into account inflation, seniority, promotion and other factors.



Expected long term rate of return on plan
assets:This is based on the average long term rate of return expected on investments of the fund during the estimated term
of the obligations.



Assumptions regarding future mortality are
based on published statistics and mortality tables.



The Group assesses these assumptions with
the projected long-term plans of growth and prevalent industry standards.



Historical information



|                                          |  | March 31, 2014 |       |  | March 31, 2013 | 
|----------------------------------------- |  | -------------- | ----- |  | -------------- | 
|Experience adjustment on plan liabilities |  |                | 6,405 |  |                | 
|Experience adjustment on plan assets      |  |                | -     |  |                | 



Contributions: The Group expects to
contribute ₹ 15,000 (March 31, 2013: ₹15,000) to its gratuity fund during the year ending March 31, 2014.



The expected benefit payments to be made
in the next five years are as under:



|Year    |  | Amount
    (₹) |      
|------- |  | -------------- | -----
|2014-15 |  |                | 3,673
|2015-16 |  |                | 3,645
|2016-17 |  |                | 3,927
|2017-18 |  |                | 4,782
|2018-19 |  |                | 4,880



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Plan assets:The Gratuity plan’s
weighted-average asset allocation at March 31, 2014 and March 31, 2013, by asset category is as follows:



|                          |  | March 31, 2014 |     |   | March 31, 2013 | 
|------------------------- |  | -------------- | --- | - | -------------- | 
|Funds managed by insurers |  |                | 100 | % |                | 



Actuarial gains and losses recognized in
other comprehensive income



The amount of actuarial gains and losses recognized
in other comprehensive income for the years ending March 31, 2014, 2013 and 2012 are as follows:



|                        |  | March 31, 2014 |        |  | March 31, 2013 |  |       | March 31, 2012 | 
|----------------------- |  | -------------- | ------ |  | -------------- |  | ----- | -------------- | 
|Actuarial gain / (loss) |  |                | 23,806 |  |                |  | 5,835 |                | 
|                        |  |                | 23,806 |  |                |  | 5,835 |                | 



Sensitivity Analysis of significant actuarial
assumption



Sensitivity
analysis for the defined benefit obligations will increase/ decrease by the amounts mentioned below if there is a variation of
50 basis points in the discount rate and salary escalation rate.



|                                            |  | Discount rate                    |       |  | Salary escalation rate            | 
|------------------------------------------- |  | -------------------------------- | ----- |  | --------------------------------- | 
|                                            |  | Increase by 50 bps
    (₹ ‘000s) |       |  | Decrease by 50 
    bps (₹ ‘000s) | 
|Present Value of Defined Benefit Obligation |  |                                  | 2,546 |  |                                   | 



The present
value of defined benefit obligation has been arrived at using the same method as is used for valuing the defined benefit obligation
as per the current assumptions. The increase/decrease in defined benefit obligation has been arrived assuming the other assumptions
are constant though such increase/decrease do not happen in isolation in real scenarios.



Contributions to defined contribution
plans



In accordance
with Indian law, all employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee
and employer make monthly contributions to the plan, each equal to a specified percentage of employee’s basic salary. The
Group has no further obligations under the plan beyond its monthly contributions. The Group contributed ₹ 52,524, ₹
59,524 and ₹ 57,144 for the years ended March 31, 2014, 2013 and 2012.



| | 19. | Other liabilities
| | --- | -----------------



|                                                    |  | March 31, 2014 |         |  | March 31, 2013 | 
|--------------------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Deferred income and other liabilities               |  |                | 432,051 |  |                | 
|                                                    |  |                | 432,051 |  |                | 
|Financial liabilities included in other liabilities |  |                | 158,942 |  |                | 



The franchisees, as part of the agreement,
were required to pay initial security deposit in consideration for establishing the franchisee relationship and providing certain
initial services. As the Company no more concentrates on the consumer segment, these deposits are repayable and hence are moved
to trade and other payables.



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| | 20. | Borrowings
| | --- | ----------



|                                                      |  | March 31, 2014 |         |  | March 31, 2013 | 
|----------------------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Current                                               |  |                |         |  |                | 
|Term bank loans (Refer note 1 below)                  |  |                | 113,333 |  |                | 
|Other working capital facilities (Refer note 2 below) |  |                | 448,578 |  |                | 
|Borrowings from others (Refer note 3 below)           |  |                | 284,600 |  |                | 
|                                                      |  |                | 846,511 |  |                | 
|Non current                                           |  |                |         |  |                | 
|Term bank loans (Refer note 1 below)                  |  |                | 430,889 |  |                | 
|Borrowings from others (Refer note 3 below)           |  |                | 155,669 |  |                | 
|                                                      |  |                | 586,558 |  |                | 



The Group has borrowings which include:



| | 1. | The term loans bear interest rate
                                         ranging from 12.75% to 13.25% and repayable in equal monthly / quarterly installments
                                         within a tenor of 6 years after moratorium periods ranging from 3 months to one year
                                         of total balance , an amount of ₹  217,000 is primarily secured by charge
                                         on movable fixed assets funded by term loan and also collaterally secured by extension
                                         EM of title deeds of property at Noida in the name of  M/s Pace Infocom (100% subsidiary
                                         of STL) together with their corporate guarantee in this regard. Balance amount of ₹
                                          327,200 is primarily secured by EM of title deeds of property of the company at
                                         Rabale & collaterally by EM of title deeds of property of the company at Vashi at
                                         Mumbai.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Working capital facilities:
| | -- | ---------------------------



| | (a) | Cash credit facilities amounting
                                         to ₹ 1,085,900 are primarily secured by way of pari-passu first charge on the entire
                                         current assets of the Company to all working capital bankers under consortium.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | In addition to the above, out
                                         of these Cash Credit facilities,
| | --- | -------------------------------------------------------------------------------------------------------



| | (i) | exposure amounting to ₹
                                         730,200 is collaterally secured by way of pari-passu charge on the unencumbered movable
                                         fixed assets of the Company, both present and future.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | exposure amounting to ₹
                                         636,300 is collaterally secured by way of equitable mortgage over the properties at Tidel
                                         Park, Chennai and Vashi, Vile Parle at Mumbai
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | exposure amounting to ₹
                                         343,200 is collaterally secured by equitable mortgage over the land and building at Noida,
                                         Delhi in the name of M/s Pace Info Com Park Private Limited, a subsidiary company and
                                         also by the corporate guarantee issued by the said subsidiary and
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | the balance exposure amounting
                                         to ₹ 93,900 is collaterally secured by equitable mortgage over the Vashi property
                                         at Mumbai.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | These working capital facilities
                                         bear interest ranging from 11.70% to 13.50% p.a. and these facilities are subject to
                                         renewal annually.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Borrowings from others are secured
                                         against relevant assets and software. These loans carry an interest rate ranging from
                                         11.7% p.a to 13.5% p.a.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21. | Trade and other payables
| | --- | ------------------------



|                                                           |  | March 31, 2014 |           |  | March 31, 2013 | 
|---------------------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Trade payables                                             |  |                | 1,025,110 |  |                | 
|Advance from customers                                     |  |                | 114,438   |  |                | 
|Accrued expenses                                           |  |                | 1,462,258 |  |                | 
|Other payables                                             |  |                | 294,172   |  |                | 
|                                                           |  |                | 2,895,978 |  |                | 
|Financial liabilities included in trade and other payables |  |                | 2,835,738 |  |                | 



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| | 22. | Deferred income
| | --- | ---------------



|                |  | March 31, 2014 |         |  | March 31, 2013 | 
|--------------- |  | -------------- | ------- |  | -------------- | 
|Deferred income |  |                | 667,778 |  |                | 
|                |  |                | 667,778 |  |                | 



| | 23. | Revenue
| | --- | -------



|                             |  | Year ended     |           
|---------------------------- |  | -------------- | ----------
|                             |  | March 31, 2014 |           
|Rendering of services        |  |                |           
|Service revenue*             |  |                | 8,589,983 
|Initial franchise fee        |  |                | 79        
|Installation service revenue |  |                | 1,376,342 
|                             |  |                | 9,966,404 
|Sale of products             |  |                | 493,825   
|                             |  |                | 10,460,229



* Including revenue arising from construction
contracts (refer note 24) and revenue from operating leases amounting to ₹24,792 (refer note 32)



| | 24. | Construction contracts in progress
| | --- | ----------------------------------



|                                                                                                                                          |  | Year ended     |       
|----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------
|                                                                                                                                          |  | March 31, 2014 |       
|                                                                                                                                          |  |                |       
|Contract revenue recognized for the year                                                                                                  |  |                | 71,421
|Aggregate amounts of costs incurred and recognized profits (less recognized losses) upto the
    reporting date for contracts in progress |  |                | 53,273
|Amount of retentions                                                                                                                      |  |                | -     
|Gross amount due from customers for contract work presented as an asset                                                                   |  |                | 63,976



| | 25. | Cost of goods sold and services rendered
| | --- | ----------------------------------------



Cost of goods sold and services rendered information
is presented before any depreciation or amortization that is direct and attributable to revenue sources. The Group’s asset
base deployed in the business is not easily split into a component that is directly attributable to a business and a component
that is common / indirect to all the businesses. Since a gross profit number without depreciation and amortization does not necessarily
meet the objective of such a disclosure, the Group has not disclosed gross profit numbers but disclosed all expenses, direct and
indirect, in a homogenous group leading directly from revenue to operating income.



| | 26. | Other income
| | --- | ------------



|       |  | Year ended     |       
|------ |  | -------------- | ------
|       |  | March 31, 2014 |       
|Others |  |                | 93,461
|       |  |                | 93,461



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| | 27. | Selling, general and administrative
                                         expenses
| | --- | -------------------------------------------------------------------------------------



|                                   |  | Year ended     |          
|---------------------------------- |  | -------------- | ---------
|                                   |  | March 31, 2014 |          
|                                   |  |                |          
|Personnel expenses                 |  |                | 616,727  
|Marketing and promotion expenses   |  |                | 212,757  
|Administrative and other expenses* |  |                | 1,910,329
|                                   |  |                | 2,739,813



* Includes foreign exchange gain / (loss)
of ₹ (5,284), ₹ 18,881 and ₹ 37,650 for the years ended March 31, 2014, 2013 and 2012 respectively



| | 28. | Personnel expenses
| | --- | ------------------



|                                                             |  | Year ended     |          
|------------------------------------------------------------ |  | -------------- | ---------
|                                                             |  | March 31, 2014 |          
|Salaries and wages                                           |  |                | 1,202,713
|Contribution to provident fund and other funds               |  |                | 70,604   
|Staff welfare expenses                                       |  |                | 17,138   
|Employee stock compensation expense                          |  |                | 45       
|                                                             |  |                | 1,290,500
|Attributable to cost of goods sold and services rendered     |  |                | 673,773  
|Attributable to selling, general and administration expenses |  |                | 616,727  



| | 29. | Share-based payments
| | --- | --------------------



Share based payments are
designed as equity-settled plans. Under the equity settled plans, the Group had issued stock options under Associate Stock Option
Plan (ASOP) 1999, ASOP 2000, ASOP 2002, ASOP 2005 and ASOP 2007. Each option entitles the holder to purchase one American Depository
Share (ADS) at an exercise price determined by the Compensation committee on the date of the grant. There are no options outstanding
in respect of ASOP 1999, ASOP 2000, ASOP 2002 and ASOP 2005 plans as at April 1, 2009. Our stock option plans are detailed as
under:



| | (i) | Associate Stock Option Plan 2007
| | --- | --------------------------------



In September 2007, the Shareholders
of the Group approved a new scheme for allotment of stock options to employees, the Associate Stock Option Plan 2007. Consequent
upon the introduction of ASOP 2007 plan, 797,600 unissued stock options pertaining to Associate Stock Option Plan 2005 are no
longer available for issuance.

The options vest over a period of 4 years
as follows:



|One sixth of the option quantity:  |  | At the end of one year from the date of the grant.                                                                              
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------
|                                   |  |                                                                                                                                 
|Five sixth of the option quantity: |  | At the end of each quarter during the second, third and fourth year from the date of the grant
    in twelve equal installments.



The stock options
can be exercised within a period of twelve months from the date of last vesting.



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As the number of stock options and the price
of those options were made known to each allottee, the Plan has been considered as a fixed price grant. Stock option activity
under the ASOP 2007 Plan is as follows:



|No. of options granted,
    exercised and forfeited |  | Number of options |         |   | Weighted average
    exercise price in ₹ |  |        | Number of options |  |  | Weighted average
    exercise price in ₹ |   |  | Number of
    options |        |  | Weighted average
    exercise price in ₹ | 
|--------------------------------------------------- |  | ----------------- | ------- | - | ---------------------------------------- |  | ------ | ----------------- |  |  | ---------------------------------------- | - |  | --------------------- | ------ |  | ---------------------------------------- | 
|                                                    |  | 2014              |         |   | 2014                                     |  |        | 2013              |  |  | 2013                                     |   |  | 2012                  |        |  | 2012                                     | 
|Outstanding at the beginning of the year            |  |                   | 54,592  |   |                                          |  | 98.85  |                   |  |  | 601,168                                  |   |  |                       | 152.26 |  |                                          | 
|Granted during the year                             |  |                   | -       |   |                                          |  | -      |                   |  |  | -                                        |   |  |                       | -      |  |                                          | 
|Replaced (Refer to notes below)                     |  |                   | -       |   |                                          |  | -      |                   |  |  | -                                        |   |  |                       | -      |  |                                          | 
|Replacement options granted (Refer to notes below)  |  |                   | -       |   |                                          |  | -      |                   |  |  | -                                        |   |  |                       | -      |  |                                          | 
|Forfeited during the year                           |  |                   | -       |   |                                          |  | -      |                   |  |  | -                                        |   |  |                       | -      |  |                                          | 
|Expired during the year                             |  |                   | (7,394  | ) |                                          |  | 177.67 |                   |  |  | (546,576                                 | ) |  |                       | 144.52 |  |                                          | 
|Exercised during the year                           |  |                   | (17,198 | ) |                                          |  | 65.69  |                   |  |  | -                                        |   |  |                       | -      |  |                                          | 
|Outstanding at the end of the year                  |  |                   | 30,000  |   |                                          |  | 98.24  |                   |  |  | 54,592                                   |   |  |                       | 98.85  |  |                                          | 
|Vested and Exercisable at the end of the year       |  |                   | 30,000  |   |                                          |  | 98.24  |                   |  |  | 54,592                                   |   |  |                       | 98.85  |  |                                          | 



The fair value of stock options granted has
been measured using the Black Scholes model at the date of the grant. The Black Scholes model includes assumptions regarding dividend
yields, expected volatility, expected term (or “option life”) and risk free interest rates. In respect of the options
granted, the expected term is estimated based on the vesting term, contractual term as well as expected exercise behavior of the
employees receiving the option. Expected volatility of the option is based on historical volatility, during a period equivalent
to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the
options is based on the recent dividend activity. Risk-free interest rates are based on the Government securities yield in effect
at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent
market uncertainties based on market conditions generally outside the Company’s control. As a result, if other assumptions
had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management
uses different assumptions in the future periods, stock compensation expense could be materially impacted in future years.



The estimated fair value of stock options
is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award
as if the award was, in substance, multiple awards.



There has been no options granted during the
year and hence no fair value disclosures have been made.



A summary of information about fixed price
stock options outstanding as at March 31, 2014 is furnished below:



|          |  | Range of exercise price
    in ₹ |       |  | Number outstanding at
    March 31, 2014 |  |        | Weighted average exercise price
    in ₹ |  |  | Weighted average remaining
    contractual life |  |  | Number exercisable at
    March 31, 2013 |                                                   |  | Weighted average exercise price
    in ₹ | 
|--------- |  | -------------------------------- | ----- |  | ---------------------------------------- |  | ------ | ---------------------------------------- |  |  | ----------------------------------------------- |  |  | ---------------------------------------- | ------------------------------------------------- |  | ---------------------------------------- | 
|ASOP 2007 |  |                                  | 98.24 |  |                                          |  | 30,000 |                                          |  |  | 98.24                                           |  |  |                                          | 0.56
                                         yrs |  |                                          | 



Modification



During the year ended March 31, 2008, the
stock options issued under ASOP 2005 and ASOP 2007 had been out of money for most time of the vesting period. As a result, the
Group’s compensation committee allowed certain employees in their approval dated January 22, 2008 to surrender their (a)
unvested (b) vested and (c) unexercised stock options and obtain fresh options at a discount of 10% of the market price under
ASOP 2007 prevalent at the date of modification in lieu of the surrendered stock options. This modification resulted in the revision
in the exercise price as well as the service period over which the stock options vest. Consequent upon modification, 497,200 stock
options of ASOP 2005 plan and 123,900 stock options of ASOP 2007 plan were replaced with an allotment of equal number of fresh
options to those who surrendered.



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The incremental fair
value of the stock options replaced was determined by reference to the difference between the fair value of the replaced stock
options and the fair value of the cancelled stock options at the date of grant of new stock options. The incremental fair value
as a result of such modification in respect of modified options amounted to Rs.20,959 during the year ended March 31, 2008. In
respect of modification that has occurred during the vesting period, the incremental fair value granted is included in the measurement
of the amount recognized, for services received over the period from the modification date until the date when the modified equity
instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized
over the remainder of the original vesting period. In respect of the modification that has occurred after vesting date, the incremental
fair value granted is recognized immediately or over the vesting period if the employee is required to complete an additional
period of service before becoming unconditionally entitled to those modified equity instruments. The incremental cost recognized
in respect of such modified options amounted to ₹ 17,967 for the years ended March 31, 2012.



The assumptions that
were used in arriving at the incremental fair value are as summarized below:



|Assumptions          |  | Pre modification |                                                          |  | Post modification | 
|-------------------- |  | ---------------- | -------------------------------------------------------- |  | ----------------- | 
|Current market price |  |                  | 174.83                                                   |  |                   | 
|Exercise price       |  |                  | 308.34-578.38                                            |  |                   | 
|Expected term        |  |                  | 3
                                         – 4.5 years   |  |                   | 
|Volatility           |  |                  | 53.83%
                                         - 77.82% |  |                   | 
|Dividend yield       |  |                  | 0%                                                       |  |                   | 
|Discount rate        |  |                  | 2.5%                                                     |  |                   | 



| | 30. | Financial income and expense
| | --- | ----------------------------



|                                                                                       |  | Year ended     |         
|-------------------------------------------------------------------------------------- |  | -------------- | --------
|                                                                                       |  | March 31, 2014 |         
|Interest income on bank deposits                                                       |  |                | 61,959  
|Others                                                                                 |  |                | 58,289  
|Finance income                                                                         |  |                | 120,248 
|Interest expense on lease obligations                                                  |  |                | 90,911  
|Bank charges (including letter of credit, bill discounting and buyer’s credit charges) |  |                | 82,158  
|Interest expense on borrowings                                                         |  |                | 204,553 
|Finance expense                                                                        |  |                | (377,622
|Net finance income / (expense) recognized in profit
    or loss                        |  |                | (257,374



| | 31. | Earnings / (loss) per share
| | --- | ---------------------------



The calculation of basic earnings / (loss)
per share for the years ended March 31, 2014, 2013 and 2012 is based on the earnings / (loss) attributable to ordinary shareholders
of ₹ 318,400, ₹ 451,569 and ₹ (383,337) respectively and a weighted average number of shares outstanding of
136,679,950, 131,638,589, and 103,313,278, respectively, calculated as follows:



|                                            |  | Year
    ended     |            
|------------------------------------------- |  | ------------------ | -----------
|                                            |  | March
    31, 2014 |            
|Net profit / (loss ) – as reported          |  |                    | 318,400    
|                                            |  |                    |            
|Weighted average number of shares – basic   |  |                    | 136,679,950
|Basic earnings / (loss) per share           |  |                    | 2.33       
|                                            |  |                    |            
|Weighted average number of shares – diluted |  |                    | 136,682,565
|Diluted earnings / (loss) per share         |  |                    | 2.33       



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Weighted average number of ordinary shares
basic



|                                                                           |  | Year ended March 31, |            
|-------------------------------------------------------------------------- |  | -------------------- | -----------
|                                                                           |  | 2014                 |            
|Issued  fully paid ordinary shares at April 01                             |  |                      | 53,351,498 
|Effect of shares issued on exercise of stock options                       |  |                      | 169,205    
|Effect of partly paid shares (Note 1)                                      |  |                      | 83,159,247 
|Weighted average number of equity shares and equivalent shares outstanding |  |                      | 136,679,950



Weighted average number of ordinary shares
diluted



|                                                               |  | Year ended March 31, |            
|-------------------------------------------------------------- |  | -------------------- | -----------
|                                                               |  | 2014                 |            
|Weighted average number of ordinary shares (basic)             |  |                      | 136,679,950
|Effect of stock options                                        |  |                      | 2,615      
|Weighted average number of equity shares outstanding (diluted) |  |                      | 136,682,565



As the Company incurred a net loss attributable
to ordinary shareholders for the year ended March 31, 2012, 601,168 ordinary shares arising out of potential exercise of outstanding
stock options as at March 31, 2012 were not included in the computation of diluted earnings per share, as their effect was anti-dilutive.



|Note 1: |  | During the year
                                         ended March 31, 2011, 125,000,000 ordinary shares were issued to the existing promoter
                                         group on a private placement basis. As of March 31, 2014, these shares were partly paid
                                         up to the extent of ₹ 7 (March 31, 2013 : ₹ 6.25) per share. Refer note 16
                                         to the consolidated financial statements.
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32. | Operating leases
| | --- | ----------------



The Group
leases office buildings and other equipment under operating lease arrangements that are renewable on a periodic basis at the option
of both the lessor and the lessee. Some of the leases include rent escalation clauses. Rental expenses under these leases were
₹ 356,631, ₹ 367,252 and ₹ 339,139 for the years ended March 31, 2014, 2013 and 2012 respectively. The schedule
of future minimum rental payments in respect of operating leases is set out below:



As at
March 31, 2014



|Lease obligations                           |  | Total |           |  | Less
    than 1 year |  |         | 1-5 years |  |  | More than 5
    years | 
|------------------------------------------- |  | ----- | --------- |  | -------------------- |  | ------- | --------- |  |  | --------------------- | 
|Non-cancellable operating lease obligations |  |       | 1,690,119 |  |                      |  | 123,316 |           |  |  | 540,552               | 



As at
March 31, 2013



|Lease obligations                           |  | Total |           |  | Less 
    than 1 year |  |         | 1-5 years |  |  | More than 5
    years | 
|------------------------------------------- |  | ----- | --------- |  | --------------------- |  | ------- | --------- |  |  | --------------------- | 
|Non-cancellable operating lease obligations |  |       | 1,803,863 |  |                       |  | 113,744 |           |  |  | 519,254               | 



Operating lease income:



The
company has given plant and machinery under operating lease arrangements to its customers the period of which are generally up
to 5 years. The schedule of minimum lease rental incomes in respect of these operating lease arrangements are given below:

|                                                              |  | As
                                         atMarch 31,2014 |         |  | As
                                         atMarch 31,2013 | 
|------------------------------------------------------------- |  | ----------------------------------------------------------- | ------- |  | ----------------------------------------------------------- | 
|Receivables not later than one year                           |  |                                                             | 23,429  |  |                                                             | 
|Receivables later than one year and not later than five years |  |                                                             | 81,630  |  |                                                             | 
|                                                              |  |                                                             | 105,059 |  |                                                             | 





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| | 33. | Segment reporting
| | --- | -----------------



The Company,
in the immediate past, has been operating with two segments of business viz Enterprise Service and Software services. During the
year 2013-14, the Company has reorganised its business into the following offerings.



|Telecom Services                   |  | Consists of domestic Data, International Data, Wholesale Voice and Collaborative
    Tools                     consisting
    of Audio and Video conferencing solutions
|---------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                   |  |                                                                                                                                                                        
|Data Centre Services               |  | Currently provides Co-location services for enterprise class clients.                                                                                                  
|                                   |  |                                                                                                                                                                        
|Cloud & Managed Services           |  | Consists of IT infra services, IT transformation Services, Remote and Onsite Infrastructure
    Management services and Delivery platforms.                            
|                                   |  |                                                                                                                                                                        
|Applications Integration Services* |  | Consists of Application Development and Maintenance, Application testing, Mobility solutions,
    eLearning, Portal services, Tools, Process and Automation.           
|                                   |  |                                                                                                                                                                        
|Technology Integration Services    |  | Consists of Data Centre Build, Network Integration, Information security and End User computing                                                                        



*The segment
was named as “Application Services” in 6 K and subsequently renamed as “Applications Integration Services”.



Consequently
the operating segments are as under:



Telecom services: The telecom services consist of network services addressing the domestic connectivity needs of Indian enterprises
and international inward and outward connectivity needs of International Enterprises. The services include a comprehensive range
of Internet protocol based Virtual Private Network, offerings, including intranets, extranets and remote access applications to
both small and large corporate customers. The Company provides MPLS-enabled IPVPN’s through entire network. The Company
also provides last mile connectivity to customers.



The cable landing
station and investment in submarine cable consortium are other assets extended to International partners for international inward
and outward connectivity needs. The cable landing station currently lands 2 major submarine cables; namely Gulf Bridge International
(GBI) and the Middle Eastern and North African cable (MENA)



Data Centre services:  The
Company operate 5 Tier III Data Centres of which two are located in Mumbai (Bombay), one each at Noida (Delhi), Chennai (Madras)
and Bengaluru, to host mission-critical applications. The Company offers co-location services which allow customers to bring in
their own rack-mountable servers and house them in shared racks or hire complete racks, and even rent ‘secure cages’
at the hosting facility as per their application requirements. It also offers a wide variety of managed hosting services, such
as storage, back-up and restoration, performance monitoring and reporting hardware and software procurement and configuration
and network configuration under this business line.



Cloud and managed services:
On-demand hosting (cloud) services offer end-customers with the solutions to Enterprises. The Company offers on-demand cloud
services giving companies the option to “pay as you go” basis.



The Remote and Onsite
Infrastructure Management services provide management and support of customer operating systems, applications and database layers.



Technology integration services:The services under this segment consist of Data Centre Build, Network Integration, Information security and End User computing.



Applications integration services:The
wide range of web-applications include sales force automation, supply chain management, intranet and extranets, workflow engine
and knowledge management systems.



Applications integration
services operates the online portals, such as www.sify.com, www.samachar.com, that function as principal
entry points and gateway for accessing the Internet by providing useful web-related services and links. The company also offers
related content sites worldwide.



Sify.com provides
a gateway to the Internet by offering communication and search tools such as email, chat, travel, online portfolio management
and channels for personal finance, astrology, lifestyle, shopping, movies, sports and news.



The company also
offers value-added services to organizations such as website design, development, content management, Online assessment tools,
search engine optimization, , including domain name management, secure socket layer (SSL) certificate for websites, and server
space in required operating system and database. It provides messaging and collaboration services and solutions such as e-mail
servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and services
to enable data & access security over the Internet, Infrastructure-based services on demand, including on-line testing engine
and network management. On-line testing services include test management software, required servers and proctored examination
facilities at Sify’s franchisee points. On-line exam engine offered allows a secure and flexible way of conducting examinations
involving a wide range of question patterns.



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Accordingly, revenues represented by nature
of service rendered comprise the primary basis of segmental information.



Bandwidth costs, which form a significant
part of the total expenses, are of three kinds – international, Domestic and last mile. These are allocated primarily to
the Telecom services.



The Direct costs such as Bandwidth , Inter
Connect Charges , IP termination costs, Associate costs of Delivery teams, Associate costs of billable resources , Revenue share
payable , Power costs , Operating costs of the Network , Cost of goods sold and other direct costs are allocated directly to the
respective operating segments.



| | § | Certain
                                         expenses, like depreciation and overheads incurred by the support functions including
                                         finance, human resources, administration and corporate, 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 feasible to provide
                                         segment disclosure of these expenses and, accordingly, they are separately disclosed
                                         as “unallocated expenses” and “depreciation” and adjusted only
                                         against the total operating income of the Company.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



The Group’s operating segment information
for the years ended March 31, 2014, 2013 and 2012, are presented below:



Year ended March 31, 2014 (As adjusted)



|                                             |  | Telecom Services |            |   | Data Centre Services |  |           | Cloud and Managed Services |  |  | Technology Integration Services |   |  | Applications Integration Services |          |   | Total | 
|-------------------------------------------- |  | ---------------- | ---------- | - | -------------------- |  | --------- | -------------------------- |  |  | ------------------------------- | - |  | --------------------------------- | -------- | - | ----- | 
|Segment revenue                              |  |                  | 6,875,633  |   |                      |  | 1,223,857 |                            |  |  | 515,146                         |   |  |                                   | 842,017  |   |       | 
|Allocated segment expenses                   |  |                  | (5,246,162 | ) |                      |  | (952,176  | )                          |  |  | (436,408                        | ) |  |                                   | (881,163 | ) |       | 
|Segment operating income / (loss)            |  |                  | 1,629,471  |   |                      |  | 271,681   |                            |  |  | 78,738                          |   |  |                                   | (39,146  | ) |       | 
|Unallocated expenses:                        |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Selling, general and administrative expenses |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Depreciation and amortization                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Other income / (expense), net                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Finance income                               |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Finance expenses                             |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Profit / (loss) before tax                   |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Income tax (expense) / benefit               |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Profit / (loss) for the year                 |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 



Year ended March 31, 2013 (As adjusted)



|                                             |  | Telecom Services |            |   | Data Centre Services |  |           | Cloud and Managed Services |  |  | Technology Integration Services |   |  | Applications Integration Services |          |   | Total | 
|-------------------------------------------- |  | ---------------- | ---------- | - | -------------------- |  | --------- | -------------------------- |  |  | ------------------------------- | - |  | --------------------------------- | -------- | - | ----- | 
|Segment revenue                              |  |                  | 5,337,983  |   |                      |  | 1,235,613 |                            |  |  | 510,904                         |   |  |                                   | 785,147  |   |       | 
|Allocated segment expenses                   |  |                  | (4,376,213 | ) |                      |  | (989,533  | )                          |  |  | (242,308                        | ) |  |                                   | (878,501 | ) |       | 
|Segment operating income / (loss)            |  |                  | 961,769    |   |                      |  | 246,080   |                            |  |  | 268,596                         |   |  |                                   | (93,354  | ) |       | 
|Unallocated expenses:                        |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Selling, general and administrative expenses |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Depreciation and amortization                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Other income / (expense), net                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Finance income                               |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Finance expenses                             |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Profit / (loss) before tax                   |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Exceptional item                             |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 
|Profit / (loss) for the year                 |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |          |   |       | 



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Year ended March 31, 2012 (As adjusted)



|                                             |  | Telecom Services |            |   | Data Centre Services |  |           | Cloud and Managed Services |  |  | Technology Integration Services |   |  | Applications Integration Services |            |   | Total | 
|-------------------------------------------- |  | ---------------- | ---------- | - | -------------------- |  | --------- | -------------------------- |  |  | ------------------------------- | - |  | --------------------------------- | ---------- | - | ----- | 
|Segment revenue                              |  |                  | 4,331,963  |   |                      |  | 1,042,976 |                            |  |  | 409,625                         |   |  |                                   | 1,165,308  |   |       | 
|Allocated segment expenses                   |  |                  | (3,469,398 | ) |                      |  | (737,009  | )                          |  |  | (277,762                        | ) |  |                                   | (1,452,600 | ) |       | 
|Segment operating income / (loss)            |  |                  | 862,565    |   |                      |  | 305,967   |                            |  |  | 131,863                         |   |  |                                   | (287,292   | ) |       | 
|Unallocated expenses:                        |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Selling, general and administrative expenses |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Depreciation and amortization                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Other income / (expense), net                |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Finance income                               |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Finance expenses                             |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Share of profit of equity accounted investee |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Profit / (loss) before tax                   |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Income tax (expense) / benefit               |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 
|Profit / (loss) for the year                 |  |                  |            |   |                      |  |           |                            |  |  |                                 |   |  |                                   |            |   |       | 



Year Reconciliations



|                              |  | Cost of goods sold |           |  | Selling, general
    and
    administrative
    expenses |  |           | Finance expenses |  |  | Total   | 
|----------------------------- |  | ------------------ | --------- |  | -------------------------------------------------------- |  | --------- | ---------------- |  |  | ------- | 
|Year ended March 31, 2014     |  |                    |           |  |                                                          |  |           |                  |  |  |         | 
|Allocated segment expenses    |  |                    | 6,136,860 |  |                                                          |  | 2,141,939 |                  |  |  | -       | 
|Unallocated segment expenses  |  |                    | -         |  |                                                          |  | 597,874   |                  |  |  | 377,622 | 
|Total as per income statement |  |                    | 6,136,860 |  |                                                          |  | 2,739,813 |                  |  |  | 377,622 | 
|                              |  |                    |           |  |                                                          |  |           |                  |  |  |         | 
|Year ended March 31, 2013     |  |                    |           |  |                                                          |  |           |                  |  |  |         | 
|Allocated segment expenses    |  |                    | 5,340,910 |  |                                                          |  | 1,863,565 |                  |  |  | -       | 
|Unallocated segment expenses  |  |                    | -         |  |                                                          |  | 587,909   |                  |  |  | 260,441 | 
|Total as per income statement |  |                    | 5,340,910 |  |                                                          |  | 2,451,474 |                  |  |  | 260,441 | 
|                              |  |                    |           |  |                                                          |  |           |                  |  |  |         | 
|Year ended March 31, 2012     |  |                    |           |  |                                                          |  |           |                  |  |  |         | 
|Allocated segment expenses    |  |                    | 5,124,090 |  |                                                          |  | 1,542,266 |                  |  |  | -       | 
|Unallocated segment expenses  |  |                    | -         |  |                                                          |  | 541,626   |                  |  |  | 306,732 | 
|Total as per income statement |  |                    | 5,124,090 |  |                                                          |  | 2,083,892 |                  |  |  | 306,732 | 







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Revenue reclassifications



For the year ended March 31, 2013



|                             |  | Revised operating segments |          
|---------------------------- |  | -------------------------- | ---------
|                             |  | Telecom Services           |          
|Segments previously reported |  |                            |          
|Enterprise services          |  |                            | 5,337,983
|Software services            |  |                            |          
|Revised revenue              |  |                            | 5,337,983



For the year ended March 31, 2012



|                             |  | Revised operating segments |          
|---------------------------- |  | -------------------------- | ---------
|                             |  | Telecom Services           |          
|Segments previously reported |  |                            |          
|Enterprise services          |  |                            | 4,331,963
|Software services            |  |                            |          
|Revised revenue              |  |                            | 4,331,963



Operating and allocated cost reclassifications:



For the year ended March 31, 2013



|                             |  | Revised operating segments |          
|---------------------------- |  | -------------------------- | ---------
|                             |  | Telecom Services           |          
|Segments previously reported |  |                            |          
|Enterprise services          |  |                            | 4,376,213
|Software services            |  |                            |          
|Revised Costs                |  |                            | 4,376,213



For the year ended March 31, 2012



|                             |  | Revised operating segments |          
|---------------------------- |  | -------------------------- | ---------
|                             |  | Telecom Services           |          
|Segments previously reported |  |                            |          
|Enterprise services          |  |                            | 3,439,474
|Tech opex costs*             |  |                            | 29,924   
|Software services            |  |                            |          
|Revised Costs                |  |                            | 3,469,398



*Tech operating costs which was previously
part of unallocated expenses, have now been allocated to telecom services.



Geographic segments



The Group has two geographic segments India
and rest of the world. Revenues from the geographic segments based on domicile of the customer are as follows:



|Description               |  | India |           |  | Rest of the 
    world |  |           | Total | 
|------------------------- |  | ----- | --------- |  | ---------------------- |  | --------- | ----- | 
|Revenues                  |  |       |           |  |                        |  |           |       | 
|Year ended March 31, 2014 |  |       | 6,360,229 |  |                        |  | 4,099,930 |       | 
|Year ended March 31, 2013 |  |       | 5,222,415 |  |                        |  | 3,347,901 |       | 
|Year ended March 31, 2012 |  |       | 4,864,915 |  |                        |  | 2,834,034 |       | 



The Group
does not disclose information relating to non-current assets located in India and rest of the world as the necessary information
is not available and the cost to develop it would be excessive.



The revenue
from transactions with a single external customer did not exceed 10% of the total revenue of the Company for each of the three
years ended March 31, 2014.



| | 34. | Contingencies
| | --- | -------------



| | a) | During the previous years, the Group
                                         had received assessment orders from the Income-tax Department of India for various financial
                                         years disallowing certain expenditure like bandwidth charges and foreign currency payments
                                         for non-deduction of withholding taxes. The Company appealed against those order before
                                         Commissioner of Income Tax (Appeals) (CIT(A)) and received favourable orders. The department
                                         has filed appeals before Income Tax Appellate Tribunal (ITAT) disputing CIT(A) orders.
                                         The group believes that the appeal by the department is not sustainable and consequently
                                         no loss contingency is necessary as at March 31, 2014. Income tax claims against the
                                         company as at March 31, 2014 amounted to ₹ 8,028 (March 31, 2013: ₹ Nil).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Contingencies due to certain service
                                         tax claims as at March 31, 2014 amounted to ₹ 502,033 (March 31, 2013: ₹
                                         478,876).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Additionally, the Group is also involved
                                         as a party to lawsuits, claims and proceedings, which arise in the ordinary course of
                                         business. The Group does not foresee any material contingency out of the pending issues.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | The Group during the year ended March
                                         31, 2009 entered into a contract with Emirates Integrated Telecom for the construction
                                         and supply of capacity from the Europe India Gateway. As per the contract with Emirates,
                                         the Group is required to pay its share of decommissioning costs if any that may arise
                                         in the future. No provision has been made by the Group for such decommissioning costs
                                         as the amount of provision cannot be measured reliably as at March 31, 2014.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | Liability on customer letter of credit
                                         discounted amounted to ₹ Nil (March 31, 2013: ₹ 122,260).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------



| | f) | Effective 2012-13, the Company has
                                         participated in the Export Promotion Capital Goods Scheme (“the scheme”)
                                         under which capital equipments are permitted to be imported against a specific licence
                                         at a substantially reduced customs duty, subject to fulfilment of obligation to export
                                         services rendered by use of capital equipment imported under the scheme to the extent
                                         of over 6 times (March 31,2013: 8 times) the value of duty saved over a period of 6 years
                                         (March 31,2013: 8 years) from the date of obtaining the licence. In case of failure to
                                         meet the export obligation, the company would be liable to pay the differential between
                                         the normal duty and the duty saved under the scheme along with interest.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of March 31, 2013, the Company
was holding 19 licences with a corresponding export obligation of ₹ 6,269. During the year 2013-14, the Company had fulfilled
the Export Obligation pertaining to 16 licences of the above by virtue of higher export of services enabling earlier settlement
of obligation. As of March 31, 2014, the company is holding 32 licenses with a corresponding export obligation of ₹12,723.
Taking into account the track record of the Company’s exports, it believes that it would be able to meet the export obligation
within the time frame and would not be exposed to any liability on account of the above scheme.



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| | g) | In respect of contingencies arising
                                         on legal proceedings, refer Note 35.
| | -- | -----------------------------------------------------------------------------------------------------------------



| | 35. | Legal proceedings
| | --- | -----------------



| | a) | The Company and certain of its officers
                                         and directors are named as defendants in a securities class action lawsuit filed in the
                                         United States District Court for the Southern District of New York. This action, which
                                         is captioned In re Satyam Infoway Ltd. Initial Public Offering Securities Litigation,
                                         also names several of the underwriters involved in Company’s initial public offering
                                         of American Depository Shares as defendants. This class action is brought on behalf of
                                         a purported class of purchasers of Company’s ADSs from the time of Company’s
                                         Initial Public Offering (“IPO”) in October 1999 through December 2000. The
                                         central allegation in this action is that the underwriters in Company’s IPO solicited
                                         and received undisclosed commissions from, and entered into undisclosed arrangements
                                         with, certain investors who purchased Company’s ADSs in the IPO and the aftermarket.
                                         The complaint also alleges that Company violated the United States Federal Securities
                                         laws by failing to disclose in the IPO prospectus that the underwriters had engaged in
                                         these allegedly undisclosed arrangements. More than 300 issuers have been named in similar
                                         lawsuits.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On April 2, 2009, the parties lodged
with the Court a motion for preliminary approval of a proposed settlement between all parties, including the Company and its former
officers and directors.  The proposed settlement provides the plaintiffs with $586 million in recoveries from all defendants.
 Under the proposed settlement, the Issuer Defendants collectively would be responsible for $100 million, which would be
paid by the Issuers’ insurers, on behalf of the Issuer Defendants and their officers and directors.



Accordingly, any direct financial
impact of the proposed settlement is expected to be borne by the Company’s insurers.  On June 12, 2009, the Federal
District Court granted preliminary approval of the proposed settlement. On October 6, 2009, the District Court issued an order
granting final approval of the settlement.  Subsequent to the final approval of Settlement agreement by the District court,
there were several notices of appeal filed.  Most were filed by the same parties that objected to the settlement in front
of the District Court.  These appeals were consolidated into a single appeal and briefing schedule was held. On January 9,
2012 the class counsel and objectors counsel entered into a settlement agreement, which includes an agreement to dismiss the above
appeal. Thus the above Appeal has been dismissed with prejudice confirming the Settlement agreement entered before the District
Court.



During the year 2012-13, the exposure
under this settlement had been settled by the insurer as per the settlement agreement.



| | b) | Proceedings before Department of Telecommunications
| | -- | ---------------------------------------------------



| | (ii) | License fees
| | ---- | ------------



| | · | On
                                         October 12, 2009 (as later clarified by the DoT), the Department of Telecommunications
                                         (‘DOT’) raised a demand on Sify Technologies for ₹ 14 million after
                                         correcting the arithmetical error in the assessment letter.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On
                                         February 26, 2010 DOT raised a demand on Sify Communications (erstwhile subsidiary merged
                                         with Sify Technologies Limited) for ₹ 26 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The above demands were made by
the DoT on the premise that all amounts of income (whether direct or indirect) including certain items like other income, interest
on deposits, gain on foreign exchange fluctuation, profit on sale of assets & provision written back, that have got anything
to do with telecom operations of the Company or arise in connection with the Telecom business of the Company, are to be considered
as income for the purpose of calculation of the license fee. The company has replied suitably on the above demand notice.



The service providers had approached
Telecom Disputes Settlement & Appellate Tribunal (‘TDSAT’) on what all items of income are liable for calculation
of license fee and what all items of income on which license fees are not liable to be paid. TDSAT by its order clarified on the
above. The TDSAT order was challenged by DoT in Supreme Court of India and the Supreme Court has set aside the TDSAT order. The
service providers through their associations are contemplating for further appeal in Supreme Court by way of review petition.
Sify believes that inspite of the Supreme Court order, the above demands are not tenable under law nor fit into the definition
of Adjusted Gross Revenue as defined by DoT. The company believes it has adequate defenses for these demands and the ultimate
outcome of these actions may not have a material adverse effect.



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| | (ii) | In November 2009, the Company received
                                         a demand notice pertaining to the allocation of spectrum in the 3.3-3.4 GHz frequency,
                                         from DoT, demanding ₹ 345 million (US $ 7.05 million) towards spectrum charges
                                         payable from the date of issue of allocation letter for 170 Base Stations.  As per
                                         the notice, in case no payment is received within 15 days from the date of issue of the
                                         notice, then it would be presumed that the Company is no longer interested for the frequency
                                         assignments in 3.3-3.4 GHz band.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Whilst the Company received allotment
letter for Spectrum in 3.3 GHz band (3303.5/3353.5 MHz) (Total 12 MHz) the Company had neither started any operations in this
frequency band nor had applied for any Operating License from DOT/ Wireless Planning Commission (WPC). The Company believes that
the obligation to make payment will arise only after obtaining the operating license from DOT/WPC.  The Company also believes
that it has adequate legal defences for these demands, as the Company has not yet obtained any operative license, hence such
demand is not tenable Nevertheless, the Company has as a commitment to hold and use the spectrum in the above band has paid ₹
11.56 million towards 40 Base Stations and has surrendered the remaining 130 Base Stations.  The Company believes that the
ultimate outcome of these actions will not have a material adverse effect.



| | c) | The company is party to additional
                                         legal actions arising in the ordinary course of business. Based on the available information
                                         as at March 31, 2014, the Company believes that it has adequate legal defences for these
                                         actions and that the ultimate outcome of these actions will not have a material adverse
                                         effect. However in the event of adverse judgement in all these cases, the maximum financial
                                         exposure would be ₹ 26.6 million (March 31, 2013: ₹ 10.6 million)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 36. | Related parties
| | --- | ---------------



The related parties where control / significant
influence exists are subsidiaries and associates. Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the entity, directly or indirectly, including any director whether executive
or otherwise. Key management personnel includes the board of directors and other senior management executives. The other related
parties are those with whom the Group has had transaction during the years ended March 31, 2014, 2013 and 2012 are as follows:



|Particulars                                                                                                                                             |  | Countryof incorporation |           |  | % of Ownership interest | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- |  | ----------------------- | 
|                                                                                                                                                        |  |                         |           |  | March 31, 2014          | 
|Holding Company                                                                                                                                         |  |                         |           |  |                         | 
|Infinity Satcom Universal Private Limited                                                                                                               |  |                         |           |  |                         | 
|Raju Vegesna Infotech & Industries Private Limited (Refer note 40)                                                                                      |  |                         |           |  |                         | 
|Ramanand Core Investment Company Private Limited                                                                                                        |  |                         |           |  |                         | 
|Subsidiaries                                                                                                                                            |  |                         |           |  |                         | 
|Sify Software Limited (Formerly Sify Networks Private Limited)*****                                                                                     |  |                         | India     |  |                         | 
|Sify Technologies (Singapore) Pte. Limited                                                                                                              |  |                         | Singapore |  |                         | 
|Hermit Projects Private Limited*****                                                                                                                    |  |                         | India     |  |                         | 
|Pace Info Com Park Private Limited                                                                                                                      |  |                         | India     |  |                         | 
|Sify Empower India Foundation                                                                                                                           |  |                         | India     |  |                         | 
|Others (Entities in which the Key Management Personnel have controlling interest
    / significant influence and relatives of Key Management Personnel) |  |                         |           |  |                         | 
|Radhika Vegesna                                                                                                                                         |  |                         | India     |  |                         | 
|Server Engines LLC                                                                                                                                      |  |                         | USA       |  |                         | 
|Server Engines India Private Limited                                                                                                                    |  |                         | India     |  |                         | 
|VALS Developers Private Limited                                                                                                                         |  |                         | India     |  |                         | 
|Raju Vegesna Developers Private Limited                                                                                                                 |  |                         | India     |  |                         | 



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The following is a summary of the related
party transactions for the year ended March 31, 2014:



|Transactions                                            |  | Holding Company |     |  | Associates |  |   | Others |  |  | Key Management Personnel*** | 
|------------------------------------------------------- |  | --------------- | --- |  | ---------- |  | - | ------ |  |  | --------------------------- | 
|Consultancy services received                           |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Sitting fees paid                                       |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Salaries and other short term benefits                  |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Contributions to defined contribution plans             |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Share based payment transactions                        |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Issue of shares on private placement basis**            |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Advance lease rentals and refundable deposits refunded* |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Refundable lease deposit paid****                       |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Lease rentals paid****                                  |  |                 | 900 |  |            |  | - |        |  |  | 3,813                       | 
|Amount of outstanding balances                          |  |                 |     |  |            |  |   |        |  |  |                             | 
|Advance lease rentals and refundable deposits made****  |  |                 | -   |  |            |  | - |        |  |  | 2,558                       | 



The following is a summary of the related
party transactions for the year ended March 31, 2013:



|Transactions                                            |  | Holding Company |     |  | Associates |  |   | Others |  |  | Key Management Personnel*** | 
|------------------------------------------------------- |  | --------------- | --- |  | ---------- |  | - | ------ |  |  | --------------------------- | 
|Consultancy services received                           |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Sitting fees paid                                       |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Salaries and other short term benefits                  |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Contributions to defined contribution plans             |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Share based payment transactions                        |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Issue of shares on private placement basis**            |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Advance lease rentals and refundable deposits refunded* |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Refundable lease deposit paid****                       |  |                 | -   |  |            |  | - |        |  |  | -                           | 
|Lease rentals paid****                                  |  |                 | 900 |  |            |  | - |        |  |  | 3,429                       | 
|Amount of outstanding balances                          |  |                 |     |  |            |  |   |        |  |  |                             | 
|Advance lease rentals and refundable deposits made****  |  |                 | -   |  |            |  | - |        |  |  | 2,558                       | 



The following is a summary of the related
party transactions for the year ended March 31, 2012:



|Transactions                                            |  | Holding Company |           |  | Associates |  |   | Others |  |  | Key Management Personnel*** | 
|------------------------------------------------------- |  | --------------- | --------- |  | ---------- |  | - | ------ |  |  | --------------------------- | 
|Consultancy services received                           |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Sitting fees paid                                       |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Salaries and other short term benefits                  |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Contributions to defined contribution plans             |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Share based payment transactions                        |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Issue of shares on private placement basis**            |  |                 | 1,500,000 |  |            |  | - |        |  |  | -                           | 
|Advance lease rentals and refundable deposits refunded* |  |                 | -         |  |            |  | - |        |  |  | 2,175                       | 
|Refundable lease deposit paid****                       |  |                 | -         |  |            |  | - |        |  |  | -                           | 
|Lease rentals paid****                                  |  |                 | 150       |  |            |  | - |        |  |  | 3,129                       | 
|Amount of outstanding balances                          |  |                 |           |  |            |  |   |        |  |  |                             | 
|Advance lease rentals and refundable deposits made****  |  |                 | -         |  |            |  | - |        |  |  | 2,558                       | 



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*Represents deposits made to VALS Developers
Private Limited (“VALS”).VALS was owned and controlled by Raju Vegesna Infotech & Industries Private Limited,
in which Mr. Raju Vegesna, our principal share holder and Managing Director, was holding  94.66% equity in his personal capacity.
During the year ended March 31, 2009, Sify entered into an agreement for Sub Lease with VALS Developers Private Limited to take
on lease on long term basis the proposed building which is in the process of being constructed. The lease agreement, when final
and executed, was expected to have an initial non-cancellable term of 5 years, with a further option for Sify to renew or cancel
the lease for the incremental five year terms. In terms of this Agreement for Sub Lease, Sify had paid a security deposit of ₹
125,700 and advance rental of ₹157,125 to VALS. As per the terms of the Sub Lease, the security deposit will be refunded
at the end of lease term and the advance rental would be adjusted over a period of 15 months from the commencement of the lease.
To give effect to the above arrangement, VALS had entered into a Memorandum of Understanding on 16th June 2008 with M/s. Advance
India Projects Limited (AIPL) and M/s. Pace Info com Private Limited (PACE), wherein PACE is an allottee of the land situated
at B-07, Sector-132, Noida and VALS had through a Special Purpose Vehicle Hermit Projects Private Limited (HERMIT) decided to
acquire the shares of PACE including the land held by it. VALS had paid a sum of ₹ 285,000 to AIPL at the time of signing
the MoU.



During the year, on October 30, 2010, the
Board of Directors had approved to cancel the MoU for lease arrangement and decided to acquire the property which is under construction
from the third party directly. On 12th January 2011, through a Memorandum of Amendment, the company with the intention to acquire
the said land, had substituted its name with that of VALS and through such amendment VALS had agreed to assign all rights, responsibilities,
obligations, title etc. in favour of the company, thus making the company eligible to acquire PACE through HERMIT and subsequently
the land and also making liable to pay the entire consideration of ₹ 1,140,000. Hence the Company had paid VALS an amount
of ₹ 2,175 i.e., difference between the amount paid by the Company to VALS and the amount paid by VALS to AIPL.



During the previous year, the Company acquired
the leasehold rights along with the building under construction through acquisition of entire shares HERMIT which in turn holds
the entire shares of PACE, the original allottee of the land. As of March 31, 2014, the Company had paid a sum of ₹ 180,779
as an advance to AIPL towards construction of the building and any further sum it has to advance as per the commitment shall be
adjusted towards value of investment in HERMIT after settling further debts and liabilities relating to construction of the said
Data Centre.



** Also refer note 16 in relation to transactions
relating to issue of equity shares on private placement basis to Raju Vegesna Infotech & Industries Private Limited.



*** Some of the key management personnel of
the Group are also covered under the Group’s gratuity plan along with other employees of the Group. Proportionate amounts
of gratuity accrued under the gratuity plan have not been separately computed or included in the above disclosure.



****The company had entered into a lease agreement
with Ms Radhika Vegesna, Daughter of Mr. Ananda Raju Vegesna, Executive Director of the company, to lease the premises owned by
her for a period of three years effective June 1, 2010 on a rent of ₹ 256 per month and payment of refundable security deposit
of ₹ 2,558. This arrangement will be automatically renewed for a further period of two blocks of three years with all the
terms remaining unchanged.



****During the year 2011 -12, the Company
had entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding Company, to lease
the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 75 (Rupees Seventy Five Thousand
Only) per month. Subsequently, the Company entered into an amendment agreement with effect from April 1, 2013, providing for automatic
renewal for a further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three
years.



**** During the year ended March 31, 2012,
the Company had entered into a lease agreement with M/s Raju Vegesna Developers Private Limited, a Company in which Mr Ananda
Raju Vegesna, Executive Director of the Company and Mr Raju Vegesna, Chairman and Managing director of the Company exercise significant
influence, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 30 (Rupees
Thirty Thousand Only) per month. Subsequently, the Company entered into an amendment agreement with effect from April 1, 2013,
providing for the automatic renewal for further period of two blocks of 3 years with an escalation of 15% on the last paid rent
after the end of every three years



***** The Companies have merged with Sify
Technologies Limited effective April 1, 2013.



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| | 37. | Financial instruments
| | --- | ---------------------



Financial instruments by category



The carrying value and fair value of financial
instruments by each category as at March 31, 2014 were as follows:



|Particulars                      |  | Note |  | Loans and receivables |           |  | Financial assets
    / liabilities at fair value through profit and loss |  |       | Available for sale |  |  | Other financial liabilities |  |  | Total carrying value |           |  | Total fair value | 
|-------------------------------- |  | ---- |  | --------------------- | --------- |  | ------------------------------------------------------------------------ |  | ----- | ------------------ |  |  | --------------------------- |  |  | -------------------- | --------- |  | ---------------- | 
|Assets                           |  |      |  |                       |           |  |                                                                          |  |       |                    |  |  |                             |  |  |                      |           |  |                  | 
|Cash and cash equivalents        |  | 8    |  |                       | 1,270,127 |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other assets                     |  | 10   |  |                       | 226,698   |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Trade receivables                |  | 13   |  |                       | 3,520,587 |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other receivables                |  | 13   |  |                       | 56,936    |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Derivative financial instrument  |  |      |  |                       | -         |  |                                                                          |  | 1,397 |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other investments                |  | 15   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | 1,710                       |  |  |                      | -         |  |                  | 
|Liabilities                      |  |      |  |                       |           |  |                                                                          |  |       |                    |  |  |                             |  |  |                      |           |  |                  | 
|Bank overdraft                   |  | 8    |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 637,347   |  |                  | 
|Finance lease liabilities        |  | 17   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 1,053,852 |  |                  | 
|Other liabilities                |  | 19   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 158,942   |  |                  | 
|Borrowings from banks            |  | 20   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 992,800   |  |                  | 
|Borrowings from others           |  | 20   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 440,269   |  |                  | 
|Trade and other payables         |  | 21   |  |                       | -         |  |                                                                          |  | -     |                    |  |  | -                           |  |  |                      | 2,835,738 |  |                  | 
|Derivative financial instruments |  |      |  |                       | -         |  |                                                                          |  | 4,702 |                    |  |  | -                           |  |  |                      | -         |  |                  | 



The carrying value and fair value of financial
instruments by each category as at March 31, 2013 were as follows:



|Particulars               |  | Note |  | Loans and receivables |           |  | Financial assets
    / liabilities at fair value through profit and loss |  |   | Available for sale |  |  | Other financial liabilities |  |  | Total carrying value |           |  | Total fair value | 
|------------------------- |  | ---- |  | --------------------- | --------- |  | ------------------------------------------------------------------------ |  | - | ------------------ |  |  | --------------------------- |  |  | -------------------- | --------- |  | ---------------- | 
|Assets                    |  |      |  |                       |           |  |                                                                          |  |   |                    |  |  |                             |  |  |                      |           |  |                  | 
|Cash and cash equivalents |  | 8    |  |                       | 1,001,052 |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other assets              |  | 10   |  |                       | 254,724   |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Trade receivables         |  | 13   |  |                       | 2,708,879 |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other receivables         |  | 13   |  |                       | 34,745    |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | -         |  |                  | 
|Other investments         |  | 15   |  |                       | -         |  |                                                                          |  | - |                    |  |  | 1,710                       |  |  |                      | -         |  |                  | 
|Liabilities               |  |      |  |                       |           |  |                                                                          |  |   |                    |  |  |                             |  |  |                      |           |  |                  | 
|Bank overdraft            |  | 8    |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 644,606   |  |                  | 
|Finance lease liabilities |  | 17   |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 472,002   |  |                  | 
|Other liabilities         |  | 19   |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 217,848   |  |                  | 
|Borrowings from banks     |  | 20   |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 611,155   |  |                  | 
|Borrowings from others    |  | 20   |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 517,527   |  |                  | 
|Trade and other payables  |  | 21   |  |                       | -         |  |                                                                          |  | - |                    |  |  | -                           |  |  |                      | 2,392,143 |  |                  | 



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Details of financial assets pledged
as collateral

The carrying amount of financial assets as
March 31, 2014 and 2013 that the Group has provided as collateral for obtaining borrowings and other facilities from its bankers
are as follows:



|                          |  | March 31, 2014 |           |  | March 31, 2013 | 
|------------------------- |  | -------------- | --------- |  | -------------- | 
|Cash and cash equivalents |  |                | 1,270,127 |  |                | 
|Other assets              |  |                | 226,698   |  |                | 
|Trade receivables         |  |                | 3,520,587 |  |                | 
|Other receivables         |  |                | 56,936    |  |                | 
|                          |  |                | 5,074,348 |  |                | 



Derivative financial instruments



| | (a) | Forwards and options
| | --- | --------------------

Foreign exchange forward contracts
and options are purchased to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables
and forecasted transactions denominated in certain foreign currencies. These derivative contracts do not qualify for hedge accounting
under IAS 39, and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured
at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately
in profit or loss. The counterparties for these contracts are generally banks or financial institutions. The following table gives
details in respect of the notional amount of outstanding foreign exchange contracts as at March 31, 2014 and 2013.



|                       |  | As of          |      
|---------------------- |  | -------------- | -----
|                       |  | March 31, 2014 |      
|Forward contracts      |  |                |      
|In U.S. Dollars (Sell) |  |                | 1,000



The Company recognized a net gain on the forward
contracts of ₹ 1,397 for the year ended March 31, 2014.



The forward exchange contracts and option
contracts mature between one and twelve months. The table below summarizes the notional amounts of derivative financial instruments
into relevant maturity groupings based on the remaining period as at the end of the year:



|                                                      |  | As of          |    
|----------------------------------------------------- |  | -------------- | ---
|                                                      |  | March 31, 2014 |    
|                                                      |  | (USD)          |    
|Sell:                                                 |  |                |    
|Not later than one month                              |  |                | 500
|Later than one month and not later than three months  |  |                | 500
|Later than three months and not later than six months |  |                | -  
|Later than six months and not later than one year     |  |                | -  



| | (b) | Cross Currency Swap:
| | --- | --------------------



In order
hedge against the variability in cash flows for the term loan taken by the Company, the company has entered into Cross Currency
Swap (Principle Only Swap) arrangement with the bank where in, the Company pays fixed USD and receives Fixed INR principle and
interest cash flows. The Company has designated such derivative at Fair Value through Profit and Loss Account and the gains or
loss arising on the fair valuation of the said derivative is recognized in the profit and loss account.



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The details of outstanding cross currency
swap contracts as of March 31, 2014 are as under:



|As of                     | 
|------------------------- | 
|                          | 
|                          | 
|Cross Currency Swap (USD) | 



The maturity of these contracts extends till
six years. The table below summarizes the cash flows (principal and interest) of these derivative financial instruments into relevant
maturity groupings based on the remaining period as at the end of the year:



|                     |  | As of          |      
|-------------------- |  | -------------- | -----
|                     |  | March 31, 2014 |      
|                     |  | Payable (USD)  |      
|                     |  |                |      
|Less than 1 year     |  |                | 757  
|One to two years     |  |                | 717  
|Two to three years   |  |                | 677  
|Three to four years  |  |                | 637  
|Four to five years   |  |                | 597  
|More than five years |  |                | 421  
|Total cash flows     |  |                | 3,806



Disclosure of fair value measurements:



The details
of the fair value of the derivative financial instruments and their fair value measurement classifications are given below:



|Derivative instrument |  | Fair value measurement level |  | Fair value as of March
    31,2014 |       |  | Fair value measurement
    level |  |   | Fair value as of
    March 31,2013 | 
|--------------------- |  | ---------------------------- |  | ---------------------------------- | ----- |  | -------------------------------- |  | - | ---------------------------------- | 
|Derivative Asset      |  |                              |  |                                    |       |  |                                  |  |   |                                    | 
|Forward contracts     |  | Level 2                      |  |                                    | 1,397 |  |                                  |  | - |                                    | 
|Derivative Liability  |  |                              |  |                                    |       |  |                                  |  |   |                                    | 
|Cross currency swaps  |  | Level 2                      |  |                                    | 4,702 |  |                                  |  | - |                                    | 



| | · | Level
                                         1 classification comprises financial instruments where fair value is determined by unadjusted
                                         quoted prices in active markets for identical assets or liabilities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level
                                         2 classification comprises where fair value is determined from inputs other than quoted
                                         prices that are observable for the asset or liability, either directly or indirectly.
                                         Fair values for unlisted equity securities are derived from observable quoted market
                                         prices for similar items. Derivative financial instrument fair values are present values
                                         determined from future cash flows discounted at rates derived from market sourced data.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Interest, (expenses), gains and (losses)
recognized on financial assets and liabilities



Recognized in profit or loss

|                                                                             |  | Year ended     |         
|---------------------------------------------------------------------------- |  | -------------- | --------
|                                                                             |  | March 31, 2014 |         
|Loans and receivables                                                        |  |                |         
|Interest income on bank deposits                                             |  |                | 61,959  
|Interest income from other loans and receivables                             |  |                | 9,845   
|Impairment loss of trade receivables                                         |  |                | (177,581
|                                                                             |  |                |         
|Financial assets at fair value through profit or loss                        |  |                |         
|Net change in fair value of derivative financial instruments
    gain/(loss) |  |                | (3,305  
|                                                                             |  |                |         
|Other financial liabilities                                                  |  |                |         
|Interest expenses on lease obligations                                       |  |                | (90,911 
|Interest expenses on borrowings from banks, others and
    overdrafts        |  |                | (204,553



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Recognized directly in other comprehensive
income



|                                                                    |  | Year ended     |  
|------------------------------------------------------------------- |  | -------------- | -
|                                                                    |  | March 31, 2014 |  
|Net change in fair value of available-for-sale
    financial assets |  |                | -



| | 38. | Financial Risk Management
| | --- | -------------------------



The Group has exposure to the following risks
from its use of financial instruments:

| | · | Credit
                                         risk
| | - | ----------------------------------------------------

| | · | Liquidity
                                         risk
| | - | -------------------------------------------------------

| | · | Market
                                         risk
| | - | ----------------------------------------------------



The Board of Directors has overall responsibility
for the establishment and oversight of the Group’s risk management framework. The Board of Directors has established a risk
management policy to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the
Group’s activities. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures, and reviews the risk management framework. The Group Audit Committee is assisted in its oversight role
by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported
to the Audit Committee.



Credit risk: Credit risk is the risk
of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations
and arises principally from the Group’s trade receivables, treasury operations and other activities that are in the nature
of leases.



Trade and other receivables

The Group’s exposure to credit risk
is influenced mainly by the individual characteristics of each customer. Management considers that the demographics of the Group’s
customer base, including the default risk of the industry and country in which customers operate, has less of an influence on
credit risk. The group is not exposed to concentration of credit risk to any one single customer since the services are provided
to and products are sold to customers who are spread over a vast spectrum. Credit risk is managed through credit approvals, establishing
credit limits and continuously monitoring the credit worthiness of the customers to which the Company grants credit terms in the
normal course of the business.



Cash and cash equivalents and other investments

In the area of treasury operations, the Group
is presently exposed to counter-party risks relating to short term and medium term deposits placed with public-sector banks, and
also to investments made in mutual funds.



Guarantees

The Group’s policy is to provide financial
guarantees only to subsidiaries.



The Chief Financial Officer is responsible
for monitoring the counterparty credit risk, and has been vested with the authority to seek Board’s approval to hedge such
risks in case of need.



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Exposure to credit risk



The gross carrying amount of financial assets,
net of any impairment losses recognized represents the maximum credit exposure. The maximum exposure to credit risk as at March
31, 2014 and 2013 was as follows:



|                                 |  | March 31, 2014 |           |  | March 31, 2013 | 
|-------------------------------- |  | -------------- | --------- |  | -------------- | 
|Cash and cash equivalents        |  |                | 1,270,127 |  |                | 
|Other assets                     |  |                | 226,698   |  |                | 
|Trade receivables                |  |                | 3,520,587 |  |                | 
|Other receivables                |  |                | 56,936    |  |                | 
|Derivative financial instruments |  |                | 1,397     |  |                | 
|Other investments                |  |                | 1,710     |  |                | 
|                                 |  |                | 5,077,455 |  |                | 



Financial assets that are past due but
not impaired



There is no other class of financial assets
that is past due but not impaired other than trade receivables. The age analysis of trade receivables have been considered from
the date of invoice. The ageing of trade receivables, net of allowances that are past due, is given below:



|Period (in days)        |  | March 31, 2014 |           |  | March 31, 2013 | 
|----------------------- |  | -------------- | --------- |  | -------------- | 
|Past due 181 - 270 days |  |                | 274,116   |  |                | 
|Past due 271 - 365 days |  |                | 265,228   |  |                | 
|More than 365 days      |  |                | 665,799   |  |                | 
|                        |  |                | 1,205,143 |  |                | 



See note 13 for the activity in the allowance
for impairment of trade account receivables.



Financial assets that are not past due



Cash and cash equivalents, other assets, other
receivables and finance lease receivables are neither past due nor impaired. Of the total trade receivables that are not past
due as at March 31, 2014 amounting to ₹ 2,315,444 (March 31, 2013: ₹ 1,835,359) and impairment has not been recorded
on the same.



Details of collateral and other credit
enhancements held



|                                                        |  | March 31, 2014 |     |  | March 31, 2013 | 
|------------------------------------------------------- |  | -------------- | --- |  | -------------- | 
|Security deposits received for internet access services |  |                | 727 |  |                | 



Liquidity risks: Liquidity risk is
the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation. Typically the Group ensures that it has
sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition, the Group has
concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there be a need.
The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.



Thefollowingare the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:



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As at March 31,
2014

|                                     |  | Carrying amount |           |  | Contractual cash
    flows |  |           | 0-12 months |  |  | 1-3 years |  |  | 3-5 years |          
|------------------------------------ |  | --------------- | --------- |  | -------------------------- |  | --------- | ----------- |  |  | --------- |  |  | --------- | ---------
|Non-derivative financial liabilities |  |                 |           |  |                            |  |           |             |  |  |           |  |  |           |          
|Bank overdrafts                      |  |                 | 637,347   |  |                            |  | 637,347   |             |  |  | 637,347   |  |  |           | -        
|Finance lease liabilities            |  |                 | 1,053,852 |  |                            |  | 1,263,310 |             |  |  | 466,587   |  |  |           | 765,807  
|Other liabilities                    |  |                 | 158,942   |  |                            |  | 158,942   |             |  |  | 158,942   |  |  |           | -        
|Borrowing from banks                 |  |                 | 992,800   |  |                            |  | 1,172,355 |             |  |  | 627,455   |  |  |           | 312,979  
|Borrowings from others               |  |                 | 440,269   |  |                            |  | 484,151   |             |  |  | 318,702   |  |  |           | 165,449  
|Trade and other payables             |  |                 | 2,835,738 |  |                            |  | 2,835,738 |             |  |  | 2,835,738 |  |  |           | -        
|                                     |  |                 | 6,118,948 |  |                            |  | 6,551,843 |             |  |  | 5,044,771 |  |  |           | 1,244,235

As at March 31,
2013

|                                     |  | Carrying amount |           |  | Contractual cash
    flows |  |           | 0-12 months |  |  | 1-3 years |  |  | 3-5 years |        
|------------------------------------ |  | --------------- | --------- |  | -------------------------- |  | --------- | ----------- |  |  | --------- |  |  | --------- | -------
|Non-derivative financial liabilities |  |                 |           |  |                            |  |           |             |  |  |           |  |  |           |        
|Bank overdrafts                      |  |                 | 644,606   |  |                            |  | 644,606   |             |  |  | 644,606   |  |  |           | -      
|Finance lease liabilities            |  |                 | 472,002   |  |                            |  | 580,375   |             |  |  | 205,811   |  |  |           | 343,774
|Other liabilities                    |  |                 | 211,044   |  |                            |  | 217,848   |             |  |  | 217,848   |  |  |           | -      
|Borrowing from banks                 |  |                 | 611,155   |  |                            |  | 780,018   |             |  |  | 327,818   |  |  |           | 200,054
|Borrowings from others               |  |                 | 517,527   |  |                            |  | 577,871   |             |  |  | 422,825   |  |  |           | 142,813
|Trade and other payables             |  |                 | 2,392,143 |  |                            |  | 2,392,143 |             |  |  | 2,392,143 |  |  |           | -      
|                                     |  |                 | 4,848,477 |  |                            |  | 5,192,861 |             |  |  | 4,211,051 |  |  |           | 686,641



Market risk:Market risk is the risk
of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument.
The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other
market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial
instruments including foreign currency receivables and payables. The Group is exposed to market risk primarily related to foreign
exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Group’s exposure
to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign
currencies.



Currency risk: The Group’s exposure
in USD, Euro and other foreign currency denominated transactions gives rise to Exchange Rate fluctuation risk. Group’s policy
in this regard incorporates:



| | · | Forecasting
                                         inflows and outflows denominated in US$ for a twelve-month period
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | Estimating
                                         the net-exposure in foreign currency, in terms of timing and amount
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | Determining
                                         the extent to which exposure should be protected through one or more risk-mitigating
                                         instruments to maintain the permissible limits of uncovered exposures.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Carrying
                                         out a variance analysis between estimate and actual on an ongoing basis, and taking stop-loss
                                         action when the adverse movements breaches the 5% barrier of deviation, subject to review
                                         by Audit Committee.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Group’s exposure to foreign currency
risk as at March 31, 2014 was as follows:

All amounts in respective currencies as mentioned
(in thousands)

|                          |  | USD |        |   | CAD |  |    | CHF |  |  | EUR |   |  | GBP |     |   | DHS |  |     | HKD |  |  | SGD | 
|------------------------- |  | --- | ------ | - | --- |  | -- | --- |  |  | --- | - |  | --- | --- | - | --- |  | --- | --- |  |  | --- | 
|Cash and cash equivalents |  |     | 621    |   |     |  | -  |     |  |  | -   |   |  |     | -   |   |     |  | -   |     |  |  | -   | 
|Trade receivables         |  |     | 1,0057 |   |     |  | -  |     |  |  | -   |   |  |     | 110 |   |     |  | 98  |     |  |  | -   | 
|Trade payables            |  |     | (4,753 | ) |     |  | (4 | )   |  |  | (4  | ) |  |     | (16 | ) |     |  | (12 | )   |  |  | -   | 
|Working capital loan      |  |     | (7,463 | ) |     |  | -  |     |  |  | -   |   |  |     | -   |   |     |  | -   |     |  |  | -   | 
|Net exposure              |  |     | (1,538 | ) |     |  | (4 | )   |  |  | (4  | ) |  |     | 94  |   |     |  | 86  |     |  |  | -   | 



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The Group’s exposure to foreign currency
risk as at March 31, 2013 was as follows:

All amounts in respective currencies as mentioned
(in thousands)

|                                    |  | USD |        |   | CAD |  |   | CHF |  |  | EUR |   |  | GBP |     |   | DHS |  |     | HKD |  |  | SGD | 
|----------------------------------- |  | --- | ------ | - | --- |  | - | --- |  |  | --- | - |  | --- | --- | - | --- |  | --- | --- |  |  | --- | 
|Cash and cash equivalents           |  |     | 1,098  |   |     |  | - |     |  |  | -   |   |  |     | -   |   |     |  | -   |     |  |  | -   | 
|Trade receivables                   |  |     | 14,260 |   |     |  | - |     |  |  | 37  |   |  |     | 95  |   |     |  | 151 |     |  |  | -   | 
|Trade payables                      |  |     | (4,757 | ) |     |  | - |     |  |  | (4  | ) |  |     | (35 | ) |     |  | -   |     |  |  | -   | 
|Gross balance sheet exposure        |  |     | 10,601 |   |     |  | - |     |  |  | 33  |   |  |     | 60  |   |     |  | 151 |     |  |  | -   | 
|Forward exchange / option contracts |  |     | -      |   |     |  | - |     |  |  | -   |   |  |     | -   |   |     |  | -   |     |  |  | -   | 
|Net exposure                        |  |     | 10,601 |   |     |  | - |     |  |  | 33  |   |  |     | 60  |   |     |  | 151 |     |  |  | -   | 



Sensitivity analysis



A 10% strengthening of the rupee against the
respective currencies as at March 31, 2014 and 2013 would have increased / (decreased) other comprehensive income and profit or
loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
The analysis is performed on the same basis for 2013.



|               |  | Other comprehensive income |   |  | Profit or (loss) | 
|-------------- |  | -------------------------- | - |  | ---------------- | 
|March 31, 2014 |  |                            | - |  |                  | 
|March 31, 2013 |  |                            | - |  |                  | 



A 10% weakening of the rupee against the above
currencies as at March 31, 2014 and 2013 would have had the equal but opposite effect on the above currencies to the amounts shown
above, on the basis that all other variables remain constant.



Interest Rate Risk:Interest
rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the group.



Profile



At the reporting date the
interest rate profile of the Group’s interest –bearing financial instruments were as follows:



|                            |  | Carrying amount |        
|--------------------------- |  | --------------- | -------
|                            |  | March 31, 2014  |        
|Fixed rate instruments      |  |                 |        
|Financial assets            |  |                 |        
|- Fixed deposits with banks |  |                 | 510,336
|                            |  |                 |        
|Financial liabilities       |  |                 |        
|- Borrowings from banks     |  |                 | -      
|- Borrowings from others    |  |                 | 440,269
|                            |  |                 |        
|Variable rate instruments   |  |                 |        
|Financial liabilities       |  |                 |        
|- Borrowings from banks     |  |                 | 992,800
|- Bank overdrafts           |  |                 | 637,347



Fair value sensitivity
for fixed rate instruments



The
Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group
does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore
a change in interest rates at the reporting date would not affect profit or loss.



Cash
flow sensitivity for variable rate instruments



An
increase of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
The analysis has been performed on the same basis as 2013.



|               |  | Equity |   |  | Profit or loss | 
|-------------- |  | ------ | - |  | -------------- | 
|March 31, 2014 |  |        | - |  |                | 
|March 31, 2013 |  |        | - |  |                | 



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A
decrease of 100 basis points in the interest rates at the reporting date would have had equal but opposite effect on the amounts
shown above, on the basis that all other variable remain constant.



| | 39. | IPO listing
| | --- | -----------



The Ministry of Finance
of the Government of India (‘MoF’) issued a press release dated March 31, 2006, making amendments to the ’Issue
of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993’ (‘the
Scheme’). The amendments included a statement that unlisted Companies which had accessed FCCBs, ADR/GDRs in terms of guidelines
of May 22, 1998 and are not making profit, be permitted to comply with listing condition on the domestic stock exchanges within
three years of having started making profit. Further, the press release states that no fresh issues of FCCBs, ADR/GDRs by such
companies will be permitted without listing first in the domestic exchanges. Securities and Exchange Board of India (SEBI) has
amended the (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2012 on October 12, 2012.  In
terms of the amended Clause 26 (1) (b), in order to be eligible to go for the Initial Public Offer, the Company should have a
minimum average pre-tax operating profit of ₹ 150 calculated on a restated and consolidated basis, during the three most
profitable years out of the immediately 5 preceding years.



This is in addition to
the other clauses viz. it has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for
at least three out of the immediately preceding five years; provided that extraordinary items shall not be considered for calculating
distributable profits, for being eligible to go for the IPO



Hence the Company would
not be able to raise funds by issuing ADRs until such time the Company complies with the ’Issue of Foreign Currency Convertible
Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993’ and lists in the domestic stock exchanges
as per the above press release.



However, in September
2013, the Ministry of Finance, Government of India, has liberalized the condition for Unlisted Indian Companies to raise capital
abroad without the requirement of prior or simultaneous listing in India initially for a period of two years in order to attract
more Foreign Direct Investment.



| | 40. | Issue of shares on a private placement
                                         basis to the existing promoter group
| | --- | --------------------------------------------------------------------------------------------------------------------



On
August 4, 2010, the Board of Directors of the company approved the issuance, in a private placement, of upto an aggregate of 125,000,000
of the company’s equity shares, par value ₹ 10 per share (“Equity shares”) at a discount compared to market
value of , for an aggregate purchase price of ₹ 4,000,000, to a group of investors affiliated with the company’s promoter
group, including entities affiliated with Mr Raju Vegesna, the company’s Chairman and Managing Director and Mr Ananda Raju
Vegesna, Executive Director and brother of Mr Raju Vegesna (the “Offering”). The company’s shareholders approved
the terms of the Offering at the Company’s Annual General Meeting held on September 27, 2010.



On
October 22 2010, the company entered into a Subscription Agreement with Mr Ananda Raju Vegesna, acting as representative (the
“Representative”) of the purchasers in connection with the Offering. In pursuance of the Agreement, the company issued
and allotted 125,000,000 equity shares to M/s Raju Vegesna Infotech and Industries Private Limited (“RVIIPL”), a promoter
group company. In accordance with Indian law, the purchase price is to be paid at such time as determined by Board of Directors
of the company.



On
August 14, 2011, the company received a letter from RVIIPL expressing its intention to transfer the above partly paid shares to
its wholly owned subsidiary M/s Ramanand Core Investment Company Private limited (“RCICPL”). The company, on August
26, 2011, registered such transfer of partly paid shares in the name of RCICPL.



On September 7,
2011, the parties entered into an amendment to the Subscription Agreement (the “Amendment”) extending the validity
of the agreement period to September 26, 2013. This Amendment provides the Board of Directors of the Company with additional
time to call upon the purchasers to pay the balance money, in accordance with the terms of the Subscription Agreement.



As
on March 31, 2014, these shares are partly paid to the extent of ₹ 7 per share. Until the full purchase price is paid by
the purchasers, the company retains a lien on the equity shares purchased in connection with the Offering. As of March 31, 2014,
entities affiliated with our Chairman and Managing Director, Raju Vegesna, beneficially owned approximately 86.27% of our outstanding
equity shares, which includes the 125,000,000 shares (partly paid with proportionate voting rights) issued in connection with
the above Offering.



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MF Global Sify Securities India Private
Limited



IFRS Consolidated Financial Statements



As at March 31, 2012 and 2011 and for the
year ended March 31, 2012, 2011 and 2010



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MF Global Sify Securities India Private
Limited



|(All amounts in Indian Rupees thousands, except
    as otherwise stated)
|------------------------------------------------------------------------



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders
of MF Global Sify Securities India Private Limited



In our opinion, the accompanying Consolidated
Statement of Balance Sheet, and the related Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated
Statement of Changes in Equity and Consolidated Statement of Cash Flow (collectively “consolidated financial statements)
present fairly, in all material respects, the financial position of MF Global Sify Securities India Private Limited and its subsidiaries
(collectively “the Company”) at March 31, 2012 and & March 31, 2011 and the results of their operations
and their cash flows for the year ended March 31, 2012 & March 31, 2011 in conformity with International Financial Reporting
Standards as issued by the International Accounting Standard Board. These consolidated 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.



Without qualifying our opinion, we draw your
attention to



| | a) | Note 2.1 to the Consolidated Financial
                                         Statements which states that on October 31, 2011, MF Global Holdings Ltd (the “ultimate
                                         parent company”) filed voluntary petitions for relief under Chapter 11 of the United
                                         States Bankruptcy Code. Such liquidation of the Ultimate Parent Company has negatively
                                         impacted the scale of operations of the Company. The shareholders of the Company have
                                         entered into Share Purchase Agreement (SPA) with an international brokerage house for
                                         acquiring its respective stake in the Company for which necessary regulatory approvals
                                         have been received & formalities relating to completion of such acquisition are pending.
                                         The revival of the scale of operations and resultant profitability of the Company is
                                         dependent upon successful completion of such acquisition of the Company.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Note 8.1.2 to the Consolidated Financial
                                         Statements which states that brokerage aggregating to Rs. 12,019 (000) from Institutional
                                         Clients have neither been disputed nor denied by the respective clients. However, these
                                         amounts have remained overdue as the Institutional clients are awaiting the clarity about
                                         the change of ownership of the Company.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Note 26 to the Consolidated Financial
                                         Statements, which describes the uncertainty related to the outcome of the ongoing discussions
                                         between the Company’s shareholders concerning the reconsideration of certain costs
                                         charged to the Company by MF Global Holdings Limited and its affiliated and associated
                                         group companies for the two years ended March 31, 2008 and March 31, 2009 which
                                         is being carried as a liability in the accounts.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | Note 30.1 to the Consolidated Financial
                                         Statements which states that as on October 31, 2011, MF Global Holdings Ltd (the “ultimate
                                         parent company”) filed voluntary petitions for relief under Chapter 11 of the United
                                         States Bankruptcy Code. Consequently, the Company has not obtained confirmation of outstanding
                                         balances with related parties as at March 31, 2012. The Company has confirmed that there
                                         were no significant transactions with such parties after the date of filing such petitions
                                         and therefore the Consolidated Financial Statements have been prepared from the book
                                         balances which are subject to reconciliation / confirmations from the respective parties.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We conducted our audit of these consolidated
financial statements for the year ended March 31, 2012 and March 31, 2011 in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by the management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.



ASA & ASSOCIATES

Independent Registered Public
Accounting Firm

Mumbai , India

July 29, 2012



159


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Consolidated
Statement of Balance Sheet



|                                                             |  |      |  | As at          |          
|------------------------------------------------------------ |  | ---- |  | -------------- | ---------
|                                                             |  | Note |  | March 31, 2012 |          
|ASSETS                                                       |  |      |  |                |          
|Cash and bank balance                                        |  | 11   |  |                | 146,980  
|Cash-restricted                                              |  | 12   |  |                | 2,324,000
|Interest bearing deposits with bank                          |  | 13   |  |                | 70,777   
|Receivable from broker-dealers and clearing organizations    |  | 9    |  |                | 170,660  
|Receivable from customers                                    |  |      |  |                |          
|(net of provision of Rs. 86,300 and Rs. 60,600 respectively) |  | 8    |  |                | 340,998  
|Available-for-sale securities:                               |  |      |  |                |          
|Marketable, at market value                                  |  | 14   |  |                | 41,005   
|Deposits with clearing organizations                         |  |      |  |                | 78,613   
|Interest accrued but not due                                 |  |      |  |                | 57,301   
|Other assets                                                 |  | 10   |  |                | 208,999  
|Intangible assets:                                           |  |      |  |                |          
|Computer software                                            |  | 5.1  |  |                | 7,886    
|Memberships in exchanges                                     |  | 5.2  |  |                | 6,385    
|Property, plant and equipment                                |  | 6    |  |                | 11,021   
|Deferred tax asset (Net)                                     |  | 7    |  |                | 42,288   
|                                                             |  |      |  |                |          
|Total assets                                                 |  |      |  |                | 3,506,913
|                                                             |  |      |  |                |          
|EQUITY                                                       |  |      |  |                |          
|Capital and reserves attributable to the Equity Holders      |  |      |  |                |          
|Ordinary shares                                              |  | 15   |  |                | 518,942  
|Additional paid in capital                                   |  |      |  |                | 28,968   
|Retained earnings                                            |  |      |  |                | 1,898,693
|Currency translations                                        |  |      |  |                | 8,759    
|Fair value adjustments                                       |  |      |  |                | (774     
|                                                             |  |      |  |                |          
|Total Equity                                                 |  |      |  |                | 2,454,588
|                                                             |  |      |  |                |          
|LIABILITIES                                                  |  |      |  |                |          
|Payable to broker-dealers and clearing organizations         |  | 9    |  |                | 184,659  
|Payable to customers                                         |  |      |  |                | 684,802  
|Borrowings                                                   |  | 17   |  |                | -        
|Accounts payable, accrued expenses and other liabilities     |  | 19   |  |                | 181,357  
|Employee benefit obligation                                  |  | 18   |  |                | 1,507    
|                                                             |  |      |  |                |          
|Total Liabilities                                            |  |      |  |                | 1,052,325
|                                                             |  |      |  |                |          
|Total liabilities and equity                                 |  |      |  |                | 3,506,913



The accompanying notes form an integral part
of these consolidated financial statements



These financial statements have been approved
by the Board of Directors on July 29, 2012



For and on behalf of
the Board



Vineet Bhatnagar

Managing Director



160


Table of Contents




MF Global Sify Securities India Private
Limited



|(All amounts in Indian Rupees thousands, except
    as otherwise stated)
|------------------------------------------------------------------------



Consolidated
Income Statement



|                                                       |  |      |  | Year ended     |          
|------------------------------------------------------ |  | ---- |  | -------------- | ---------
|                                                       |  | Note |  | March 31, 2012 |          
|INCOME                                                 |  |      |  |                |          
|Commissions                                            |  |      |  |                | 774,266  
|Depository and clearing fees                           |  |      |  |                | 30,123   
|Interest on fixed deposits held as margin              |  |      |  |                | 256,869  
|Other Income                                           |  | 23   |  |                | 108,319  
|                                                       |  |      |  |                |          
|Total Income                                           |  |      |  |                | 1,169,577
|                                                       |  |      |  |                |          
|EXPENSES                                               |  |      |  |                |          
|Employee compensation and benefits                     |  | 21   |  |                | 517,075  
|Exchange expenses and clearance fees                   |  |      |  |                | 152,642  
|Brokerage to other broker-dealers                      |  |      |  |                | 95,940   
|Communications and data processing                     |  |      |  |                | 28,373   
|Bank interest and guarantee commission                 |  |      |  |                | 2,651    
|Depreciation and amortization                          |  |      |  |                | 29,672   
|Occupancy                                              |  |      |  |                | 60,907   
|Write back of provision                                |  |      |  |                | -        
|Provision for receivable from customers                |  | 22   |  |                | 25,700   
|Advertisement and business promotion                   |  |      |  |                | 31,370   
|Other expenses                                         |  | 20   |  |                | 70,330   
|                                                       |  |      |  |                |          
|Total Expenses                                         |  |      |  |                | 1,014,660
|                                                       |  |      |  |                |          
|Profit before income tax                               |  |      |  |                | 154,917  
|Income tax expense                                     |  | 24   |  |                | 62,295   
|                                                       |  |      |  |                |          
|Profit for the year attributable to the Equity holders |  |      |  |                | 92,622   



The accompanying notes form an integral part
of these consolidated financial statements



These financial statements have been approved
by the Board of Directors on July 29, 2012



For and on behalf of the Board



Vineet Bhatnagar

Managing Director



161


Table of Contents




MF Global Sify Securities India Private
Limited



|(All amounts in Indian Rupees thousands, except
    as otherwise stated)
|------------------------------------------------------------------------



Consolidated
Statement of Comprehensive Income



|                                         |  | Years ended March 31, |        
|---------------------------------------- |  | --------------------- | -------
|                                         |  | 2012                  |        
|Net income for the year                  |  |                       | 92,622 
|                                         |  |                       |        
|Other comprehensive income               |  |                       |        
|Available for sale financial assets      |  |                       |        
|- Net change in fair value               |  |                       | -      
|                                         |  |                       |        
|Foreign currency translation differences |  |                       |        
|Currency translation differences         |  |                       | 8,991  
|                                         |  |                       | 8,991  
|                                         |  |                       |        
|Total comprehensive income for the year  |  |                       | 101,613



The accompanying notes form an integral part
of these consolidated financial statements



These financial statements have been approved
by the Board of Directors on July 29, 2012



For and on behalf of the Board



Vineet Bhatnagar

Managing Director



162


Table of Contents




MF Global Sify Securities India Private
Limited



|(All amounts in Indian Rupees thousands, except
    as otherwise stated)
|------------------------------------------------------------------------



Consolidated
Statement of Changes in Equity



|                                                                        |  | Number of ordinaryshares |            |  | Parvalue |  |    | Share Capital |  |  | Additionalpaid -incapital |  |  | Retainedearnings |        |  | Currencytransalation |  |           | Fair Valueadjustment |  |  | TotalEquity |  
|----------------------------------------------------------------------- |  | ------------------------ | ---------- |  | -------- |  | -- | ------------- |  |  | ------------------------- |  |  | ---------------- | ------ |  | -------------------- |  | --------- | -------------------- |  |  | ----------- | -
|Balance as at April 1, 2009                                             |  |                          | 51,894,182 |  |          |  | 10 |               |  |  | 518,942                   |  |  |                  | 28,968 |  |                      |  | 1,256,688 |                      |  |  | 6,610       |  
|Currency translation differences                                        |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  | (5,657      | )
|Fair value gains, net of tax on available-for-sale
    financial assets |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  |             |  
|Net income directly recognised in equity                                |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | -         |                      |  |  | (5,657      | )
|Profit for the year                                                     |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 307,543   |                      |  |  |             |  
|Total recognised income and expense for the
    year                    |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 307,543   |                      |  |  | (5,657      | )
|Balance as at March 31,
    2010                                        |  |                          | 51,894,182 |  |          |  | 10 |               |  |  | 518,942                   |  |  |                  | 28,968 |  |                      |  | 1,564,231 |                      |  |  | 953         |  
|Currency translation differences                                        |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  | (1,185      | )
|Fair value gains, net of tax on available-for-sale
    financial assets |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  |             |  
|Net income directly recognised in equity                                |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | -         |                      |  |  | (1,185      | )
|Profit for the year                                                     |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 241,840   |                      |  |  |             |  
|Total recognised income and expense for the
    year                    |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 241,840   |                      |  |  | (1,185      | )
|Balance as at March 31,
    2011                                        |  |                          | 51,894,182 |  |          |  | 10 |               |  |  | 518,942                   |  |  |                  | 28,968 |  |                      |  | 1,806,071 |                      |  |  | (232        | )
|Currency translation differences                                        |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  | 8,991       |  
|Fair value gains, net of tax on available-for-sale
    financial assets |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  |           |                      |  |  |             |  
|Net income directly recognised in equity                                |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | -         |                      |  |  | 8,991       |  
|Profit for the year                                                     |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 92,622    |                      |  |  |             |  
|Total recognised income and expense for the
    year                    |  |                          |            |  |          |  |    |               |  |  |                           |  |  |                  |        |  |                      |  | 92,622    |                      |  |  | 8,991       |  
|Balance as at March 31,
    2012                                        |  |                          | 51,894,182 |  |          |  | 10 |               |  |  | 518,942                   |  |  |                  | 28,968 |  |                      |  | 1,898,693 |                      |  |  | 8,759       |  



The accompanying notes form an integral part
of these consolidated financial statements



These financial statements have been approved
by the Board of Directors on July 29, 2012



For and on behalf of the Board



Vineet Bhatnagar

Managing Director



163


Table of Contents




Consolidated
Statement of Cash Flow



|                                                                                |  |      |    |  | Year ended March 31, | 
|------------------------------------------------------------------------------- |  | ---- | -- |  | -------------------- | 
|                                                                                |  | Note |    |  | 2012                 | 
|Cash flows from operating activities                                            |  |      |    |  |                      | 
|Profit before income tax                                                        |  |      |    |  |                      | 
|Adjustments for                                                                 |  |      |    |  |                      | 
|Depreciation and amortization                                                   |  |      |    |  |                      | 
|Profit on sale of Available-for-sale securities                                 |  |      |    |  |                      | 
|Provision on receivable from customers                                          |  |      | 8  |  |                      | 
|Interest on fixed deposits with banks                                           |  |      |    |  |                      | 
|Loss(profit) on Sale of Property Plant & Equipment                              |  |      | 6  |  |                      | 
|Interest and other financial costs                                              |  |      |    |  |                      | 
|Interest Income                                                                 |  |      |    |  |                      | 
|Dividend Income                                                                 |  |      |    |  |                      | 
|Others                                                                          |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Movements in working capital                                                    |  |      |    |  |                      | 
|Cash-restricted                                                                 |  |      | 12 |  |                      | 
|Interest bearing deposits with banks                                            |  |      |    |  |                      | 
|Deposits with clearing organizations                                            |  |      |    |  |                      | 
|Receivable from broker-dealers and clearing organizations                       |  |      | 9  |  |                      | 
|Receivable from customers                                                       |  |      | 8  |  |                      | 
|Other assets                                                                    |  |      | 10 |  |                      | 
|Payable to broker dealers and clearing organizations                            |  |      | 9  |  |                      | 
|Payable to customers                                                            |  |      |    |  |                      | 
|Accounts payable, accrued expenses, and other liabilities                       |  |      | 19 |  |                      | 
|Stock appreciation rights                                                       |  |      | 16 |  |                      | 
|Cash provided by operations                                                     |  |      |    |  |                      | 
|Interest received                                                               |  |      |    |  |                      | 
|Interest received on fixed deposits placed                                      |  |      |    |  |                      | 
|Income taxes paid                                                               |  |      |    |  |                      | 
|Net cash provided by/(used in) by operating activities                          |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Cash flows from investing activities                                            |  |      |    |  |                      | 
|Purchase of Available for Sale Securities: Marketable, At Market Value          |  |      |    |  |                      | 
|Available for Sale Securities: Not readily marketable (at estimated fair value) |  |      |    |  |                      | 
|Dividend Income                                                                 |  |      |    |  |                      | 
|Expenditure on furniture and equipment                                          |  |      |    |  |                      | 
|Expenditure on Computer Software                                                |  |      |    |  |                      | 
|Sale of Property Plant & Equipment                                              |  |      |    |  |                      | 
|Net cash (used in) / provided in investing activities                           |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Cash flows from financing activities                                            |  |      |    |  |                      | 
|Proceeds from loan from associate company                                       |  |      |    |  |                      | 
|Repayment of loan to associate company                                          |  |      |    |  |                      | 
|Interest and other finance charges paid                                         |  |      |    |  |                      | 
|(Repaymnet of) / Proceeds from borrowings                                       |  |      |    |  |                      | 
|Net cash provided by / (used in) financing activities                           |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Effect of foreign exchange fluctuation on Cash and Bank balances                |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Net increase / (decrease) in cash and bank balance                              |  |      |    |  |                      | 
|Cash and bank balance at beginning of the period                                |  |      |    |  |                      | 
|Cash and cash equivalents at the end of the year                                |  |      |    |  |                      | 
|                                                                                |  |      |    |  |                      | 
|Cash and cash equivalents comprise of:                                          |  |      |    |  |                      | 
|Balances with Banks                                                             |  |      |    |  |                      | 
|Demand deposits (less than 3 months maturity)                                   |  |      |    |  |                      | 
|Highly liquid investments                                                       |  |      |    |  |                      | 
|Total                                                                           |  |      |    |  |                      | 



The accompanying notes form an integral part
of these consolidated financial statements



These financial statements have been approved
by the Board of Directors on July 29, 2012



For and on behalf of the Board



Vineet Bhatnagar

Managing Director



164


Table of Contents




Notes
to the consolidated financial statements



| | 1. | General information
| | -- | -------------------



MF
Global Sify Securities India Private Limited and its consolidated subsidiaries (hereinafter referred to as “MF” or
“the group”) are engaged as a stock and commodity broker for foreign institutional investors (‘FIIs’),
mutual funds, domestic financial institutions and retail investors. The group also acts as a depository participant and provides
depository services to FIIs, mutual funds, domestic financial institutions and retail investors.



MF
Global Sify Securities India Private Limited (“MF Global Sify”) was incorporated on December 29, 1999 in India as
a private limited company under the Companies Act, 1956. The address of its registered office is 2nd Floor, C block,
Modern Centre, 101 K. K. Marg, Jacob Circle, Mahalaxmi, Mumbai – 400 011. MF Global Sify has one wholly owned subsidiary
in India, MF Global Commodities India Private Limited, which has one wholly owned subsidiary, MF Global Middle East DMCC incorporated
in Dubai.



MF
Global Overseas Limited (”MFG”) (formerly Man Financial Holdings Limited ), a company incorporated in the United Kingdom
holds 70.15% of MF Global Sify and Sify Technologies Limited (“Sify”) holds the balance, 29.85% of MF Global Sify’s
equity shares. The ultimate holding company of MF Global Sify is MF Global Holdings Limited (a company incorporated in the state
of Delaware, USA and listed on the New York Stock Exchange).



These
consolidated financial statements have been approved for issue by the Board of Directors on July 29, 2012.



| | 2. | Summary of significant accounting
                                         policies
| | -- | -----------------------------------------------------------------------------------



| | 2.1. | Basis of preparation
| | ---- | --------------------



These
consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”). They have been prepared under the historical cost
convention, on accrual basis as modified for certain financial instruments which are measured at fair value.



The
principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.



The
preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise judgement in the process of applying the group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 4.



As
on October 31, 2011, MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code. Such liquidation of the ultimate parent company has negatively impacted the scale
of operations of the Company. On March 27, 2012, MF Global Overseas Limited & Sify Technologies Limited has entered into Share
Purchase Agreements (SPA) with an international brokerage house for acquiring its 70.15% and 29.85% stake respectively in the
Company. In respect of such acquisition, the Company has received necessary regulatory approvals and acquisition is expected to
be completed shortly. The Management believes that this acquisition is expected to substantially revive the business of the Company.



| | 2.1.1. | Amendments and
                                         interpretations effective as at March 31, 2012 but not relevant
| | ------ | -----------------------------------------------------------------------------------------------------------------------



The following standards, amendments
and interpretations to published standards are effective as at March 31, 2012 but are not relevant to the group’s operations:



| | · | IFRIC
                                         3, (Revised) Business combinations.
| | - | ----------------------------------------------------------------------------------



| | · | IFRS
                                         8 – Operating Segments.
| | - | ---------------------------------------------------------------------



| | · | IFRIC
                                         13, ‘Customer loyalty programmers’.
| | - | ----------------------------------------------------------------------------------



| | · | IFRIC
                                         15, ‘Agreements for the construction of real estate’.
| | - | ----------------------------------------------------------------------------------------------------



| | · | IFRIC
                                         16, ‘Hedges of a net investment in a foreign operation’.
| | - | -------------------------------------------------------------------------------------------------------



165


Table of Contents




| | · | IFRIC
                                         18, Transfers of assets from customers.
| | - | --------------------------------------------------------------------------------------



| | · | IFRIC
                                         19, ‘Extinguishing Financial Liabilities with Equity Instruments’
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | IAS
                                         17,(Amended) Leases;
| | - | -----------------------------------------------------------------



| | · | IAS
                                         24, (revised), ‘Related party disclosures’
| | - | ---------------------------------------------------------------------------------------



The Management has reviewed the
above amendments and interpretation to standards and find that none of them are applicable or relevant to the activities of the
company during the year.



166


Table of Contents




| | 2.1.2. | Recent Accounting Pronouncements
| | ------ | --------------------------------



The following Standards and amendments are
not yet mandatorily effective and have not been early adopted by the Company;



| | • | IFRS
                                         7 “Disclosures—offsetting financial assets and financial liabilities”.
| | - | --------------------------------------------------------------------------------------------------------------------



| | • | IFRS
                                         9, “Financial instruments”,
| | - | -------------------------------------------------------------------------



| | • | IFRS
                                         10, “Consolidated financial statements”.
| | - | --------------------------------------------------------------------------------------



| | • | IFRS
                                         11, “Joint arrangements”.
| | - | -----------------------------------------------------------------------



| | • | IFRS
                                         12, “Disclosure of interests in other entities”.
| | - | ----------------------------------------------------------------------------------------------



| | • | IFRS
                                         13 Fair Value Measurement
| | - | -----------------------------------------------------------------------



| | • | IAS
                                         1 (Amended) Presentation of Financial Statements
| | - | ---------------------------------------------------------------------------------------------



| | • | IAS-19
                                         (Amended) “Employee benefits”
| | - | -----------------------------------------------------------------------------



| | • | IAS
                                         27 (Revised 2011), “Consolidated and separate financial statements”
| | - | ----------------------------------------------------------------------------------------------------------------



| | • | IAS
                                         28 (Revised 2011), “Investments in associates”
| | - | -------------------------------------------------------------------------------------------



| | • | IAS
                                         32 “Offsetting financial assets and financial liabilities”
| | - | -------------------------------------------------------------------------------------------------------



All the standards mentioned above are effective
for annual periods beginning on or after January 1, 2013; earlier application is permitted. We are in the process of determining
the impact of these amendments on our consolidated financial statements and the company does not believe that the adoption of
these standards will have a material effect on its consolidated financial statements.



| | 2.2. | Consolidation
| | ---- | -------------



The Company is a subsidiary of MF
Global Holdings Limited, a company incorporated in the State of Delaware, USA. MF Global Holdings Limited is listed on the New
York Stock Exchange.



Domestic and foreign subsidiaries
considered for consolidation are as follows:



| |   |   | Country of incorporation |                                             | Percentage of holding
    as at March 31, 2012 |       |  | Percentage of holding
    as at March 31, 2011 |    
| | - | - | ------------------------ | ------------------------------------------- | ---------------------------------------------- | ----- |  | ---------------------------------------------- | ---
| |   |   |                          | Direct subsidiaries                         |                                                |       |  |                                                |    
| | 1 | ) |                          | MF Global Commodities India Private Limited |                                                | India |  |                                                | 100
| |   |   |                          |                                             |                                                |       |  |                                                |    
| |   |   |                          | Indirect Subsidiary                         |                                                |       |  |                                                |    
| | 1 | ) |                          | MF Global Middle East DMCC                  |                                                | Dubai |  |                                                | 100



The reporting date for all the above
companies is March 31.



Subsidiaries are all entities over
which the group has the power to govern the financial and operating policies so as to obtain economic benefits from its activities,
generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the
date on which control is transferred to the group.



The financial statements of the
Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain /
loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting
policies in use at the Group.



167


Table of Contents




| | 2.3. | Foreign currency translation
| | ---- | ----------------------------



| | a) | Functional and presentation
                                         currency
| | -- | -----------------------------------------------------------------------------



Items included in the financial
statements in each of the group’s entities are measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”). Indian rupee is the functional currency of MF Global Sify and its
domestic subsidiaries. US dollar is the functional currency of MF Global Middle East Limited DMCC located in Dubai. These
consolidated financial statements are presented in Indian Rupee (“INR”), which is the group’s presentation currency.
The results and financial position are translated into presentation currency as follows:



| | · | assets
                                         and liabilities for each balance sheet presented are translated as at the closing rate
                                         at that balance sheet date;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | income
                                         and expenses for each income statement are translated at an average exchange rate; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | · | all
                                         resulting exchange differences are recognised as a separate component of equity.
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | b) | Transactions and balances
| | -- | -------------------------



Foreign currency transactions are
translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year–end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.



| | 2.4. | Cash and bank balance
| | ---- | ---------------------



Cash and bank balance include cash
in hand and at bank, and short–term deposits with an original maturity period of three months or less. The Group’s
exposure to credit risk is represented by the carrying value of the assets. Bank overdrafts that are an integral part of cash
management and where there is a legal right of set–off against positive cash balances are included in cash and bank balance.
Otherwise bank overdrafts are classified as borrowings.



| | 2.5. | Restricted Cash
| | ---- | ---------------



Individual entities within the group
are members of exchange, where cash or securities are deposited or bank guarantees are issued to conduct day-to-day trading and
clearance activities. As required by the respective exchange, margin obligations towards clearing organizations are determined
based on open positions by clearing organizations of the exchanges.



The group classifies bank fixed
deposits as restricted cash on the balance sheet, when they are either placed with banks as margin for bank guarantees issued
to clearing organisation or specifically earmarked as liens to clearing organizations towards margin.



| | 2.6. | Interest bearing deposits
                                         with banks
| | ---- | -----------------------------------------------------------------------------



Interest bearing deposits with bank
represent fixed term deposits placed with banks earning fixed rate of interest. At the balance sheet date, these deposits are
measured at amortised cost using effective interest method.



| | 2.7. | Receivables
| | ---- | -----------



Receivables are recognized initially
at fair value. They are subsequently measured at amortised cost using the effective interest method, net of provision for impairment,
if the effect of discounting is considered material. The carrying amounts, net of provision for impairment, reported in the balance
sheet approximate the fair value due to their short realisation period. A provision for impairment of trade receivables is established
when there is objective evidence that Group will not be able to collect all amounts due according to the original terms of receivables.
The provision is established at amounts considered to be appropriate, based primarily upon Group’s past credit loss experience
and an evaluation of potential losses on the receivables. The amount of the provision is recognized in the income statement. Receivables
include receivables from broker-dealers and clearing organizations and receivables from customers, whereas the securities owned
by customers are held as collateral for receivables.



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| | 2.8. | Financial instruments
| | ---- | ---------------------



Financial assets and financial liabilities
are recognised in the consolidated balance sheet, when the Group becomes a party to the contractual provisions of an instrument,
at fair value adjusted for transaction costs, except for financial assets classified at fair value through profit or loss where
transaction costs are immediately recognised in the consolidated income statement. Financial assets are de-recognised when the
rights to receive cash flows from the investments have expired or where they have been transferred and the Group has also transferred
substantially all risks and rewards of ownership. Financial liabilities are de-recognised when the obligation under the liability
has been discharged or cancelled.



Financial assets principally comprise
investments, receivable from broker dealers, clearing organisations, customers and other receivables, bank deposits and cash and
bank balance. Financial liabilities principally comprise bank overdraft, and payables to broker dealers, clearing organisations,
customers, other payables and accrued expenses.



Financial assets and liabilities
are offset and the net amount reported in the balance sheet if, and only if, there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously.
In many cases, even though there is a legal right to set off is in place, the lack of an intention to settle on a net basis results
in the related assets and liabilities being presented gross in the balance sheet.



| | 2.9. | Financial assets
| | ---- | ----------------



The financial assets of the group
are classified into following categories: loans and receivables and available for sale. The classification of financial assets
depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial
assets at initial recognition.



| | a) | Loans and Receivables
| | -- | ---------------------



Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. The entity’s loans and receivables
comprise receivable from broker dealers, clearing organisations, customers and other receivables, investments in bank deposits
and cash and bank balance and loans to staff classified under other assets in balance sheet (Notes 2.10, 2.11 and 2.12).



| | b) | Available
                                         for sale
| | -- | -----------------------------------------------------------



Available for sale financial assets
are non-derivatives that are either designated in this category or not classified in any other categories. Available for sale
consists of marketable securities, which are investments in units of mutual funds and are reported at fair values. Securities
not readily marketable represent investments in equity shares of BSEL, obtained by MF Global Sify pursuant to the exchange transaction
under the ‘Bombay Stock Exchange (Corporatisation and Demutualization) scheme 2005’.



After initial recognition, investments,
which are classified as available-for-sale, are measured at fair value. Gains or losses, on available-for-sale investments are
recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment
is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is transferred to the consolidated
income statement. For investments that are actively traded in organised financial markets, fair value is determined by reference
to quoted market price at the close of business on the balance sheet date. For investments where there is no quoted market price,
fair value is determined by using valuation techniques.



MF assesses at each balance sheet
date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of securities
classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered
as an indicator that the equity securities are impaired. If any such evidence exists for available-for-sale financial assets,
the cumulative loss – measured as the difference between the cost and the current fair value, less any impairment loss on
that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement.
Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment
testing of trade receivables is described in Note 2.10.



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| | 2.10. | Derivatives and Trading
| | ----- | -----------------------



Financial assets at fair value through
profit or loss are financial assets held for trading or upon initial recognition are designated by the group as at fair value
through profit or loss. A financial asset is primarily classified as held for trading in this category if acquired principally
for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated
as hedges. Assets in this category are classified as current assets. Gains or losses arising from changes in the fair value of
the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within
‘other (losses)/gains – net’ in the period in which they arise. Derivatives are initially recognised at fair
value on the date a derivative contract is entered into and are subsequently remeasured at their fair value at each reporting
date.



| | 2.11. | Property, plant and equipment
| | ----- | -----------------------------



Property, plant and equipment are
stated at actual cost less accumulated depreciation and any accumulated impairment losses. The cost of an item of premise and
equipment comprises its purchase price and any costs directly attributable to bringing the asset into use, while maintenance and
repairs are charged to expense when incurred.



On April 1, 2010, the Company changed
(with retrospective effect) its method of calculating depreciation on fixed assets, from the Written Down Value method (‘WDV’)
to the Straight Line Method (“SLM”) at the rates based on management’s estimates of useful lives. Management
believes that such change will result in a more appropriate presentation of financial statements.



The company adopted the straight
line method (SLM) of depreciation so as to write off 100% of the cost of the assets based on management’s estimates of the
useful lives of all the assets. Estimated useful lives over which assets are depreciated are as follows:



|Type of assets         |  | Rates
                                         (SLM) adopted by the
        Company
|---------------------- |  | -----------------------------------------------------------------------------------
|Computer systems       |  | 3 years                                                                            
|Office equipments      |  | 3 years                                                                            
|Furniture and fixtures |  | 5 years                                                                            
|Vehicles               |  | 4 years                                                                            



Tangible assets costing less than
Rs.15 are fully depreciated in the year of purchase.



Depreciation on addition of Property,
plant and equipment is charged considering the month of purchase as full month.



The residual values and useful economic
lives of premises and equipment are reviewed annually.



Depreciation on leasehold improvements
is provided using the straight–line method over the shorter of the lease term or the useful life of the asset.



The fair value of property, plant
and equipment recognized as a result of a business combination is an estimated amount for which a property could be exchanged
on the date of acquisition between a willing buyer and a willing seller. The fair value of items of plant, equipment, fixtures
and fittings is based on the market approach and cost approach.



| | 2.12. | Intangible assets
| | ----- | -----------------



All intangible
assets are stated at cost less accumulated amortisation and any accumulated impairment losses.



| | a) | Software
| | -- | --------



Capitalised costs of computer software
obtained for internal use represents costs incurred to purchase computer software from third parties. These capitalised costs
are amortised over the period of three years on a straight–line basis, if the estimated useful lives are beyond one year.
However, if the estimated useful life of an asset is short i.e. less than a year, it is charged to the income statement. They
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.



The residual values and useful economic
lives of intangible assets are reviewed annually.



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The fair value of intangible assets
acquired in the business combinations is expected to be derived from the use and realisable value.



| | b) | Trading rights in Stock Exchange
| | -- | --------------------------------



BSE membership



MF Global Sify acquired The Stock
Exchange, Mumbai (the ‘BSE’) membership card on December 6, 2000. During the year 2005-06, a scheme, The ‘Bombay
Stock Exchange (Corporatisation and Demutualization) Scheme 2005’ (‘the Scheme’) was approved by the Securities
Exchange Board of India with effect from August 19, 2005 which converted the BSE from an Association of Person to a corporate
body in the name of Bombay Stock Exchange Limited (‘BSEL’).



In accordance with the scheme, the
members of the erstwhile BSE, in exchange of their erstwhile BSE membership cards (rights) received membership rights of BSEL
(i.e. right to trade on BSEL without placement of cash deposit) as well as equity shares of BSEL. (refer to note 5.2 – Membership
in Exchanges)



DGCX membership



MF Global Middle East DMCC (‘DMCC’)
is registered with and has been granted a trading license by the Dubai Multi Commodities Centre on February 7, 2006. The United
Arab Emirates Securities and Commodities Authority issued the DMCC a license on June 18, 2006 to operate as a broker on the Dubai
Gold and Commodities Exchange (‘DGCX’). DMCC has been admitted as a member of the DGCX on September 1, 2006. DMCC
has paid and capitalized US$ 100 thousand towards the license of DGCX, which is assessed for impairment.



Trading rights in stock exchanges
have indefinite useful life and are carried at cost less any accumulated impairment. They are reviewed for impairment annually
or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.



| | 2.13. | Impairment of non–financial
                                         assets
| | ----- | ---------------------------------------------------------------------------



Assets that have an indefinite useful
life are not subject to amortisation and are tested for impairment annually or whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. Both external as well as internal
indicators are considered by the group for impairment testing. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs
to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash–generating units). Non–financial assets that suffered impairment are reviewed
for possible reversal of the impairment at each reporting date.



| | 2.14. | Payables
| | ----- | --------



Payables include payables to broker-dealers
and clearing organizations and payable to customers. The payable to broker-dealers and clearing organizations are at fair values
because of their nature of short-term maturity. Amount payable to customers include amounts due on cash and margin transactions.
These are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method.



| | 2.15. | Borrowings – Bank
                                         overdraft
| | ----- | --------------------------------------------------------------------



Borrowings are recognized initially
at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between
the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the
borrowings using the effective interest method.



| | 2.16. | Provisions
| | ----- | ----------



Provisions are recognised when the
group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. In the event that the time value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects a current market assessment of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.



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| | 2.17. | Current and deferred income
                                         tax
| | ----- | ------------------------------------------------------------------------



The current income tax charge is
calculated on the basis of the tax laws in the countries where the group operates and generates taxable income. The tax rate of
MF Global Sify and its Indian Subsidiaries is 32.445%. MF Global Middle East DMCC,
the Dubai based subsidiary operates in a tax free jurisdiction. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions, where
appropriate, on the basis of amounts expected to be paid to the tax authorities.



Deferred income tax is provided
in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been
enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.



Deferred income tax assets are recognised
to the extent that it is probable that future taxable profit will be available against which the temporary differences can be
utilised.



Deferred income tax is provided
on temporary differences, if any, arising on investments in subsidiaries, except where the timing of the reversal of the temporary
difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.



Current and deferred income tax
are recognized in the income statement, except when the tax relates to items charged or credited directly to equity, in which
case the tax is also dealt with directly in equity.



| | 2.18. | Employee benefits
| | ----- | -----------------



Employee benefits are accrued in
the period in which the associated services are rendered by employees of the group. The group provides employees with retirement
benefits through both defined benefit and defined contribution schemes. Contributions to the defined contribution scheme are charged
to the consolidated income statement as they become payable in accordance with the rules of the scheme.



| | a) | 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 make monthly
contributions to the plan, each equal to a specified percentage of employee’s basic salary. The group has no further obligations
under the plan beyond its monthly contributions.



| | b) | Gratuity
| | -- | --------



The Gratuity Plan is a defined benefit
plan that, at retirement or termination of employment, provides all employees with a lump sum payment, which is a function of
the respective employee's salary and completed years of service with the group. The group 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 group, although the LIC administers the scheme and determines the contribution premium required to be paid by
the group. The liability recognised in the balance sheet in respect of gratuity plan is the present value of the defined benefit
obligation at the balance sheet date less the fair value of plan assets, if any, together with adjustments for unrecognised past–service
costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest
rates of Government of India securities (representing risk-free interest rates) and that have terms to maturity approximating
to the terms of the related gratuity liability.



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Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are charged or credited to income statement in the period in
which they arise.



| | c) | Share–based payment
| | -- | -------------------



The group’s employees participate
in share-based payment plans; that is stock appreciation rights plan sponsored by MF and co-investment plan sponsored by Man Group
plc. The group follows IFRS 2, “Share Based Payment” (“IFRS 2”).



For Equity settled share based payments;
the fair value of the employee services received in exchange for the share awards and options granted is recognised as an expense.
Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date and expensed, together
with a corresponding increase in equity, on a straight-line basis over the vesting period, based on the Group’s estimate
of shares that will eventually vest.



For cash settled share based payments;
the fair value of the employee services received in exchange for the stock appreciation rights is recognised as an expense. The
cost of cash-settled transactions is measured initially at fair value at the grant date. The fair value of each tranche of rights
issued under the plan is expensed over the period until vesting, with recognition of a corresponding liability. The liability
is remeasured at each balance sheet date up to and including the settlement date, with changes in fair value recognised in the
consolidated income statement.



The impact of non-market vesting
conditions is included in assumptions about the number of options that are expected to vest. At each balance sheet date, the group
revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision
of original estimates, if any, in the income statement.



| | 2.19. | Revenue Recognition
| | ----- | -------------------



| | a) | Commission, clearing fees, depository
                                         fee income
| | -- | -----------------------------------------------------------------------------------------



Commission, clearing fees and related
expenses are recorded on a trade-date basis as securities transactions occur. Depository fee income earned from customer is recognized
in the period in which services are rendered.



| | b) | Dividend and Interest Income
| | -- | ----------------------------



Dividend income is recognised when
the right to receive the payment is established. Interest income is recognised on accrual basis using the effective interest rate
method.



| | c) | Principal transactions
| | -- | ----------------------



Principal transactions include revenues
from proprietary transactions. The Company records in Principal transactions the gains or losses on repurchase and resale agreements
accounted for as sales and purchase transactions.



The Company does not separately
amortize purchase premiums and discounts associated with proprietary transactions, as these are a component of the recorded fair
value. Changes in the fair value of such securities are recorded as unrealized gains and losses within Principal transactions
in the consolidated statements of operations.



| | d) | Other
| | -- | -----



Other revenues consist of revenues
earned in the normal course of operations and other non operating revenue. The same is accounted on accrual basis.



| | 2.20. | Leases
| | ----- | ------



Leases in which a significant portion
of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the
period of the lease. All leases are classified as operating leases.



Under these arrangements, interest
free deposits have been given to the lessor and are refundable at the end of lease term. The group recognises the security deposit
at fair value using the market rate of interest for a deposit of similar term. The difference between the amount of security deposit
and fair value is considered as prepaid lease rental, which is a non-financial asset.



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The security deposit initially recognised
at fair value will accrete to the amount of security deposit received through accruals as interest income over the term of security
deposit and prepaid lease rental will be charged to income statement as lease rental over the lease term.



| | 3. | Financial risk management objectives
                                         and policies
| | -- | ------------------------------------------------------------------------------------------



| | 3.1. | Financial risk factors
| | ---- | ----------------------



The group is exposed to a variety
of financial risks. The principal risks are business risk, interest rate risk, price risk, foreign currency risk, credit risk
and cash liquidity risk. Each of these risks is discussed in detail below. The group monitors financial risks on a consolidated
basis. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the financial performance. The group has a risk management structure and processes to monitor, evaluate
and manage the principal risks in conducting business.



Business Risk



The group’s results of operations
will be affected by many factors including economic, political and market conditions, broad trends in the brokerage and finance
industry, changes in level of trading activity in the broader market place, price levels and price volatility in the derivative,
equity and commodity markets, legislative and regulatory changes and competition, among other factors. In particular, the revenues
of the group are substantially dependent on the volume of client transactions that it executes and clears, the volatility in the
principal markets in which it operates and the prevailing interest rates.



Interest rate Risk



The group is exposed to interest
rate risk primarily due to changes in interest rates on bank fixed deposits that impact the amount of interest income the group
earns. Interest income is earned on fixed deposits placed with banks out of the group’s funds and margin monies placed by
clients. The group monitors the movement of interest rates to determine whether deposits need to be placed for a short , medium
or long-term. Investments in fixed deposits placed with banks earn fixed rate of interest. As at March 31, 2012 the carrying value
of bank deposits approximates fair value of these deposits as having original maturity of less than a year. The weighted average
rate of interest earned on bank fixed deposits amounted to 7.73% p.a. and 6.49% p.a. during the year ended March 31, 2012 and
March 31, 2011, respectively.



The group rolls-over fixed deposits
on maturity based on the market condition and business needs; the weighted average remaining term of fixed deposits as at the
balance sheet date is approximately 5.36 months and 7.35 months as at March 31, 2012 and March 31, 2011, respectively.



As at March 31, 2012, a 100 bps
increase / decrease in interest rates, with all other variables held constant , would have resulted in an increase / decrease
in Interest Income by Rs.12,129 ( Previous year Rs. 18,064)



Price Risk



The
group is subject to price risk in respect of investments held by the group in listed and unlisted equity shares and investment
in money market mutual funds, which are held as available for sale securities. The impact of price risk on carrying value of these
shares is not material compared to the size and operations of the group. Investments in money market funds are subject to minimum
price risk due to their investment in instruments of highest safety call money market instruments. Highest Safety represents a
credit rating equivalent of AAA.



Foreign
Exchange Risk



The group has minimal transactional
currency exposure arising from operations in currencies other than its functional currency.



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Credit Risk



Credit risk is the possibility that
the group may suffer a loss from the failure of clients or counterparties to meet their financial obligations at all or in a timely
manner. The group acts as an agent in providing execution and clearing services for exchange-traded products. The group’s
clients’ security activities are transacted on either cash or margin basis. In the event that a client fails to satisfy
its obligations for cash transactions, the group may be required to purchase or sell financial instruments at the prevailing market
price to fulfil the client’s obligations. The clients are required to maintain margin accounts with collateral sufficient
to support their open trading positions. Initially, the group establishes each client’s margin requirements to levels it
believes are sufficient to cover their open positions. However, later if the client’s subsequent trading activity or adverse
market conditions may cause the client’s previous margin payments to be inadequate to support their trading obligations,
the group then serves as the exchange clearing member for the trade and thus the group would cover any shortfall and thereby expose
itself to potential losses.



The Credit exposure also arises
in relation to fixed deposits placed with Banks. The group places fixed deposits with highly rated banks , which are reviewed
on an on-going basis.



The group’s policy is to place
fixed deposits with credit worthy banks. The following table depicts that the majority of the group’s fixed deposits are
placed in highly rated banks :



|                 |  | % of fixed deposits |    
|---------------- |  | ------------------- | ---
|                 |  | 2012                |    
|Investment grade |  |                     |    
|                 |  |                     |    
|Highest safety   |  |                     | 100
|High safety      |  |                     | -  
|Adequate safety  |  |                     | -  
|                 |  |                     | 100



Highest Safety represents a credit
rating equivalent of AAA, A1+, P1+; High Safety represents a credit rating equivalent of AA; and Adequate Safety represents a
credit rating of A.



The credit exposure also arises
in relation to the deposits placed with exchanges and clearing corporations, which is required as per the rules of the exchanges
/ clearing corporation for the company membership. The risk is inherent in our industry and is largely controlled and influenced
by the regulatory bodies that impose rules on the exchanges and clearing houses.



All exchanges and clearing houses
are financially sound organisations and the Company is therefore not exposed to significant credit risk.



Risk Management Process
and Mitigation



The group has a separate risk management
department, which monitors, evaluates and manages the risks. Client-wise position limits are set by the risk department based
on the collateral placed by the respective clients. The risk department is responsible for making daily risk reports based on
day-end positions of clients. Client orders are directed to the exchange only if the risk parameters set by the risk department
are met. The risk department monitors client activity levels to ensure exposures are within the risk parameters of the group.
Intra-day margin calls are made on the clients to reflect market movements on the client positions and may result in clients being
asked to reduce positions. Generally, the group reserves the right to liquidate any client position immediately in the event of
a failure to meet a margin call. For the year ended March 31, 2012 and March 31, 2011, group’s bad debts as a percentage
of broking income were 3.31% and 2.75%, respectively. For clearing business, the group generally mandates that initial margin
be paid by the clients as deposit before they commence trading. The clients are required to provide collateral as margin to secure
the performance of their obligations.



The group employs the following
techniques to monitor the market environment and clients risk of default based upon the exposure created by their open positions:



| | · | establishing
                                         risk parameters based on analysis of current and historical prices and price volatility;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | · | intra-day
                                         and end of day risk limit monitoring, including intra-day position and trade monitoring
                                         to identify any accounts trading beyond pre-set limits and parameters;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | market
                                         risk analysis and evaluation of adequacy of margin requirements for traded products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | · | intra-day
                                         stress analysis for material market moves or accounts with material position taking and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| | · | approval
                                         of margin requirements, limits and risk control of new instruments
| | - | --------------------------------------------------------------------------------------------------------------------



Cash Liquidity Risk



In normal conditions, the group’s
core business of providing execution and clearing brokerage services is self-financing because the operations generate sufficient
revenues to pay expenses as they become due. As a result, the group generally does not face a substantial cash liquidity risk
– that is a risk that the group will be unable to raise cash quickly enough to meet payment obligations as they arise. The
group has sufficient readily available liquid assets and credit facilities to ensure that the group can meet financial obligations
as they become due under both normal and distressed market conditions. The group also has committed credit lines from banks to
support the business in respect of settlement and intraday requirements. The group evaluates liquidity needs by analysing the
impact of liquidity stress scenarios. The following table analyses the Group’s financial assets, liabilities and commitments.
The amounts disclosed are the contractual undiscounted cash flows.



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As at March 31, 2012



|                                                         |  | Within 6 |           |  | 6 months to |  |   |              |  |  |               |  |  |       |  
|-------------------------------------------------------- |  | -------- | --------- |  | ----------- |  | - | ------------ |  |  | ------------- |  |  | ----- | -
|                                                         |  | months   |           |  | 1 year      |  |   | 2 to 3 years |  |  | After 3 years |  |  | Total |  
|Financial Liabilities                                    |  |          |           |  |             |  |   |              |  |  |               |  |  |       |  
|Payable to broker-dealers and clearing organizations     |  |          | 184,659   |  |             |  |   |              |  |  |               |  |  |       |  
|Payable to customers                                     |  |          | 684,803   |  |             |  |   |              |  |  |               |  |  |       |  
|Accounts payable, accrued expenses and other liabilities |  |          | 181,357   |  |             |  |   |              |  |  |               |  |  |       |  
|                                                         |  |          | 1,050,819 |  |             |  | - |              |  |  | -             |  |  |       | -



|                                                                                                   |  | Within 6 |           |  | 6 months to |  |           |              |  |  |               |  |  |       |       
|-------------------------------------------------------------------------------------------------- |  | -------- | --------- |  | ----------- |  | --------- | ------------ |  |  | ------------- |  |  | ----- | ------
|                                                                                                   |  | months   |           |  | 1 year      |  |           | 2 to 3 years |  |  | After 3 years |  |  | Total |       
|The group has at its disposal following financial assets in addition
    to unused lines of credit |  |          |           |  |             |  |           |              |  |  |               |  |  |       |       
|Cash and bank balance                                                                              |  |          | 146,980   |  |             |  |           |              |  |  |               |  |  |       |       
|Cash-restricted                                                                                    |  |          | 892,500   |  |             |  | 1,431,000 |              |  |  | 500           |  |  |       |       
|Interest bearing deposits with bank                                                                |  |          | 49,277    |  |             |  | 21,500    |              |  |  |               |  |  |       |       
|Deposits with clearing organizations                                                               |  |          | -         |  |             |  |           |              |  |  |               |  |  |       | 78,613
|Receivable from broker-dealers and clearing organizations                                          |  |          | 170,660   |  |             |  |           |              |  |  |               |  |  |       |       
|Receivable from customers                                                                          |  |          | 340,998   |  |             |  |           |              |  |  |               |  |  |       |       
|Available-for-sale securities Marketable, at market value                                          |  |          | 41,005    |  |             |  |           |              |  |  |               |  |  |       |       
|Interest accrued but not due                                                                       |  |          | 57,302    |  |             |  |           |              |  |  |               |  |  |       |       
|                                                                                                   |  |          | 1,698,722 |  |             |  | 1,452,500 |              |  |  | 500           |  |  |       | 78,613



As at March 31, 2011



|                                                         |  | Within 6 months |           |  | 6 months to 1 year |  |   | 2 to 3 years |  |  | After 3 years |  |  | Total |  
|-------------------------------------------------------- |  | --------------- | --------- |  | ------------------ |  | - | ------------ |  |  | ------------- |  |  | ----- | -
|Financial Liabilities                                    |  |                 |           |  |                    |  |   |              |  |  |               |  |  |       |  
|Payable to broker-dealers and clearing organizations     |  |                 | 264,504   |  |                    |  |   |              |  |  |               |  |  |       |  
|Payable to customers                                     |  |                 | 1,272,571 |  |                    |  |   |              |  |  |               |  |  |       |  
|Borrowings                                               |  |                 | 53,000    |  |                    |  | - |              |  |  | -             |  |  |       | -
|Accounts payable, accrued expenses and other liabilities |  |                 | 505,605   |  |                    |  |   |              |  |  |               |  |  |       |  
|                                                         |  |                 | 2,095,680 |  |                    |  | - |              |  |  | -             |  |  |       | -



|                                                                                                   |  | Within 6 months |           |  | 6 months to 1 year |  |         | 2 to 3 years |  |  | After 3 years |  |  | Total |        
|-------------------------------------------------------------------------------------------------- |  | --------------- | --------- |  | ------------------ |  | ------- | ------------ |  |  | ------------- |  |  | ----- | -------
|The group has at its disposal following financial assets in addition to unused
    lines of credit |  |                 |           |  |                    |  |         |              |  |  |               |  |  |       |        
|Cash and bank balance                                                                              |  |                 | 281,486   |  |                    |  |         |              |  |  |               |  |  |       |        
|Cash-restricted                                                                                    |  |                 | 2,832,900 |  |                    |  | 126,163 |              |  |  |               |  |  |       |        
|Interest bearing deposits with bank                                                                |  |                 | 86,523    |  |                    |  | 6,839   |              |  |  |               |  |  |       |        
|Deposits with clearing organizations                                                               |  |                 |           |  |                    |  |         |              |  |  |               |  |  |       | 173,783
|Receivable from broker-dealers and clearing organizations                                          |  |                 | 18,580    |  |                    |  |         |              |  |  |               |  |  |       |        
|Receivable from customers                                                                          |  |                 | 447,770   |  |                    |  |         |              |  |  |               |  |  |       |        
|Available-for-sale securities Marketable, at market value                                          |  |                 | 40,776    |  |                    |  |         |              |  |  |               |  |  |       |        
|Interest accrued but not due                                                                       |  |                 | 67,124    |  |                    |  |         |              |  |  |               |  |  |       |        
|                                                                                                   |  |                 | 3,775,159 |  |                    |  | 133,002 |              |  |  | -             |  |  |       | 173,783



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| | 3.2. | Capital risk management
| | ---- | -----------------------



The objectives of the Group when
managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders
and to maintain minimal debt. Capital of the group is ‘equity’ as shown in the consolidated balance sheet. The exchange
in which the group is a member has stipulated minimum net worth that must be maintained. In order to maintain or adjust the capital
structure, the group may adjust the amount of dividends to shareholders, issue new shares or sell assets to reduce debt. The group
has embedded in its regulatory compliance framework the necessary test to ensure the continuous and full compliance with the net
worth criteria set by the Exchange at each entity level. The group has complied with the net worth requirement at each entity
level during the year and as at March 31, 2012 and March 31, 2011.



| | 3.3. | Fair value estimation
| | ---- | ---------------------



The fair value of financial instruments
traded in active markets (such as available-for-sale securities) is based on the quoted market price at the balance sheet date.
The quoted market price used for financial assets held by the group is the closing market price. The fair value of financial instruments
that are not traded in an active market is determined by using valuation techniques except for the investment in equity shares
of Bombay Stock Exchange Limited.



The fair value of Investment in
the equity shares of BSEL is provided by BSEL. The fair value provided by BSEL is used for valuing investment in shares for the
purposes of computation of net worth of trading member.



However the Investment in BSEL have
been sold by the company during the financials year March 31, 2011.Please refer to note 14 for further details.



The carrying value, less impairment
provision of trade receivables, is assumed to approximate their fair values.



| | 4. | Critical accounting estimates and
                                         judgements
| | -- | -------------------------------------------------------------------------------------



| | 4.1. | Critical accounting
                                         estimates
| | ---- | ----------------------------------------------------------------------



In the process of applying the group’s
accounting policies, management has made estimates and judgements in preparing the financial statements.



Estimates and judgments are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances.



MF makes estimates and assumptions
concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.



| | · | Valuation
                                         of financial assets where there is no quoted price - This determination requires significant
                                         judgement particularly in determining changes in fair value since the last formal valuation.
                                         When the fair value of the financial asset cannot be measured reliably, it is measured
                                         at cost.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Impairment
                                         of non-financial assets - The recoverable amount of an asset or a cash-generating unit
                                         is determined based on value-in-use calculations prepared on the basis of management’s
                                         assumptions and estimates.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Income
                                         taxes - There are transactions and calculations for which the ultimate tax determination
                                         is uncertain and would get finalized on completion of assessment by tax authorities.
                                         Where the final tax outcome is different from the amounts that were initially recorded,
                                         such differences will impact the income tax and deferred tax provisions in the period
                                         in which such determination is made.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Defined
                                         benefit schemes - Gratuity Liability – The costs of and period-end obligations
                                         under defined benefit schemes are determined using an actuarial valuation. The actuarial
                                         valuation involves making assumptions about discount rates, expected rates of return
                                         on assets, future salary increases, mortality rates and future pension increases. Due
                                         to the long-term nature of these schemes, such estimates are subject to significant uncertainty.
                                         The group reviews its assumptions annually in conjunction with its independent actuary
                                         and considers this adjustment appropriate given the geographical and demographic profile
                                         of the scheme.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Share-based
                                         payment transactions - Share-based payments are measured at fair value by an independent
                                         valuer using the Black-Scholes model and expensed over the vesting period based on the
                                         group’s estimate of shares that will eventually vest.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 4.2. | Critical accounting
                                         judgements in applying the entity’s accounting policy
| | ---- | ------------------------------------------------------------------------------------------------------------------



| | 4.2.1. | Revenue recognition
| | ------ | -------------------



MF estimates that fixed deposits
placed with banks will be held till maturity while determining the accrued interest, which is unpaid on the balance sheet date.
In the event 1% of such deposit is withdrawn before it’s its maturity date the Interest income will be lower by Rs. 1,197.



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| | 5. | Intangible assets
| | -- | -----------------



5.1.	  Software



|                                        |  | Computer software |        |   | Web development costs |  |         | Total | 
|--------------------------------------- |  | ----------------- | ------ | - | --------------------- |  | ------- | ----- | 
|Cost                                    |  |                   |        |   |                       |  |         |       | 
|As at March 31, 2010                    |  |                   | 88,691 |   |                       |  | 207,422 |       | 
|Additions                               |  |                   | 5,671  |   |                       |  | -       |       | 
|Disposals                               |  |                   | -      |   |                       |  | -       |       | 
|Exchange difference                     |  |                   | (2     | ) |                       |  | -       |       | 
|As at March 31, 2011                    |  |                   | 94,360 |   |                       |  | 207,422 |       | 
|Additions                               |  |                   | 1,003  |   |                       |  | -       |       | 
|Disposals                               |  |                   | -      |   |                       |  | -       |       | 
|Exchange difference                     |  |                   | 29     |   |                       |  | -       |       | 
|As at March 31, 2012                    |  |                   | 95,392 |   |                       |  | 207,422 |       | 
|Accumulated amortisation and impairment |  |                   |        |   |                       |  |         |       | 
|As at March 31, 2010                    |  |                   | 60,505 |   |                       |  | 207,422 |       | 
|Charge for the year                     |  |                   | 14,587 |   |                       |  | -       |       | 
|Disposals                               |  |                   | -      |   |                       |  | -       |       | 
|Exchange difference                     |  |                   | (3     | ) |                       |  | -       |       | 
|As at March 31, 2011                    |  |                   | 75,089 |   |                       |  | 207,422 |       | 
|Charge for the year                     |  |                   | 12,386 |   |                       |  | -       |       | 
|Disposals                               |  |                   | -      |   |                       |  | -       |       | 
|Exchange difference                     |  |                   | 31     |   |                       |  | -       |       | 
|As at March 31, 2012                    |  |                   | 87,506 |   |                       |  | 207,422 |       | 
|                                        |  |                   |        |   |                       |  |         |       | 
|Net book amount as at                   |  |                   |        |   |                       |  |         |       | 
|March 31, 2012                          |  |                   | 7,886  |   |                       |  | -       |       | 
|March 31, 2011                          |  |                   | 19,271 |   |                       |  | -       |       | 



| | 5.2. | Membership in exchanges
| | ---- | -----------------------



Membership in exchanges consists
of:



| | a) | BSE membership
                                         of Rs.1,257 and Rs 1,257 as at March 31, 2012 and 2011 respectively, and
| | -- | --------------------------------------------------------------------------------------------------------------------------------

| | b) | DGCX membership of Rs. 5,128 and
                                         Rs. 4,476 as at March 31, 2012 and 2011, respectively. DGCX membership value underwent
                                         a change due to foreign currency translation.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BSE membership



The carrying value of the erstwhile
BSE membership card in the books of MF Global Sify was Rs.13,570 in August 2005. Consequent to the corporatisation of the BSE,
MF Global Sify computed the fair value of the membership rights of BSEL and shares of BSEL as follows:



|Membership rights of BSEL |  | On the basis of the benefits which MF Global Sify would
    get over the current deposit based membership right of BSEL
|------------------------- |  | -----------------------------------------------------------------------------------------------------------------------
|                          |  |                                                                                                                        
|Equity shares of BSEL     |  | On the basis of the fair value of the equity
    shares of BSEL determined by management                               



The fair value of the membership
rights of BSEL is calculated by present value over 10 years of opportunity costs incurred on current deposit and admission fees
required for new membership on the date of the balance sheet. The interest rate and present value is determined @ 8% p.a. On the
balance sheet date the current deposit requirement is Rs. 1,000 and admission fees (non – refundable) is Rs. 250.



In accordance with the above methodology,
an impairment charge arose in BSE membership rights of Rs. Nil for the year ended March 31, 2012 and March 31, 2011 respectively.



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| | 6. | Property, plant and equipment*
| | -- | ------------------------------



|                         |  | Furniture and |       |   | Computers |  |         | Office     |  |  |          |   |  |       |        
|------------------------ |  | ------------- | ----- | - | --------- |  | ------- | ---------- |  |  | -------- | - |  | ----- | -------
|                         |  | Fixtures      |       |   | Systems   |  |         | equipments |  |  | Vehicles |   |  | Total |        
|Cost                     |  |               |       |   |           |  |         |            |  |  |          |   |  |       |        
|As at March 31, 2010     |  |               | 8,317 |   |           |  | 177,927 |            |  |  | 37,780   |   |  |       | 13,101 
|Additions                |  |               | 50    |   |           |  | 4,498   |            |  |  | 212      |   |  |       | -      
|Disposals                |  |               | -     |   |           |  | -       |            |  |  |          |   |  |       | -      
|Exchange difference      |  |               | (14   | ) |           |  | (9      | )          |  |  | (8       | ) |  |       | (10    
|As at March 31, 2011     |  |               | 8,353 |   |           |  | 182,416 |            |  |  | 37,984   |   |  |       | 13,091 
|Additions                |  |               | 160   |   |           |  | 5,652   |            |  |  | 635      |   |  |       | -      
|Disposals                |  |               | -     |   |           |  | (553    | )          |  |  | -        |   |  |       | (10,369
|Exchange difference      |  |               | 189   |   |           |  | 123     |            |  |  | 124      |   |  |       | 128    
|As at March 31, 2012     |  |               | 8,702 |   |           |  | 187,638 |            |  |  | 38,743   |   |  |       | 2,850  
|Accumulated depreciation |  |               |       |   |           |  |         |            |  |  |          |   |  |       |        
|As at March 31, 2010     |  |               | 4,011 |   |           |  | 142,704 |            |  |  | 13,375   |   |  |       | 6,876  
|Charge for the year      |  |               | 2,739 |   |           |  | 25,595  |            |  |  | 20,233   |   |  |       | 4,506  
|Disposals                |  |               | -     |   |           |  |         |            |  |  |          |   |  |       |        
|Exchange difference      |  |               | (7    | ) |           |  | (7      | )          |  |  | (4       | ) |  |       | (4     
|As at March 31, 2011     |  |               | 6,743 |   |           |  | 168,292 |            |  |  | 33,604   |   |  |       | 11,378 
|Charge for the year      |  |               | 1,555 |   |           |  | 10,497  |            |  |  | 4,774    |   |  |       | 1,838  
|Disposals                |  |               | -     |   |           |  | (553    | )          |  |  | -        |   |  |       | (10,369
|Exchange difference      |  |               | (105  | ) |           |  | (74     | )          |  |  | (393     | ) |  |       | (275   
|As at March 31, 2012     |  |               | 8,193 |   |           |  | 178,162 |            |  |  | 37,985   |   |  |       | 2,572  
|                         |  |               |       |   |           |  |         |            |  |  |          |   |  |       |        
|Net book amount as at    |  |               |       |   |           |  |         |            |  |  |          |   |  |       |        
|March 31, 2012           |  |               | 509   |   |           |  | 9,476   |            |  |  | 758      |   |  |       | 278    
|March 31, 2011           |  |               | 1,610 |   |           |  | 14,124  |            |  |  | 4,380    |   |  |       | 1,713  



Change in estimates

On the basis of comprehensive evaluation on
April 1, 2010, the Group has changed its method of calculating depreciation on fixed assets from the Written Down Value method
(‘WDV’) to the Straight Line method (“SLM”) at the revised rates based on management’s estimates
of useful lives of the assets.



In view of such changes, the charge of depreciation
for the current year is Nil (Previous year higher by Rs. 31,395 (of which Rs.28,180 pertains to earlier periods upto March 31,
2010 and Rs. 3,232 pertains to the Previous year.) and the profit for the year is lower by Nil (Previous Year Rs.31,395.) Correspondingly,
the net block of the Fixed Asset is lower by Nil (Previous Year Rs. 31,395).



As it is impracticable to estimate the effect
of such changes on depreciation for the future periods, the same is not disclosed.



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| | 7. | Deferred income tax
| | -- | -------------------



The movement in deferred tax assets
and liabilities during the respective years is as follows:



|                                       |  | 2012 |         |   | 2011 | 
|-------------------------------------- |  | ---- | ------- | - | ---- | 
|At April 1                             |  |      | 79,476  |   |      | 
|Property, plant and equipment          |  |      | 1,511   |   |      | 
|Provision on receivable from customers |  |      | 7,870   |   |      | 
|Gratuity                               |  |      | (27     | ) |      | 
|Stock appreciation rights              |  |      | (31,881 | ) |      | 
|Provision for bonus                    |  |      | (13,033 | ) |      | 
|Stamp duty                             |  |      | (1,628  | ) |      | 
|                                       |  |      |         |   |      | 
|At March 31                            |  |      | 42,288  |   |      | 
|                                       |  |      |         |   |      | 
|Comprised Of:                          |  |      |         |   |      | 
|Deferred tax assets                    |  |      | 42,288  |   |      | 
|Deferred tax liabilities               |  |      | -       |   |      | 
|                                       |  |      | 42,288  |   |      | 



|An analysis of the gross deferred tax asset and liability balances is as follows:
|---------------------------------------------------------------------------------
|                                                                                 
|                                                                                 
|Deferred tax assets:                                                             
|Property, plant and equipment                                                    
|Provision on receivable from customers                                           
|Stock appreciation rights                                                        
|Provision for bonus                                                              
|Stamp duty                                                                       
|Gratuity                                                                         
|                                                                                 
|                                                                                 



|The analysis of deferred tax assets and deferred tax liabilities is as follows:
|-------------------------------------------------------------------------------
|                                                                               
|                                                                               
|Deferred tax assets:                                                           
|– Deferred tax asset to be recovered after more than 12 months                 
|– Deferred tax asset to be recovered within 12 months                          
|                                                                               



|                                                       |  |                |        |  | Provision on |  |        |              |  |  |           |   |  |          |         |   |            |  |     |             | 
|------------------------------------------------------ |  | -------------- | ------ |  | ------------ |  | ------ | ------------ |  |  | --------- | - |  | -------- | ------- | - | ---------- |  | --- | ----------- | 
|                                                       |  |                |        |  | receivable   |  |        | Stock        |  |  |           |   |  |          |         |   |            |  |     |             | 
|                                                       |  | Property Plant |        |  | from         |  |        | appreciation |  |  | Provision |   |  |          |         |   |            |  |     |             | 
|Deferred tax assets:                                   |  | and Equipment  |        |  | customers    |  |        | rights       |  |  | for Bonus |   |  | Gratuity |         |   | Stamp Duty |  |     | Grand Total | 
|Opening Balance as on April 1, 2011                    |  |                | 829    |  |              |  | 7,364  |              |  |  | 7,477     |   |  |          | 927     |   |            |  | -   |             | 
|Charged / (Credited) to Other Comprehensive Income     |  |                | 10,479 |  |              |  | 12,765 |              |  |  | 24,404    |   |  |          | 12,106  |   |            |  | 577 |             | 
|Effect of Change in Tax rates                          |  |                |        |  |              |  |        |              |  |  |           |   |  |          |         |   |            |  |     |             | 
|As at March 31, 2011                                   |  |                | 11,308 |  |              |  | 20,129 |              |  |  | 31,881    |   |  |          | 13,033  |   |            |  | 577 |             | 
|Charged / (Credited) to Other Comprehensive
    Income |  |                | 1,511  |  |              |  | 7,870  |              |  |  | (31,881   | ) |  |          | (13,033 | ) |            |  | (28 | )           | 
|As at March 31, 2012                                   |  |                | 12,819 |  |              |  | 27,999 |              |  |  | -         |   |  |          | -       |   |            |  | 549 |             | 



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8.



| | 8.1.1. | Receivables from customers
| | ------ | --------------------------



Receivables from customers that
are due for less than six months are generally not considered impaired. In respect of receivables that are neither past due nor
impaired, as at the reporting date, there are no indications that the customers will not meet their payment obligations.



As at March 31, 2012, receivables
of Rs. 85,310 (March 31, 2011: Rs. 10,193) were past due but not impaired. There are no indications that these customers will
not meet their payment obligations. The ageing analysis of receivables, which are not impaired, is as follows:



|                   |  | As at March 31, |        
|------------------ |  | --------------- | -------
|                   |  | 2012            |        
|up to 6 months     |  |                 | 255,688
|more than 6 months |  |                 | 85,310 
|                   |  |                 | 340,998



Receivables are tested individually
for impairment. Based on such testing as at March 31, 2012, receivables of Rs. 86,300 (March 31, 2011: Rs. 60,600) were impaired
and provided for. The amount of the provision was Rs. 86,300 as at March 31, 2012 (March 31, 2011: Rs. 60,600).



The ageing of these receivables
is as follows:



|                   |  | As at March 31, |       
|------------------ |  | --------------- | ------
|                   |  | 2012            |       
|up to 6 months     |  |                 | 17,525
|more than 6 months |  |                 | 68,775
|                   |  |                 | 86,300



The carrying amounts of the group’s
receivables are denominated in Indian Rupees (INR):



|As at March 31, |        
|--------------- | -------
|2012            |        
|                | 340,998
|                | 340,998



Movements on the group’s provision
for impairment of trade receivables are as follows:



|                                |  | As at March 31, |       
|------------------------------- |  | --------------- | ------
|                                |  | 2012            |       
|                                |  |                 |       
|As at the beginning of the year |  |                 | 60,600
|Provision for impairment        |  |                 | 25,700
|Write back of provision         |  |                 | -     
|As at the closing of the year   |  |                 | 86,300



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The maximum exposure
to credit risk at the reporting date is the fair value of each class of receivable mentioned above.



| | 8.1.2. | Trade receivables include brokerage
                                         aggregating to Rs. 12,019 from Institutional Clients, invoiced on account of trades executed
                                         on their behalf. While these parties, with whom regular business has discontinued, have
                                         neither disputed nor denied such claims. However the amounts have remained outstanding
                                         as the Institutional Clients are awaiting clarity about the change of ownership of the
                                         Company. The Management is confident of recovery of these amounts.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | Receivable from and payable to broker-dealer
                                         and clearing organisations
| | -- | ----------------------------------------------------------------------------------------------------------------



Amounts receivable from and payable
to broker-dealers and clearing organizations (non-interest bearing) within six months from the balance sheet date consist of the
following:



|                       |  | As at March 31 |        
|---------------------- |  | -------------- | -------
|                       |  | 2012           |        
|                       |  | Receivable     |        
|Clearing organizations |  |                |        
|- Unsettled trade      |  |                | 159,809
|Broker-dealer          |  |                | 10,851 
|                       |  |                |        
|Total                  |  |                | 170,660



| | 10. | Other assets
| | --- | ------------



|                                |  | As at March 31, |        
|------------------------------- |  | --------------- | -------
|                                |  | 2012            |        
|Prepaid expenses                |  |                 | 11,553 
|Advance tax (net of provisions) |  |                 | 134,726
|Deposits                        |  |                 | 28,900 
|Loans and advances (to staff)   |  |                 | 6,110  
|Gratuity Trust                  |  |                 | 3,994  
|Others*                         |  |                 | 23,716 
|                                |  |                 | 208,999



* includes Advances to vendors towards
expenses, delayed payment charges from clients, withholding tax recoverable, etc.



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| | 11. | Cash and Bank Balance
| | --- | ---------------------



Cash and bank balance consist of:



|             |  | As at March 31, |        
|------------ |  | --------------- | -------
|             |  | 2012            |        
|Cash in hand |  |                 | 11     
|Cash at bank |  |                 | 146,969
|             |  |                 | 146,980



| | 12. | Cash – restricted
| | --- | -----------------



Restricted cash as of March 31,
2012 includes fixed deposits of Rs. Nil (Rs. 100,000 as of March 31, 2011) placed with banks as margins for bank guarantees issued
to clearing organizations and fixed deposits of Rs.2,324,000 (Rs. 2,859,062 as of March 31, 2011) specifically earmarked as liens
to clearing organizations towards margins.



Excess margin placed in the form
of fixed deposits or bank guarantees can be withdrawn by giving one-day notice to the clearing organizations of the exchange.



Bank guarantees outstanding are
Rs. Nil as at March 31, 2012 (March 31, 2011: Rs. 200,000). Bank guarantees are generally provided to the Exchanges for the purposes
of Margins. An exchange may invoke these guarantees if they suffer any losses or damage through the breach of any of the covenants
contained in the agreements.



| | 13. | Interest bearing deposits with banks
| | --- | ------------------------------------



Interest bearing deposits with bank
represent fixed term deposits placed with banks earning fixed rate of interest. At the balance sheet date, these deposits are
measured at amortised cost using effective interest method.



The net decrease in interest bearing
deposits with banks by Rs. 657,648 during the year is primarily on account of cash money repaid to customers.



| | 14. | Available for sale securities
| | --- | -----------------------------



Available for sale securities include
following:



|                                             |  | As at March 31, |          
|-------------------------------------------- |  | --------------- | ---------
|                                             |  | 2012            |          
|(a) Equity Shares (Quoted)                   |  | Quantity        |          
|Patni Computers Systems Limited.             |  |                 | -        
|Piramal Health Care Limited                  |  |                 | -        
|Siemens Limited                              |  |                 | -        
|Total (a)                                    |  |                 | -        
|                                             |  |                 |          
|Templeton India - Dividend reinvestment plan |  |                 | 4,100,471
|Total (b)                                    |  |                 | 4,100,471



The fair value of unlisted securities
is determined based on the valuations provided by Bombay Stock Exchange Limited. This value is considered as fair value of investment
in the net worth computation of trading member.



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| | 15. | Share capital and Dividend distribution
| | --- | ---------------------------------------



|                                                |  | As at March 31, |        
|----------------------------------------------- |  | --------------- | -------
|                                                |  | 2012            |        
|Authorised capital                              |  |                 |        
|70,000,000 ordinary shares of Rs.10/- per share |  |                 | 700,000



As
at March 31, 2012, 51,894,182 ordinary shares (March 31, 2011: 51,894,182 ordinary shares) of Rs.10/- each, issued and fully paid–up
aggregating to Rs.518,942 (March 31, 2012 Rs. 518,942)



Dividend distribution



Dividends payable to equity shareholders
are based on the net income available for distribution as reported in the stand–alone financial statements of MF Global
Sify prepared in accordance with Indian GAAP. The net income in accordance with IFRS may, in certain years, either not be fully
available or will be additionally available for distribution to equity shareholders.



Under the Companies Act, 1956 dividends
may be paid out of the 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
to transfer to its reserves a minimum percentage of its profits for that year, ranging from 2.5% to 10%, depending on the dividend
percentage to be declared in such year. Dividends declared are subject to a dividend distribution tax of 16.22%.



| | 16. | Share–based payments
| | --- | --------------------



Employee’s Stock Appreciation
Scheme



The group had introduced the ‘Stock
Appreciation Rights Plan 2006 ‘ (‘SARs Plan 2006’), ‘Stock Appreciation Rights Plan 2007’ (‘SARS
Plan 2007’) and and ‘Stock Appreciation Rights Plan 2008’ (‘SARS Plan 2008’) during the years ended
March 31, 2007, March 31, 2008 and March 31, 2009, respectively, and granted stock appreciation rights to eligible employees.
The group believes that such awards better align the interests of its employees with those of its shareholders. As per the SARS
Plan, the stock appreciation rights shall vest with the employee and shall be settled in cash on the day following the fourth
anniversary of the grant date. The Board of Directors of the Company has preponed the vesting date of the SARS Plan 2007 and SARS
Plan 2008 from March 31, 2011 and March 31, 2012 to July 31, 2010 and March 31, 2011, respectively. The exercise price for the
grant is Rs. Nil. SARs are accounted as cash settled share-based payments.



The group has granted a total of
711,247 SARs under the SARs Plan 2006, 809,500 SARs under the SARs Plan 2007 and 1,386,000 SARs under the SARs Plan 2008 to the
employees. The weighted-average fair value of SARs as at March 31, 2011 is Rs 70 per unit (2010: Rs. 86 per unit) for SARs Plan
2006, SARs plan 2007 and SARs plan 2008, respectively. The forfeited SARs are reissued to the other eligible employees, where
the vesting period is from the date of reissue to the vesting date as per the initial grant of SARs. The Company has carried out
an independent fair valuation of the stock appreciation rights as of March 31, 2011. The total unrecognized compensation costs
relating to SARs to be recognized in the future over the remaining vesting period is estimated to be Rs. Nil and Rs. 111,718 as
of March 31, 2011 and March 31, 2010 respectively.



The fair value of each SARs is estimated
on the date of grant using a Black-Scholes valuation model that uses the following variables:



Stock Price: Current value of the
underlying asset is derived through a valuation exercise, wherein the profit earning capacity has been considered as an appropriate
method of valuation.



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The valuation has been undertaken
based on the methodology of Price Earning Capacity Value (PECV Method) for the valuation of SARS every year.



PECV Method requires determination
of three parameters, which are relevant to the company whose shares are being valued. These are



| | · | Corporate
                                         tax rate – Current period tax rate is considered as corporate tax rate.
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | Future
                                         maintainable profit – Future maintainable profit is derived based on simple average
                                         adjusted PBT for each year. From the future maintainable profit, corporate tax at the
                                         corporate tax rate has been deducted to derive future maintainable profit after tax.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Expected
                                         rate of return – Expected rate of return is determined based on the average price
                                         earnings multiple of comparable companies on the basis of their 12 months average market
                                         prices.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The above parameters are approved
by the Board of Directors. In accordance of this, an independent valuer has provided the valuation certificate at Balance Sheet
date.



In the valuation as at March 31,
2011 the corporate tax rate is considered at 32.445% and Expected rate of return is determined at 7.81%.



Changes in number of SARs representing
stock options outstanding were as follows:



|                                              |  | As at March 31, |  
|--------------------------------------------- |  | --------------- | -
|                                              |  | 2012            |  
|As at the beginning of the year               |  |                 | -
|Granted during the year                       |  |                 |  
|Exercised                                     |  |                 | -
|Forfeited                                     |  |                 | -
|Reissued                                      |  |                 | -
|Lapsed                                        |  |                 |  
|As at the end of the year                     |  |                 | -
|Exercisable at the end of the year            |  |                 | -
|Approximate remaining vesting period in years |  |                 | -



| | 17. | Borrowings
| | --- | ----------





Aggregate maturities of the borrowings are as
follows:





|                             |  | As at March 31, |  
|---------------------------- |  | --------------- | -
|                             |  | 2012            |  
|On demand or within one year |  |                 | -
|In one to three years        |  |                 | -
|In three to five years       |  |                 | -
|                             |  |                 | -



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| | 18. | Employee benefit obligation
| | --- | ---------------------------



|                          |  | Years ended March 31, |      
|------------------------- |  | --------------------- | -----
|                          |  | 2012                  |      
|Gratuity                  |  |                       | 1,507
|Stock appreciation rights |  |                       | -    
|                          |  |                       | 1,507



The movement in the defined benefit obligation
of gratuity over the period is as follows:



|                                   |  | Years ended March 31, |       
|---------------------------------- |  | --------------------- | ------
|                                   |  | 2012                  |       
|Opening defined benefit obligation |  |                       | 17,403
|Current service cost               |  |                       | 2,640 
|Interest cost                      |  |                       | 1,359 
|Actuarial losses/ (gains)          |  |                       | (1,829
|Benefits paid                      |  |                       | (836  
|Closing defined benefit obligation |  |                       | 18,737



The movement in the fair value of plan
assets of the year is as follows:



|                                  |  | Years ended March 31, |       
|--------------------------------- |  | --------------------- | ------
|                                  |  | 2012                  |       
|Beginning of year                 |  |                       | 18,198
|Expected return on plan assets    |  |                       | 1,728 
|Actuarial (losses)/gains          |  |                       | (81   
|Employer contributions            |  |                       | 2,214 
|Benefits paid                     |  |                       | (836  
|Closing fair value of plan assets |  |                       | 21,223



The amounts recognised in the income statement
in respect of gratuity are as follows:



|                              |  | Years ended March 31, |       
|----------------------------- |  | --------------------- | ------
|                              |  | 2012                  |       
|Current service cost          |  |                       | 2,640 
|Interest cost                 |  |                       | 1,359 
|Actuarial loss                |  |                       | (1,747
|Expected return on plan asset |  |                       | (1,728
|                              |  |                       | 524   



The principal actuarial assumptions used were
as follows:



|                                                                                                                   |  | Years ended March 31, |     
|------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ----
|                                                                                                                   |  | 2012                  |     
|Discount rate                                                                                                      |  |                       | 8.00
|Expected return on plan assets                                                                                     |  |                       | 9.15
|Long term rate of compensation increase                                                                            |  |                       | 6.00
|Mortality rates at various age groups are taken as per 1994-96 Life Insurance Corporation (LIC)
    Ultimate table |  |                       |     



| | 19. | Accounts payables, accrued expenses
                                         and other liabilities
| | --- | --------------------------------------------------------------------------------------------------



|                        |  | As at March 31, |        
|----------------------- |  | --------------- | -------
|                        |  | 2012            |        
|Accruals                |  |                 | 55,360 
|Withholding tax payable |  |                 | 15,868 
|Bonus payable           |  |                 | 16,567 
|Other payables          |  |                 | 93,562 
|Total                   |  |                 | 181,357



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| | 20. | Other expenses
| | --- | --------------



|                                                      |  | Year ended March 31, |       
|----------------------------------------------------- |  | -------------------- | ------
|                                                      |  | 2012                 |       
|Professional fees                                     |  |                      | 11,085
|Travelling and conveyance                             |  |                      | 9,272 
|Books & periodicals, postage, printing and stationary |  |                      | 28,533
|Loss on account of error trades (net)                 |  |                      | 2,583 
|Repairs & maintenance                                 |  |                      | 424   
|Currency loss on revaluation of current               |  |                      | 9,205 
|Insurance premium                                     |  |                      | 1,590 
|Others                                                |  |                      | 7,638 
|Total                                                 |  |                      | 70,330



| | 21. | Employee benefit expense
| | --- | ------------------------



|                                 |  | Year ended March 31 |        
|-------------------------------- |  | ------------------- | -------
|                                 |  | 2012                |        
|Salaries and bonus               |  |                     | 505,907
|Defined contribution plans       |  |                     | 3,992  
|Defined benefit plans            |  |                     | 2,169  
|Staff welfare expenses           |  |                     | 5,007  
|Share–based compensation expense |  |                     | -      
|                                 |  |                     | 517,075



Share based compensation expense
has increased during the year due to increase in fair value of SARS .



| | 22. | Provision for doubtful debts
| | --- | ----------------------------



The Company’s allowance for
doubtful accounts is based upon management’s continuing review and evaluation of factors such as collateral value, aging
and the financial condition of the customers. The allowance is assessed to reflect the best estimate of probable losses due to
client defaults that have been incurred as of the balance sheet date. Any changes in the estimate are included in the operating
results for the current period. In circumstances where a specific customer’s inability to meet its financial obligation
is known, the Company records a specific provision against accounts receivable to reduce the receivable to the amount that it
reasonably believes will be collected. The bad debt expense aggregating to Rs. 25,700 is recognised for the years ended March 31,
2012 (March 31, 2011: Rs 38,300).



| | 23. | Other income
| | --- | ------------



|                                                |  | Year ended March 31, |        
|----------------------------------------------- |  | -------------------- | -------
|                                                |  | 2012                 |        
|Profit on sale of available-for-sale securities |  |                      | -      
|Delayed payment charges (*)                     |  |                      | 23,219 
|Research fees                                   |  |                      | 8,851  
|Referral fees (**)                              |  |                      | 46,000 
|Interest                                        |  |                      | 6,567  
|Dividend                                        |  |                      | 3,897  
|Currency fluctuation fain                       |  |                      | 119    
|Expenses reversal (***)                         |  |                      | -      
|Principal trading activity                      |  |                      | 3,493  
|Miscellaneous income                            |  |                      | 16,173 
|                                                |  |                      | 108,319



(*)	           Delayed
payment charges represents the penal charges levied to clients on account of delay in settlement of their trade related obligations.



(**)	        Referral
fees consist of payments received for introducing clients to other MF Global associated companies.



(***)	      The
amount of Rs 17,567 was provided in year 2009 on account of group recharges from MF Global Holdings Limited (formerly known as
MF Global Limited) has been reversed during the year 2010, on account of mutual agreement between the stakeholders.



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| | 24. | Income tax expense
| | --- | ------------------



|                      |  | Year ended March 31, |       
|--------------------- |  | -------------------- | ------
|                      |  | 2012                 |       
|Current tax           |  |                      | 25,106
|Deferred tax (Note 7) |  |                      | 37,189
|                      |  |                      | 62,295



The tax on MF’s profit before
tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated
entities as follows:



|                                                                 |  | Year ended March 31, |        
|---------------------------------------------------------------- |  | -------------------- | -------
|                                                                 |  | 2012                 |        
|Net income before taxes                                          |  |                      | 154,917
|Enacted tax rates in India                                       |  |                      | 32.445 
|Computed tax expense                                             |  |                      | 50,263 
|Income exempt from tax:                                          |  |                      |        
|Dividend                                                         |  |                      | (1,264 
|Non-deductible expenses:                                         |  |                      |        
|Contribution to co-investment plan                               |  |                      | -      
|Others including donations, IT interest etc.                     |  |                      | 773    
|Recharges by parent and affiliate companies                      |  |                      | -      
|                                                                 |  |                      |        
|Excess Provisions for earlier years reverse back in current year |  |                      | 7,207  
|Income charged at lower rate                                     |  |                      | -      
|(Gain) / loss in subsidiaries                                    |  |                      | (442   
|Others                                                           |  |                      | 5,758  
|Income taxes recognized in the statement of income               |  |                      | 62,295 



| | 25. | Financial instruments by category
| | --- | ---------------------------------



The accounting policies for financial
instruments have been applied to the line items below:



As at March 31, 2012



|                                                          |  | Loans and   |           |  | Available for |  |        |       | 
|--------------------------------------------------------- |  | ----------- | --------- |  | ------------- |  | ------ | ----- | 
|                                                          |  | receivables |           |  | sale          |  |        | Total | 
|Assets as per Balance Sheet                               |  |             |           |  |               |  |        |       | 
|Cash and bank balance                                     |  |             | 146,980   |  |               |  |        |       | 
|Cash-restricted                                           |  |             | 2,324,000 |  |               |  |        |       | 
|Interest bearing deposits with bank                       |  |             | 70,777    |  |               |  |        |       | 
|Deposits with clearing organizations                      |  |             | 78,613    |  |               |  |        |       | 
|Receivable from broker-dealers and clearing organizations |  |             | 170,660   |  |               |  |        |       | 
|Receivable from customers                                 |  |             | 340,998   |  |               |  |        |       | 
|Available-for-sale securities:                            |  |             |           |  |               |  |        |       | 
|Marketable, at market value                               |  |             |           |  |               |  | 41,005 |       | 
|Not readily marketable (at estimated fair value)          |  |             |           |  |               |  | -      |       | 
|Interest accrued but not due                              |  |             | 57,302    |  |               |  |        |       | 
|Other assets                                              |  |             | 208,999   |  |               |  |        |       | 
|                                                          |  |             | 3,398,329 |  |               |  | 41,005 |       | 



|                                                         |  | Other       |           |  |       | 
|-------------------------------------------------------- |  | ----------- | --------- |  | ----- | 
|                                                         |  | financial   |           |  |       | 
|                                                         |  | liabilities |           |  | Total | 
|Liabilities as per Balance Sheet                         |  |             |           |  |       | 
|Payable to broker dealers and clearing organizations     |  |             | 184,659   |  |       | 
|Payable to customers                                     |  |             | 684,802   |  |       | 
|Borrowings                                               |  |             | -         |  |       | 
|Accounts payable, accrued expenses and other liabilities |  |             | 181,357   |  |       | 
|                                                         |  |             | 1,050,818 |  |       | 



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|As at March 31, 2011                                      |  |                       |           |  |                    |  |         |       | 
|--------------------------------------------------------- |  | --------------------- | --------- |  | ------------------ |  | ------- | ----- | 
|                                                          |  | Loans and receivables |           |  | Available for sale |  |         | Total | 
|Assets as per Balance Sheet                               |  |                       |           |  |                    |  |         |       | 
|Cash and bank balance                                     |  |                       | 281,486   |  |                    |  |         |       | 
|Cash-restricted                                           |  |                       | 2,959,063 |  |                    |  |         |       | 
|Interest bearing deposits with bank                       |  |                       | 93,362    |  |                    |  |         |       | 
|Deposits with clearing organizations and others           |  |                       | 173,783   |  |                    |  |         |       | 
|Receivable from broker-dealers and clearing organizations |  |                       | 18,580    |  |                    |  |         |       | 
|Receivable from customers                                 |  |                       | 447,770   |  |                    |  |         |       | 
|Available-for-sale securities:                            |  |                       |           |  |                    |  |         |       | 
|Marketable, at market value                               |  |                       |           |  |                    |  | 40,776  |       | 
|Not readily marketable (at estimated fair value)          |  |                       |           |  |                    |  | 92,868  |       | 
|Interest accrued but not due                              |  |                       | 67,124    |  |                    |  |         |       | 
|Other assets                                              |  |                       | 251,868   |  |                    |  |         |       | 
|                                                          |  |                       | 4,293,036 |  |                    |  | 133,644 |       | 



|                                                         |  | Other financial liabilities |           |  | Total | 
|-------------------------------------------------------- |  | --------------------------- | --------- |  | ----- | 
|Liabilities as per Balance Sheet                         |  |                             |           |  |       | 
|Payable to broker-dealers and clearing organizations     |  |                             | 264,504   |  |       | 
|Payable to customers                                     |  |                             | 1,272,571 |  |       | 
|Borrowings                                               |  |                             | 53,000    |  |       | 
|Accounts payable, accrued expenses and other liabilities |  |                             | 505,605   |  |       | 
|                                                         |  |                             | 2,095,680 |  |       | 



The carrying amounts reported in
the balance sheet for cash and cash equivalents, receivables, amounts due to or from related parties, accounts payable and other
liabilities approximate their respective fair values due to their short maturity.



During October 2010, Sify Technologies
Limited, the minority shareholder of the Company holding 29.85 percent of the outstanding shares of the Company, requested the
Company's Board of Directors to reconsider certain costs charged to the Company by MF Global Holdings Limited (the majority shareholder)
and its affiliated and associated group companies, who hold 70.15 percent of the outstanding shares of the Company. These charges
are currently recorded in the financial statements of the Company for year ended March 31, 2008 aggregating to Rs. 43,479 and
March 31, 2009 aggregating to Rs. 15,375. The resolution of this matter between the shareholders remains uncertain and any financial
adjustment that may arise is not presently known. Any financial adjustment that may arise on resolution of the said matter would
be expected to be handled prospectively and therefore would be reported in the period in which it is resolved.



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| | 26. | Merger
                                         of Subsidiary Company
| | --- | ---------------------------------------------------------------------



The Scheme of Amalgamation (the
‘Scheme’) of MF Global Capital India Private Limited (‘MFGCIPL’) [the Transferor Company] with MF Global
Sify Securities India Private Limited (‘MFGSSIPL’) [the Transferee Company] was sanctioned by the Bombay High Court
on March 25, 2011 and the order sanctioning the Scheme was filed with the Registrar of Companies at Mumbai on April 15, 2011 (‘the
Effective Date’).

Accordingly, pursuant to the Scheme,
the undertaking of the erstwhile MFGCIPL (comprising all of its properties and assets (whether movable or immovable, tangible
or intangible) such as security deposits, licenses, permits, quotas, approvals, leases, tenancy rights, permissions, incentives
if any, and all other rights, title, interests, contracts, consent, approvals or powers of every nature and descriptions shall
without any further act, instrument or deed stand transferred to and vested in and/or deemed to be transferred to and vested in
the Transferee Company, free from all encumbrances, but subject to subsisting charges and pledges, if any. All debts, liabilities,
contingent liabilities, financial commitments, duties and obligations pertaining to the Transferor Company, whether provided for
or not in the books of account of the Transferor Company and whether disclosed or undisclosed in its Balance Sheet has been transferred
to and vested with MFGSSIPL retrospectively with effect from April 1, 2010 (the ‘Appointed Date’). The Scheme has
accordingly been given effect to in these financial statements.



| | 27. | Commitments and contingencies
| | --- | -----------------------------



| | a) | Contingent
                                         Liabilities
| | -- | ---------------------------------------------------------------



(i)Guarantee given by scheduled
banks on behalf of the company in favour of commodity Exchange Rs. Nil (March 31, 2011 Rs. 200,000).



(ii) Claims against the company
not acknowledged as debts Rs. 15,030 (March 31, 2011 Rs. 15,030). In the said claim, based on the facts and merits of the case, the
Company is hopeful of succeeding and as such does not expect any significant liability to crystallize.



| | b) | Operating
                                         lease commitments – MF as lessee
| | -- | -----------------------------------------------------------------------------------



The group has obligations under
long term operating leases with initial non-cancellable terms in excess of one year. Aggregate annual rentals for office space
as of March 31, 2012, are approximately as listed below:



|                                             |  | As at March 31, |       
|-------------------------------------------- |  | --------------- | ------
|                                             |  | 2012            |       
|Not later than 1 year                        |  |                 | 13,728
|Later than 1 year and not later than 5 years |  |                 | 12,821
|Later than 5 years                           |  |                 | -     
|Total minimum lease commitments              |  |                 | 26,549



Rent expense for the current year
aggregated to Rs. 44,273 (2011: Rs. 59,979) and is included in the occupancy expense line item on the consolidated statements
of income.



| | c) | Contingencies
| | -- | -------------



The group is a member of various
exchanges that trade and clear securities, commodities and/or futures contracts. Associated with its membership, the group may
be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to
the exchange. While the rules governing different exchange memberships vary, in general the group’s exposure would be restricted
only to the extent of amounts receivable from the exchange and would arise only if the exchange had previously exhausted its resources.
However, based on its experience, the company expects the risk of loss to be remote.



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| | 28. | Capital commitment
| | --- | ------------------



Estimated amount of contract (net
of advances) remaining to be executed on capital account and not provided for is Rs. 400 (March 31, 2011: Rs. 314)



| | 29. | Related party transactions
| | --- | --------------------------



The share capital of MF is held
jointly by MF Global Overseas Limited and Sify Technologies Limited. The ultimate holding company of MF Global Sify is MF Global
Holdings Limited.



| | a) | Related party relationship
| | -- | --------------------------



|Related parties where control exists:                         
|--------------------------------------------------------------
|                                                              
|Nature of relationship                                        
|Holding enterprises:                                          
|                                                              
|Ultimate Holding company:                                     
|                                                              
|Party having substantial interest:                            
|                                                              
|Other related parties with whom transactions have taken place:
|                                                              
|Nature of relationship                                        
|Subsidiary Companies:                                         
|                                                              
|                                                              
|Fellow subsidiary Companies:                                  
|(where transactions exist)                                    
|                                                              
|Key management personnel:                                     
|                                                              
|                                                              
|                                                              
|                                                              



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|b) | Transactions involving services
|-- | -------------------------------



|                               |  | Year ended March 31, |       
|------------------------------ |  | -------------------- | ------
|                               |  | 2012                 |       
|Services provided by MF to :   |  |                      |       
|Holding Companies              |  |                      |       
|Reimbursement of expenses      |  |                      | 549   
|                               |  |                      |       
|Fellow subsidiary Companies    |  |                      |       
|Referral fees                  |  |                      | 48,449
|Research fees                  |  |                      | 173   
|Brokerage income               |  |                      | 18,673
|Reimbursement of expenses      |  |                      | 3,676 
|                               |  |                      | 71,520
|Services received by MF from : |  |                      |       
|                               |  |                      |       
|Holding Companies              |  |                      |       
|Bank guarantee commission      |  |                      | -     
|Insurance premium              |  |                      | -     
|                               |  |                      |       
|Fellow subsidiary Companies    |  |                      |       
|Lease line charges             |  |                      |       
|IB commission expense          |  |                      | 4,001 
|Interest expense               |  |                      | 956   
|Membership & subscription      |  |                      | 2,197 
|                               |  |                      | 7,154 
|Loan (taken) and repaid (Net)  |  |                      | 5,300 



|c) | Key management compensation
|-- | ---------------------------



|                                                |  |  | Year ended March 31, | 
|----------------------------------------------- |  |  | -------------------- | 
|                                                |  |  | 2012                 | 
|Salaries and other short-term employee benefits |  |  | 138,362              | 
|Other long-term benefits (Co-investment plan)   |  |  | -                    | 
|Share-based payments                            |  |  | -                    | 
|                                                |  |  | 138,362              | 



|d) | Year-end balances arising from transactions involving services
|-- | --------------------------------------------------------------



|Due To Related Parties                                          |  |  |        |  |  | 
|--------------------------------------------------------------- |  |  | ------ |  |  | 
|MF Global Holdings Ltd.                                         |  |  | 36,985 |  |  | 
|MF Global UK Ltd.                                               |  |  | 33,662 |  |  | 
|MF Global Inc. DE                                               |  |  | 9,220  |  |  | 
|MF Global Holdings USA Inc.                                     |  |  | 2,308  |  |  | 
|MF Global Singapore Pte Ltd.                                    |  |  | 206    |  |  | 
|MF Global Holdings HK Ltd.                                      |  |  | 243    |  |  | 
|MF Global Finance and Investment Services India Private Limited |  |  | -      |  |  | 
|MF Global Australia Limited                                     |  |  | 143    |  |  | 
|                                                                |  |  | 82,767 |  |  | 



|Due from Related Parties                |  |  |        |  |  | 
|--------------------------------------- |  |  | ------ |  |  | 
|MF Global Inc. DE                       |  |  | 256    |  |  | 
|MF Global Mauritius Pvt. Ltd.           |  |  | 153    |  |  | 
|MF Global Singapore Pte Ltd.            |  |  | 5,014  |  |  | 
|MF Global Holdings HK Ltd.              |  |  | -      |  |  | 
|MF Global HK Ltd.                       |  |  | 308    |  |  | 
|MF Global UK Ltd.                       |  |  | 6,953  |  |  | 
|MF Global Futures Trust Company Limited |  |  | 13     |  |  | 
|MF Global India Pvt. Ltd.               |  |  | 1,550  |  |  | 
|MF Global FXA Securites Limited         |  |  | 231    |  |  | 
|                                        |  |  | 14,478 |  |  | 



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| | 29.1. | As stated in Note – 1,
                                         MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions
                                         for relief under Chapter 11 of the United States Bankruptcy Code. Meanwhile, the affairs
                                         of other affiliated Company of MF Global Group are being managed by the Administrator
                                         / Liquidators.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has reconciled outstanding
receivables / payables with the related parties on monthly basis in the ERP system till September 30, 2011. In view of the above
petitions, the Company has not obtained confirmation of outstanding balances with related parties as at March 31, 2012. There
were no significant transactions with such parties after the date of filing such petitions. Under these circumstances, the Financials
Statements have been prepared from the book balances which are subject to reconciliation / confirmations from the respective parties.
Moreover, MF Global Overseas Limited and Sify Technologies Ltd. have entered into Share Purchase Agreements (SPA) with an international
brokerage house for acquiring its 70.15% and 29.85% respectively. In respect of such acquisition,
the Company has received necessary regulatory approvals and acquisition is expected to be completed shortly.





| | For
    and on behalf of the Board
| | ----------------------------------
| |                                   
| |                                   
| | Vineet Bhatnagar                  
| | Managing Director                 



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Item19. Exhibits



|Number |  | Description                                                                                                                                                                                                                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                           
|1.1    |  | Amended Articles of Association of Sify Technologies Limited. (1)                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                           
|1.2    |  | Memorandum
    of Association of Sify Technologies Limited. (2)                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                           
|1.3    |  | Amendment of Memorandum of Association. (3)                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|2.1    |  | Deposit Agreement, dated as of October 18, 1999, among Sify Technologies Limited, Citibank, N.A.
    and holders from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder (including,
    as an exhibit, the form of American Depository Receipt). (4) 
|       |  |                                                                                                                                                                                                                                                                                                           
|2.2    |  | Amendment No. 1 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders
    from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder (including, as
    an exhibit, the form of American Depository Receipt). (4)             
|       |  |                                                                                                                                                                                                                                                                                                           
|2.3    |  | Amendment No. 2 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders
    from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder (including, as
    an exhibit, the form of American Depository Receipt). (5)             
|       |  |                                                                                                                                                                                                                                                                                                           
|2.4    |  | Subscription Agreement dated November 10, 2005 between Sify Technologies Limited and Infinity
    Capital Ventures, LP. (9)                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|2.5    |  | Standstill Agreement dated November 10, 2005 by and among Sify Technologies Limited, Infinity
    Capital Ventures, LP and Mr Raju Vegesna. (9)                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                                           
|2.6    |  | Shareholders’ Agreement dated December 20, 2005 between Sify Technologies Limited, Infinity
    Satcom Universal (P) Limited, and Sify Communications Limited(erstwhile subsidiary). (10)                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                           
|2.7    |  | Shareholders’ Agreement dated November 25, 2005 between Sify Technologies Limited and Man
    Financial. (11)                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                           
|4.1    |  | Associate Stock Option Plan 2000 (6)                                                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                           
|4.2    |  | Associate Stock Option Plan 2002 (6)                                                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                           
|4.3    |  | Associate Stock Option Plan 2005 (12)                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                           
|4.4    |  | Associate Stock Option Plan 2007 (14)                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                           
|4.5    |  | Form of Indemnification Agreement. (7)                                                                                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                                           
|4.6    |  | License Agreement for Provision of Internet Service, including Internet Telephony dated as of
    April 1, 2002 by and between Sify Technologies Limited and the Government of India, Ministry of Communications and Information
    Technology, Department of Telecommunications, Telecom Commission. (3)
|       |  |                                                                                                                                                                                                                                                                                                           
|4.7    |  | Bank Guarantee, dated as of November 4, 1998. (2)                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                           
|4.8    |  | Agreement, dated November 10, 2004, between Sify Technologies Limited, Satyam Computer Services
    Limited, SAIF Investment Company Limited and Venture Tech Solutions Pvt. Ltd. (8)                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                           
|4.9    |  | Subscription Agreement dated March 24, 2008 between Sify Technologies Limited and Infinity Satcom
    Universal Private Limited. (13)                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                           
|4.10   |  | Scheme of Amalgamation between Sify Communications Limited with Sify Technologies Limited and
    their respective shareholders (15)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                           
|4.11   |  | Subscription agreement dated October 22, 2010 between Sify Technologies Limited and Mr Ananda
    Raju Vegesna, Representative of the entities and affiliates in India of Mr Raju Vegesna, Chairman and Managing Director of
    the company. (16)                                                        



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|4.12 |  | Amendment to subscription agreement dated September 7, 2011between Sify Technologies
    Limited and Mr Ananda Raju Vegesna, Representative of the entities and affiliates in India of Mr Raju Vegesna, Chairman and
    Managing Director of the company. (17)
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                
|8.1  |  | List of Subsidiaries.                                                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                
|11.1 |  | Code of Conduct and Conflict of Interest
        Policy (6)                                                                                                                                                                                                    
|12.1 |  | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                
|12.2 |  | Rule 13a-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                
|13.1 |  | Section 1350 Certification of Chief Executive Officer                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                
|13.2 |  | Section 1350 Certification of Chief Financial Officer                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                
|15.1 |  | Consent of ASA & Associates in respect of the Sify Technologies Limited                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                
|15.2 |  | Consent of ASA & Associates in respect of the MF Global Sify Securities India Private Limited                                                                                                                                                                  










|(1)  | Previously filed as
        an exhibit to the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference.                               
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                    
|(2)  | 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. 
|     |                                                                                                                                                                                    
|(3)  | Previously filed as an exhibit to
        the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference.                               
|     |                                                                                                                                                                                    
|(4)  | 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.            
|     |                                                                                                                                                                                    
|(5)  | Previously filed as an exhibit to the Registration Statement on Form S-8 (File No. 333-101322)
    filed with Commission on November 20, 2002 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, 2004 and incorporated herein by reference.                              
|     |                                                                                                                                                                                    
|(7)  | 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.
|     |                                                                                                                                                                                    
|(8)  | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
    30, 2004 and incorporated herein by reference.                                  
|     |                                                                                                                                                                                    
|(9)  | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
    21, 2005 and incorporated herein by reference.                                  
|     |                                                                                                                                                                                    
|(10) | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on December
    7, 2005 and incorporated herein by reference.                                   
|     |                                                                                                                                                                                    
|(11) | Previously filed as an exhibit to
        the Report on Form 6-K filed with the Commission on December 23, 2005 and incorporated herein by reference.                              
|     |                                                                                                                                                                                    
|(12) | Previously filed as an exhibit to
        the Annual Report on Form 20-F filed with the Commission on June 30, 2006 and incorporated herein by reference.                          
|     |                                                                                                                                                                                    
|(13) | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on April
    14, 2008 and incorporated herein by reference.                                     



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|(14) | Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on October
    11, 2008 and incorporated herein by reference.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                  
|(15) | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on January
    23, 2009 and incorporated herein by reference. 
|     |                                                                                                                                                  
|(16) | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
    15, 2010 and incorporated herein by reference.
|     |                                                                                                                                                  
|(17) | Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on September
    8, 2011 and incorporated herein by reference.





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SIGNATURES



The company hereby certifies that it meets
all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual
Report on its behalf.



| | SIFY TECHNOLOGIES LIMITED
| | -------------------------



| | By:    | /s/ Raju Vegesna                             
| | ------ | ---------------------------------------------
| | Name:  | Raju Vegesna                                 
| | Title: | Chief Executive Officer and Managing Director



|                       | By:    | /s/ M P Vijay Kumar    
|---------------------- | ------ | -----------------------
|                       | Name:  | M P Vijay Kumar        
|Date:    July 18, 2014 | Title: | Chief Financial Officer



198