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, 2017.                                            



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
    filer |  ̈ | Non-accelerated
    filer | þ
|--------------------------- | - | --------------------- | - | ------------------------- | -





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 Board þ | 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



|Item                                               |                                                                              | Page
|-------------------------------------------------- | ---------------------------------------------------------------------------- | ----
|                                                   |                                                                              |     
|Currency of Presentation and Certain Defined Terms | 3                                                                           
|Forward-Looking Statements                         | 4                                                                           
|                                                   |                                                                             
|PART I                                             |                                                                              | 5   
|                                                   |                                                                              |     
|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                                                   | 25  
|Item 4A.                                           | Unresolved Staff Comments                                                    | 39  
|Item 5.                                            | Operating and Financial Review and Prospects                                 | 39  
|Item 6.                                            | Directors, Senior Management and Employees                                   | 59  
|Item 7.                                            | Major Shareholders and Related Party Transactions                            | 67  
|Item 8.                                            | Financial Information                                                        | 71  
|Item 9.                                            | The Offer and Listing                                                        | 72  
|Item 10.                                           | Additional Information                                                       | 73  
|Item 11.                                           | Quantitative and Qualitative Disclosures About Market Risk                   | 90  
|Item 12.                                           | Description of Securities Other Than Equity Securities                       | 90  
|                                                   |                                                                              |     
|PART II                                            |                                                                              | 91  
|                                                   |                                                                              |     
|Item 13.                                           | Defaults, Dividend Arrearages and Delinquencies                              | 91  
|Item 14.                                           | Material Modifications to the Rights of Security Holders and Use of Proceeds | 91  
|Item 15.                                           | Controls and Procedures                                                      | 91  
|Item 16A.                                          | Audit Committee Financial Expert                                             | 94  
|Item 16B.                                          | Code of Ethics                                                               | 94  
|Item 16C.                                          | Principal Accountant Fees and Services                                       | 94  
|Item 16D.                                          | Exemptions from the Listing Standards for Audit Committees                   | 94  
|Item 16E.                                          | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 95  
|Item 16F.                                          | Change in Registrant’s Certifying Accountant                                 | 95  
|Item 16G.                                          | Corporate Governance                                                         | 95  
|Item 16H.                                          | Mine Safety Disclosure                                                       | 95  
|                                                   |                                                                              |     
|PART III                                           |                                                                              | 95  
|                                                   |                                                                              |     
|Item 17.                                           | Financial Statements                                                         | 95  
|Item 18.                                           | Financial Statements                                                         | 95  
|Item 19.                                           | Exhibits                                                                     | 152 



2







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, 2017 (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 “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, 2017 for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI), which was ₹ 64.84
per US $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.corporate.sify.com, is not part of this Annual Report.



3







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 reports and other documents filed with the United States Securities and
Exchange Commission (“SEC”) from time to time.



4







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, 2017, 2016, 2015,
2014 and 2013 and the summary consolidated Statement of Financial Position as of March 31, 2017, 2016, 2015, 2014 and 2013 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.



5







Sify Technologies Limited

Consolidated Statement of Income

(In thousands of Rupees, except share and
per share data and as otherwise stated)



|                                                                 |  | Year ended 
March 31, |            
|---------------------------------------------------------------- |  | --------------------- | -----------
|                                                                 |  | 2017 ₹                |            
|Revenue                                                          |  |                       | 18,432,020 
|Cost of goods sold and services rendered                         |  |                       | (11,870,221
|Other income                                                     |  |                       | 145,872    
|                                                                 |  |                       |            
|Selling, general and administrative expenses                     |  |                       | (3,991,273 
|Depreciation and amortization                                    |  |                       | (1,758,776 
|Profit / (loss) from operating activities                        |  |                       | 957,622    
|                                                                 |  |                       |            
|Finance income                                                   |  |                       | 122,584    
|                                                                 |  |                       |            
|Finance expenses                                                 |  |                       | (437,109   
|                                                                 |  |                       |            
|Net finance income / (expense)                                   |  |                       | (314,525   
|                                                                 |  |                       |            
|Profit from sale of equity accounted investee and rights therein |  |                       | -          
|Profit / (loss) before tax                                       |  |                       | 643,097    
|Income tax (expense) / benefit                                   |  |                       | (698       
|Profit / (loss) for the year                                     |  |                       | 642,399    
|Attributable to:                                                 |  |                       |            
|                                                                 |  |                       |            
|Equity holders of the Company                                    |  |                       | 642,399    
|Non-controlling interest                                         |  |                       | -          
|                                                                 |  |                       | 642,399    
|Earnings per share                                               |  |                       |            
|Basic earnings per share                                         |  |                       | 4.45       
|Diluted earnings per share                                       |  |                       | 4.45       
|                                                                 |  |                       |            
|Dividend paid per share *                                        |  |                       |            
|Fully paid up (₹ 10 per share)                                   |  |                       | 1.00       
|Partly paid up (₹ 7 per share)                                   |  |                       | 0.70       



* Excluding dividend distribution tax



6







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 ) |     
|--------------------------------------------------------------- | --------- | ---- | ---------- | -------------------------------------------------------------------------------------------- | ----
|                                                                |           | 2017 |            |                                                                                              | 2016
|                                                                |           | ₹    |            |                                                                                              | ₹   
|Cash and cash equivalents including restricted cash             |           |      | 1,884,265  |                                                                                              |     
|                                                                |           |      |            |                                                                                              |     
|Net current assets                                              |           |      | 700,522    |                                                                                              |     
|                                                                |           |      |            |                                                                                              |     
|Total assets                                                    |           |      | 21,534,054 |                                                                                              |     
|                                                                |           |      |            |                                                                                              |     
|Total equity attributable to equity shareholders of the Company |           |      | 8,264,419  |                                                                                              |     
|                                                                |           |      |            |                                                                                              |     
|Cash Flow Data                                                  |           |      |            |                                                                                              |     
|Net cash provided by / (used in):                               |           |      |            |                                                                                              |     
|Operating activities                                            |           |      | 1,748,483  |                                                                                              |     
|Investing activities                                            |           |      | (1,609,979 | )                                                                                            |     
|Financing activities                                            |           |      | (257,913   | )                                                                                            |     



Notes



| | 1. | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7







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         |  | ₹.   |       |  | ₹   | 
|May 2017      |  |      | 64.99 |  |     | 
|April 2017    |  |      | 65.04 |  |     | 
|March 2017    |  |      | 66.85 |  |     | 
|February 2017 |  |      | 67.65 |  |     | 
|January 2017  |  |      | 68.23 |  |     | 
|December 2016 |  |      | 68.37 |  |     | 



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.



|Fiscal Year Ended |  | Period end |       |  | Average |  |       | High |  |  | Low   | 
|----------------- |  | ---------- | ----- |  | ------- |  | ----- | ---- |  |  | ----- | 
|March 31          |  | ₹          |       |  | ₹       |  |       | ₹.   |  |  | ₹.    | 
|2017              |  |            | 64.84 |  |         |  | 67.09 |      |  |  | 68.72 | 
|2016              |  |            | 66.33 |  |         |  | 65.46 |      |  |  | 68.78 | 
|2015              |  |            | 62.59 |  |         |  | 61.14 |      |  |  | 63.75 | 
|2014              |  |            | 60.10 |  |         |  | 60.49 |      |  |  | 68.36 | 
|2013              |  |            | 54.39 |  |         |  | 54.53 |      |  |  | 57.22 | 



On March 31, 2017,
the reference rate in the City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹64.84.



On June 15, 2017, the
reference rate in the City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹64.28.



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.



8







Risks Related to our Company and Industry



Our ADS
could be delisted from the NASDAQ Global Select Market.



NASDAQ
has established certain standards for the continued listing of a security on the NASDAQ Global Select Market. The standards for
continued listing include, inter alia, that the minimum bid price for the listed securities be at least $1.00 per share. Under
these rules, a security is considered deficient if it fails to achieve at least a $1.00 closing bid price for a continuous period
of 30 business days. On December 27, 2016, we received a notification (the "Notice") from the NASDAQ stating that the
bid price for the Company’s ADS has closed below the minimum $1.00 per share for 30 consecutive business days which is not
in compliance with the NASDAQ rules for continued listing. At that time the Company was provided by NASDAQ with a compliance period
of 180 calendar days (i.e) upto June 26, 2017 in which to regain compliance pursuant to NASDAQ Listing Rule. If we are not deemed
in compliance before the expiration of the 180-day compliance period, NASDAQ may afford us an additional 180-day compliance period,
provided that we submit a Transfer Application to transfer to the NASDAQ Capital Market, that we meet the continued listing requirement
for market value of publicly held shares and all other initial listing standards (except the bid price requirement), and that we
provide a written notice of our intent to cure the deficiency.



If
the closing bid price of our ADS continues to fail to meet NASDAQ's minimum closing bid price requirement, NASDAQ may make a determination
to delist our ADS. Any such delisting could adversely affect the market liquidity of our ADS and the market price of our ADS could
decrease. A delisting could adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence
by investors, customers, suppliers or employees.



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



We have in the past
incurred losses. 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. In future, we may
incur expenses in connection with investments in Data Centers and infrastructure. Accordingly, we will need to generate significant
additional revenues in order to improve our profitability. 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 incur 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.



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



Spending
on technology products and services is subject to fluctuations depending on many factors, including the economic environment in
the markets in which our clients operate. Factors such as the pace of recovery, management of large government deficits, sovereign
ratings of government bonds, which we believe remains challenging in many countries and may continue to be challenging in the near
future, or any slowdown in global IT spending may adversely affect our revenue growth, due to the markets in which our clients
operate. Global 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.



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



We
have invested in building our network and Data Center infrastructure and will continue invest in the future. Our utilization rates
of the existing and prospective infrastructure will determine our profitability. We may not utilize our infrastructure at the optimum
level which would impact our revenue.



Reduction
in IT spending, inability to maintain or increase prices, extended credit terms, and inability to maintain or improve utilization
rates of our infrastructure may adversely impact our revenues, gross profits, operating margins and results of operations.



9







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. We have entered into cross currency
swap and interest rate swap transactions. Exchange rate fluctuations may adversely impact our cash flows on these transactions.



For the year ended
March 31, 2017, we have recognized a net gain of ₹ 29.16 million ($0.45 million) arising on account of foreign exchange fluctuations.
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.



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. 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.



A significant portion
of our revenue arises from exports in foreign currency and hence, any appreciation/ depreciation in Indian Rupee in relation to
any foreign currency may affect our revenue and profits.



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 unfavourable
exchange rate, which will result in loss.



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,
the Government-owned telecom companies, Bharat Sanchar Nigam Limited or BSNL and Mahanagar Telephone Nigam Limited or MTNL and
new players like Reliance Jio.



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 of our services. With entry of new player, the retail internet
market has seen significant reduction in prices during the current year by all operators due to pricing strategy by the new entrant.
This has significantly affected the customer base and the average revenue per user of the existing operators. We may see similar
trend in enterprise market as well, which may have an adverse effect on our revenues and operating margins. 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. While we seek to manage costs efficiently, there may not be improvements
in margins due to the sustained pricing pressure. Unavailability of tax loss carryforwards might impact our margins in the current
year and the future. Our continuing investment in infrastructure may result in lower margins in the initial years of investment
and may or may not improve further, which will adversely impact our margins.



10







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



The single largest
operating cost in Data Centers is power. Currently all Data Centers are located in proximity to, or at the edge of major urban
centers such as Mumbai, Chennai, Bengaluru and Noida. Inexpensive land and labour allow companies to locate new Data Centers in
remote locations. We may neither be in a position to develop Data Centers at remote locations where power is cheap nor procure
power at cheaper rates for our Data Centers. 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.



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



We have been availing
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 the value of
such duty benefit availed within a period of 6 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, we may be subjected to repay the
duty benefit availed along with interest.



Our business
will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes
in technology



The
technology market is characterized by rapid technological change, evolving industry standards, changing client preferences and
new product and service introductions. Our future success will depend on our ability to anticipate these advances and develop new
product and service offerings to meet client needs. We may fail to anticipate or respond to these advances on a timely basis, or,
if we do respond, the services or technologies that we develop may not be successful in the marketplace. We have recently introduced,
and propose to introduce several solutions involving complex delivery models combined with innovative outcome-based pricing models.
The complexity of these solutions, our inexperience in developing or implementing them and significant competition in the markets
for these solutions may affect our ability to market these solutions successfully. In addition, better or more competitively priced
products, services or technologies that are developed by our competitors may render our service non-competitive or obsolete.



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



11







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.



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. The internet market has
seen significant changes in the recent past from connecting fixed offices/locations to connecting mobile devices to connecting
things of late and to continue to be relevant in this dynamic and disruptive environment, 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.



The success
of our business depends on penetration of the Internet in India, which may be slowed or halted by technical obstacles in India.



Penetration
of bandwidth in India, which is the measure of Internet penetration, is relatively low and slow compared to many developing and
developed countries in the world. Though in recent years, the coverage of tier III/tier IV cities has increased, there may be many
technical obstacles to accessing certain regions which may increase the cost of delivering internet and thereby cause a slowdown
or halt the progress of internet, which will adversely affect our operations.



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 prices.



We may not
be able to retain and acquire customers for our Data Centers.



In
the field of Data Center services, competition from Data Center 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.



12







In
order to improve our competitiveness, we continue to expand our Data Center infrastructure. 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
Centers may not be competitive enough in terms of green features.



We
may fail to convert our existing Data Centers and/or build new Data Centers 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 Center uses several
green features such as site ecology, water conservation, smart energy meters and equipment, reduction of CO2 emissions, high recycle
content, effective waste management and eco-friendly interiors. Increased demand for green Data Center may hamper the marketing
of our existing Data Centers that are not LEED certified.



Inability to deliver quality services
may lead to penalties and loss of customers



The delivery of services
using our online assessment tools require the related infrastructure to be available in all exam centres. As these exam centres
are geographically spread across the country, we may not be able to assure quality of services in all these locations. This may
lead to penalties which could adversely affect our business and results of operations.



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



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 Centers, we resort to alternate sources of power (fuel) and the running of the Data Centers
mainly depend on the availability of fuel, which will increase the cost of operations. Additionally, 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.



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



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.



13







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 the 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 on 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 the 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



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 social, political,
regulatory and 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.



14







Emergence
of Enterprise Software Suites, Artificial Intelligence and Machine Learning 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. Additionally, the emergence of Machine Learning and Artificial Intelligence could adversely impact our revenues.



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 content 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 content through our websites (e.g. live videos, new channel based portals, etc) 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.



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, other malware, ransomware 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



Though
we have not had any attempted cybersecurity breaches reported, 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, Chairman
and Managing Director, 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.



15







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.



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.



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 Centers 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.                                                                                                                                  





16









| | · | 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. Also, Prevention of Corruption (Amendment) Bill 2013, (“PCA”) prohibits giving bribe to a public servant. Although we believe that we have adequate policies and enforcement mechanisms to ensure legal and regulatory compliance with the FCPA, PCA 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.



Prior to 2013-14 we
did not pay dividends due to the losses incurred in the previous years and non-availability of divisible profits under Indian law.
In view of the consistent positive performance of the Company for the year 2016-17, the Board of Directors had recommended a 12%
cash dividend to all the shareholders of the Company for the year ended March 31, 2017, which is subject to approval by the shareholders
at the Annual General Meeting to be held on July 6, 2017.



Dividend payment is
a function of profits, and the distribution of profits is based on home country laws and the financial statements prepared under
the Indian Accounting Standards (Ind AS) as specified in Section 133 of the Companies Act 2013 read together with rule 4 of the
Companies (Indian Accounting Standards) Rules 2015 and rule 4 of Companies (Indian Accounting Standards) Amendment Rules 2016 to
the extent applicable, pronouncements of regulatory bodies applicable to the Company and other provisions of the Act.  The
Board of Directors, after assessing various factors including the future cash flow requirements of the Company, recommends a dividend
payout to the shareholders for approval at the Annual General Meeting.



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 of Directors and the approval of the shareholders. Thus, there is no assurance that dividends will be paid in the future.



Risks Related to Regulation and Compliance



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 and vouchers in specific formats. The records must 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 and litigation or cause us to incur legal costs, which
may adversely affect our business and results of operations.



We may encounter
litigation and penalties due to non-compliance with relevant laws applicable to the products sold and services rendered by us.



The
products and services that we deal with are subjected to various laws such as ITA. We are exposed to risks relating to non-compliance
with such Acts which may affect our reputation and also result in litigations and penalties which may adversely affect our business
and results of operations.



We may not
be able to comply with Goods and Service Tax Act (“GST”) resulting in litigations and penalties.



GST
is a new law likely to come into effect from 1st July 2017. GST replaces several local and central tax laws such as excise duty,
service tax, value added tax, central sales tax, entry tax, etc. The proposed GST law prescribes compliance and procedures which
are more than present tax laws and it also involves matching of tax credit with the vendors and customers. Tax credits are based
on proper compliance by all the vendors and filing of returns on time. We are exposed to risks relating to non-compliance with
the requirements of the law which may affect our reputation and also result in litigations and penalties which may adversely affect
our business and results of operations.



17







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.



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 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.



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 increases
in premium rates. Further, our Board members, CEO, Chairman and Managing Director 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 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.



18







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 and, could adversely affect our business or results of operations.



We are subject to quality of service
(QOS) guidelines issued by the Telecom Regulatory Authority of India (“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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 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.



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 86.29% of our outstanding
equity shares. 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:



19







| | • | 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 pre-emptive 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 pre-emptive 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 pre-emptive 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 pre-emptive 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 you 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.



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
₹ 500,000 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.



20







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 ADSs.



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.



21







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 favourable 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
favourable 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.



In 2006, The Ministry
of Finance (MoF), issued a press release by which Indian companies cannot raise new capital abroad unless, the securities of the
company are listed on a stock exchange in India. However, by virtue of notification issued by the MoF on October 21, 2014,
the issuance of depository receipts has been taken out of the 1993 Scheme and is now regulated by the Depository Receipts Scheme,
2014. The 2014 Scheme allows Indian companies, whether listed or unlisted, to access the international capital markets using depository
receipts. Such issuances can either be through a public offering of depository receipts or through a preferential allotment or
qualified institutional placement. They can also either be sponsored by the issuer company or unsponsored (such as when an existing
shareholder sells its holding through the issue of depository receipts). These issuances are subject to the usual foreign investment
regime, including in relation to sectoral caps as well as pricing.  Moreover, such issuances are permitted only to investors
in certain specific jurisdictions as listed in the 2014 Scheme, which currently consists of a list of 34 countries. The earlier
condition of mandatory listing in India is dispensed with.



However, in the future
we may be required by the Government of India to list on the 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 would 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.





22







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. 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.



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.



23







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 2, 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 and non licensed activities 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.



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 license for Unified License
ISP issued on June 2, 2014 provides for payment of License fee on pure
Internet services also. The Company had approached Honourable High Court of Madras (Court) by filing a writ petition prohibiting
Department of Telecommunications (DOT) from levying license fee on non-licensed activities.



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



Increase
in License fees paid for the 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 2017 and was subject to a 12% surcharge where the taxable
total income exceeds ₹ 10 crore (7% 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 34.61%. 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.



Goods
and Services Tax is proposed to be introduced replacing majority of the existing indirect tax regulations in India. The point of
taxation is proposed to be changed and also rates for our services are likely to increase from 15% to 18%. There are multi-year
contracts entered into with customers. Customers will not accept increases in service tax rate. Consequently the incremental costs
will impact the profitability and cash flow of the company. There may be future increases in tax rate that will impact our profitability
and cash flows adversely.



24







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, Sify Technologies North America Corporation and Sify Data and Managed Services Limited are our wholly owned subsidiaries.



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, 101 Avenue of the Americas,
14th Floor, NY 10013, United States, phone +1-646-284-9400. Our website address is www.corporate.sify.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.



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 Center 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, 2017, we provide services to
over 6,500 corporate clients in industries ranging from information technology, manufacturing, banking and financial services industry,
pharmaceuticals, retail distribution and the Government.



25







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.



Following the transactions,
Mr. Raju Vegesna of Infinity Capital was appointed as the Chairman of our Board of Directors. Mr. P. S. Raju was 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 and Industries
Private Limited, our promoter group, and an entity affiliated with our CEO, Managing Director and Chairman, Mr Raju Vegesna. See
note 37 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.



26







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 years
2017, 2016 and 2015, we spent ₹ 1,940 million (US$
29.92 million), ₹ 2,811 million (US$ 43.35 million) and ₹
1,485 million (US$ 22.90 million) respectively, on capital expenditures of which ₹1
million (US$ 0.02 million), ₹4 million (US$
0.06 million) and ₹ 8 million (US$ 0.12 million) were incurred in North America in fiscal years 2017, 2016 and 2015
respectively. The remaining amounts were incurred in India. As of March 31, 2017, we had contractual commitments of
approximately ₹ 1,045 million (US $16.12 million) for
capital expenditures towards the acquisition of property, plant and equipment. These commitments included approximately ₹
809 million (US $ 12.48 million) in domestic purchases and ₹
236 million (US $ 3.64 million) in imports and overseas commitments for products and spares. The total capital expenditure
with respect to capital work in progress as on March 31, 2017 amounted to ₹ 268  million (US$ 4.13 million).All
our capital expenditures were financed out of cash generated from operations, equity infusion, finance leases and borrowings
from banks.



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 net worth, 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 US $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.



27







Due to the decline
in business travels on account of the global economic environment, the company tested impairment for goodwill and intangibles,
and recorded impairment charges of ₹ 1,857, ₹
47,269 and ₹ 15,200 (thousand) 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 (ROC), 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 Technologies (Singapore) Pte Ltd



Sify Technologies (Singapore)
Pte Ltd incorporated in Singapore as a wholly owned subsidiary of Sify Technologies Limited to pursue the business of Information
Technology Enabled Services, Sourcing and Selling of Networking Equipment and IT Software and Software Consultancy Services. During
fiscal 2016 further investment of US $ 500,000 was made in the equity shares of subsidiary.



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 and
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 Center 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 ₹ 1,140 million. 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.



Effective April 1,
2014, PACE was merged with the holding company, Sify Technologies Limited. We are in the process of obtaining the requisite approval
for incorporating the name change from PACE to Sify in the statutory records maintained by the Government with respect to land
located at Noida.



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.



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 Technologies
Limited to pursue the overseas market for eLearning and Infrastructure Managed Services in the US region.



Sify Data and Managed Services Limited



Sify Data and Managed
Services Limited was Incorporated on March 16, 2017 as a wholly owned Subsidiary Company of Sify Technologies Limited, to carry
on IT service business. During the fiscal year 2017, the Company has invested ₹250
million in the Subsidiary.



28







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 1400 cities and towns in India. This telecom network
also connects 43 Data Centers across India including Sify’s 6 Tier III Data Centers across the cities of Chennai, Mumbai,
Delhi and Bengaluru and customer Data Centers.



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 our revenue is derived from services to enterprise customers, comprising Telecom services,
Data Center services, Cloud and Managed services, Applications Integration services and Technology Integration services. Sify also
provides services that cater to the burgeoning demands of the small and medium business (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 more than 1400 towns and cities and gives a prospect of more than 2800 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 1400 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 Center services
| | -- | --------------------



We are among the earliest
to invest in the Data Center landscape in the country with our first Data Center 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 Center being Tier III compliant.
We currently have 6 Tier III Data Centers 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.



| | 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.



29







| | 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
Center products to provide a converged turn-key ICT solution to the customer.



TIS leverages Sify’s
home-grown expertise in design, implementation and maintenance to deliver end- to-end managed IT services across Data Centers,
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 Center Build
| | - | -----------------



| | • | Campus/LAN/Data Center 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. Second was 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.



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 Center 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 Center services, Cloud and Managed Services,
Technology Integration Services and Applications Integration Services.



30







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 services 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 Centers. Today, this multi-mode,
multi-mesh network connects 43 of India’s DCs; a fact that endorses the quality of our offering and our network presence



Our network, reaches
1400 cities and towns with more than 2800 Points of Presence and 90,000 links, thus making us the largest MPLS network in India.



| | b) | Data Center services.
| | -- | ---------------------



Right from our first
Data Center at Vashi, Mumbai in 2000, we have invested in the top of the line technologies across all our networks with every new
Data Center taking the game forward. The Sify SDA (Sify Data Center Architecture) 4.0 is an IP that has found acceptance in the
several Data Centers 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. With approximately
0.2 million square feet coverage today including the new Data Centers, we are among the largest to offer Data Center 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.



In order to offer the
best-of-breed services, we chose to tie up with the leaders in the business like HP and VMware. Our 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 home-grown expertise in design, implementation
and maintenance to deliver end-to-end managed IT services across datacenters, network and security.



31







As described, this
business takes the knowledge developed from building Network architecture, Unified Communication and Unified Access, Collaborative
tools, Data Center 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 being part of the biggest deals in ground-up technology refreshes for some of India’s biggest private
and Government clients.



| | e) | Applications 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 Centers across India with a multi-mode, multi-mesh network. This builds
redundancy at multiple levels across the network. This network connects 43 of India’s Data Centers including 6 of our own.
To ensure undisrupted high quality service and to achieve cost efficiencies, we have invested in an undersea cable consortium.
The capacity went live during the Q1 of 2012-13. We have further increased the capacity during the fiscal 2016. We have also leased
intercity links from multiple suppliers including BSNL, Bharti Airtel, 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.



•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 its 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 Center 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 Center, 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.



32







•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 in-house 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. We have built a stack of
managed services for our network customers, like Managed WLAN, Managed DDoS and security solutions. We have built a carrier neutral
internet exchange in India in partnership with Amsterdam Internet Exchange.



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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



33







| | · | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                     
| | · | CleanConnect(TM) which provides managed and secured internet connectivity to customers.                                                                                                             
| |   |                                                                                                                                                                                                     
| | · | Managed DDoS which offers protection from DDoS attack to corporate customers.                                                                                                                       
| |   |                                                                                                                                                                                                     
| | · | Managed WLAN provides Managed Wi-Fi solutions offering connect devices to the network of the customer and the internet at customer locations.                                                       



Data
Center Services. We operate 6 Tier III Data Centers of which three are located in Mumbai (Bombay), one each at Noida (UP),
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
and 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 Managed 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 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.



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.



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



34







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 have also launched mobile applications
to offer the below-mentioned services on the mobile.



| | · | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | 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.



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 reorganization of our business has helped us expand our customer base to over 6,500
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 Center 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 any service to 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.



35







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 endeavor. We support both telephonic and email interactions from our clients
and support for Enterprises services is 24x7.



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 390 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 1400 towns and cities and between them have more than 90,000 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.



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 Center Infrastructure.We operate six tier III Internet Data Centers, three in Mumbai, one each at Chennai, Bangalore and Noida (UP). We offer managed
hosting, security and infrastructure managed services from these facilities. These Data Centers 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 Centers. The Data Centers conform to the tier III standards to cater to the security consideration of our customer servers.



36







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 Centers, 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.



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.



37







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.



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, Plants 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 Center in Vashi, Mumbai, 95,250 square feet Data Center in Airoli, 46,600 square feet in Bangalore Data Center and 65,000
square feet Data Center in Rabale, Mumbai. In November 2011, we acquired 175,000 square feet of building space for construction
of a Data Center 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 Center was completed and went live during fiscal 2015. We have acquired over
200,000 square feet of building space for construction of a Data Center space in Rabale, Mumbai which is completed and became operational
during fiscal 2016.



38







We have also acquired
another building measuring 83,450 square feet at Rabale, Mumbai for future business.



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 1,400 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, plants 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 went live during fiscal 2013 and was upgraded during fiscal 2015 and
2016. 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.



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

(₹ in million, except share
data and where otherwise stated)



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 1400 cities and towns in India. This telecom network today connects 43
client Data Centers across India, including Sify’s own 6 Tier III Data Centers across the cities of Chennai, Mumbai, Delhi
and Bengaluru.



39







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 Center 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 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. We have built a stack of
managed services for our network customers, like Managed WLAN, Managed DDoS and security solutions. We have built a carrier neutral
internet exchange in India in partnership with Amsterdam Internet Exchange.



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).



Data
Center Services:We operate 6 Tier III Data Centers of which three are
located in Mumbai (Bombay) and one each at Noida (UP), 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
and 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 Managed 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.



40







Applications
Integration service:Our range of web-applications includes 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 and launched the services on mobile applications.



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 and 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.



We
have been historically including the results of Digital Certification services under the Technology Integration Services segment.
The Industry in which this product competes has witnessed newer competitions, business models resulting in dynamic market changes.
In order to leverage the versatility and the organizational capability, the Chief Operations Decision Maker (CODM) has evaluated
options of reorganizing this product into Applications Integration Services segment with effect from April 1, 2016. This will enable
the product to address customers across segments, achieve better marketability, flexibility and scale. The corresponding revenue
and costs of this product have been regrouped under the respective segments. Consequently, the figures for the years ended March
31, 2016 and March 31, 2015 are adjusted accordingly.



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 and 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. During the year, the company introduced a new service offering
in the retail voice market in partnership with Skype Communications, S.a.r.l. The company realized revenue from sale of voice credits
and subscription of Skype.



Data Center
services



Revenue
from Data Center services includes revenue from co-location of space, racks and 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 managed 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.



41







Technology
Integration Service (TIS)



Revenues
from TIS comprises of DC build services and Security services. 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, content
management and sale of Digital certificates. 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
leased 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 annual maintenance contract and
the cost of installation in connectivity business. 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 Unified license.



Data Center
Services



Cost
of goods sold and services rendered for the Data Center 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 Infrastructure Managed services, Third party professionals engaged in providing services, associate
costs of the delivery teams and cost of operations of DC build BOT projects.



Technology
Integration Services



Cost
of goods sold and services rendered consists of cost of hardware and software supplied for DC build projects, 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 professional 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, cost of digital certificates and platform usage 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, advertising and other brand building costs, travel costs, and occupancy and
overhead costs.



42







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.



Deferred tax 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 tax 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.



43







Stock compensation expense



A total of 25 million
equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). Our ASOP 2014 was adopted at the Eighteenth
Annual General Meeting held on July 28, 2014. As of March 31, 2017, we had an aggregate outstanding of 5.84 million options under
our ASOP with a weighted average exercise price equal to approximately ₹ 73.55 ($1.13) per equity share. Unamortized stock
compensation expense as of March 31, 2017 on these options is ₹ 14.40 million ($ 0.22 million).



Results of Operations



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



|                                              |  | Fiscal |       
|--------------------------------------------- |  | ------ | ------
|                                              |  | 2017   |       
|                                              |  | %      |       
|Revenues                                      |  |        | 100   
|Cost of goods sold and services rendered      |  |        | (64.40
|Other income/(expense)                        |  |        | 0.79  
|Selling, general  and administrative expenses |  |        | (21.65
|Depreciation and amortization expenses        |  |        | (9.54 
|Profit from operating activities              |  |        | 5.20  
|Finance income                                |  |        | 0.66  
|Finance expenses                              |  |        | (2.38 
|Net finance income/(Loss)                     |  |        | (1.72 
|Profit before tax                             |  |        | 3.48  
|Income tax (expense)/ benefit                 |  |        | -     
|Net profit for the year                       |  |        | 3.48  



Results of year ended March 31, 2017
compared to year ended March 31, 2016



Revenues



The growth in our revenues
in fiscal 2017 from fiscal 2016 is given below:



|         |  | 2016 – 17 |        |  | 2015 – 16 |  |        | Increase/ (decrease) |  |  | % Change | 
|-------- |  | --------- | ------ |  | --------- |  | ------ | -------------------- |  |  | -------- | 
|         |  |           |        |  |           |  |        |                      |  |  |          | 
|Revenues |  |           | 18,432 |  |           |  | 15,035 |                      |  |  | 3,397    | 



Year 2016-17 had a
23% growth with an increase in revenues of ₹ 3,397 million ($52.39 million) contributed largely by Applications Integration
Services with a revenue growth of ₹ 1,360 million ($20.97 million), Technology Integration services with ₹982 million
($15.14 million), Telecom Services with ₹624 million ($9.62 million) and Data Center Services with ₹452 million ($6.97
million). The increase is offset by decrease in revenue from Cloud and Managed Services by ₹21 million ($0.32 million).



The revenue by operating
segments is as follows:





|                                  |  | Revenue |        |  | Percentage of revenue |  |        | Growth % | 
|--------------------------------- |  | ------- | ------ |  | --------------------- |  | ------ | -------- | 
|                                  |  | 2016-17 |        |  | 2015-16               |  |        | 2016-17  | 
|Telecom Services                  |  |         | 10,173 |  |                       |  | 9,549  |          | 
|Data Center Services              |  |         | 1,975  |  |                       |  | 1,523  |          | 
|Cloud and Managed Services        |  |         | 920    |  |                       |  | 941    |          | 
|Technology Integration Services   |  |         | 2,688  |  |                       |  | 1,706  |          | 
|Applications Integration Services |  |         | 2,676  |  |                       |  | 1,316  |          | 
|Total                             |  |         | 18,432 |  |                       |  | 15,035 |          | 



44







Revenue from Telecom
Service increased by ₹624 million ($9.62 million) primarily due to (i) an increase in revenue of ₹758 million ($11.69
million) from Connectivity Services, contributed by net increase in number of links by 7,180 with existing and new customer engagements,
and (ii) the increase is offset by decrease in revenue of ₹134 million ($2.07 million) in Voice Services, which is on account
of a decrease of` ₹343 million ($5.29 million) from ILD business, contributed by volume decrease of 491 million minutes and
decrease of ₹24 million ($0.37 million) from VoIP services, partially offset by increase of ₹233 million ($3.59 million)
from Voice Retail services.



Revenue from Data Center
Services increased by ₹452 million ($6.97 million) due to increase of new contracts and capacities sold.



Revenue from Cloud
and Managed Services is decreased by ₹21 million ($0.32 million), primarily on account of decrease in revenue of ₹72
million ($1.11 million) from Infrastructure Managed Services and this decrease is offset by increase in revenue of ₹51 million
($0.79 million) from cloud based offerings on account of new customer engagements.



Revenue from Technology
Integration Services is increased by ₹982 million ($15.14 million), on account of increase in revenues from large network
integration and security services.



Revenue from Applications
Integration Services is increased by ₹1,360 million ($20.97 million). The increase is attributable to increase in (i) Online
Assessment services revenue by ₹1,515 million ($23.37 million) and the above increase is offset by decrease in (ii) revenue
by ₹47 million ($0.72 million) from SAP and App-led SI (iii) E Learning services by ₹82 million ($1.27 million) (iv)
Digital certification business by ₹5 million ($0.08 million) (v) Portals business by ₹21 million ($0.32 million) on
account of decrease in customer engagements.



Other income



The change in other
income is as follows:



|             |  | 2016 -17 |     |  | 2015 -16 |  |     | Increase/ (decrease) |  |  | % Change | 
|------------ |  | -------- | --- |  | -------- |  | --- | -------------------- |  |  | -------- | 
|Other income |  |          | 146 |  |          |  | 104 |                      |  |  | 42       | 



The increase in other
income is on account of increase in rental income by ₹51 million ($0.79 million), net gain on forex exchange fluctuations
amounting to ₹ 29 million ($0.45 million). The increase is slightly offset by decrease in provision for expenses and doubtful
debts written back by ₹ 41 million ($0.63 million) compared to previous year.



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:



|                                  |  | 2016-17 |        |  | 2015-16 |  |       | Increase/ (decrease) |  |  | % change | 
|--------------------------------- |  | ------- | ------ |  | ------- |  | ----- | -------------------- |  |  | -------- | 
|Telecom Services                  |  |         | 6,632  |  |         |  | 6,031 |                      |  |  | 601      | 
|Data Center Services              |  |         | 1,030  |  |         |  | 817   |                      |  |  | 213      | 
|Cloud and Managed Services        |  |         | 382    |  |         |  | 341   |                      |  |  | 41       | 
|Technology Integration Services   |  |         | 2,088  |  |         |  | 1,201 |                      |  |  | 887      | 
|Applications Integration Services |  |         | 1,738  |  |         |  | 714   |                      |  |  | 1,024    | 
|Total                             |  |         | 11,870 |  |         |  | 9,104 |                      |  |  | 2,766    | 



The cost of goods sold
has increased by 30% on overall basis and the movement in COGS by nature of expense is explained in detail below:



|                             |  | 2016-17 |        |  | 2015-16 |  |       | Increase/ (decrease) |  |  | % change | 
|---------------------------- |  | ------- | ------ |  | ------- |  | ----- | -------------------- |  |  | -------- | 
|Network Costs                |  |         | 5,419  |  |         |  | 5,165 |                      |  |  | 254      | 
|License fees (revenue share) |  |         | 519    |  |         |  | 463   |                      |  |  | 56       | 
|Cost of goods sold           |  |         | 2,067  |  |         |  | 1,271 |                      |  |  | 796      | 
|-     Sale of products       |  |         | 1,225  |  |         |  | 815   |                      |  |  | 410      | 
|-     Integration services   |  |         | 842    |  |         |  | 456   |                      |  |  | 386      | 
|Direct Resources costs       |  |         | 924    |  |         |  | 862   |                      |  |  | 62       | 
|Power costs                  |  |         | 984    |  |         |  | 775   |                      |  |  | 209      | 
|Other direct costs           |  |         | 1,957  |  |         |  | 568   |                      |  |  | 1,389    | 
|Total                        |  |         | 11,870 |  |         |  | 9,104 |                      |  |  | 2,766    | 



45







Network costs comprises
cost of Bandwidth leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Increase in Network
costs of ₹254 million ($3.92 million) is due to (i) ₹398 million ($6.14 million) increase in Bandwidth costs incurred
on account of capacity upgrades and newer links and (ii) decrease of ₹144 million ($2.22 million) of Inter connect charges
due to the decrease in 491 million minutes in the volume of International Long distance.



License fees (Revenue
share) cost comprises revenue share payable to DOT on licensed services. Increase in revenue share is on account of increase of
₹56 million ($0.86 million) in the revenue share payable to DOT on account of increase in licensed Revenues.



Cost of Goods sold
consists of cost of Hardware and Software and integration services. Cost of Hardware and Software sold increased by ₹796
million ($12.28 million). The same being on account of increase in projects in Technology Integration business by ₹876 million
($13.51 million) which is partially offset by decrease in cost related to one time sales by ₹80 million ($1.23 million)



Direct Resource costs
comprises 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). Increase in resources costs of ₹62 million ($0.96
million) is primarily on account of increase of (i) ₹109 million ($1.68 million) increase in delivery telecom services, (ii)
Applications Integration Services by ₹7 million ($0.11 million), (iii) Technology Integration Services by ₹10 million
($0.15 million) and (iv) DC services increase by ₹1 million ($0.02 million) on account of increase in number of employees.
(v) The above increase is partially offset by decrease of ₹63 million ($0.97 million) in resource cost of Managed Services
Delivery (Part of Cloud and Managed services) due to decrease in number of employees in Infrastructure managed services due to
customer churn.



Power cost comprises
of electricity charges incurred for our Data Center operations. Power cost increased by ₹209 million ($3.22 million) due
to increase in occupancy of Rabale DC and also increase in consumption in existing Data Centers and increased power tariff.



Other direct cost,
comprises Link implementation and maintenance charges pertaining to Telecom services, direct cost of Applications Integration services
business containing Online Exams, digital certificate platform, content costs and subject matter experts for international businesses.
The increase in other direct costs of ₹1,389 million ($21.42 million) is primarily on account of increase of (i) ₹1,071
million ($16.51 million) in applications integrations services on account of operating cost of online assessment due to new customer
engagements with higher volumes (ii) ₹105 million ($1.62 million) on account of operating costs of cloud and managed services
and. (iii) Increase of ₹182 million ($2.81 million) on account of link maintenance charges, (iii) Increase of ₹7 million
($0.10 million) on account of Data Center new contract executions.



Selling, General and Administrative
expenses



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



|                                            |  | 2016-17 |       |  | 2015-16 |  |       | Increase/ (decrease) |  |  | % change |  
|------------------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Operating costs                             |  |         | 980   |  |         |  | 861   |                      |  |  | 119      |  
|Selling and Marketing Expenses              |  |         | 136   |  |         |  | 136   |                      |  |  | -        |  
|Associate Expenses                          |  |         | 1549  |  |         |  | 1,308 |                      |  |  | 241      |  
|Other Indirect expenses                     |  |         | 940   |  |         |  | 986   |                      |  |  | (46      | )
|Allowance for doubtful receivables/advances |  |         | 386   |  |         |  | 182   |                      |  |  | 204      |  
|Net Forex Loss                              |  |         | -     |  |         |  | 6     |                      |  |  | (6       | )
|Total                                       |  |         | 3,991 |  |         |  | 3,479 |                      |  |  | 512      |  



Operating costs includes
rental, repairs and maintenance charges of our network operating centers, base stations and other co-location sites including the
rent and maintenance for our Data Centers. Operating costs increased by ₹119 million ($1.84 million) primarily on account
of increase in repairs and maintenance and network operating cost.



46







Selling and Marketing
expenses consist of, selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. The
Selling and Marketing expenses were flat when compared to previous year.



Associate expenses
consists of cost of the employees who are part of the Sales and marketing, Business development, General management and support
services. Associate expenses increased by ₹241 million ($3.72 million) between two periods due to increase in headcounts
and regular Increments.



Other indirect expense
consists of, rental and electricity cost of office, travel cost, legal charges, professional charges, communication and others.
During the year Other Indirect costs have decreased by ₹46 million ($0.71 million)



Allowance for doubtful
receivables/advances consists of the charge on account of the provisions created during the year against doubtful receivables/advances.
Allowance for doubtful receivables/advances increased by ₹204 million ($3.15 million) between two periods.



Depreciation and amortization



Depreciation and amortization
is set forth in the table below:



|                                  |  | 2016 -17 |       |   | 2015 -16 |  |       | Increase/ (Decrease) |  |  | % Change | 
|--------------------------------- |  | -------- | ----- | - | -------- |  | ----- | -------------------- |  |  | -------- | 
|Depreciation and amortization     |  |          | 1,759 |   |          |  | 1,598 |                      |  |  | 161      | 
|As a percentage of carrying value |  |          | 24.49 | % |          |  | 23.04 | %                    |  |  |          | 



As the business is
continuing to expand, the amount of depreciation is increasing on account of constructing and deploying new facilities by the Company.
Increase in depreciation is primarily on account of expansion of existing Data Center at Rabale, during fiscal 2017.



Profit from operating activities



|                           |  | 2016 -17 |      |   | 2015 -16 |  |      | Increase/ (Decrease) |  |  | % Change |  
|-------------------------- |  | -------- | ---- | - | -------- |  | ---- | -------------------- |  |  | -------- | -
|Operating profit           |  |          | 958  |   |          |  | 959  |                      |  |  | (1       | )
|As a percentage of revenue |  |          | 5.20 | % |          |  | 6.38 | %                    |  |  |          |  



The operating profit
as a percentage of revenue has decreased due to percentage increase in cost of goods sold partially offset by percentage decrease
in selling and distribution expenses and depreciation and amortization expense as explained above.



Finance income/expense



|                           |  | 2016 -17 |      |   | 2015 -16 |  |      | Increase/ (Decrease) |  |  | % Change |  
|-------------------------- |  | -------- | ---- | - | -------- |  | ---- | -------------------- |  |  | -------- | -
|Finance income             |  |          | 123  |   |          |  | 45   |                      |  |  | 78       |  
|Finance expense            |  |          | (437 | ) |          |  | (565 | )                    |  |  | (128     | )
|Net finance income/expense |  |          | (314 | ) |          |  | (520 | )                    |  |  | (206     | )



Finance income:
The finance income primarily consists of interest received from bank deposits of ₹27 million ($0.42 million), and interest
income on other deposits of ₹96 million ($1.48 million). The interest received from bank decreased by ₹2 million ($0.03
million) from last year, and interest income on other deposits increased by ₹78 million ($1.22 million) on account of interest
on income tax refund received during current year amounting to ₹ 82 million ($ 1.26 million).



Finance expense:The finance expense primarily consists of ₹88 million ($1.36 million) of interest expense on leases, ₹255 million
($3.93 million) of interest paid on borrowings and ₹94 million ($1.45 million) of other borrowing costs paid in respect of
utilization of non-fund facilities from the banks and other processing charges.



The decrease in finance
expense is on account of the fact that during previous year exchange loss amounting to ₹ 66 million ($1.02 million) on foreign
currency loans was classified as interest costs. During current year there is net exchange gain on foreign currency loans. Also,
during previous year an amount of ₹17 million ($0.26 million) was recognized as finance expense arising on account of loss
on cross currency and interest rate swap transactions. During current year there is net gain on such transactions amounting to
₹ 4 million ($0.06 million). Further, decrease in finance expenses being on account of reduction in interest rates and repayment
of loans and leases during current year.



47







Net Profit



|                           |  | 2016-17 |      |   | 2015-16 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Net Profit                 |  |         | 642  |   |         |  | 438  |                      |  |  | 204      | 
|As a percentage of revenue |  |         | 3.48 | % |         |  | 2.92 | %                    |  |  |          | 



The
increase in the net profit during the year 2016-17 is mainly attributable to reduction in net finance costs as explained
above.



Results of year ended March 31, 2016
compared to year ended March 31, 2015



Revenues



The growth in our revenues
in fiscal 2016 from fiscal 2015 is given below



|         |  | 2015 – 16 |        |  | 2014-15 |  |        | Increase/ (decrease) |  |  | % Change | 
|-------- |  | --------- | ------ |  | ------- |  | ------ | -------------------- |  |  | -------- | 
|         |  |           |        |  |         |  |        |                      |  |  |          | 
|Revenues |  |           | 15,035 |  |         |  | 12,865 |                      |  |  | 2,170    | 



Year 2015-16 had a
17% growth with an increase in revenues of ₹ 2,170 million ($32.71 million) contributed largely by Telecom Services with
a revenue growth of ₹1,088 million ($16.4 million), Technology Integration services with ₹650 million ($9.81 million),
Data Center Services with ₹247 million ($3.72 million) and Cloud and Managed Services with ₹319 million ($4.80 million).
The increase is offset by decrease in revenue from Applications Integration Services by ₹134 million ($2.03 million).



The revenue by operating
segments is as follows:



|                                  |  | Revenue |        |  | Percentage of revenue |  |        | Growth % | 
|--------------------------------- |  | ------- | ------ |  | --------------------- |  | ------ | -------- | 
|                                  |  | 2015-16 |        |  | 2014-15               |  |        | 2015-16  | 
|Telecom Services                  |  |         | 9,549  |  |                       |  | 8,461  |          | 
|Data Center Services              |  |         | 1,523  |  |                       |  | 1,276  |          | 
|Cloud and Managed Services        |  |         | 941    |  |                       |  | 622    |          | 
|Technology Integration Services   |  |         | 1,706  |  |                       |  | 1,056  |          | 
|Applications Integration Services |  |         | 1,316  |  |                       |  | 1,450  |          | 
|Total                             |  |         | 15,035 |  |                       |  | 12,865 |          | 



Revenue from Telecom
Service increased by ₹1,088 million ($16.4 million) primarily due to (i) an increase in revenue of ₹369 million ($5.6
million) from Connectivity Services, contributed by net increase in number of links by 7,264 with existing and new customer engagements,
and (ii) an increase in revenue of ₹719 million ($10.8 million) in Voice Services, which is on account of an increase of`
₹739 million ($11.15 million) from ILD business, contributed by volume increase of 236 million minutes, partially offset
by reduction of ₹20 million ($0.3 million) from VoIP services.



Revenue from Data Center
Services increased by ₹247 million ($3.72 million) due to increase of new contracts and capacities sold from our new Data
Center.



Revenue from Cloud
and Managed Services increased by ₹319 million ($4.81 million), primarily on account of an increase of ₹23 million
($0.4 million) from cloud based offerings on account of new customer engagements and increase in Infrastructure managed services
by ₹296 million ($4.46 million) due to increase in customer engagements.



Revenue from
Technology Integration Services increased by ₹650 million ($10.04 million), on account of increase in revenues from
large network integration, security services and DC build contracts by ₹650 million ($10.04 million). Digital
certification services has been moved to Applications Integration Services segment in the financial year 2016-17 and hence
the necessary adjustment in the comparative figures of previous year have been done.



48







Revenue from Applications
Integration Services decreased by ₹134 million ($2.07 million). The decrease is attributable to decrease in (i) revenue by
₹64 million ($0.96 million) from SAP and App-led SI and (ii) Portals business by ₹41 million ($0.62 million) on account
of decrease in customer engagements. (iii) Online Assessment services by ₹5 million ($0.07 million) (iv) Digital certification
services revenue decreased by ₹ 79 million ($1.19 million). The decrease is partially offset by increase in e-Learning business
by ₹55 million ($0.81 million) on account of increase in customer engagements.



Other income



The change in other
income is as follows:



|             |  | 2015 -16 |     |  | 2014-15 |  |    | Increase/ (decrease) |  |  | % Change | 
|------------ |  | -------- | --- |  | ------- |  | -- | -------------------- |  |  | -------- | 
|Other income |  |          | 104 |  |         |  | 92 |                      |  |  | 12       | 



The increase in other
income is on account of increase in rental income by ₹28.3 million ($0.43 million) and a provision for expenses amounting
to ₹ 49.9 million ($0.75 million) written back during current year. The increase is offset by decrease in write back of deposits/advances
no longer required by ₹ 41.6 million ($ 0.63 million) and reimbursements of investor related expense to our ADS programs
by ₹ 25 million ($ 0.38 million).



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:



|                                  |  | 2015-16 |       |  | 2014-15 |  |       | Increase/ (decrease) |  |  | % change |  
|--------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Telecom Services                  |  |         | 6,031 |  |         |  | 5,055 |                      |  |  | 976      |  
|Data Center Services              |  |         | 817   |  |         |  | 729   |                      |  |  | 88       |  
|Cloud and Managed Services        |  |         | 341   |  |         |  | 223   |                      |  |  | 118      |  
|Technology Integration Services   |  |         | 1,201 |  |         |  | 972   |                      |  |  | 229      |  
|Applications Integration Services |  |         | 714   |  |         |  | 748   |                      |  |  | (34      | )
|Total                             |  |         | 9,104 |  |         |  | 7,727 |                      |  |  | 1,377    |  



The cost of goods sold
has increased by 18% on overall basis and the movement in COGS by nature of expense is explained in detail below:



|                             |  | 2015-16 |       |  | 2014-15 |  |       | Increase/ (decrease) |  |  | % change |  
|---------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Network Costs                |  |         | 5,165 |  |         |  | 4,124 |                      |  |  | 1,041    |  
|License fees (revenue share) |  |         | 463   |  |         |  | 409   |                      |  |  | 54       |  
|Cost of goods sold           |  |         | 1,271 |  |         |  | 1,325 |                      |  |  | (54      | )
|-      Sale of products      |  |         | 815   |  |         |  | 740   |                      |  |  | 75       |  
|-      Integration services  |  |         | 456   |  |         |  | 585   |                      |  |  | (129     | )
|Direct Resources costs       |  |         | 862   |  |         |  | 714   |                      |  |  | 148      |  
|Power costs                  |  |         | 775   |  |         |  | 644   |                      |  |  | 131      |  
|Other direct costs           |  |         | 568   |  |         |  | 511   |                      |  |  | 57       |  
|Total                        |  |         | 9,104 |  |         |  | 7,727 |                      |  |  | 1,377    |  



Network costs comprises
cost of Bandwidth leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Increase in Network
costs of ₹1,041 million ($15.69 million) is due to (i) ₹212 million ($3.2 million) increase in Bandwidth costs incurred
on account of capacity upgrades and newer links and (ii) ₹829 million ($12.5 million) of Inter connect charges due to the
increase of 236 million minutes in the volume of International Long distance.



49







License fees (Revenue
share) cost comprises revenue share payable to DOT on licensed services. Increase in revenue share is on account of increase of
₹54 million ($0.8 million) in the revenue share payable to DOT on account of increase in licensed Revenues.



Cost of Goods sold
consists of cost of Hardware and Software and integration services. Cost of Hardware and Software sold decreased by ₹54 million
($0.8 million). The same being on account of decrease in projects in Technology Integration business by ₹129 million ($1.9
million) which is partially offset by increase in cost related to one time sales by ₹75 million ($1.1 million)



Direct Resource costs
comprises 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). Increase in resources costs of ₹148 million ($2.2
million) is primarily on account of increase of (i) ₹70 million ($1.06 million) increase in delivery telecom services, (ii)
Applications Integration Services by ₹33 million ($0.50 million) (iii) ₹28 million ($0.42 million) in resource cost
of Managed Services Delivery (Part of Cloud and Managed services), (iv) Technology Integration Services by ₹14 million ($0.21
million) and (v) DC services increase by ₹3 million ($0.05 million) on account of increase in number of employees.



Power cost comprises
of electricity charges incurred for our Data Center operations. Power cost increased by ₹131 million ($2 million) due to
increase in occupancy of Noida DC and also increase in consumption in existing Data Centers and increased power tariff.



Other direct cost,
comprises 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 ₹57 million ($0.9 million) is primarily on account of increase of (i) ₹17 million ($0.3 million)
in applications integrations services on account of operating cost of online assessment and cost of delivering large projects (ii)
₹72 million ($1.1 million) on account of operating costs of cloud and managed services and. (iii) decrease of ₹32 million
($0.5 million) on account of lower link maintenance charges.



Selling, General and Administrative
expenses



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



|                                            |  | 2015-16 |       |  | 2014-15 |  |       | Increase/ (decrease) |  |  | % change |  
|------------------------------------------- |  | ------- | ----- |  | ------- |  | ----- | -------------------- |  |  | -------- | -
|Operating costs                             |  |         | 861   |  |         |  | 869   |                      |  |  | (8       | )
|Selling and Marketing Expenses              |  |         | 136   |  |         |  | 103   |                      |  |  | 33       |  
|Associate Expenses                          |  |         | 1,308 |  |         |  | 974   |                      |  |  | 334      |  
|Other Indirect expenses                     |  |         | 986   |  |         |  | 922   |                      |  |  | 64       |  
|Allowance for doubtful receivables/advances |  |         | 182   |  |         |  | 261   |                      |  |  | (79      | )
|Net forex loss                              |  |         | 6     |  |         |  | 3     |                      |  |  | 3        |  
|Total                                       |  |         | 3,479 |  |         |  | 3,132 |                      |  |  | 347      |  



Operating costs includes
rental, repairs and maintenance charges of our network operating centers, base stations and other co-location sites including the
rent and maintenance for our Data Centers. Operating costs decreased by ₹8 million ($0.12 million) primarily on account of
decrease in repairs and maintenance and network operating cost.



Selling and Marketing
expenses consist of, selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. The
increase in Selling and Marketing expenses is on account of increase in marketing spend.



Associate expenses
consists of cost of the employees who are part of the Sales and marketing, Business development, General management and support
services. Associate expenses increased by ₹334 million ($5.04 million) between two periods due to increase in headcount.



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



50







Allowance for doubtful
receivables/advances consists of the charge on account of the provisions created during the year against doubtful receivables/advances.
Allowance for doubtful receivables/advances decreased by ₹79 million ($1.19 million) between two periods primarily on account
of reduction in provision for doubtful advances.



Depreciation and amortization



Depreciation and amortization
is set forth in the table below:



|                                  |  | 2015 -16 |       |   | 2014-15 |  |       | Increase/ (Decrease) |  |  | % Change | 
|--------------------------------- |  | -------- | ----- | - | ------- |  | ----- | -------------------- |  |  | -------- | 
|Depreciation and amortization     |  |          | 1,598 |   |         |  | 1,272 |                      |  |  | 326      | 
|As a percentage of carrying value |  |          | 23.04 | % |         |  | 19.43 | %                    |  |  |          | 



As the business is
continuing to expand, the amount of depreciation is increasing on account of constructing and deploying new facilities by the Company.
Increase in depreciation is primarily on account of leased assets taken for customer specific contracts by ₹ 148 million
($2.2 million) and ₹ 103 million ($1.6 million) on account of commissioning of new Data Center at Rabale, during the fiscal
2016.



Profit from operating activities



|                           |  | 2015 -16 |      |   | 2014-15 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | -------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Operating profit           |  |          | 959  |   |         |  | 826  |                      |  |  | 133      | 
|As a percentage of revenue |  |          | 6.38 | % |         |  | 6.42 | %                    |  |  |          | 



The operating profit
as a percentage of revenue has remained flat due to increase in depreciation and amortization expense compensated by decrease in
percentage of selling and distribution expenses.



Finance income/expense



|                           |  | 2015 -16 |      |   | 2014-15 |  |      | Increase/ (Decrease) |  |  | % Change |  
|-------------------------- |  | -------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | -
|Finance income             |  |          | 45   |   |         |  | 61   |                      |  |  | (16      | )
|Finance expense            |  |          | (565 | ) |         |  | (512 | )                    |  |  | 53       |  
|Net finance income/expense |  |          | (520 | ) |         |  | (451 | )                    |  |  | 69       |  



Finance
income: The finance income primarily consists of interest received from bank deposits of ₹28 million ($0.42
million), and interest income on other deposits of ₹17 million ($0.26 million). The interest received from bank
decreased by ₹4 million ($0.06 million) from last year, and interest income on other deposits decreased by ₹12
million ($0.18 million) on account of income tax refund received during previous year amounting to ₹ 5 million ($ 0.76
million) and decrease in interest collected on deposits with third parties by ₹ 7 million ($ 0.11 million) due to refund of
deposits during current year.



Finance expense:The finance expense primarily consists of ₹126 million ($1.9 million) of interest expense on leases, ₹86 million
($1.29 million) of interest paid on term loans from banks, ₹127 million ($1.91 million) of interest paid on fund based working
capital facilities from banks, ₹17 million ($0.26 million) interest expense arising on account of loss on cross currency
and interest rate swap transactions, ₹ 83 million ($1.25 million) interest paid to other financial institutions and ₹126
million ($1.9 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
new foreign currency term loans from banks amounting to ₹601 million ($9.06 million) during the current year and working
capital loans increased by ₹ 194 million ($2.92 million) over fiscal 2015, resulting in increase in interest expense.



Net Profit



|                           |  | 2015-16 |      |   | 2014-15 |  |      | Increase/ (Decrease) |  |  | % Change | 
|-------------------------- |  | ------- | ---- | - | ------- |  | ---- | -------------------- |  |  | -------- | 
|Net Profit                 |  |         | 438  |   |         |  | 375  |                      |  |  | 63       | 
|As a percentage of revenue |  |         | 2.91 | % |         |  | 2.91 | %                    |  |  |          | 



51







The
increase in the net profit during the year 2015-16 is attributable mainly to increase in revenue.



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 and cross currency swaps where the counter party is a bank. Forward contracts generally mature
between one to six months and Swap contracts cover a period of 5-6 years. These contracts do not qualify for hedge accounting under
IFRS. These contracts are marked to market as at the balance sheet date and recognized in the consolidated income statement.



Liquidity and capital resources



We have financed our
operations largely through cash generated from operations, equity issuance and bank borrowings. Our liquidity requirements are
for meeting working capital needs and capital expenditures required to upgrade and maintain our existing infrastructure.



The following table
summarises our cash flows for periods presented:



|                                                             |  | 2017         |        |   | 2016         |  |        | 2015         |  |  | 2017            |  
|------------------------------------------------------------ |  | ------------ | ------ | - | ------------ |  | ------ | ------------ |  |  | --------------- | -
|                                                             |  | ₹ In million |        |   | ₹ In million |  |        | ₹ in million |  |  | US $ in
million |  
|Net cash from / (used in) operating activities               |  |              | 1,748  |   |              |  | 2,442  |              |  |  | 1,557           |  
|Net cash from / (used in) investing activities               |  |              | (1,610 | ) |              |  | (1,566 | )            |  |  | (867            | )
|Net cash from / (used in) financing activities               |  |              | (257   | ) |              |  | (580   | )            |  |  | (598            | )
|Effect of exchange rate changes on cash and cash equivalents |  |              | (4     | ) |              |  | -      |              |  |  | (4              | )
|Net increase / (decrease) in cash and cash equivalents       |  |              | (119   | ) |              |  | 296    |              |  |  | 92              |  



As of March 31, 2017,
2016 and 2015 we had working capital of ₹ 701 million, ₹ 1,047 million, ₹ 1,033 million which includes cash and
cash equivalents of ₹ 893 million, ₹ 1,016 million and ₹ 721 million. Our working capital net of cash and cash
equivalents is ₹ 192 million (negative), ₹ 31 million, ₹ 312 million as of March 31, 2017, 2016 and 2015. We
believe that cash from operations, existing lines of credit and capital availability from promotor group, we have sufficient resources
to meet our liquidity requirements.



Our short term borrowings
to finance working capital requirements are primarily financed by cash credit facilities with banks. Borrowings for capital expenditures
are financed through capital leases and long term loans. We have foreign currency demand loans and cross currency swap for our
term loan in Indian Rupee, which carry lower interest rates compared to loans in Indian currency but are subject to exchange fluctuations,
due to which there could be an adverse impact on cash outflows.



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 CEO, 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 2017 and 2014, the Company has received an aggregate of ₹ 300 million each year, in connection with
this private placement, resulting in an aggregate of ₹ 3,100 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 Report, Mr. Vegesna has paid for
77.50% of the shares of the subscription.The balance of the proceeds from the allotment of the equity shares to our promoter
group, or ₹ 900 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 37 in the
notes to the financial statements included in this Annual Report.



We have borrowings
of ₹ 4,921 million as of March 31, 2017 out of which ₹ 4,009 million will be repaid within a period of 12 months. Interest
outflow on existing borrowings for next year is expected to be ₹ 321 million. We have utilized working capital facility of
₹ 1,950 million out of limit of ₹ 2,000 million during fiscal 2017. We have unutilized non fund limit of ₹ 494
million as of March 31, 2017.



52







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.



Cash and cash equivalents:



Cash and cash equivalents
comprise of ₹ 1,434 million, ₹ 1,123 million, ₹ 865 million, in bank accounts and ₹ 449 million, ₹
613 million, ₹ 611 million in the form of bank deposits as on March 31, 2017, 2016, 2015 out of which cash deposits in the
form of margin money is restricted for use by us amounting to ₹ 263 million, ₹ 345 million, ₹ 248 million. Balances
in foreign currency amount to ₹336 million, ₹ 285 million, ₹341 million as of March 31, 2017, 2016 and 2015.



Net cash
generated from operating activities for the year ended March 31, 2017 was ₹ 1,748 million ($ 26.96 million). This is
mainly attributable to cash generated during the year before changes in working capital ₹ 3,064 million ($ 47.25 million),
increase in trade and other payables by ₹1,379 million ($ 21.27 million), increase in employee benefits ₹27
million ($ 0.42 million) and increase in deferred revenue by ₹173 million ($ 2.67 million) on account of increase in
advance billing in long term projects and partially offset by increase in trade and other receivables by ₹ 1,844
million ($ 28.43 million), increase in inventories by ₹ 441 million ($ 6.80 million), other assets by ₹ 618
million ($ 9.53 million).



Net cash
generated from operating activities for the year ended March 31, 2016 was ₹ 2,442 million ($ 36.81 million). This is
mainly attributable to cash generated during the year before changes in working capital ₹ 2,785 million ($ 41.99 million),
increase in trade and other payables by ₹1,347 million ($ 20.31 million), increase in employee benefits and other
assets by ₹ 36 million ($ 0.54 million) and increase in deferred revenue by ₹220 million ($ 3.32 million) on
account of increase in advance billing in long term projects and partially offset by increase in trade and other receivables
by ₹ 946 million ($ 14.26 million), increase in inventories by ₹ 508 million ($ 7.66 million).



Net cash
generated from operating activities for the year ended March 31, 2015 was ₹1,557 million ($ 24.87 million). This is
mainly attributable to cash generated during the year before changes in working capital ₹ 2,399 million ($ 38.17 million)
increase in trade and other payables by ₹660 million ($ 10.5 million), and increase in deferred revenue of ₹247
million ($ 3.9 million) on account of increase in advance billing in long term projects and partially offset by increase in
trade and other receivables by ₹ 1,157 million ($ 18.48 million), increase in other assets by ₹273 million ($ 4.3
million) .



Net cash used in investing
activities for the year ended March 31, 2017 was ₹ 1,610 million ($ 24.83 million) primarily on account of additional expenditure
on Data Center in Rabale, upgradation of network backbone and investment in corporate debt securities.



Net cash used in investing
activities for the year ended March 31, 2016 was ₹ 1,566 million ($ 23.61 million) primarily on account of additional expenditure
on Data Center in Rabale.



Net cash used in investing
activities for the year ended March 31, 2015 was ₹867 million ($ 13.8 million) primarily on account of additional expenditure
on Data Center in Rabale. Also ISP license fee for unified license for a period of 20 years amounting to ₹23 million ($ 0.37
million) was spent during the year.



Net cash used in financing
activities for fiscal year 2017 was ₹ 257 million ($ 3.96 million). The increase is mainly due to repayment of lease liabilities
of ₹603 million ($ 9.30 million) and finance expenses paid amounting to ₹427 million ($ 6.59 million). Also, dividend
of ₹170 million ($ 2.62 million) was paid during the year. The increase is partially offset by borrowings amounting ₹643
million ($ 9.92 million) and call money on shares amounting to ₹300 million ($ 4.63 million) received during the year.



Net cash used in financing
activities for fiscal year 2016 was ₹ 580 million ($ 8.75 million). The increase is mainly due to repayment of lease liabilities
of ₹543 million ($ 8.20 million) and finance expenses paid amounting to ₹568 million ($ 8.56 million). Also dividend
of ₹170 million ($ 2.56 million) was paid during the year. The increase is partially offset by borrowings amounting ₹701
million ($ 10.57 million) during the year.



Net cash used in financing
activities for fiscal year 2015 was ₹598 million ($ 9.5 million). The increase is mainly due to repayment of lease liabilities
of ₹568 million ($ 9 million), also increase in finance expenses by ₹508 million ($ 8.1 million). Also dividend of
₹160 million ($ 2.5 million) was paid during the year.



53







Capital expenditure



We incurred ₹
1,940 million (US$ 29.92 million) towards capital expenditure for the year ended March 31, 2017. We expect further capital expenditure
to be incurred during the fiscal year 2018 to strengthen our infrastructure capabilities. The capital expenditure was funded out
of internal accruals, bank borrowings and finance leasing arrangements. Also refer to section “Principal Capital Expenditures”
under Item 4 for capital commitments as on March 31, 2017.



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’.



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, 2017:



|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 15 Revenue from Contracts with Customers:In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue
from Contracts with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount,
timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits
the use of either the retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual
periods beginning on or after January 1, 2018, though early adoption is permitted. The entity has not yet evaluated the impact
of IFRS 15 on the consolidated financial statements.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | IFRS 16 leases:IFRS 16 on lease was issued
on January 13, 2016 and is effective from the year January 1, 2019. The standard replaces all existing lease accounting requirements
and represents a significant change in accounting and reporting of leases, with more assets and liabilities to be reported on the
Statement of Financial Position and a different recognition of lease costs.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Group is currently evaluating the effect of the standard on the consolidated financial statements.



| | (iii) | IFRIC 22 Foreign currency transactions and advance consideration:IFRIC 22 was issued on December 8, 2016 which clarifies the date of the transaction for the purpose of determining the exchange
rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration
in a foreign currency. The effective date for adoption of IFRIC 22 is annual reporting periods beginning on or after January 1,
2018, though early adoption is permitted. The Group is currently evaluating the effect of the same on the consolidated financial
statements.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



54







| | (iv) | IFRIC 23 Uncertainty over income tax treatments:IFRIC
23 was issued on June 7, 2017 to clarify the accounting for uncertainties in income taxes.The effective date for adoption
of IFRIC 23 is annual reporting periods beginning on or after January 1, 2019, though early adoption is permitted. The Group is
currently evaluating the effect of the same on the consolidated financial statements.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Amendments to IAS 7, Statement of cash flows:In January
2016, the International Accounting Standards Board issued the amendments to IAS 7, requiring the entities to provide disclosures
that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing
balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The effective
date for adoption of the amendments to IAS 7 is annual reporting periods beginning on or after January 1, 2017, though early adoption
is permitted. The Group has evaluated the disclosure requirements of the amendment and the effect on the consolidated financial
statements is not expected to be material.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Amendments to IFRS 2, Share-based payment:In June
2016, the International Accounting Standards Board issued the amendments to IFRS 2, providing specific guidance for measurement
of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding
taxes. It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled
awards. Market-based performance conditions and non-vesting conditions are reflected in the ‘fair values’, but non-market
performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also,
the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the
result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date
of the modification. Further, the amendment requires the award that includes a net settlement feature in respect of withholding
taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an
equity settlement. The effective date for adoption of the amendments to IFRS 2 is annual reporting periods beginning on or after
January 1, 2018, though early adoption is permitted. The Group is evaluating the requirements of the amendment and the impact on
the consolidated financial statements.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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.
| | - | ----------------------------------------------------------------------------------------------



55







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



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



Revenue from Telecom
services includes 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 Group provides NLD (National Long Distance) and ILD (International Long Distance) services through
Company’s network.  The Group 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.



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



Revenues from DC services
consists of hosting and power charges. Data Center 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 includes 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 includes system integration services, revenue from construction of Data Centers, network services, security
solutions and to a lesser extent, revenue from hardware and software.



Revenue from construction
contracts represents revenue from construction of Data Centers 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.



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



Revenue from Applications
Integration services includes online assessment, document management services, web development, mailing solutions, supply chain
software, digital certificate based authentication services and e-learning software development services. E-learning software
development services consists of structuring of content, developing modules, delivery and training users in the modules developed.
Revenue from Applications Integration Services is recognised based on percentage of completion method. Percentage completion is
measured based on the amount of time/effort spent on a project. 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.  Revenue from commissions earned on electronic commerce transactions are recognised when the transactions
are completed.



56







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.



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.



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.



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 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 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.



57







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



Trade receivables,
contract assets, lease receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments
in debt instruments that are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective
financial asset.



Trade receivables



An impairment analysis
is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified
approach using a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future
economic conditions. In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer
segment, past due status and other factors which are relevant to estimate the expected cash loss from these assets.



Other financial assets



Other financial assets
are tested for impairment based on significant change in credit risk since initial recognition and impairment is measured based
on probability of default over the lifetime when there is significant increase in credit risk.



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.



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.



58







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
tax 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
tax 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.



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, 2017:



|Name                               |  | Age |  | Designation                                                
|---------------------------------- |  | --- |  | -----------------------------------------------------------
|Raju Vegesna (4)                   |  | 57  |  | CEO, Chairman & Managing Director                          
|Ananda Raju Vegesna  (2) (4) (5)   |  | 57  |  | Executive Director                                         
|C B Mouli (1)                      |  | 70  |  | Director, Chairman & Financial Expert of Audit Committee   
|S K Rao (1) (2) (3) (5)            |  | 73  |  | Director                                                   
|T H Chowdary (2) (3) (5)           |  | 85  |  | Director & Chairman of Compensation & Nominating Committees
|Vegesna Bala Saraswathi            |  | 53  |  | Director                                                   
|C E S Azariah  (1) (2) (3) (4) (5) |  | 69  |  | Director                                                   
|Kamal Nath                         |  | 52  |  | Chief Executive Officer - Sify Technologies Limited, India 
|M P Vijay Kumar                    |  | 47  |  | Chief Financial Officer                                    
|C R Rao                            |  | 57  |  | Chief Operating Officer                                    



59







| | (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
| | --- | -------------------------------------------------------



| | (5) | Member of Nomination and Remuneration Committee
| | --- | -----------------------------------------------



Raju Vegesna, CEO,
Chairman and 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. Raju 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
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 Server Engines LLC, Nulife Corp, USA. and Raju Vegesna Infotech & Industries Private Limited.



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 and
Industries Limited, Raju Vegesna Developers Private Limited, Ramanand Core Investment Company 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 Equity Fund Private Limited.



S.K. Rao has served
as a Director of our Company since July 2005. Mr Rao, recently retired as 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.



Ms Vegesna Bala Saraswathi,
spouse of Mr Raju Vegesna, CEO, Chairman and Managing Director, served as Director of our Company since July 2015. Ms Vegesna Bala
Saraswathi is a Commerce Graduate, Associate Course Work in Computer Skills (US) and Associate Course Work in US Federal and State
Taxes (US).



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 Limited, India, since August 2012. He is a Graduate in Electronics & Communications
from BIT, Sindri. He has an overall experience of 27 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 27 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.



60







Infinity Capital Ventures,
LP beneficially owned 7.79 % of our equity shares as of March 31, 2017. 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. Consequent to the resignation of Mr P S Raju, as a Director effective May 31, 2015, Ms Vegesna
Bala Saraswathi was appointed as an additional Director effective July 22, 2015 of our Company as a Nominee. Further, she was elected
by shareholders as a Director at the Annual General Meeting held on July 4, 2016. She retires by rotation at the ensuing Annual
General Meeting scheduled on July 6, 2017 and is eligible for re-election.



Infinity Satcom Universal
Private Limited beneficially owned 8.14% of our equity shares as of March 31, 2017. 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 committee meeting and ₹ 50,000 for each Board meeting attended by them.



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 regulatory approval.



Officer Compensation



The following table
sets forth all compensation paid by us during the fiscal year ended March 31, 2017 to our executive officers:



|                    |  | Summary Compensation Table(₹in million) |      
|------------------- |  | --------------------------------------- | -----
|Name                |  | Salary(1)                               |      
|                    |  |                                         |      
|Kamal Nath          |  |                                         | 13.92
|Ravi Shelvankar (2) |  |                                         | 0.74 
|M P Vijay Kumar     |  |                                         | 11.83
|C R Rao             |  |                                         | 11.18



| | (1) | Includes provident fund contributions.
| | --- | --------------------------------------

| | (2) | Resigned from the services of the Company effective April
9, 2016.
| | --- | ------------------------------------------------------------------



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.



61







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      |  |               | 0.67
|M P Vijay Kumar |  |               | 0.50
|C R Rao         |  |               | 0.47



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, 2017 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.



(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
₹ 79.45 million ($1.23 million) towards bonus payable for the year ended March 31, 2017 to employees including executive
officers who have achieved the KRAs and KPIs.



Total of 1.65 million
options were allotted to executive officers as part of ASOP 2014 plan during fiscal 2015. No such options were allotted to executive
officers during fiscal 2016 and 2017. Related charge for the fiscal 2017 amounted to ₹3.75 million ($0.06 million).



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
on the Board. 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



However Independent
Directors are not liable to retire by rotation.



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.



62







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 and, T H Chowdary) continue to remain independent in accordance with NASDAQ rules.



In addition, based on the recommendation
of the Board of Directors the above four Directors were appointed by the shareholders as the Independent Directors of the Board
for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held 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 was reappointed as the Chairman & Managing Director for a further period of five years effective July 18, 2014 and the same was approved by the shareholders of the Company at the Annual General Meeting held on July 28, 2014. The Ministry of Corporate Affairs, Government of India also approved the same.  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. Pursuant to the recommendation of the Nomination & Remuneration Committee and the Board, Mr Ananda Raju Vegesna was reappointed as the Executive Director for a further period of five years effective June 22, 2015 which was approved by the shareholders at the Annual General Meeting held on June 18, 2015.                                                                                                                                                                                                                                              
|Dr T H Chowdary, Chairman of Compensation and Nominating Committees |  | Appointed as a Director in February 1996.  As per the Indian Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014.                                                                                                                                                                                                                                                                                                                                                                                            
|Dr S K Rao                                                          |  | Appointed as a Director in July 2005.  As per the Indian Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014.                                                                                                                                                                                                                                                                                                                                                                                                
|Ms Vegesna Bala Saraswathi                                          |  | Appointed as an Additional Director in July 2015.  As per the Indian Companies Act, 2013, she was elected by the shareholders at the Annual General Meeting held on July 4, 2016. Further, as per the Act, she retires by rotation at the ensuing Annual General Meeting scheduled on July 6, 2017 and is eligible for re-election                                                                                                                                                                                                                                                                                                                
|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, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held 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, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014.                                                                                                                                                                                                                                                                                                                                                                     



The Company has service
contracts with Mr. Raju Vegesna, CEO, Chairman and Managing Director. The service contracts with Mr. 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 appointment.



63







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 five meetings
in person during fiscal year 2016-17.



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



Compensation Committee



Our Compensation Committee consists of
one executive and three independent directors as determined under applicable NASDAQ rules, and consists of:



| | (i) | Dr T H Chowdary;
| | --- | ----------------



| | (ii) | Dr S K Rao;
| | ---- | -----------



| | (iii) | Mr C E S Azariah and
| | ----- | --------------------



| | (iv) | Mr Ananda Raju Vegesna
| | ---- | ----------------------



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 has
adopted a Charter, which is reviewed annually.



The Compensation Committee held four meetings
in person during fiscal 2016-17.



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



64







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. 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.



The Corporate Social
Responsibility (CSR) is displayed on the Company’s website at http://corporate.sify.com/csr-policy.html.



For the financial year 2016-17, the company
has spent ₹ 8.39 million in pursuance of its Corporate Social Responsibility Policy in the following manner:



| | 1. | Contribution to the Hospital for the Disabled: the Company has contributed ₹7.0 million to Sri Venkateswara Institute of Research and Rehabilitation for the Disabled Trust, Dwarakha, Tirumala Hospital for the disabled which runs by the Trust.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Contribution towards promoting Education:the Company has contributed ₹ 0.34 million towards promotion of education.
| | -- | -------------------------------------------------------------------------------------------------------------------



| | 3. | Contribution towards Sports:The Company has spent a sum of ₹1.05 million towards sports meets for the disabled.
| | -- | ---------------------------------------------------------------------------------------------------------------



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 Nominating Committee is
to oversee nomination process for 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 July 22, 2015, the Nominating Committee
has reviewed and recommended the appointment of Ms Vegesna Bala Saraswathi as an additional Director of the Company who holds office
upto the Annual General Meeting. Further, she was elected by shareholders as a Director at the Annual General Meeting held on July
4, 2016, who retires by rotation at the ensuing Annual General Meeting to be held on July 6, 2017 and is eligible for re-election.



The Nominations Committee has adopted a
charter.



Employees



As of March 31, 2017,
we had 2,318 employees, compared with 2,175 as of March 31, 2016. Of our current employees, 110 are administrative, 390 form our
sales and marketing, 37 are in product and content development, 1,712 are dedicated to technology and technical support, and 69
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.



Stock Ownership



The following table
sets forth information with respect to the beneficial ownership of our equity shares as of May 31, 2017 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.



65







|                        |  | Equity Shares Beneficially Owned |            
|----------------------- |  | -------------------------------- | -----------
|Beneficial Owner        |  | Number                           |            
|Raju Vegesna *          |  |                                  | 154,053,326
|Ananda Raju Vegesna     |  |                                  | -          
|Vegesna Bala Saraswathi |  |                                  | -          
|T. H. Chowdary          |  |                                  | -          
|C B Mouli               |  |                                  | -          
|S K Rao                 |  |                                  | -          
|C E S Azariah           |  |                                  | -          



All 125,000,000 shares 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 March 31, 2017, the entities affiliated
with Mr. Vegesna had paid for 77.5% of the shares sold pursuant to the subscription agreement described elsewhere in this form,
and his beneficial ownership is approximately 83.70%. As only 96,875,000 shares have the right to vote at this time, he may only
vote those 96,875,000 shares.



The balance amount of 22.5% 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.



Associate 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 2014 was approved by
our Board of Directors and our shareholders in July 2014 and 25,000,000 shares were reserved for issuance under the plan. This
was in addition to the earlier ASOP Plans of 2000, 2002, 2005 and 2007. A total of 25 million equity shares are currently reserved
for issuance under our ASOP Plans. As of March 31, 2017, we had outstanding an aggregate of 5.84 million options under our ASOP
Plans with a weighted average exercise price equal to approximately ₹ 73.55 ($1.13) 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 introduced
a new Stock Option Plan under Associate Stock Option Plan 2014 (ASOP 2014) for granting ESOPs as Equity Shares and/or ADSs linked
warrants to the eligible Associates of the Company and its Holding/Subsidiaries/Associates. For this purpose, the Company allocated
25 million Equity Shares of ₹ 10/- each under ASOP 2014. The proposal was approved by the shareholders of the Company at
the Eighteenth Annual General Meeting held on July 28, 2014.



Subsequently, the Board
at their meeting held on January 20, 2015 approved to grant of 5,870,800 options to 85 Associates and issued Grant Letters. Further
during fiscal 2016 and 2017, the Company granted 184,300 and 525,000 options to eligible Associates.



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.



66







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.



We have filed Form S-8 on December 21,
2015 with SEC for the options issued under the plan. The vesting of options has commenced from January 2016 and so far no employee
has exercised vested options.



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 March 31, 2017 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, CEO, 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, CEO, Chairman and 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, 2017,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.29% 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 SharesBeneficially 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     |  |                                 | 620,466    
|                                                                                           |  |                                 |            
|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.



67







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



|Name of the shareholder                                 |  | 2014-15       |             |  | 2015-16 |  |       | 2016-17       | 
|------------------------------------------------------- |  | ------------- | ----------- |  | ------- |  | ----- | ------------- | 
|                                                        |  | 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 86.29% of the equity shares eligible to vote in
the meeting.



** 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 made to note 37 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 77.50 % 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, 2017,
39,000,135 of our ADSs were held in the United States and we had approximately 11,278 shareholders in the United States. Each ADS
represents one equity share.



Host country Shareholders



As on March 31, 2017,
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 ₹ 7.75 per share.



Control of Registrant



Based on our review
of filings made with the SEC, Infinity Capital Ventures, LP beneficially owned 7.79 % of our equity shares as of March 31, 2017.
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. Consequent to the
resignation of Mr P S Raju, as a Director effective May 31, 2015, Ms Vegesna Bala Saraswathi was appointed as an additional Director
of our Company effective July 22, 2015, as a Nominee. Further, she was elected by shareholders as a Director at the Annual General
Meeting held on July 4, 2016. She retires by rotation at the ensuing Annual General Meeting scheduled on July 6, 2017 and is eligible
for re-election.



Infinity Satcom Universal
Private Limited, India also beneficially owned 8.14% of our equity shares as of March 31, 2017.



As of March 31, 2017,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.29% of
our outstanding equity shares, which includes the 125,000,000 shares issued in connection with the private placement described
below.



68







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.



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 37 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, Chairman
and Managing Director 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 $ 3,000,000 in a private transaction.



69







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 CEO, Chairman and Managing Director, Mr Raju Vegesna. See note 37 in the notes to the consolidated
financial statements in this Annual Report.



The proceeds from the
said issue has been utilized towards capital expenditure and expansion plans of the Company. As of March 31, 2017, we had received
an aggregate of $ 47.81 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 shareholder and CEO, Chairman, Managing Director, was holding 94.66% equity in his personal capacity. VALS
executed a MoU on June 16, 2008 with Advance India Private Limited (“AIPL”) and HERMIT Projects Private Limited (“HERMIT”)
for the purchase of shares of HERMIT. HERMIT in turn held entire share capital of Pace Info Com Park Private Limited (“Pace”).
AIPL was the Holding Company of HERMIT. During the year ended March 31, 2009, Sify entered into a memorandum of understanding with
VALS Developers Private Limited to obtain land on which building was proposed to be 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.



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 Center.



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 34.



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 34 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 34 in the notes to the financial statements in this annual
report.



70







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, 2017, the loan outstanding from employees is ₹ 7.43 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 2017.



Legal Proceedings



| | a) | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



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.



On a related matter, the service
providers had approached TDSAT (the ‘Tribunal’) 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. The Tribunal by its order dated April 23, 2015 held that
revenue from sale of scrap, treasury income etc are to be included as part of AGR. The Tribunal has also passed an order asking
DOT to levy at most nominal amount as token penalty with interest if permissible at the lower rates. The Company had approached
Honourable High Court of Madras (Court) in 2013 by filing a writ petition prohibiting Department of Telecommunications (DOT) from
levying license fee on non-licensed activities. An interim order was passed by the Court restraining DOT from recovering license
fee in respect of non- telecom activities for the writ petition filed in 2013.



Also, the Group has received
notices for earlier years from DoT claiming License fee on the total Income (including income from Non Licensed activities). The
Group has replied to these notices stating that license fees are not payable on income from non-licensed activities. The Group
believes that it has adequate legal defenses against these notices and that the ultimate outcome of these actions may not have
a material adverse effect on the Group's financial position and result of operations.



| | (ii) | The present license for ISP under unified license issued by DOT on June 2, 2014 provides for payment
of License fee on pure Internet services. However, the company through Internet Service Providers Association of India (ISPAI)
challenged the said clause before TDSAT. TDSAT passed a stay order on DOT from charging the license fee on pure Internet services.
The group has appropriately accounted for any adverse effect that may arise in this regard in the books of account.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | The Company is party to additional legal actions arising in the ordinary course of business. Based
on the available information as at March 31, 2017, 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 judgment in
all these cases, the maximum financial exposure would be ₹ 37.4 million (March 31, 2016: ₹ 19.7 million)
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



71







Dividends



In view of the good
performance of the Company during the fiscal 2016-17 and availability of divisible profits, the Board of Directors recommended
12% cash dividend to all the shareholders of the Company for the year ended March 31, 2017, which is placed in the Notice of Annual
General Meeting for Shareholders approval at the Annual General Meeting Scheduled to be held on July 6, 2017.



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.



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 Select 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, 2017    |  |      | 1.37 |  |     | 
|March 31, 2016    |  |      | 1.62 |  |     | 
|March 31, 2015    |  |      | 2.55 |  |     | 
|March 31, 2014    |  |      | 2.73 |  |     | 
|March 31, 2013    |  |      | 3.35 |  |     | 



|                                 |  | High |      |  | Low | 
|-------------------------------- |  | ---- | ---- |  | --- | 
|Fiscal year ended March 31, 2017 |  | $    |      |  | $   | 
|First Quarter                    |  |      | 1.37 |  |     | 
|Second Quarter                   |  |      | 1.17 |  |     | 
|Third Quarter                    |  |      | 1.10 |  |     | 
|Fourth Quarter                   |  |      | 0.97 |  |     | 



|                                 |  | High |      |  | Low | 
|-------------------------------- |  | ---- | ---- |  | --- | 
|Fiscal year ended March 31, 2016 |  | $    |      |  | $   | 
|First Quarter                    |  |      | 1.62 |  |     | 
|Second Quarter                   |  |      | 1.62 |  |     | 
|Third Quarter                    |  |      | 1.31 |  |     | 
|Fourth Quarter                   |  |      | 1.27 |  |     | 



72







Most recent six months



|Month         |  | High |      |  | Low | 
|------------- |  | ---- | ---- |  | --- | 
|              |  | $    |      |  | $   | 
|May 2017      |  |      | 0.90 |  |     | 
|April 2017    |  |      | 0.96 |  |     | 
|March 2017    |  |      | 0.94 |  |     | 
|February 2017 |  |      | 0.94 |  |     | 
|January 2017  |  |      | 0.97 |  |     | 
|December 2016 |  |      | 0.91 |  |     | 



Item 10. Additional
Information



In fiscal 2015, the
authorized share capital of the Company was enhanced by an amount of ₹ 189,000,000. Consequently our
authorized share capital was increased to ₹ 2,040,000,000, divided into 204,000,000 Equity Shares, having a par value ₹
10 per share.



As of March 31, 2017,
178,530,787 Equity Shares were issued, outstanding, of which 125,000,000 Equity Shares were partly paid and the balance fully paid.



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.



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).



73







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 US $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 CEO, 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 to note 37 to the Consolidated Financial statements.



The ASOP 2014 gives the Board and the Compensation Committee
the absolute discretion and power in formulating the Rules, Regulations, Eligibility criteria, Vesting Schedule, Expiry etc. of
the Plan and also to amend the same in the Plan from time to time as they may deem fit and appropriate.



During the year, the Nomination and Remuneration Committee has approved to grant the options and the details
are given below:



|Category                                                                                       |  | Total No of
    Options |         |  | No. of
    Associates | 
|---------------------------------------------------------------------------------------------- |  | ----------------------- | ------- |  | --------------------- | 
|                                                                                               |  |                         |         |  |                       | 
|Associates who have completed more than 2 years of Service with Sify on the date of grant,     |  |                         | -       |  |                       | 
|                                                                                               |  |                         |         |  |                       | 
|Associates who have completed  between 1 and 2 years of Service with Sify on the date of grant |  |                         | -       |  |                       | 
|                                                                                               |  |                         |         |  |                       | 
|Associates who have completed  less than 1 year of service with Sify  on the date of grant     |  |                         | 525,000 |  |                       | 
|                                                                                               |  |                         |         |  |                       | 
|Total                                                                                          |  |                         | 525,000 |  |                       | 



The Nomination and Remuneration Committee
had approved to grant 5,870,800 options during the fiscal 2015 and 184,300 options during Fiscal 2016.



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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



74







| | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 2013:



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



75







| | (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, which is
Rs.20,000 for each Meeting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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, 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 the annual 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.



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 by the shareholders 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 and it
is left to the discretion of the Company which may transfer such percentage of its profits as it may consider appropriate.



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:



76







| | · | 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.



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 pre-emptive rights for the issuance of any new shares and a reduction of share capital, require
that votes cast in favour 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;



77







(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.



Pre-emptive 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 favour 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 pre-emptive
rights holders in the manner that it deems most beneficial to the Company.



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.



2016 Annual General Meeting



Our Annual General
Meeting for the fiscal year 2016 was held on July 4, 2016 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 approved the following items:



| | · | Adoption of audited financials for the fiscal year ended March 31, 2016 as per Indian GAAP.
| | - | -------------------------------------------------------------------------------------------



78







| | · | Declaration of Dividend for the year ended March 31, 2016.
| | - | ----------------------------------------------------------

| | · | Appoint a Director in place of Mr Ananda Raju Vegesna (DIN 01598346), who retires by rotation and
being eligible, offers himself for reappointment..
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Reappointment of ASA & Associates LLP as the statutory auditors.
| | - | ----------------------------------------------------------------

| | · | Appointment of Ms Vegesna Bala Saraswathi, as a Director.
| | - | ---------------------------------------------------------

| | · | Ratification of Remuneration payable to Mr S Ramachandran, Cost Auditor.
| | - | ------------------------------------------------------------------------



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.



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 GNSA Infotech Limited, Chennai.



Disclosure of Ownership Interest



Section 89 of
the Indian Companies Act 2013 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.



79







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 audited financial statements 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.



The Company has voluntarily
adopted the Indian Accounting Standards (Ind AS) and prepared the Financials under Ind AS for the year 2015-16 though it was mandatorily
required only from the year 2016-17 onwards. The Financial Statements were approved by the Board of Directors as well as the Shareholders
at the Twentieth Annual General Meeting held on July 4, 2016.



The Company could not
file the financial statements and other documents with Ministry of Corporate Affairs, Government of India (“MCA”) till
date, since the Taxonomy for converting the Financials prepared under Ind AS into XBRL format is yet to be released by MCA. The
Company has made representations to MCA at various levels and the Professional Bodies viz. the Institute of Chartered Accountants
of India and the Institute of Company Secretaries of India in this regard and awaiting their assistance in resolving this issue.



The Company has however
filed a printed annual report prepared as per Indian Companies Act with the Registrar of Companies, Chennai.



The Company is confident
of filing the Audited Financials in XBRL format for the year 2015-16 along with the Financials for 2016-17 as soon as the taxonomy
is released.



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.



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.



80







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 pre-emptive 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 and 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".



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.



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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.



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.



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.
| | -- | ---------------------------------------------------------------------------------------------------------------------



However,
the above limits have been reversed in the year 2014.



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.



82







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 Indian 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.



The Government is yet
to notify the scheme.



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;
| | - | -----------------------------------

| | · | 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.



83







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 endeavour 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.



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



The Finance Act, 2012
included General Anti-Avoidance Rule (GAAR), wherein the tax authority may declare an arrangement as an impermissible avoidance
arrangement if an arrangement is not entered at arm’s length, results in misuse / abuse of provisions of Income Tax Act,
1961 lacks commercial substance or the purpose of arrangement is for obtaining a tax benefit. If any of our transactions are found
to be ‘impermissible avoidance arrangements’ under GAAR, our business may be adversely affected.



84







The GAAR was originally
proposed to become effective for transactions entered into on or after April 1, 2013. In September 2013, vide Notification No.
75, the Government of India had notified the applicability of the GAAR provisions along with certain threshold limits which will
become effective from April 1, 2015. However vide Finance Act, 2015 the implementation of GAAR has been deferred by 2 years so
as to implement it as part of a comprehensive regime to deal with OECD’s BEPS project of which India is an active participant.
Thus, GAAR provisions shall be applicable from fiscal 2018.



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.



Provisions of the Income
Tax Act have been amended effective April 1, 2016 for determination of place of effective management (POEM) of a Company. Accordingly,
Section 6(3) was amended to provide that a Company is said to be resident in India in any financial year if it is an Indian Company
or its POEM in that year is in India. POEM has been defined to mean a place where key management and commercial decisions that
are necessary for the conduct of the business of an entity as a whole are, in substance, made. The effective date of these amendments
have been postponed to fiscal year commencing April 2017.



EACH PROSPECTIVE INVESTOR SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVISORS WITH RESPECT TO INDIAN AND LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY
SHARES OR ADSs



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 of at least 182 days; or at least 60 days and at least 365 days within the four preceding years.



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. Dividend income is currently
exempt from tax for shareholders.



Up to fiscal 2013,
the domestic companies were liable to pay a dividend distribution tax at the rate of 16.22% inclusive of applicable surcharge and
education cess. The Finance Act, 2013 has increased the surcharge on dividend distribution tax from 5% to 10% which resulted in
increase in the effective rate of dividend distribution tax to 16.995% as against 16.22% effective April 1, 2013. Any distributions
of additional ADSs or equity shares to resident or non-resident holders will not be subject to Indian tax. The Finance Act, 2014
made an amendment in section 115-O, which requires grossing up of dividend amount distributed for computing DDT. As a result the
effective rate of DDT increased from 16.995% to 19.994% inclusive of surcharge and cess. This was effective from October 1, 2014.
Further as a result of increase in rate of surcharge in the Finance Act, 2015, the effective rate of DDT has increased to 20.3576%
from 19.994% at present. Any distributions of additional ADSs or equity shares to resident or non-resident holders will not be
subject to Indian 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 tax on taxable income of a Company computed
under this Act, in respect of a previous year is less than 18.5% of its book profits, the tax on total income of such Company for
the relevant previous year shall be deemed to be an amount equal to 18.5% of such 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 The Finance Act, 2015 has increased the
surcharge to 12% from 10% which has resulted in the increase in the effective rate of MAT to 21.3416% from 20.9605% at present.



The Income Tax Act
provides that the MAT paid by companies can be adjusted against its tax liability over the next ten years

.

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.



85







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.
Finance Act (No.2) 2014, introduced Section 115QA to tax the distributed income of domestic company on buy back of securities at
an effective rate of 22.66%. Such tax will be paid by the company before distribution of buy back amount. Correspondingly exemption
to shareholder under section 10(34A) is provided



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. Finance Act (No.2) 2014, abolished Wealth tax.



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
14.5% till May 31, 2016. The service tax has been increased to 15% effective June 1 2016. The stock broker is responsible for collecting
the service tax from the shareholder and paying it to the relevant authority



86







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.
From fiscal year 2015, the corporate income tax rate is 30%, subject to a surcharge of 12% where the taxable total income exceeds
₹ 10 crores and education cess of 2 % and 1% secondary and higher education cess, resulting in an effective tax rate of 34.61%
(or 33.99%). 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 2014 has increased the rate of dividend distribution tax to 15% plus applicable surcharge
and education cess resulting in an effective rate of 20.358%.



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 made 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
herein, 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.



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.



87







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 Select 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 the NASDAQ Global Select Market.
Nonetheless, we may be eligible for benefits under the Treaty. Each U.S. holder should consult his, her or 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 entitled 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.



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.



88







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 or 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 U.S. holder, other than
an “exempt recipient,” if such U.S. 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.



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.



89







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 36 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.                                                                                             



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



90







(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.



Amendment to the Depositary Agreement
with Citibank NA. New York.



By Letter dated October 4, 2016, the Company
has executed an amendment to the Letter Agreement dated February 17, 2009 with Citibank N.A., New York wherein the Depository Service
Fees was reduced from USD 0.025 to USD 0.015 per ADS per year. Further, the agreement with the Citibank was also extended upto
March 31, 2020.



As per the amendment agreement, Citibank
will make available to the Company an Annual Financial Contribution for each Programme Year equal to 33% of the Depositary Service
Fee collected from the ADS holders and the Contribution will be used by the Company solely to defray Program Related Expenses.



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, 2017 in connection
with our ADS Program:



|Fee                                    |  | Amount in US $ |          
|-------------------------------------- |  | -------------- | ---------
|Travel (Investor Relations)            |  |                | 10,000.00
|Internet , telephone  and mail charges |  |                | -        
|Printing/mailing/processing            |  |                | 22,683.64
|Text Conversion charges & others       |  |                | 450.00   
|Total amount reimbursed                |  |                | 31,133.64



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



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 CEO, Chairman, Managing Director
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.



91







Based on their evaluation
as of March 31, 2017, our CEO, Chairman and Managing Director 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 CEO, Chairman, Managing Director 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,
2017. In conducting its assessment of internal control over financial reporting, management based its evaluation on the framework
in Internal Control — Integrated Framework 2013 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, 2017.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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, 2017.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



92







Report of Independent Registered Public
Accounting Firm



The Board of Directors and Shareholders



Sify Technologies Limited



We have audited Sify Technologies Limited’s
(“the Company”) internal control over financial reporting as of March 31, 2017, based on criteria established
in Internal Control — Integrated Framework (2013)issued 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 the 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, 2017, based on criteria established
in Internal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway
Commission(COSO).



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated statements of financial position of the Company and subsidiaries as of March 31, 2017 and
March 31, 2016 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, 2017 and our report dated June 15, 2017 expressed an unqualified
opinion on those consolidated financial statements.



ASA & Associates LLP

Independent Registered Public Accounting
Firm

Chennai,India
June 15, 2017



93







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. See Item 6 for description of Mr. Mouli’s relevant experience.



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.corporate.sify.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.corporate.sify.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.corporate.sify.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, 2017 |             
|(a) Audit Fees         |  | ₹                  | 5.40
million
|(b) Audit Related Fees |  |                    | -           
|(c) Tax Fees           |  |                    | -           
|(d) All Other Fees     |  |                    | -           



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.



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.



94







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



95







Report of Independent Registered Public
Accounting Firm



The Board of Directors and Shareholders

Sify Technologies Limited



We have audited the accompanying consolidated statements of financial position of Sify Technologies Limited
and its subsidiaries(‘the Company’) as of March 31, 2017 and 2016 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 31,2017.
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 audits.



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



In our opinion, based on our audits, 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, 2017 and 2016 and the results of their operations and their cash flows for each
of the years in the three-year period ended March 31, 2017, 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, 2017, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 15, 2017
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
June 15, 2017



96







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            |  | 2017₹ |                 |  
|                                                           |  |                 |  |       |                 |  
|Assets                                                     |  |                 |  |       |                 |  
|Property, plant and equipment                              |  | 5               |  |       | 6,622,081       |  
|Intangible assets                                          |  | 6               |  |       | 559,102         |  
|Lease prepayments                                          |  | 8               |  |       | 1,017,623       |  
|Other assets                                               |  | 9               |  |       | 1,121,872       |  
|Other investments                                          |  | 14              |  |       | 74,653          |  
|Deferred tax assets                                        |  | 10              |  |       | -               |  
|Total non-current assets                                   |  |                 |  |       | 9,395,331       |  
|                                                           |  |                 |  |       |                 |  
|Inventories                                                |  | 11              |  |       | 1,181,987       |  
|Trade and other receivables, net                           |  | 12              |  |       | 8,781,692       |  
|Prepayments for current assets                             |  | 13              |  |       | 290,779         |  
|Restricted cash                                            |  | 7               |  |       | 262,907         |  
|Cash and cash equivalents                                  |  | 7               |  |       | 1,621,358       |  
|Total current assets                                       |  |                 |  |       | 12,138,723      |  
|Total assets                                               |  |                 |  |       | 21,534,054      |  
|                                                           |  |                 |  |       |                 |  
|Equity                                                     |  | 15              |  |       |                 |  
|Share capital                                              |  |                 |  |       | 1,516,875       |  
|Share premium                                              |  |                 |  |       | 18,680,731      |  
|Share based payment reserve                                |  |                 |  |       | 305,539         |  
|Other components of equity                                 |  |                 |  |       | 26,798          |  
|Accumulated deficit                                        |  |                 |  |       | (12,265,524     | )
|Total equity attributable to equity holders of the Company |  |                 |  |       | 8,264,419       |  



97







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            |  | 2017₹ |                 | 
|                                                           |  |                 |  |       |                 | 
|Liabilities                                                |  |                 |  |       |                 | 
|Finance lease obligations, other than current installments |  | 16              |  |       | 185,736         | 
|Borrowings                                                 |  | 19              |  |       | 881,834         | 
|Employee benefits                                          |  | 17              |  |       | 127,298         | 
|Other liabilities                                          |  | 18              |  |       | 636,566         | 
|Total non-current liabilities                              |  |                 |  |       | 1,831,434       | 
|                                                           |  |                 |  |       |                 | 
|Finance lease obligations, current installments            |  | 16              |  |       | 333,483         | 
|Borrowings                                                 |  | 19              |  |       | 2,529,244       | 
|Bank overdraft                                             |  | 7               |  |       | 991,161         | 
|Trade and other payables                                   |  | 20              |  |       | 6,367,607       | 
|Deferred income                                            |  | 21              |  |       | 1,216,706       | 
|Total current liabilities                                  |  |                 |  |       | 11,438,201      | 
|                                                           |  |                 |  |       |                 | 
|Total liabilities                                          |  |                 |  |       | 13,269,635      | 
|Total equity and liabilities                               |  |                 |  |       | 21,534,054      | 



The accompanying notes form an integral
part of these consolidated financial statements



98







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                 |  | 2017₹ |                      |  
|                                             |  |                      |  |       |                      |  
|Revenue                                      |  |                      |  |       |                      |  
|- Rendering of services                      |  |                      |  |       | 17,033,322           |  
|- Sale of products                           |  |                      |  |       | 1,398,698            |  
|Total                                        |  | 22                   |  |       | 18,432,020           |  
|Cost of goods sold and services rendered     |  |                      |  |       |                      |  
|- Rendering of services                      |  |                      |  |       | (9,806,582           | )
|- Sale of products                           |  |                      |  |       | (2,063,639           | )
|Total                                        |  | 24                   |  |       | (11,870,221          | )
|Other income                                 |  |                      |  |       | 145,872              |  
|Selling, general and administrative expenses |  | 25                   |  |       | (3,991,273           | )
|Depreciation and amortization                |  | 5 & 6                |  |       | (1,758,776           | )
|Profit from operating activities             |  |                      |  |       | 957,622              |  
|                                             |  |                      |  |       |                      |  
|Finance income                               |  | 28                   |  |       | 122,584              |  
|Finance expenses                             |  | 28                   |  |       | (437,109             | )
|Net finance income / (expense)               |  |                      |  |       | (314,525             | )
|                                             |  |                      |  |       |                      |  
|Profit before tax                            |  |                      |  |       | 643,097              |  
|Income tax (expense) / benefit               |  | 10                   |  |       | (698                 | )
|Profit for the year                          |  |                      |  |       | 642,399              |  
|Attributable to:                             |  |                      |  |       |                      |  
|Equity holders of the Company                |  |                      |  |       | 642,399              |  
|Non-controlling interest                     |  |                      |  |       | -                    |  
|                                             |  |                      |  |       | 642,399              |  
|Earnings per share                           |  | 29                   |  |       |                      |  
|Basic earnings per share                     |  |                      |  |       | 4.45                 |  
|Diluted earnings per share                   |  |                      |  |       | 4.45                 |  



The accompanying notes form an integral
part of these consolidated financial statements



99







Sify Technologies Limited

Consolidated Statement of Comprehensive
Income

(In thousands of Rupees, except share data
and as otherwise stated)



|                                                          |  | Year ended March 31, |         |   |         | 
|--------------------------------------------------------- |  | -------------------- | ------- | - | ------- | 
|                                                          |  | 2017  ₹              |         |   | 2016  ₹ | 
|Profit for the year                                       |  |                      | 642,399 |   |         | 
|Other comprehensive income                                |  |                      |         |   |         | 
|Items that will not be reclassified to profit or loss     |  |                      |         |   |         | 
|Remeasurements of the net defined benefit liability/asset |  |                      | (17,034 | ) |         | 
|Items that may be reclassified to profit or loss          |  |                      |         |   |         | 
|Exchange differences on translation of foreign operations |  |                      | (7,663  | ) |         | 
|Total other comprehensive income, net of taxes            |  |                      | (24,697 | ) |         | 
|Total comprehensive income                                |  |                      | 617,702 |   |         | 
|Total comprehensive income attributable to:               |  |                      |         |   |         | 
|Equity holders of the Company                             |  |                      | 617,702 |   |         | 
|Non-controlling interest                                  |  |                      | -       |   |         | 
|                                                          |  |                      | 617,702 |   |         | 



100







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, 2017                        
|-----------------------------------------------------
|Particulars                                          
|Balance at April 1, 2016                             
|                                                     
|Total comprehensive income for the year              
|Transactions with owners, recorded directly in equity
|Call money received                                  
|Dividends paid (incl dividend distribution tax)      
|Transaction costs related to equity                  
|Share-based payment transactions                     
|Balance at March 31, 2017                            



|For year ended March 31, 2016                        
|-----------------------------------------------------
|Particulars                                          
|Balance at April 1, 2015                             
|                                                     
|Total comprehensive income for the year              
|Transactions with owners, recorded directly in equity
|Call money received                                  
|Dividends paid (incl dividend distribution tax)      
|Share-based payment transactions                     
|Balance at March 31, 2016                            



101







|For year ended March 31, 2015                        
|-----------------------------------------------------
|Particulars                                          
|Balance at April 1, 2014                             
|                                                     
|Total comprehensive income for the year              
|Transactions with owners, recorded directly in equity
|Call money received                                  
|Dividends paid (incl dividend distribution tax)      
|Share-based payment transactions                     
|Balance at March 31, 2015                            



The accompanying notes form an integral
part of these consolidated financial statements.



102







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, |            |   |        | 
|------------------------------------------------------------------ |  | -------------------- | ---------- | - | ------ | 
|                                                                   |  | 2017 ₹               |            |   | 2016 ₹ | 
|                                                                   |  |                      |            |   |        | 
|                                                                   |  |                      |            |   |        | 
|Profit for the year                                                |  |                      | 642,399    |   |        | 
|Adjustments for:                                                   |  |                      |            |   |        | 
|Depreciation and amortization                                      |  |                      | 1,758,776  |   |        | 
|(Gain) / loss on sale of property, plant and equipment             |  |                      | (1,081     | ) |        | 
|Provision for advances no longer required written back             |  |                      | -          |   |        | 
|Provision for doubtful receivables/ advances                       |  |                      | 383,534    |   |        | 
|Provision for expenses no longer required written back             |  |                      | -          |   |        | 
|Stock compensation expense                                         |  |                      | 17,638     |   |        | 
|Net finance (income) / expense                                     |  |                      | 314,525    |   |        | 
|Unrealized (gain)/ loss on account of exchange differences         |  |                      | (68,300    | ) |        | 
|Amortization of leasehold prepayments                              |  |                      | 15,939     |   |        | 
|Tax expense                                                        |  |                      | 698        |   |        | 
|Cash flow from operating activities before working capital changes |  |                      | 3,064,128  |   |        | 
|                                                                   |  |                      |            |   |        | 
|Change in trade and other receivables                              |  |                      | (1,843,683 | ) |        | 
|Change in inventories                                              |  |                      | (440,555   | ) |        | 
|Change in other assets                                             |  |                      | (618,297   | ) |        | 
|Change in trade and other payables                                 |  |                      | 1,379,505  |   |        | 
|Change in employee benefits                                        |  |                      | 26,500     |   |        | 
|Change in deferred income                                          |  |                      | 172,920    |   |        | 
|Cash generated from operations                                     |  |                      | 1,740,518  |   |        | 
|Income taxes (paid)/ refund received                               |  |                      | 7,965      |   |        | 
|Net cash from / (used in) operating activities                     |  |                      | 1,748,483  |   |        | 



103







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, |            |   |       | 
|----------------------------------------------------------------------------------- |  | -------------------- | ---------- | - | ----- | 
|                                                                                    |  | 2017₹                |            |   | 2016₹ | 
|                                                                                    |  |                      |            |   |       | 
|Cash flows from / (used in) investing activities                                    |  |                      |            |   |       | 
|Acquisition of property, plant and equipment                                        |  |                      | (1,596,694 | ) |       | 
|Expenditure on intangible assets                                                    |  |                      | (72,050    | ) |       | 
|Proceeds from sale of property, plant and equipment                                 |  |                      | 2,281      |   |       | 
|Investments in corporate debt securities                                            |  |                      | (72,943    | ) |       | 
|Finance income received                                                             |  |                      | 129,427    |   |       | 
|Net cash from / (used in) investing activities                                      |  |                      | (1,609,979 | ) |       | 
|                                                                                    |  |                      |            |   |       | 
|Cash flows from / (used in) financing activities                                    |  |                      |            |   |       | 
|Proceeds from issue of share capital (including share premium)                      |  |                      | 300,000    |   |       | 
|Proceeds from / (repayment) of borrowings (net)                                     |  |                      | 643,341    |   |       | 
|Transaction costs related to equity                                                 |  |                      | (2,010     | ) |       | 
|Finance expenses paid                                                               |  |                      | (426,696   | ) |       | 
|Proceeds from / (repayment of) finance lease liabilities                            |  |                      | (602,806   | ) |       | 
|Payment of dividend and dividend distribution tax                                   |  |                      | (169,742   | ) |       | 
|Net cash from / (used in) financing activities                                      |  |                      | (257,913   | ) |       | 
|                                                                                    |  |                      |            |   |       | 
|Net increase / (decrease) in cash and cash equivalents                              |  |                      | (119,409   | ) |       | 
|Cash and cash equivalents at April 1                                                |  |                      | 1,016,113  |   |       | 
|Effect of exchange fluctuations on cash held                                        |  |                      | (3,600     | ) |       | 
|Cash and cash equivalents at March 31                                               |  |                      | 893,104    |   |       | 
|                                                                                    |  |                      |            |   |       | 
|Refer note 3 (c) and note 7 for the composition of cash and cash equivalents.       |  |                      |            |   |       | 
|                                                                                    |  |                      |            |   |       | 
|Supplementary information                                                           |  |                      |            |   |       | 
|Additions to property, plant and equipment represented by finance lease obligations |  |                      | 168,715    |   |       | 



The
accompanying notes form an integral part of these consolidated financial statements



104







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, Sify Technologies North America Corporation and Sify Data and Managed Services Limited (together
referred to as the ‘Group’ and individually as ‘Group entities’). The Group is primarily involved in providing
converged ICT solutions comprising network, Data Center, cloud, integration and IT and software 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 June 15, 2017



| | b. | Basis of measurement
| | -- | --------------------



These Consolidated Financial Statements have
been prepared on the historical cost basis except for the following:



| | · | Financial assets at fair value through other comprehensive income
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 and the US.



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.



Convenience translation (unaudited):
Solely for the convenience of the reader, the financial statements as of and for the year ended March 31, 2017 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, 2017, for cable transfers in Indian rupees as published by the Reserve Bank of India which
was ₹ 64.84 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, 2017 or at any other date.



105







| | d. | Use of estimates and judgments
| | -- | ------------------------------



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, judgments and assumptions having the most significant effect on the amounts recognized in
the financial statements are:



| | · | Useful lives of property, plant and equipment (Note 3 e and Note 5)
| | - | -------------------------------------------------------------------

| | · | Useful lives of intangible assets (Note 3 g and Note 6)
| | - | -------------------------------------------------------

| | · | Lease classification (Note 3 h, 8, 16 and 30)
| | - | ---------------------------------------------

| | · | Determination of percentage completion in construction contracts (Note 3 j)
| | - | ---------------------------------------------------------------------------

| | · | Measurement of the recoverable amounts of cash-generating units containing goodwill (Note 3 k and
Note 6)
| | - | ---------------------------------------------------------------------------------------------------------

| | · | Utilization of tax losses (Note 10)
| | - | -----------------------------------

| | · | Measurement of defined employee benefit obligations (Note 17)
| | - | -------------------------------------------------------------

| | · | Measurement of share-based payments (Note 27)
| | - | ---------------------------------------------

| | · | Valuation of financial instruments (Note 3 c, 4, 35 and 36)
| | - | -----------------------------------------------------------

| | · | Provisions and contingencies (Note 3 n and 32)
| | - | ----------------------------------------------



| | 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 is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Thus, the Company controls an investee if and
only if the Company has all the following:

- power over the investee;

- exposure, or rights,
to variable returns from its involvement with the investee; and

- the ability to use
its power over the investee to affect the amount of the Company’s returns.

Generally, there is a presumption that
majority of voting rights results in control. To support this presumption and when the Group has less than a majority of voting
of similar rights of an investee, the group considers all relevant facts and circumstances in assessing whether it has power over
an investee.

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.



106







| | 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 Indian Rupees 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) Financial Assets



Financial assets comprises of investments
in equity and debt securities, trade and other receivables, cash and cash equivalents and other financial assets.



Initial recognition:



All financial assets are recognised initially
at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets
within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade
date, i.e., the date that the Group commits to purchase or sell the asset.



Subsequent measurement:



Financial assets measured at amortized
cost:

Financial assets held within a business
model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial
asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
are measured at amortised cost using effective interest rate (EIR) method. The EIR amortisation is recognised as finance income
in the Statement of Income.



The Group while applying above criteria
has classified the following at Amortised cost

- Trade receivables

- Other financial assets.

- Investment in debt securities



Financial assets at fair value through
other comprehensive income (FVTOCI):

Financial assets that are held within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual
terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding are subsequently measured at FVTOCI. Fair value movements in financial assets at FVTOCI are recognised
in other comprehensive income.



107







Equity instruments held for trading are
classified as at fair value through profit or loss (FVTPL). For other equity instruments the Group classifies the same as at FVTOCI.
The classification is made on initial recognition and is irrevocable. Fair value changes on equity investments at FVTOCI, excluding
dividends, are recognised in other comprehensive income (OCI).



Financial assets at fair value through
profit or loss (FVTPL):

Financial asset are measured at fair value
through profit or loss if it does not meet the criteria for classification as measured at amortised cost or at fair value through
other comprehensive income. All fair value changes are recognised in the Statement of Income.



Derecognition of financial assets:



Financial assets are derecognised when
the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred and the transfer
qualifies for derecognition. On derecognition of a financial asset in its entirety, the difference between the carrying amount
(measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability
assumed) shall be recognised in the Statement of Income.



Impairment of financial assets:



Trade receivables, contract assets, lease
receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments in debt instruments that
are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective financial asset.



Trade receivables

An impairment analysis is performed at
each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified approach using
a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future economic conditions.
In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer segment, past due
status and other factors which are relevant to estimate the expected cash loss from these assets.



Other financial assets

Other financial assets are tested for impairment
based on significant change in credit risk since initial recognition and impairment is measured based on probability of default
over the lifetime when there is significant increase in credit risk.



(ii) Financial liabilities



Financial liabilities are initially recognised
at fair value plus any transaction cost that are attributable to the acquisition of the financial liabilities except financial
liabilities at fair value through profit or loss which are initially measured at fair value.



Subsequent measurement:



The financial liabilities are classified
for subsequent measurement into following categories:

- at amortised cost

- at fair value through
profit or loss



Financial liabilities at amortised cost

The Group is classifying the following
under amortised cost;

a) Borrowings

b) Finance lease obligations

c) Trade and other payables

d) Other financial liabilities



Amortised cost for financial liabilities
represents amount at which financial liability is measured at initial recognition minus the principal repayments, plus or minus
the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity
amount.



Financial liabilities at fair value
through profit or loss

Financial liabilities held for trading
are measured at FVTPL.



108







Derecognition of financial liabilities:



A financial liability shall be derecognised
when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires.



(iii) 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 IFRS 9, 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.



(iv) 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.



(v) Reclassification of financial assets



The Group determines classification of
financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets
which are categorised as equity instruments at FVTOCI and financial assets or liabilities that are specifically designated as FVTPL.
For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for
managing those assets. Changes to the business model are expected to be very infrequent. The management determines change in the
business model as a result of external or internal changes which are significant to the Group’s operations. A change in the
business model occurs when the Group either begins or ceases to perform an activity that is significant to its operations. If the
Group reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the
first day of the immediately next reporting period following the change in business model. The Group does not restate any previously
recognised gains, losses (including impairment gains or losses) or interest.



| | 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.



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.



Interest cost incurred for constructed
assets is capitalized up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing
the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset.



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.



109







(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,
2017, 2016 and 2015 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                           



Depreciation is not recorded on capital
work-in-progress until construction and installation are complete and the asset is ready for its intended use.



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.



(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.



110







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.



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.



111







Assets given on operating lease:



Assets given on operating lease are depreciated
over the useful life of the assets. Rental income is recognised in the statement of income on a straight line basis over the lease
term.



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. Percentage completion is measured based on the amount of time/effort spent on a project.



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
| | -- | ----------



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”).



112







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.



| | 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)
| | --- | ------------------------------------------



Defined contribution plans are post-employment
benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no 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. The Group makes specified monthly contribution towards Government administered provident
fund scheme. The Group also contributes to 401(K) plan on behalf of eligible employees. Obligations for contributions to defined
contribution plans are recognised as an employee benefit expense in profit and loss in the periods during which the related services
are rendered by employees.



| | (b) | Defined benefit plans (Gratuity)
| | --- | --------------------------------



In accordance with applicable Indian laws,
the Group provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn
salary and years of employment with the Group. The gratuity fund is managed by the Life Insurance Corporation of India (LIC). The
Group's net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees
have earned in the current and prior periods, discounting that amount and deducting any unrecognized past service cost and the
fair value of any plan assets.

The discount rate is the yield at the reporting
date on risk free government bonds that have maturity dates approximating the terms of the Group’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.

Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), are recognised in other comprehensive
income and presented within equity. Remeasurements are not reclassified to profit or loss in subsequent periods. Service costs,
net interest expenses and other expenses related to defined benefit plans are recognised in profit or loss.



| | (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.



113







| | (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 in the statement
of income.



| | m. | Share-based payment transactions
| | -- | --------------------------------



The fair value of options on grant date,
(equity-settled share based payments) 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.



| | 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 Recognition
| | -- | -------------------



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 group;
| | - | -----------------------------------------------------------------

| | 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:



114







(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.



The Group provides NLD (National Long Distance)
and ILD (International Long Distance) services through Company’s network.  The Group 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



(ii)	Data Center 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.



(iii)	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 contracts where revenue is recognised on percentage
completion method. The stage of completion is measured by efforts spent to estimated total efforts on straight line basis over
the term of the contract.



(iv)	Technology Integration Services:



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



Revenue from construction contract represents
revenue from construction of Data Centers 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.



(v)	Applications Integration Services:



Revenue from Applications Integration services
include online assessment, document management services, web development, mailing solutions, digital certificate based authentication
services, supply chain software and e-learning software development services. E-learning software development services consist
of structuring of content, developing modules, delivery and training users in the modules developed. Revenue from Applications
Integration Services is recognised based on percentage of completion method. Percentage completion is measured based on the amount
of time/effort spent on a project. 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 Group enters into contracts with customers
to serve advertisements in the portal and the Group 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. 
Revenue from commissions earned on electronic commerce transactions are recognised when the transactions are completed.



115







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.



Multiple element contracts



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.



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
| | -- | --------------



Finance income comprises interest income
on funds invested, dividend income and gains on the disposal of 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.



| | q. | Finance expense
| | -- | ---------------



Finance expense comprises borrowing costs,
bank charges, unwinding of discount on provision, fair value losses on financial assets at fair value through profit or loss that
are recognized in Statement of Profit and Loss. Fair value changes attributable to hedged risk are recognised in the Statement
of Profit and Loss.



Borrowing costs

Borrowing costs are interest and other
costs (including exchange difference relating to foreign currency borrowings to the extent that they are regarded as an adjustment
to interest costs) incurred in connection with the borrowing of funds. Interest expense is recognised using effective interest
method.



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.



116







| | 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.



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.



| | s. | Earnings per share
| | -- | ------------------



The Group presents basic and diluted earnings
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) | Standards early adopted by the Group
| | --- | ------------------------------------



IFRS 9 Financial instruments: In
July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard
reduces the complexity of the current rules on financial instruments as mandated in IAS 39. 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.
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.



117







IFRS 9 replaces the ‘incurred loss
model’ in IAS 39 with an ‘expected credit loss’ model. The measurement uses a dual measurement approach, under
which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard
also introduces new Presentation and disclosure requirements.The effective date for adoption of IFRS 9 is annual periods beginning
on or after January 1, 2018, though early adoption is permitted. Effective April 1, 2015, the Group has elected to early adopt
IFRS 9.



| | (ii) | New Standards and interpretations not yet adopted
| | ---- | -------------------------------------------------



IFRS 15 Revenue from Contracts with
Customers: In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contracts with
Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty
of revenue and cash flows arising from the entity’s contracts with customers. The standard permits the use of either the
retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on
or after January 1, 2018, though early adoption is permitted. The Group is currently evaluating the effect of IFRS 15 on the consolidated
financial statements.



IFRS 16 leases:IFRS 16 on lease
was issued on January 13, 2016 and is effective from the year January 1, 2019. The standard replaces all existing lease accounting
requirements and represents a significant change in accounting and reporting of leases, with more assets and liabilities to be
reported on the Statement of Financial Position and a different recognition of lease costs. The Group is currently evaluating the
effect of the standard on the consolidated financial statements.



IFRIC 22 Foreign
currency transactions and advance consideration: IFRIC 22 was issued on December 8, 2016 which clarifies the date of the transaction
for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an
entity has received or paid advance consideration in a foreign currency. The effective date for adoption of IFRIC 22 is annual
reporting periods beginning on or after January 1, 2018, though early adoption is permitted. The Group is currently evaluating
the effect of the same 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 value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer
the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in
the most advantageous market for the asset or liability. The principal market or the most advantageous market must be accessible
to the Group.



The fair value of an asset or a liability
is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.



A fair value measurement of a non-financial
asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best use.



The Group uses valuation techniques that
are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.



All assets and liabilities for which fair
value is measured or disclosed in the financial statements are categorised within the fair value hierarchy based on the lowest
level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as below:

| | Level 1 - | unadjusted quoted prices in active markets for identical
assets and liabilities.
| | --------- | --------------------------------------------------------------------------------

| | Level 2 - | Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly or indirectly.
| | --------- | --------------------------------------------------------------------------------------------------------------------------------------

| | Level 3 - | unobservable inputs for the asset or liability.
| | --------- | -----------------------------------------------



118







For assets and liabilities that are recognised
in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels
in the hierarchy by re-assessing categorisation at the end of each reporting period.



For the purpose of fair value disclosures,
the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or
liability and the level of fair value hierarchy.



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 in an orderly transaction between market participants. 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 is determined by reference
to their quoted price at the reporting date. In the absence of quoted price, the fair value of the financial asset is measured
using valuation techniques.



| | (v) | Trade and other receivables
| | --- | ---------------------------

The fair value of trade and other receivables
expected to be realised beyond twelve months, 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.



| | (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) and interest rate 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).



119







| | 5. | Property, plant and equipment
| | -- | -----------------------------



The following
table presents the changes in property, plant and equipment during the year ended March 31, 2017



|                              |  | Cost                     |            |  | Accumulated depreciation |  |           | Carrying  | 
|----------------------------- |  | ------------------------ | ---------- |  | ------------------------ |  | --------- | --------- | 
|Particulars                   |  | As at 
    April 1, 2016 |            |  | Additions                |  |           | Disposals | 
|Building                      |  |                          | 2,301,987  |  |                          |  | -         |           | 
|Plant and machinery           |  |                          | 10,137,059 |  |                          |  | 1,464,523 |           | 
|Computer equipment            |  |                          | 951,508    |  |                          |  | 217,549   |           | 
|Office equipment              |  |                          | 386,702    |  |                          |  | 110,001   |           | 
|Furniture and fittings        |  |                          | 1,028,880  |  |                          |  | 68,328    |           | 
|Vehicles                      |  |                          | 2,456      |  |                          |  | 7,200     |           | 
|Total                         |  |                          | 14,808,592 |  |                          |  | 1,867,601 |           | 
|Add: Construction in progress |  |                          |            |  |                          |  |           |           | 
|Total                         |  |                          | 14,808,592 |  |                          |  | 1,867,601 |           | 



The following
table presents the changes in property, plant and equipment during the year ended March 31, 2016



|                              |  | Cost                    |            |  | Accumulated depreciation |  |           | Carrying  | 
|----------------------------- |  | ----------------------- | ---------- |  | ------------------------ |  | --------- | --------- | 
|Particulars                   |  | As at
    April 1, 2015 |            |  | Additions                |  |           | Disposals | 
|Building                      |  |                         | 1,993,085  |  |                          |  | 308,902   |           | 
|Plant and machinery           |  |                         | 8,340,520  |  |                          |  | 1,801,093 |           | 
|Computer equipment            |  |                         | 790,631    |  |                          |  | 198,488   |           | 
|Office equipment              |  |                         | 286,141    |  |                          |  | 101,010   |           | 
|Furniture and fittings        |  |                         | 755,409    |  |                          |  | 273,864   |           | 
|Vehicles                      |  |                         | 2,456      |  |                          |  | -         |           | 
|Total                         |  |                         | 12,168,242 |  |                          |  | 2,683,357 |           | 
|Add: Construction in progress |  |                         |            |  |                          |  |           |           | 
|Total                         |  |                         | 12,168,242 |  |                          |  | 2,683,357 |           | 



120







The following
table presents the changes in property, plant and equipment during the year ended March 31, 2015



|                              |  | Cost                    |            |  | Accumulated depreciation |  |           | Carrying  | 
|----------------------------- |  | ----------------------- | ---------- |  | ------------------------ |  | --------- | --------- | 
|Particulars                   |  | As at
    April 1, 2014 |            |  | Additions                |  |           | Disposals | 
|Building                      |  |                         | 1,991,503  |  |                          |  | 1,582     |           | 
|Plant and machinery           |  |                         | 7,346,809  |  |                          |  | 1,091,920 |           | 
|Computer equipment            |  |                         | 676,236    |  |                          |  | 138,687   |           | 
|Office equipment              |  |                         | 243,416    |  |                          |  | 45,834    |           | 
|Furniture and fittings        |  |                         | 661,581    |  |                          |  | 103,014   |           | 
|Vehicles                      |  |                         | 2,456      |  |                          |  | -         |           | 
|Total                         |  |                         | 10,922,001 |  |                          |  | 1,381,037 |           | 
|Add: Construction in progress |  |                         |            |  |                          |  |           |           | 
|Total                         |  |                         | 10,922,001 |  |                          |  | 1,381,037 |           | 



Leased assets

The Group’s leased assets include
certain buildings, plant and machinery acquired under finance leases. As at March 31, 2017 the net carrying amount of buildings,
plant and machinery and vehicles acquired under finance leases is ₹ 183,022 (March 31, 2016: ₹ 193,339), ₹ 718,162
(March 31, 2016: ₹ 1,113,026) and ₹ Nil (March 31, 2016: ₹ Nil) respectively. During the year, the Group acquired
leased assets of ₹ 168,715 (March 31, 2016: ₹ 510,783).



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, 2017 and March 31, 2016,
the Company had committed to spend approximately ₹ 1,044,509 and ₹ 558,249 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.



Capitalisation of expenses

The Company has capitalized expenses amounting
to ₹ Nil (March 31, 2016: ₹ Nil) which are directly attributable to the construction of building.



Security

As at March 31, 2017 property, plant and
equipment with a carrying amount of ₹ 5,444,659 (March 31, 2016: ₹4,812,229) are subject to a registered charge to
secure bank borrowings.



121







| | 6. | Intangible assets
| | -- | -----------------

Intangible assets comprise the following:



|                        |  | March 31, 2017 |         |  | March 31, 2016 |  |         | March 31, 2015 | 
|----------------------- |  | -------------- | ------- |  | -------------- |  | ------- | -------------- | 
|Goodwill                |  |                | 14,595  |  |                |  | 14,595  |                | 
|Other intangible assets |  |                | 544,507 |  |                |  | 591,051 |                | 
|                        |  |                | 559,102 |  |                |  | 605,646 |                | 



(i) Goodwill

The following table presents the changes in
goodwill during the years ended March 31, 2017 and 2016



|                                           |  | March 31, 2017 |        |  | March 31, 2016 | 
|------------------------------------------ |  | -------------- | ------ |  | -------------- | 
|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,
2017 and March 31, 2016 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, 2017, 2016 and 2015.



|                               |  | Bandwidth Capacity |          |  | Software |  |          | License fees |  |  | Total  | 
|------------------------------ |  | ------------------ | -------- |  | -------- |  | -------- | ------------ |  |  | ------ | 
|(A) Cost                       |  |                    |          |  |          |  |          |              |  |  |        | 
|Balance as at March 31, 2014   |  |                    | 553,302  |  |          |  | 498,783  |              |  |  | 50,000 | 
|Acquisitions during the year   |  |                    | 23,206   |  |          |  | 58,243   |              |  |  | 23,000 | 
|Disposals during the year      |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31, 2015   |  |                    | 576,508  |  |          |  | 557,026  |              |  |  | 73,000 | 
|Acquisitions during the year   |  |                    | 65,883   |  |          |  | 62,822   |              |  |  | -      | 
|Disposals during the year      |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31, 2016   |  |                    | 6,42,391 |  |          |  | 6,19,848 |              |  |  | 73,000 | 
|Acquisitions during the year   |  |                    | -        |  |          |  | 72,050   |              |  |  | -      | 
|Disposals during the year      |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31, 2017   |  |                    | 6,42,391 |  |          |  | 691,898  |              |  |  | 73,000 | 
|                               |  |                    |          |  |          |  |          |              |  |  |        | 
|(B) Amortization               |  |                    |          |  |          |  |          |              |  |  |        | 
|Balance as at March 31,2014    |  |                    | 92,180   |  |          |  | 446,658  |              |  |  | 18,406 | 
|Amortization for the year      |  |                    | 48,411   |  |          |  | 36,439   |              |  |  | 4,650  | 
|Impairment loss on intangibles |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31,2015    |  |                    | 140,591  |  |          |  | 483,097  |              |  |  | 23,056 | 
|Amortization for the year      |  |                    | 50,407   |  |          |  | 44,387   |              |  |  | 2,650  | 
|Impairment loss on intangibles |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31, 2016   |  |                    | 1,90,998 |  |          |  | 5,27,484 |              |  |  | 25,706 | 
|Amortization for the year      |  |                    | 56,396   |  |          |  | 59,548   |              |  |  | 2,650  | 
|Impairment loss on intangibles |  |                    | -        |  |          |  | -        |              |  |  | -      | 
|Balance as at March 31, 2017   |  |                    | 247,394  |  |          |  | 587,032  |              |  |  | 28,356 | 
|                               |  |                    |          |  |          |  |          |              |  |  |        | 
|(C) Carrying amounts           |  |                    |          |  |          |  |          |              |  |  |        | 
|As at March 31, 2015           |  |                    | 435,917  |  |          |  | 73,929   |              |  |  | 49,944 | 
|As at March 31, 2016           |  |                    | 4,51,393 |  |          |  | 92,364   |              |  |  | 47,294 | 
|As at March 31, 2017           |  |                    | 394,997  |  |          |  | 104,866  |              |  |  | 44,644 | 



122







Intangible assets that were fully impaired/amortised
were removed from the block.



Capital commitments

The Company had not committed to spend
any amount under agreements to purchase intangible assets during the year ending March 31, 2017 and 2016.



Capitalized borrowing costs

The Company had not capitalized any interest
cost during years ended March 31, 2017 and 2016.



| | 7. | Cash and cash equivalents
| | -- | -------------------------



Cash and cash equivalents as per consolidated
statement of financial position, as at March 31, 2017 amounted to ₹ 1,621,358 (March 31, 2016: ₹ 1,390,552). This excludes
cash-restricted of ₹ 262,907 (March 31, 2016: ₹ 345,328), 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, 2017 |           |   | March 31, 2016 |  |           | March 31, 2015 | 
|------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | -------------- |  | --------- | -------------- | 
|Current                                                                                           |  |                |           |   |                |  |           |                | 
|Bank deposits held under lien against borrowings / guarantees from banks / Government authorities |  |                | 262,907   |   |                |  | 345,328   |                | 
|Total restricted cash                                                                             |  |                | 262,907   |   |                |  | 345,328   |                | 
|                                                                                                  |  |                |           |   |                |  |           |                | 
|(b) Non restricted cash                                                                           |  |                |           |   |                |  |           |                | 
|Current                                                                                           |  |                |           |   |                |  |           |                | 
|Cash and bank balances                                                                            |  |                | 1,621,358 |   |                |  | 1,390,552 |                | 
|                                                                                                  |  |                |           |   |                |  |           |                | 
|Total cash (a+b)                                                                                  |  |                | 1,884,265 |   |                |  | 1,735,880 |                | 
|Bank overdraft used for cash management purposes                                                  |  |                | (991,161  | ) |                |  | (719,767  | )              | 
|Cash and cash equivalents for the statement of cash flows                                         |  |                | 893,104   |   |                |  | 1,016,113 |                | 



| | 8. | Lease prepayments
| | -- | -----------------



|                            |  | March 31, 2017 |           |  | March 31, 2016 | 
|--------------------------- |  | -------------- | --------- |  | -------------- | 
|Towards land and buildings* |  |                | 1,017,623 |  |                | 
|                            |  |                | 1,017,623 |  |                | 



* Includes ₹ 988,599 (March 2016:₹
870,184) paid for acquiring leasehold rights of land for construction of Data Centers.



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.



123







| | 9. | Other assets
| | -- | ------------



|Non current                               |  | March 31, 2017 |           |  | March 31, 2016 | 
|----------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Other deposits and receivables            |  |                | 1,121,872 |  |                | 
|                                          |  |                | 1,121,872 |  |                | 
|                                          |  |                |           |  |                | 
|Financial assets included in other assets |  |                | 213,424   |  |                | 



| | 10. | 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, 2017         |         
|Deferred tax assets                                |  |                        |         
|Property, Plant and Equipment                      |  |                        | 259,470 
|                                                   |  |                        | 259,470 
|                                                   |  |                        |         
|Deferred tax liabilities                           |  |                        |         
|Intangible assets                                  |  |                        | (127,280
|Finance Lease obligations                          |  |                        | (132,190
|                                                   |  |                        | (259,470
|                                                   |  |                        |         
|Net deferred tax asset recognized in balance sheet |  |                        | -       



The Group has recognised deferred tax assets
only to the extent of deferred tax liabilities arising during the year. 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, 2015 |          |   | Recognized in income statement |  |         | Recognized in Equity |  |  | Balance as at March 31, 2016 |  |  | Recognized in income statement |          |   | Recognized in Equity |  |         | Balance as at March 31, 2017 | 
|----------------------------- |  | --------------------------- | -------- | - | ------------------------------ |  | ------- | -------------------- |  |  | ---------------------------- |  |  | ------------------------------ | -------- | - | -------------------- |  | ------- | ---------------------------- | 
|Property, plant and equipment |  |                             | 159,787  |   |                                |  | 83,715  |                      |  |  | -                            |  |  |                                | 243,502  |   |                      |  | 15,968  |                              | 
|Intangible assets             |  |                             | (107,671 | ) |                                |  | (13,646 | )                    |  |  | -                            |  |  |                                | (121,317 | ) |                      |  | (5,963  | )                            | 
|Finance Lease obligations     |  |                             | (52,116  | ) |                                |  | (70,069 | )                    |  |  | -                            |  |  |                                | (122,185 | ) |                      |  | (10,005 | )                            | 
|                              |  |                             | -        |   |                                |  | -       |                      |  |  | -                            |  |  |                                | -        |   |                      |  | -       |                              | 



Unrecognized deferred
tax assets / (liabilities)



|                                 |  | As at March 31, 2017 |           |  | As at March 31, 2016 | 
|-------------------------------- |  | -------------------- | --------- |  | -------------------- | 
|Deductible temporary differences |  |                      | 233,501   |  |                      | 
|Unrecognized tax losses          |  |                      | 876,297   |  |                      | 
|                                 |  |                      | 1,109,798 |  |                      | 



124







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 years.



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.



Income tax expense recognized in profit
or loss



|                                                  |  | March 31, 2017 |     |  | March 31, 2016 |  |      | March 31, 2015 | 
|------------------------------------------------- |  | -------------- | --- |  | -------------- |  | ---- | -------------- | 
|Current tax expense / (benefit)                   |  |                |     |  |                |  |      |                | 
|Current period                                    |  |                | 698 |  |                |  | (135 | )              | 
|                                                  |  |                |     |  |                |  |      |                | 
|Deferred tax expense                              |  |                |     |  |                |  |      |                | 
|Origination and reversal of temporary differences |  |                | -   |  |                |  | -    |                | 
|Reversal of previously recognized tax losses      |  |                | -   |  |                |  | -    |                | 
|                                                  |  |                |     |  |                |  |      |                | 
|Total income tax expense / (benefit)              |  |                | 698 |  |                |  | (135 | )              | 



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, 2017 |          |   | Year ended March 31, 2016 |  |          | Year ended March 31, 2015 | 
|---------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ------------------------- |  | -------- | ------------------------- | 
|Profit before income taxes                                                                                 |  |                           | 643,097  |   |                           |  | 438,318  |                           | 
|Enacted tax rates in India                                                                                 |  |                           | 34.61    | % |                           |  | 34.61    | %                         | 
|Computed expected tax expense / (benefit)                                                                  |  |                           | 222,563  |   |                           |  | 151,693  |                           | 
|Effect of:                                                                                                 |  |                           |          |   |                           |  |          |                           | 
|Share based payment expense not deductible for tax purposes                                                |  |                           | 2,919    |   |                           |  | 8,657    |                           | 
|Unrecognised deferred tax assets on losses incurred during the year (net of temporary differences, if any) |  |                           | -        |   |                           |  | 16,476   |                           | 
|Unrecognized deferred tax asset on temporary differences                                                   |  |                           | (20,812  | ) |                           |  | (18,067  | )                         | 
|Difference on account differential tax rates in different jurisdictions                                    |  |                           | (723     | ) |                           |  | (212     | )                         | 
|Expenses/income not taxable                                                                                |  |                           | (2,562   | ) |                           |  | (2,751   | )                         | 
|Recognition of previously unrecognized  tax losses                                                         |  |                           | (200,687 | ) |                           |  | (155,931 | )                         | 
|                                                                                                           |  |                           | 698      |   |                           |  | (135     | )                         | 



125







| | 11. | Inventories
| | --- | -----------



|                  |  | March 31, 2017 |           |  | March 31, 2016 | 
|----------------- |  | -------------- | --------- |  | -------------- | 
|Trade inventories |  |                | 1,181,987 |  |                | 
|                  |  |                | 1,181,987 |  |                | 



The inventories
amounting to ₹ 1,154,013 (March 31, 2016: ₹ 741,432) are secured in connection with bank borrowings and overdraft.



| | 12. | Trade and other receivables
| | --- | ---------------------------



Trade and other receivables comprise:



|                                             |  | March 31, 2017 |           |  | March 31, 2016 | 
|-------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|(i)   Trade receivables, net                 |  |                | 6,950,563 |  |                | 
|(ii)  Other receivables including deposits   |  |                | 1,820,501 |  |                | 
|(iii) Construction contract related accruals |  |                | 10,628    |  |                | 
|                                             |  |                | 8,781,692 |  |                | 



| | (i) | Trade receivables as of March 31, 2017 and March 31, 2016 are stated net of allowance for doubtful
receivables. The Group maintains an allowance for doubtful receivables based on expected credit loss model. 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 36. Trade receivables consist of:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                         |  | March 31, 2017 |           |   | March 31, 2016 | 
|---------------------------------------- |  | -------------- | --------- | - | -------------- | 
|Trade receivables from related parties   |  |                | -         |   |                | 
|Other trade receivables                  |  |                | 7,184,753 |   |                | 
|                                         |  |                | 7,184,753 |   |                | 
|Less: Allowance for doubtful receivables |  |                | (234,190  | ) |                | 
|Balance at the end of the year           |  |                | 6,950,563 |   |                | 



The activity in the allowance for doubtful
accounts receivable is given below:



|                                     |  | For the year ended |         
|------------------------------------ |  | ------------------ | --------
|                                     |  | March 31, 2017     |         
|Balance at the beginning of the year |  |                    | 209,065 
|Add : Additional provision, net      |  |                    | 383,534 
|Less : Bad debts written off         |  |                    | (358,409
|Balance at the end of the year       |  |                    | 234,190 



| | (ii) | Other receivables comprises of the following items:
| | ---- | ---------------------------------------------------



|                                                   |  | March 31, 2017 |           |  | March 31, 2016 | 
|-------------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Advances and other deposits (Refer Note (a) below) |  |                | 540,233   |  |                | 
|Withholding taxes (Refer Note (b) below)           |  |                | 1,280,268 |  |                | 
|                                                   |  |                | 1,820,501 |  |                | 
|Financial assets included in other receivables     |  |                | 101,098   |  |                | 



126







Notes:

| | a) | Advances and other deposits primarily comprises of receivables in the form of deposits, sales tax/VAT,
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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 13. | Prepayments for current assets
| | --- | ------------------------------



Prepayments for current assets comprise
of the following:



|                                      |  | March 31, 2017 |         |  | March 31, 2016 | 
|------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Prepayments for purchase of bandwidth |  |                | 86,862  |  |                | 
|Prepayments related to insurance      |  |                | 8,123   |  |                | 
|Prepayments-others                    |  |                | 178,531 |  |                | 
|Lease prepayments                     |  |                | 17,263  |  |                | 
|                                      |  |                | 290,779 |  |                | 



| | 14. | Other investments
| | --- | -----------------



Other Investments comprise investment in
unquoted equity instruments classified as financial assets at FVTOCI and investment in unquoted debt securities classified as financial
assets at amortised cost. The details of such investments are given below:



|                                                                                 |  | March 31, 2017 |        |  | March 31, 2016 | 
|-------------------------------------------------------------------------------- |  | -------------- | ------ |  | -------------- | 
|Investment in equity instruments – unquoted                                      |  |                |        |  |                | 
|Investment in equity shares of  Vashi Railway Station Commercial Complex Limited |  |                | 150    |  |                | 
|Investment in equity shares of Sarayu Clean Gen Private Limited                  |  |                | 1,560  |  |                | 
|Investment in debt securities – unquoted                                         |  |                |        |  |                | 
|Investment in Attala Systems Corporation #                                       |  |                | 72,943 |  |                | 
|                                                                                 |  |                | 74,653 |  |                | 



# Unsecured convertible promissory note
of $1,125 with Attala Systems Corporation, of which $ 750 (₹ 48,629) and $ 375 (₹ 24,314) matures on 17th October 2019
and 4th January 2020 respectively. The note bears interest at a rate of five percent (5%). The promissory note is convertible into
equity securities under specific terms based on triggering events as defined in the agreement.



| | 15. | Equity
| | --- | ------



No of shares

|                                         |  | Year ended March 31, |            
|---------------------------------------- |  | -------------------- | -----------
|                                         |  | 2017                 |            
|Issued as at April 01                    |  |                      | 178,530,787
|Issued for cash                          |  |                      | -          
|Issued for consideration other than cash |  |                      | -          
|Exercise of share options                |  |                      | -          
|Issued as at March 31                    |  |                      | 178,530,787



In fiscal 2015, the authorized share capital
of the Company was enhanced by an amount of ₹ 189,000. Consequently theauthorized
share capital is increased to ₹ 2,040,000 divided into 204,000,000 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. 125,000,000 Equity shares are ₹
7.75 (March 31, 2016: ₹ 7) paid up per share.



127







The directors recommended a dividend of
₹ 1.2 per paid up Equity Share of ₹ 10 each for the year 2016-17 (2015-16: ₹
1 per paid up Equity share of ₹ 10 each) andis subject to approval by the shareholders at the Annual General Meeting
to be held on July 6, 2017. The dividend involved a cash outflow of ₹ 173,398 towards
dividend and ₹ 35,300 towards dividend distribution tax aggregating a total outflow of ₹ 208,698 (Previous year: ₹
141,030 towards dividend and ₹ 28,710 towards dividend distribution tax aggregating a total outflow of ₹ 169,740).



Also
refer note 37 – Issue of share on private basis to existing promoter group and Note 27 – Share-based payment



Share based payment reserve



Share based payment reserve represents
the stock compensation expense recognized in the statement of changes in equity.



Other components of equity:



a) Translation reserve



The translation reserve comprises all foreign
currency differences arising from the translation of the financial statements of foreign operations.



b) Fair value reserve



The fair value reserve comprises the cumulative
net change in the fair value of investments classified as at FVTOCI until the investments are derecognized or impaired.



c) Recognized actuarial gain / loss



Recognized actuarial gain / loss represent
the cumulative actuarial gain / loss recognized in other comprehensive income and presented within equity.



| | 16. | Finance lease obligations
| | --- | -------------------------



The Group leases routers and other equipment
under finance lease arrangements. The following is a schedule of future minimum finance lease commitments as at March 31, 2017:



|                           |  | March 31, 2017                |         |  | March 31, 2016 | 
|-------------------------- |  | ----------------------------- | ------- |  | -------------- | 
|                           |  | Future minimum lease payments |         |  | Interest       | 
|Less than one year         |  |                               | 367,620 |  |                | 
|Between one and five years |  |                               | 210,026 |  |                | 
|Total                      |  |                               | 577,646 |  |                | 



| | 17. | Employee benefits
| | --- | -----------------

|                     |  | March 31, 2017 |         |  | March 31, 2016 | 
|-------------------- |  | -------------- | ------- |  | -------------- | 
|Gratuity payable     |  |                | 89,114  |  |                | 
|Compensated absences |  |                | 38,184  |  |                | 
|                     |  |                | 127,298 |  |                | 



128







Gratuity cost



The components of gratuity costs recognized
in the consolidated income statement for the years ending March 31, 2017, March 31, 2016 and March 31, 2015 consist of the following:



|                |  | March 31, 2017 |        |   | March 31, 2016 |  |        | March 31, 2015 | 
|--------------- |  | -------------- | ------ | - | -------------- |  | ------ | -------------- | 
|Service cost    |  |                | 19,154 |   |                |  | 16,215 |                | 
|Interest cost   |  |                | 6,880  |   |                |  | 6,178  |                | 
|Interest income |  |                | (2,667 | ) |                |  | (2,590 | )              | 
|                |  |                | 23,367 |   |                |  | 19,803 |                | 

Details of employee benefit obligation
and plan asset are as follows:



|                                                                     |  | March 31, 2017 |         |   | March 31, 2016 | 
|-------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|Present value of projected benefit obligation at the end of the year |  |                | 109,826 |   |                | 
|Funded status of the plans                                           |  |                | (20,712 | ) |                | 
|Recognized (asset) / liability                                       |  |                | 89,114  |   |                | 



The following
table set out the status of the gratuity plan:



|Change in defined benefit obligation                      |  | March 31, 2017 |         |   | March 31, 2016 |  |        | March 31, 2015 | 
|--------------------------------------------------------- |  | -------------- | ------- | - | -------------- |  | ------ | -------------- | 
|Projected benefit obligation at the beginning of the year |  |                | 91,801  |   |                |  | 79,038 |                | 
|Service cost                                              |  |                | 19,154  |   |                |  | 16,215 |                | 
|Interest cost                                             |  |                | 6,880   |   |                |  | 6,178  |                | 
|Remeasurements - Actuarial (gain) / loss                  |  |                | 2,250   |   |                |  | (1,325 | )              | 
|Benefits paid                                             |  |                | (10,259 | ) |                |  | (8,305 | )              | 
|Projected benefit obligation at the end of the  year      |  |                | 109,826 |   |                |  | 91,801 |                | 



|Change in plan assets                                                                |  | March 31, 2017 |         |   | March 31, 2016 |  |        | March 31, 2015 | 
|------------------------------------------------------------------------------------ |  | -------------- | ------- | - | -------------- |  | ------ | -------------- | 
|Fair value of plan assets at the beginning of the year                               |  |                | 35,589  |   |                |  | 33,135 |                | 
|Interest income                                                                      |  |                | 2,667   |   |                |  | 2,590  |                | 
|Remeasurements – return on plan assets excluding amounts included in interest income |  |                | (14,785 | ) |                |  | 66     |                | 
|Employer contributions                                                               |  |                | 7,500   |   |                |  | 8,103  |                | 
|Benefits paid                                                                        |  |                | (10,259 | ) |                |  | (8,305 | )              | 
|Fair value of plan assets at the end of the year                                     |  |                | 20,712  |   |                |  | 35,589 |                | 
|                                                                                     |  |                |         |   |                |  |        |                | 
|Actual return on plan assets                                                         |  |                | (12,118 | ) |                |  | 2,656  |                | 



Actuarial assumptions at end of the
year:



The principal actuarial assumptions as
on March 31, 2017, 2016 and 2015 were as follows:

|                                                 |  | March 31, 2017 |            |  | March 31, 2016 |  |            | March 31, 2015 | 
|------------------------------------------------ |  | -------------- | ---------- |  | -------------- |  | ---------- | -------------- | 
|Discount rate                                    |  |                | 6.85% P.a  |  |                |  | 7.50% P.a  |                | 
|Long-term rate of compensation increase          |  |                | 7.00% P.a  |  |                |  | 7.00% P.a  |                | 
|Expected long term rate of return on plan assets |  |                | 7.00% P.a  |  |                |  | 8.00% P.a  |                | 
|Average future working life time                 |  |                | 4.39 years |  |                |  | 4.40 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.



129







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.



Contributions: The Group expects
to contribute ₹ 20,000 (March 31, 2016: ₹ 20,000) to its gratuity fund during the year ending March 31, 2017.



The expected benefit payments to be
made in the next few years are as under:



|Year               |  | March 31, 2017 |        |  | March 31, 2016 | 
|------------------ |  | -------------- | ------ |  | -------------- | 
|1 Year             |  |                | 19,534 |  |                | 
|2 to 5 years       |  |                | 66,704 |  |                | 
|6 to 10 years      |  |                | 45,103 |  |                | 
|More than 10 years |  |                | 28,171 |  |                | 



Plan assets:The Gratuity plan’s
weighted-average asset allocation at March 31, 2017 and March 31, 2016, by asset category is as follows:



|                          |  | March 31, 2017 |     |   | March 31, 2016 | 
|------------------------- |  | -------------- | --- | - | -------------- | 
|Funds managed by insurers |  |                | 100 | % |                | 



Remeasurements of the net defined benefit
liability recognized in other comprehensive income



Amount recognized in other comprehensive
income for the years ending March 31, 2017, 2016 and 2015 are as follows:



|                                                                                        |  | March 31, 2017 |        |   | March 31, 2016 |  |        | March 31, 2015 | 
|--------------------------------------------------------------------------------------- |  | -------------- | ------ | - | -------------- |  | ------ | -------------- | 
|Remeasurements of the net defined benefit liability                                     |  |                |        |   |                |  |        |                | 
|Actuarial (gain)/loss                                                                   |  |                |        |   |                |  |        |                | 
|-   Change in demographic assumptions                                                   |  |                | -      |   |                |  | -      |                | 
|-   change in financial assumptions                                                     |  |                | 3,271  |   |                |  | 1,250  |                | 
|-   experience variance                                                                 |  |                | (1,021 | ) |                |  | (2,575 | )              | 
|-   return on plan assets, excluding amounts recognized in net interest expense/ income |  |                | 14,785 |   |                |  | (66    | )              | 
|                                                                                        |  |                | 17,035 |   |                |  | (1,391 | )              | 



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
100 basis points in the discount rate and salary escalation rate.



|                                            |  | Discount rate                 |         |  | Salary escalation rate         | 
|------------------------------------------- |  | ----------------------------- | ------- |  | ------------------------------ | 
|                                            |  | Increase by 100 bps (₹ ‘000s) |         |  | Decrease by 100 bps  (₹ ‘000s) | 
|Present Value of Defined Benefit Obligation |  |                               | 104,867 |  |                                | 



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.



130







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 ₹ 85,006, ₹73,902
and ₹ 63,949 for the years ended March 31, 2017, 2016 and 2015. The Group has contributed to 401(K) plan on behalf of eligible
employees amounting to ₹ 9,728 (March 31, 2016: Nil) during the year ended March 31, 2017.



| | 18. | Other liabilities
| | --- | -----------------



|                                                    |  | March 31, 2017 |         |  | March 31, 2016 | 
|--------------------------------------------------- |  | -------------- | ------- |  | -------------- | 
|Deferred income and other liabilities               |  |                | 636,566 |  |                | 
|                                                    |  |                | 636,566 |  |                | 
|                                                    |  |                |         |  |                | 
|Financial liabilities included in other liabilities |  |                | 201,679 |  |                | 



| | 19. | Borrowings
| | --- | ----------

|                                                      |  | March 31, 2017 |           |  | March 31, 2016 | 
|----------------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Current                                               |  |                |           |  |                | 
|Term bank loans (Refer note 1 below)                  |  |                | 260,632   |  |                | 
|Other working capital facilities (Refer note 2 below) |  |                | 1,645,971 |  |                | 
|Borrowings from others (Refer note 3 below)           |  |                | 622,641   |  |                | 
|                                                      |  |                | 2,529,244 |  |                | 
|Non current                                           |  |                |           |  |                | 
|Term bank loans (Refer note 1 below)                  |  |                | 660,473   |  |                | 
|Borrowings from others (Refer note 3 below)           |  |                | 221,361   |  |                | 
|                                                      |  |                | 881,834   |  |                | 



The Group has borrowings which include:



| | 1. | The term loans bear interest rate ranging from 3.50% to 4.50% plus 6 months LIBOR in the case of
Foreign currency term loans and 9.30 % to 12.00% for others (March 31, 2016 - 10.85% to 12.00%) and repayable in equal quarterly
installments within a tenor of 3 to 5 years after moratorium periods ranging from 6 months to one year in certain cases.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Of total balance, an amount
of ₹ 137,500 is primarily secured by charge on movable fixed assets funded by term loan and also collaterally secured by
extension of EM of title deeds of property at Noida in the name of M/s Pace Info Com Park Pvt Ltd (Merged with the Sify from 1st
April 2014). An amount of ₹ 654,299 is primarily secured by EM of title deeds of property of the company at Rabale at
Mumbai and plant and machinery at Rabale Data Center 4th floor and the balance ₹ 129,306 is secured by property at Vashi
in Mumbai.



| | 2. | Working capital facilities:
| | -- | ---------------------------



| | (a) | Cash credit facilities amounting to ₹ 2,505,903, bank guarantees and all non fund facilities
availed by the Group are primarily secured by way of pari-passu first charge on the entire current assets of the Group to all working
capital bankers under consortium.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | In addition to the above, out of these Cash Credit facilities,
| | --- | --------------------------------------------------------------



(i)  exposure amounting to
₹ 1,598,032 is collaterally secured by way of pari-passu charge on the unencumbered movable fixed assets of the Group, both
present and future.



131







(ii)  exposure amounting to
₹ 1,052,478 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
₹ 907,871 is collaterally secured by equitable mortgage over the land and building at Noida, Uttar Pradesh and



(iv) the exposure amounting
to ₹ 220,000 is collaterally secured by equitable mortgage over the Vashi property at Mumbai.



| | (c) | These working capital facilities bear interest ranging
from 3.25% (plus LIBOR) to 11.50% p.a. [March 31, 2016 - 3.25% (plus LIBOR) to 12.00% p.a.] and these facilities are subject to
renewal annually.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Borrowings from others include secured borrowings, that are secured against relevant assets and
unsecured borrowings. These loans carry an interest rate ranging from 9.00% p.a to 12.50% p.a. (March 31, 2016 - 10% p.a. to 13%
p.a.)
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 20. | Trade and other payables
| | --- | ------------------------



|                                                           |  | March 31, 2017 |           |  | March 31, 2016 | 
|---------------------------------------------------------- |  | -------------- | --------- |  | -------------- | 
|Trade payables                                             |  | 2,740,550      |           |  | 1,923,557      | 
|Advance from customers                                     |  |                | 375,810   |  |                | 
|Accrued expenses                                           |  |                | 2,707,123 |  |                | 
|Other payables                                             |  |                | 544,124   |  |                | 
|                                                           |  |                | 6,367,607 |  |                | 
|                                                           |  |                |           |  |                | 
|Financial liabilities included in trade and other payables |  |                | 5,684,900 |  |                | 



| | 21. | Deferred income
| | --- | ---------------



|                |  | March 31, 2017 |           |  | March 31, 2016 | 
|--------------- |  | -------------- | --------- |  | -------------- | 
|Deferred income |  |                | 1,216,706 |  |                | 
|                |  |                | 1,216,706 |  |                | 

| | 22. | Revenue
| | --- | -------

|                             |  | Year ended     |           
|---------------------------- |  | -------------- | ----------
|                             |  | March 31, 2017 |           
|Rendering of services        |  |                |           
|Service revenue*             |  |                | 13,284,271
|Installation service revenue |  |                | 3,749,051 
|                             |  |                | 17,033,322
|Sale of products             |  |                | 1,398,698 
|                             |  |                | 18,432,020



* Including revenue arising from construction
contracts (refer to note 23) and revenue from operating leases amount to ₹ 394,100 (March 31, 2017), ₹391,500 (March
31, 2016) and ₹285,745 (March 31, 2015) (refer to note 30)



132







| | 23. | Construction contracts in progress
| | --- | ----------------------------------



|                                                                                                                                      |  | Year ended     |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -
|                                                                                                                                      |  | March 31, 2017 |  
|                                                                                                                                      |  |                |  
|Contract revenue recognized for the year                                                                                              |  |                | -
|Aggregate amounts of costs incurred and recognized profits (less recognized losses) upto the reporting date for contracts in progress |  |                | -
|Amount of retentions                                                                                                                  |  |                | -
|Gross amount due from customers for contract work presented as an asset                                                               |  |                | -



| | 24. | 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.



| | 25. | Selling, general and administrative expenses
| | --- | --------------------------------------------

|                                   |  | Year ended     |          
|---------------------------------- |  | -------------- | ---------
|                                   |  | March 31, 2017 |          
|                                   |  |                |          
|Personnel expenses                 |  |                | 1,236,206
|Marketing and promotion expenses   |  |                | 278,638  
|Administrative and other expenses* |  |                | 2,476,429
|                                   |  |                | 3,991,273



* Includes net foreign exchange loss of
Nil, ₹ 6,218 and ₹ 3,371 for the years ended March 31, 2017, 2016 and 2015 respectively



| | 26. | Personnel expenses
| | --- | ------------------

|                                                             |  | Year ended     |          
|------------------------------------------------------------ |  | -------------- | ---------
|                                                             |  | March 31, 2017 |          
|Salaries and wages                                           |  |                | 1,995,635
|Contribution to provident fund and other funds               |  |                | 118,101  
|Staff welfare expenses                                       |  |                | 28,236   
|Employee stock compensation expense                          |  |                | 17,638   
|                                                             |  |                | 2,159,610
|Attributable to cost of goods sold and services rendered     |  |                | 923,404  
|Attributable to selling, general and administrative expenses |  |                | 1,236,206



| | 27. | 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, ASOP 2007 and ASOP 2014. 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, ASOP 2005 and ASOP 2007 plans as at March 31, 2017. Our
stock option plans are detailed as under:



133







Associate Stock Option Plan 2014



In July 2014, the Shareholders
of the Group approved a new scheme for allotment of stock options to employees, the Associate Stock Option Plan 2014. 25,000,000
shares are reserved for this plan. Consequently 5,870,800 options were granted to the employees on January 20, 2015. The Group
has granted additional 525,000 and 184,300 options to employees during the year 2016-17 and 2015-16 respectively.



The options vest in the following manner:



4,304,600
Options (Option Plan I):                  3/5th
of the options vest at the end of one year from the date of grant. The remaining 2/5th vests at the end of every half year during
second and third years from the date of grant in four equal instalments



487,700
Options (Option Plan II):                   2/5th
of the options vest at the end of one year from the date of grant. The remaining 3/5th vests at the end of every half year during
second, third and fourth years in six equal instalments



1,787,800
Options (Option Plan III):               2/5th
of the options vest at the end of two years from the date of grant. The remaining 3/5th vests at the end of every half year during
third, fourth and fifth years in six equal instalments.



The stock
options can be exercised within a period of twelve months from the date of last vesting.



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 2014 and 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 ₹ | 
|----------------------------------------------- |  | ----------------- | --------- | - | ------------------------------------ |  | ----- | ----------------- |  |  | ------------------------------------ | - |  | ----------------- | ----- |  | ------------------------------------ | 
|                                                |  | 2017              |           |   | 2017                                 |  |       | 2016              |  |  | 2016                                 |   |  | 2015              |       |  | 2015                                 | 
|Outstanding at the beginning of the year        |  |                   | 5,665,800 |   |                                      |  | 79.10 |                   |  |  | 5,870,800                            |   |  |                   | 79.10 |  |                                      | 
|Granted during the year                         |  |                   | 525,000   |   |                                      |  | 58.69 |                   |  |  | 184,300                              |   |  |                   | 79.10 |  |                                      | 
|Forfeited during the year                       |  |                   | (353,400  | ) |                                      |  | 79.10 |                   |  |  | (389,300                             | ) |  |                   | 79.10 |  |                                      | 
|Expired during the year                         |  |                   | -         |   |                                      |  | -     |                   |  |  | -                                    |   |  |                   | -     |  |                                      | 
|Exercised during the year                       |  |                   | -         |   |                                      |  | -     |                   |  |  | -                                    |   |  |                   | -     |  |                                      | 
|Outstanding at the end of the year              |  |                   | 5,837,400 |   |                                      |  | 73.55 |                   |  |  | 5,665,800                            |   |  |                   | 79.10 |  |                                      | 
|Exercisable at the end of the year              |  |                   | 3,711,130 |   |                                      |  | 79.14 |                   |  |  | 2,544,180                            |   |  |                   | 79.10 |  |                                      | 



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. Share prices for the year
2011-12 have been eliminated in determining volatility as there had been extra ordinary price movements during the said period
on account of capital infusion by promoters. 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.



134







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.



A summary of information about fixed price
stock options outstanding with respect to ASOP 2014 is furnished below:



|As at          |  | Range of exercise price in ₹ |               |  | Number outstanding at March 31 |  |           | Weighted average exercise price in ₹ |  |  | Weighted average remaining contractual life |  | Number exercisable at March 31 |                   |  | Weighted average exercise price In ₹ |          
|-------------- |  | ---------------------------- | ------------- |  | ------------------------------ |  | --------- | ------------------------------------ |  |  | ------------------------------------------- |  | ------------------------------ | ----------------- |  | ------------------------------------ | ---------
|March 31, 2017 |  |                              | 60.60 – 82.00 |  |                                |  | 5,837,400 |                                      |  |  | 60.60 – 82.00                               |  |                                | 1.80 – 5.79 years |  |                                      | 3,711,130
|March 31, 2016 |  |                              | 79.10         |  |                                |  | 5,665,800 |                                      |  |  | 79.10                                       |  |                                | 2.81 - 5.81 years |  |                                      | 2,544,180



The assumptions used in Black Scholes model
to arrive at the fair value on grant date are as summarized below:

|Grant date         |  |  | Oct 19, 2016    |   |  |  | Jan 25, 2017    |  
|------------------ |  |  | --------------- | - |  |  | --------------- | -
|Option plan        |  |  | Option plan III |   |  |  | Option plan III |  
|Options granted    |  |  | 50,000          |   |  |  | 475,000         |  
|Assumptions        |  |  |                 |   |  |  |                 |  
|Market price (₹)   |  |  | 74.00           |   |  |  | 64.07           |  
|Exercise price (₹) |  |  | 66.60           |   |  |  | 57.66           |  
|Expected term      |  |  | 2 – 5 years     |   |  |  | 2 – 5 years     |  
|Volatility         |  |  | 35.1% - 55.8    | % |  |  | 40.6% - 48.6    | %
|Dividend yield     |  |  | 10              | % |  |  | 10              | %
|Discount rate      |  |  | 3               | % |  |  | 3               | %



| | 28. | Financial income and expense
| | --- | ----------------------------

|                                                                                       |  | Year ended     |         
|-------------------------------------------------------------------------------------- |  | -------------- | --------
|                                                                                       |  | March 31, 2017 |         
|Interest income on bank deposits                                                       |  |                | 26,463  
|Others                                                                                 |  |                | 96,121  
|Finance income                                                                         |  |                | 122,584 
|Interest expense on lease obligations                                                  |  |                | 88,138  
|Bank charges (including letter of credit, bill discounting and buyer’s credit charges) |  |                | 93,698  
|Interest expense on borrowings                                                         |  |                | 255,273 
|Finance expense                                                                        |  |                | (437,109
|Net finance income / (expense) recognized in profit or loss                            |  |                | (314,525



| | 29. | Earnings per share
| | --- | ------------------

The calculation of basic earnings per share
for the years ended March 31, 2017, 2016 and 2015 is based on the profit / (loss) attributable to ordinary shareholders of ₹
642,399, ₹ 438,453 and ₹ 375,258 respectively and a weighted average number of shares outstanding of 144,498,253, 141,030,787
and 141,030,787 respectively, calculated as follows:



|                                            |  | Year ended     |            
|------------------------------------------- |  | -------------- | -----------
|                                            |  | March 31, 2017 |            
|Net profit – as reported                    |  |                | 642,399    
|                                            |  |                |            
|Weighted average number of shares – basic   |  |                | 144,498,253
|Basic earnings per share                    |  |                | 4.45       
|                                            |  |                |            
|Weighted average number of shares – diluted |  |                | 144,498,253
|Diluted earnings per share                  |  |                | 4.45       



135







Weighted average number of ordinary
shares basic

|                                                                           |  | Year ended March 31, |            
|-------------------------------------------------------------------------- |  | -------------------- | -----------
|                                                                           |  | 2017                 |            
|Issued fully paid ordinary shares at April 01                              |  |                      | 53,530,787 
|Effect of shares issued on exercise of stock options                       |  |                      |            
|Effect of partly paid shares (Note 1)                                      |  |                      | 90,967,466 
|Weighted average number of equity shares and equivalent shares outstanding |  |                      | 144,498,253



Weighted average number of ordinary
shares diluted

|                                                               |  | Year ended March 31, |            
|-------------------------------------------------------------- |  | -------------------- | -----------
|                                                               |  | 2017                 |            
|Weighted average number of ordinary shares (basic)             |  |                      | 144,498,253
|Effect of stock options (Note 2)                               |  |                      | -          
|Weighted average number of equity shares outstanding (diluted) |  |                      | 144,498,253



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, 2017, these shares were partly paid up to the extent of ₹ 7.75 (March 31, 2016 : ₹ 7) per share.
Refer note 15 to the consolidated financial statements.

Note 2:
The Group has issued Associated Stock Options (ASOP 2014 - Refer Note 27) of which 5,837,400 options are outstanding as at March
31, 2017. These could potentially dilute basic earnings per share in the future but are not included in calculation of diluted
earnings per share during current year, as they are anti-dilutive.



| | 30. | 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
₹ 424,829, ₹ 400,026 and ₹ 370,340 for the years ended March 31, 2017, 2016 and 2015 respectively. The schedule
of future minimum rental payments in respect of operating leases is set out below:



As
at March 31, 2017

|Lease obligations                           |  | Total |           |  | Less than 1 year |  |         | 1-5 years |  |  | More than 5 years | 
|------------------------------------------- |  | ----- | --------- |  | ---------------- |  | ------- | --------- |  |  | ----------------- | 
|Non-cancellable operating lease obligations |  |       | 1,102,328 |  |                  |  | 111,469 |           |  |  | 477,441           | 



As
at March 31, 2016

|Lease obligations                           |  | Total |           |  | Less  than 1 year |  |        | 1-5 years |  |  | More than 5 years | 
|------------------------------------------- |  | ----- | --------- |  | ----------------- |  | ------ | --------- |  |  | ----------------- | 
|Non-cancellable operating lease obligations |  |       | 1,201,886 |  |                   |  | 99,558 |           |  |  | 462,045           | 



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 at March 31, 2017 |         |  | As at March 31, 2016 | 
|------------------------------------------------------------- |  | -------------------- | ------- |  | -------------------- | 
|Receivables not later than one year                           |  |                      | 207,266 |  |                      | 
|Receivables later than one year and not later than five years |  |                      | 23,746  |  |                      | 
|                                                              |  |                      | 231,012 |  |                      | 



136







31.   Segment
reporting



The operating
segments of the Group are as under:



Telecom
services -Domestic data, international data wholesale voice and network managed services



Data Center and IT Services



Data Center services:  Co-location
services



Cloud and managed services: IT infra services, IT transformation services, remote and onsite infrastructure managed services and delivery platforms



Technology
integration services:Data Center build, network integration, information security, end user computing and collaborative
tools and solutions



Applications integration services:Application development and maintenance, application testing, mobility solutions, eLearning, portals, online assessment
tools, process and automation.



The Chief Operating
Decision Maker (“CODM”), i.e, The Board of Directors and the senior management, evaluate the Group’s performance
and allocate resources to various strategic business units that are identified based on the products and services that they offer
and on the basis of the market served. The measure of profit / loss reviewed by the CODM is “Earnings/loss before interest,
taxes, depreciation and amortization” also referred to as “segment operating income / loss”. Revenue in relation
to segments is categorized based on items that are individually identifiable to that segment.



Bandwidth costs, which form a significant
part of the total expenses, is allocated to Network Services. Manpower costs of Technology resources rendering services to
support Infrastructure operations, Managed services and Application services, are identified to respective operating segments specifically. The
Group believes that the resulting allocations are reasonable.



Certain expenses, such as depreciation,
technology infrastructure and administrative overheads, which form a significant component of total expenses, are not allocable
to specific segments as the underlying services are used interchangeably. Management believes that it is not practical to provide
segment disclosure of these expenses and, accordingly, they are separately disclosed as “unallocated” and adjusted
only against the total income of the Group.



A significant part of the fixed assets
used in the Group’s business are not identifiable to any of the reportable segments and can be used interchangeably between
segments. As a result the measures of segment assets and liabilities are not regularly reviewed by the CODM and hence disclosures
relating to segment assets and liabilities have not been provided.



The Group’s operating segment information
for the years ended March 31, 2017, 2016 and 2015, are presented below:



Year ended March 31, 2017



|                                             |  |                          |            |   | Data Center and IT services* |  |            |                                     | 
|-------------------------------------------- |  | ------------------------ | ---------- | - | ---------------------------- |  | ---------- | ----------------------------------- | 
|                                             |  | Telecom Services
    (A) |            |   | Data Center Services
    (i) |  |            | Cloud and Managed
    Services (ii) | 
|Segment revenue                              |  |                          | 10,173,014 |   |                              |  | 1,975,076  |                                     | 
|Allocated segment expenses                   |  |                          | (8,050,025 | ) |                              |  | (1,489,135 | )                                   | 
|Segment operating income / (loss)            |  |                          | 2,122,989  |   |                              |  | 485,941    |                                     | 
|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                 |  |                          |            |   |                              |  |            |                                     | 





137







*The Chief Operating Decision Maker (CODM)
has evaluated and grouped Data Center services, cloud and managed services, technology integration services and applications integration
services into Data Center and IT services. There are no changes in the components of Telecom service segment. Accordingly, the
segment information has been presented.



Year ended March 31, 2016

|                                             |  |                          |            |   | Data Center and IT services  |  |            |                                     | 
|-------------------------------------------- |  | ------------------------ | ---------- | - | ---------------------------- |  | ---------- | ----------------------------------- | 
|                                             |  | Telecom Services
    (A) |            |   | Data Center Services
    (i) |  |            | Cloud and Managed
    Services (ii) | 
|Segment revenue                              |  |                          | 9,549,289  |   |                              |  | 1,522,944  |                                     | 
|Allocated segment expenses                   |  |                          | (7,342,032 | ) |                              |  | (1,165,293 | )                                   | 
|Segment operating income / (loss)            |  |                          | 2,207,257  |   |                              |  | 357,651    |                                     | 
|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, 2015

|                                             |  |                          |            |   | Data Center and IT services  |  |            |                                     | 
|-------------------------------------------- |  | ------------------------ | ---------- | - | ---------------------------- |  | ---------- | ----------------------------------- | 
|                                             |  | Telecom Services
    (A) |            |   | Data Center Services
    (i) |  |            | Cloud and Managed
    Services (ii) | 
|Segment revenue                              |  |                          | 8,461,006  |   |                              |  | 1,276,767  |                                     | 
|Allocated segment expenses                   |  |                          | (6,263,126 | ) |                              |  | (1,128,056 | )                                   | 
|Segment operating income / (loss)            |  |                          | 2,197,880  |   |                              |  | 148,711    |                                     | 
|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                 |  |                          |            |   |                              |  |            |                                     | 



138







*We have been historically including the
results of Digital Certification services under the Technology Integration Services segment. The industry in which this product
competes has witnessed newer competitions, business models resulting in dynamic market changes. In order to leverage the versatility
and the organizational capability, the Chief Operations Decision Maker (CODM) has evaluated options of reorganizing this product
into Applications Integration Services segment with effect from April 1, 2016. This will enable the product to address customers
across segments, achieve better marketability, flexibility and scale. The corresponding revenue and costs of this product have
been regrouped under the respective segments. Consequently, the figures for the years ended March 31, 2016 and March 31, 2015 are
adjusted accordingly.



The reclassification of components of operating
segments did not have any effect on reported operating income, profit before income taxes, net income or per share amounts. The
following table provides the amounts reclassified for prior period.



Operating revenue reclassification for
the year ended March 31, 2016 and March 31, 2015:



|Particulars                                        |  | March 31, 2016                  |           |   | March 31, 2015                    | 
|-------------------------------------------------- |  | ------------------------------- | --------- | - | --------------------------------- | 
|                                                   |  | Technology Integration Services |           |   | Applications Integration Services | 
|As previously reported                             |  |                                 | 2,038,699 |   |                                   | 
|Reclassification of Digital certification services |  |                                 | (332,997  | ) |                                   | 
|Revised Segment revenue                            |  |                                 | 1,705,702 |   |                                   | 



Operating costs reclassification for the
year ended March 31, 2016 and March 31, 2015:





|Particulars                                        |  | March 31, 2016                  |           |   | March 31, 2015                    | 
|-------------------------------------------------- |  | ------------------------------- | --------- | - | --------------------------------- | 
|                                                   |  | Technology Integration Services |           |   | Applications Integration Services | 
|As previously reported                             |  |                                 | 1,547,586 |   |                                   | 
|Reclassification of Digital certification services |  |                                 | (128,299  | ) |                                   | 
|Revised Segment costs                              |  |                                 | 1,419,287 |   |                                   | 



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, 2017 |  |       | 13,441,211 |  |                   |  | 4,990,809 |       | 
|Year ended March 31, 2016 |  |       | 9,860,427  |  |                   |  | 5,174,469 |       | 
|Year ended March 31, 2015 |  |       | 8,558,028  |  |                   |  | 4,306,586 |       | 



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 Group for each of the three years
ended March 31, 2017, 2016 and 2015.



| | 32. | 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, 2017. Income tax claims against the company as at March 31, 2017 amounted to
₹ 113,608 (March 31, 2016: ₹ 113,608).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



139







| | b) | Contingencies due to certain service tax claims as at
March 31, 2017 amounted to ₹ 516,736 (March 31, 2016: ₹ 505,264) and sales tax claims amounted to ₹ 13,845 (March
31, 2016: ₹13,845).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | 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, 2017.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | Effective 2012-13, the Company has participated in the
Export Promotion Capital Goods Scheme (“the scheme”) under which capital equipment is 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 31,2016: 6 times) the value of duty saved
over a period of 6 years (March 31,2016: 6 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, 2017, the company is holding
30 (March 31, 2016: 31) licenses with a corresponding export obligation of ₹2,391,737 (March 31, 2016: ₹ 1,837,325). Considering
the track record of the exports, the Company believes 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.



| | e) | In respect of contingencies arising on legal proceedings,
refer to Note 33.
| | -- | ---------------------------------------------------------------------------



| | 33. | Legal proceedings
| | --- | -----------------



| | a) | 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 ₹ 14,000 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 ₹ 26,000.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



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.



On a related matter, the service
providers had approached TDSAT (the ‘Tribunal’) 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. The Tribunal by its order dated April 23, 2015 held that
revenue from sale of scrap, treasury income etc are to be included as part of AGR. The Tribunal has also passed an order asking
DOT to levy at most nominal amount as token penalty with interest if permissible at the lower rates. The Company had approached
Honourable High Court of Madras (Court) in 2013 by filing a writ petition prohibiting Department of Telecommunications (DOT) from
levying license fee on non-licensed activities. An interim order was passed by the Court restraining DOT from recovering license
fee in respect of non- telecom activities for the writ petition filed in 2013. Also, the Group has received notices for earlier
years from DoT claiming Licence fee on the total Income (including income from Non Licensed activities). The Group has replied
to these notices stating that licence fees are not payable on income from non-licensed activities. The Group believes that it has
adequate legal defenses against these notices and that the ultimate outcome of these actions may not have a material adverse effect
on the Group's financial position and result of operations.



| | (ii) | The present license for ISP under unified license issued by DOT on June 2, 2014 provides for payment
of License fee on pure Internet services. However, the company through Internet Service Providers Association of India (ISPAI)
challenged the said clause before TDSAT. TDSAT passed a stay order on DOT from charging the licence fee on pure Internet services.
The group has appropriately accounted for any adverse effect that may arise in this regard in the books of account.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



140







| | b) | The Company is party to additional legal actions arising in the ordinary course of business. Based
on the available information as at March 31, 2017, 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 ₹ 37,429 (March 31, 2016: ₹ 19,700)
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 34. | 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, 2017, 2016 and 2015 are as follows:



|Particulars                                                                                                         |  | Country of incorporation |  | % of Ownership interest |    
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ----------------------- | ---
|                                                                                                                    |  |                          |  | March 31, 2017          |    
|Holding Company                                                                                                     |  |                          |  |                         |    
|Infinity Satcom Universal Private Limited                                                                           |  | India                    |  |                         | -  
|Raju Vegesna Infotech & Industries Private Limited (Subsidiary of Infinity Satcom Universal Private Limited)        |  | India                    |  |                         | -  
|Ramanand Core Investment Company Private Limited (Subsidiary of Raju Vegesna Infotech & Industries Private Limited) |  | India                    |  |                         | -  
|Subsidiaries                                                                                                        |  |                          |  |                         |    
|Sify Technologies (Singapore) Pte. Limited                                                                          |  | Singapore                |  |                         | 100
|Sify Technologies North America Corporation                                                                         |  | USA                      |  |                         | 100
|Sify Data and Managed Services Limited                                                                              |  | India                    |  |                         | 100



The following is a summary of the related
party transactions for the year ended March 31, 2017:



|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                     |  |                 | -       |  |            |  | - |        |  |  | -                        | 
|Lease rentals paid**                                 |  |                 | 1,035   |  |            |  | - |        |  |  | 4,385                    | 
|Dividend paid                                        |  |                 | 102,030 |  |            |  | - |        |  |  | 13,903                   | 
|Call money received                                  |  |                 | 300,000 |  |            |  | - |        |  |  | -                        | 
|Amount of outstanding balances                       |  |                 |         |  |            |  |   |        |  |  |                          | 
|Advance lease rentals and refundable deposits made** |  |                 | -       |  |            |  | - |        |  |  | 2,558                    | 
|Lease rentals payable**                              |  |                 | -       |  |            |  | - |        |  |  | 413                      | 



141







The following is a summary of the related
party transactions for the year ended March 31, 2016:



|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                     |  |                 | -       |  |            |  | - |        |  |  | -                        | 
|Lease rentals paid**                                 |  |                 | 923     |  |            |  | - |        |  |  | 3,898                    | 
|Dividend paid                                        |  |                 | 102,030 |  |            |  | - |        |  |  | 14,481                   | 
|Amount of outstanding balances                       |  |                 |         |  |            |  |   |        |  |  |                          | 
|Advance lease rentals and refundable deposits made** |  |                 | -       |  |            |  | - |        |  |  | 2,558                    | 
|Lease rentals payable**                              |  |                 | -       |  |            |  | - |        |  |  | 258                      | 



The following is a summary of the related
party transactions for the year ended March 31, 2015:



|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                     |  |                 | -      |  |            |  | - |        |  |  | -                        | 
|Lease rentals paid**                                 |  |                 | 923    |  |            |  | - |        |  |  | 3,898                    | 
|Dividend paid                                        |  |                 | 97,689 |  |            |  | - |        |  |  | -                        | 
|Amount of outstanding balances                       |  |                 |        |  |            |  |   |        |  |  |                          | 
|Advance lease rentals and refundable deposits made** |  |                 | -      |  |            |  | - |        |  |  | 2,558                    | 
|Lease rentals payable**                              |  |                 | -      |  |            |  | - |        |  |  | 121                      | 



**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 2011-12, 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, CEO, 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



During the year 2010-11, 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 ₹294 (Rupees Two Ninety
Four Thousand Only) per month and payment of refundable security deposit of ₹2,558. This arrangement will automatically be
renewed for a further period of two blocks of three years with all the terms remaining unchanged.



142







| | 35. | Financial instruments
| | --- | ---------------------



Financial instruments by category



The carrying value and fair value of financial
instruments by each category as at March 31, 2017 were as follows:



|Particulars                      |  | Note |    |  | Financial assets/ liabilities at amortised costs |  |           | Financial assets / liabilities at FVTPL |  |  | Financial assets / liabilities at FVTOCI |  |  | Total carrying value |       |  | Total fair value | 
|-------------------------------- |  | ---- | -- |  | ------------------------------------------------ |  | --------- | --------------------------------------- |  |  | ---------------------------------------- |  |  | -------------------- | ----- |  | ---------------- | 
|Assets                           |  |      |    |  |                                                  |  |           |                                         |  |  |                                          |  |  |                      |       |  |                  | 
|Cash and cash equivalents        |  |      | 7  |  |                                                  |  | 1,884,265 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other assets                     |  |      | 9  |  |                                                  |  | 213,424   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Trade receivables                |  |      | 12 |  |                                                  |  | 6,950,563 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other receivables                |  |      | 12 |  |                                                  |  | 101,098   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other investments                |  |      | 14 |  |                                                  |  | 72,943    |                                         |  |  | -                                        |  |  |                      | 1,710 |  |                  | 
|Liabilities                      |  |      |    |  |                                                  |  |           |                                         |  |  |                                          |  |  |                      |       |  |                  | 
|Bank overdraft                   |  |      | 7  |  |                                                  |  | 991,161   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Finance lease liabilities        |  |      | 16 |  |                                                  |  | 519,219   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other liabilities                |  |      | 18 |  |                                                  |  | 201,679   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Borrowings from banks            |  |      | 19 |  |                                                  |  | 2,567,076 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Borrowings from others           |  |      | 19 |  |                                                  |  | 844,002   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Trade and other payables         |  |      | 20 |  |                                                  |  | 5,648,740 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Derivative financial liabilities |  |      | 20 |  |                                                  |  | -         |                                         |  |  | 36,160                                   |  |  |                      | -     |  |                  | 



The carrying value and fair value of financial
instruments by each category as at March 31, 2016 were as follows:



|Particulars                      |  | Note |    |  | Financial assets/ liabilities at amortised costs |  |           | Financial assets / liabilities at FVTPL |  |  | Financial assets / liabilities at FVTOCI |  |  | Total carrying value |       |  | Total fair value | 
|-------------------------------- |  | ---- | -- |  | ------------------------------------------------ |  | --------- | --------------------------------------- |  |  | ---------------------------------------- |  |  | -------------------- | ----- |  | ---------------- | 
|Assets                           |  |      |    |  |                                                  |  |           |                                         |  |  |                                          |  |  |                      |       |  |                  | 
|Cash and cash equivalents        |  |      | 7  |  |                                                  |  | 1,735,880 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other assets                     |  |      | 9  |  |                                                  |  | 179,580   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Trade receivables                |  |      | 12 |  |                                                  |  | 5,497,289 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other receivables                |  |      | 12 |  |                                                  |  | 161,551   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other investments                |  |      | 14 |  |                                                  |  | -         |                                         |  |  | -                                        |  |  |                      | 1,710 |  |                  | 
|Liabilities                      |  |      |    |  |                                                  |  |           |                                         |  |  |                                          |  |  |                      |       |  |                  | 
|Bank overdraft                   |  |      | 7  |  |                                                  |  | 719,767   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Finance lease liabilities        |  |      | 16 |  |                                                  |  | 953,311   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Other liabilities                |  |      | 18 |  |                                                  |  | 205,187   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Borrowings from banks            |  |      | 19 |  |                                                  |  | 2,219,216 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Borrowings from others           |  |      | 19 |  |                                                  |  | 628,421   |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Trade and other payables         |  |      | 20 |  |                                                  |  | 4,655,605 |                                         |  |  | -                                        |  |  |                      | -     |  |                  | 
|Derivative financial liabilities |  |      | 20 |  |                                                  |  | -         |                                         |  |  | 56,496                                   |  |  |                      | -     |  |                  | 



Details of financial assets hypothecated
as collateral



The carrying amount of financial assets
as at March 31, 2017 and 2016 that the Group has provided as collateral for obtaining borrowings and other facilities from its
bankers are as follows:



143







|                          |  | As of          |          
|------------------------- |  | -------------- | ---------
|                          |  | March 31, 2017 |          
|Cash and cash equivalents |  |                | 1,654,634
|Other assets              |  |                | 209,742  
|Trade receivables         |  |                | 6,856,976
|Other receivables         |  |                | 100,457  
|                          |  |                | 8,821,809



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 IFRS 9, 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, 2017 and 2016.



|                       |  | As of          |      
|---------------------- |  | -------------- | -----
|                       |  | March 31, 2017 |      
|Forward contracts      |  |                |      
|In U.S. Dollars (Sell) |  |                | 3,000
|In U.S. Dollars (Buy)  |  |                | 9,800



The Company recognized a net loss on the
forward contracts of ₹ 14,338 (March 31, 2016: ₹ 272 – Net gain) for the year ended March 31, 2017.



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, 2017 |       
|Sell:                                                 |  |                | (US $)
|Not later than one month                              |  |                | 500   
|Later than one month and not later than three months  |  |                | 1,000 
|Later than three months and not later than six months |  |                | 1,500 
|Later than six months and not later than one year     |  |                | -     
|                                                      |  |                |       
|Buy:                                                  |  | (US $)         |       
|Not later than one month                              |  |                | 3,500 
|Later than one month and not later than three months  |  |                | 700   
|Later than three months and not later than six months |  |                | 5,600 
|Later than six months and not later than one year     |  |                | -     



| | (b) | Cross Currency Swap:
| | --- | --------------------



In
order to hedge against the variability in foreign currency cash flows, the company has entered into Cross Currency Swap (Principle
Only Swap) arrangement with the bank where in, the Company pays fixed US $ and receives Fixed₹principal and interest cash flows. The period of the swap contract is co-terminus with the period of the underlying term loan.
The Company has designated such derivative at Fair Value through profit or loss and the gains or loss arising on the fair valuation
of the said derivative is recognized in the Statement of income.



144







The details of outstanding cross currency
swap contracts as of March 31, 2017 are as under:



|                          |  | As of          |      
|------------------------- |  | -------------- | -----
|                          |  | March 31, 2017 |      
|                          |  | Payable (US $) |      
|Cross Currency Swap (US$) |  |                | 2,213



The maturity of these contracts extends
till five 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, 2017 |      
|                    |  | Payable (US $) |      
|                    |  |                |      
|Less than 1 year    |  |                | 946  
|One to two years    |  |                | 887  
|Two to three years  |  |                | 626  
|Three to four years |  |                | -    
|Four to five years  |  |                | -    
|Total cash flows    |  |                | 2,459



The Group
recognized a net gain on the cross currency swaps of ₹ 27,690 [March 31, 2016: ₹ 10,409 (loss)] for the year ended
March 31, 2017.



| | (c) | Interest Rate Swap:
| | --- | -------------------



During
the current year, the Group has entered into Interest Rate Swaps in order to hedge the cash flows arising out of the Interest payments
of the underlying US $ term loan. The period of the swap contract is co terminus with the period of the underlying term loan. As
per the terms of the arrangement, the Group shall pay fixed rate of interest (ranging from 6.3% p.a. to 6.5% p.a.) and receive
variable rate of interest equal to LIBOR + fixed rate (ranging from LIBOR + 3.5% to LIBOR + 4.5%) on notional amount. The swap
arrangement is marked to market at the end of every period and gains and losses are recognised in the Statement of Income.



The maturity of these contracts extends
till five years. The table below summarizes the cash flows (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, 2017    |    
|                    |  | Receivable (US $) |    
|                    |  |                   |    
|Less than 1 year    |  |                   | 288
|One to two years    |  |                   | 192
|Two to three years  |  |                   | 97 
|Three to four years |  |                   | 11 
|Four to five years  |  |                   | -  
|Total cash flows    |  |                   | 588



Total
notional amount outstanding as of March 31, 2017 is US $ 7,381 (March 31, 2016: US $ 10,136).



145







Net gain
on account of interest rate swaps amount to ₹ 7,073 for the year ended March 31, 2017 (March 31, 2016: ₹ 38,533 –
net loss).



Fair value measurements:



The details
of assets and liabilities that are measured on fair value on recurring basis are given below:



|                                                                                 |  | Fair value as of March 31, 2017 |   |  | Fair value as of March 31, 2016 | 
|-------------------------------------------------------------------------------- |  | ------------------------------- | - |  | ------------------------------- | 
|                                                                                 |  |                                 |   |  |                                 | 
|                                                                                 |  | Level 1                         |   |  | Level 2                         | 
|Assets                                                                           |  |                                 |   |  |                                 | 
|Derivative financial assets – gain on outstanding forward/options contracts      |  |                                 | - |  |                                 | 
|Liabilities                                                                      |  |                                 |   |  |                                 | 
|Derivative financial liabilities – loss on outstanding forward/options contracts |  |                                 | - |  |                                 | 
|Derivative financial liabilities - loss on outstanding cross currency swaps      |  |                                 | - |  |                                 | 
|Derivative financial liabilities - loss on outstanding interest rate swaps       |  |                                 | - |  |                                 | 



| | · | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities.
| | - | ------------------------------------------------------------------------------------------

| | · | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Level 3 – unobservable inputs for the asset or liability
| | - | --------------------------------------------------------

| | o | Loss on cross currency swaps are valued using present value of cash flows from the swap contract
estimated using swap rates calculated from respective countries’ yield curves.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Interest income/ (expenses), gains/
(losses) recognized on financial assets and liabilities



|Recognized in profit or loss                                            
|------------------------------------------------------------------------
|                                                                        
|                                                                        
|Financial assets at amortised cost                                      
|Interest income on bank deposits                                        
|Interest income from other financial assets                             
|Impairment loss of trade receivables                                    
|                                                                        
|Financial assets at fair value through profit or loss                   
|Net change in fair value of derivative financial instruments gain/(loss)
|                                                                        
|Financial liabilities at amortised cost                                 
|Interest expenses on lease obligations                                  
|Interest expenses on borrowings from banks, others and overdrafts       



146







| | 36. | 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.



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.



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, 2017 and 2016 was as follows:



|                          |  | March 31, 2017 |           |  | March 31, 2016 | 
|------------------------- |  | -------------- | --------- |  | -------------- | 
|Cash and cash equivalents |  |                | 1,884,265 |  |                | 
|Other assets              |  |                | 213,424   |  |                | 
|Trade receivables         |  |                | 6,950,563 |  |                | 
|Other receivables         |  |                | 101,098   |  |                | 
|Other investments         |  |                | 74,653    |  |                | 
|                          |  |                | 9,224,003 |  |                | 



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:



147







|Period (in days)        |  | March 31, 2017 |           |  | March 31, 2016 | 
|----------------------- |  | -------------- | --------- |  | -------------- | 
|Past due 181 - 270 days |  |                | 892,375   |  |                | 
|Past due 271 - 365 days |  |                | 344,529   |  |                | 
|More than 365 days      |  |                | 961,295   |  |                | 
|                        |  |                | 2,198,199 |  |                | 



See note 12 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. The total trade receivables that are not past
due as at March 31, 2017 amounts to ₹ 4,752,364 (March 31, 2016: ₹ 3,818,125) and impairment has not been recorded
on the same.



Details of collateral and other credit
enhancements held



|                                                        |  | March 31, 2017 |     |  | March 31, 2016 | 
|------------------------------------------------------- |  | -------------- | --- |  | -------------- | 
|Security deposits received for Internet access services |  |                | 497 |  |                | 



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:



|As at March 31, 2017                 |  |                 |            |  |                        |  |            |             |  |  |           |  |  |           |          
|------------------------------------ |  | --------------- | ---------- |  | ---------------------- |  | ---------- | ----------- |  |  | --------- |  |  | --------- | ---------
|                                     |  | Carrying
amount |            |  | Contractual
cash flows |  |            | 0-12 months |  |  | 1-3 years |  |  | 3-5 years |          
|Non-derivative financial liabilities |  |                 |            |  |                        |  |            |             |  |  |           |  |  |           |          
|Bank overdrafts                      |  |                 | 991,161    |  |                        |  | 991,161    |             |  |  | 991,161   |  |  |           | -        
|Finance lease liabilities            |  |                 | 519,219    |  |                        |  | 577,646    |             |  |  | 367,620   |  |  |           | 210,026  
|Other liabilities                    |  |                 | 201,679    |  |                        |  | 201,679    |             |  |  | 201,679   |  |  |           | -        
|Borrowing from banks                 |  |                 | 2,567,076  |  |                        |  | 2,711,343  |             |  |  | 1,974,313 |  |  |           | 571,339  
|Borrowings from others               |  |                 | 844,002    |  |                        |  | 915,494    |             |  |  | 676,150   |  |  |           | 239,343  
|Trade and other payables             |  |                 | 5,648,740  |  |                        |  | 5,648,740  |             |  |  | 5,648,740 |  |  |           | -        
|                                     |  |                 | 10,771,877 |  |                        |  | 11,046,063 |             |  |  | 9,859,663 |  |  |           | 1,020,708



As at March 31, 2016



|                                     |  | Carrying amount |           |  | Contractual
cash flows |  |           | 0-12 months |  |  | 1-3 years |  |  | 3-5 years |          
|------------------------------------ |  | --------------- | --------- |  | ---------------------- |  | --------- | ----------- |  |  | --------- |  |  | --------- | ---------
|Non-derivative financial liabilities |  |                 |           |  |                        |  |           |             |  |  |           |  |  |           |          
|Bank overdrafts                      |  |                 | 719,767   |  |                        |  | 719,767   |             |  |  | 719,767   |  |  |           | -        
|Finance lease liabilities            |  |                 | 953,311   |  |                        |  | 1,075,147 |             |  |  | 635,907   |  |  |           | 364,711  
|Other liabilities                    |  |                 | 205,187   |  |                        |  | 205,187   |             |  |  | 205,187   |  |  |           | -        
|Borrowing from banks                 |  |                 | 2,219,216 |  |                        |  | 2,358,425 |             |  |  | 1,526,906 |  |  |           | 575,078  
|Borrowings from others               |  |                 | 6,28,421  |  |                        |  | 701,429   |             |  |  | 440,450   |  |  |           | 257,973  
|Trade and other payables             |  |                 | 4,655,605 |  |                        |  | 4,655,605 |             |  |  | 4,655,605 |  |  |           | -        
|                                     |  |                 | 9,381,507 |  |                        |  | 9,715,560 |             |  |  | 8,183,822 |  |  |           | 1,197,762



148







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 US $, 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, 2017 was as follows:



All amounts in respective currencies as
mentioned (in thousands)

|                           |  | US $ |         |   | CA $ |  |    | CHF |  |  | EUR |   |  | GBP |      |   | DHS |  |     | HK $ | 
|-------------------------- |  | ---- | ------- | - | ---- |  | -- | --- |  |  | --- | - |  | --- | ---- | - | --- |  | --- | ---- | 
|Cash and cash equivalents  |  |      | 5,180   |   |      |  | -  |     |  |  | -   |   |  |     | -    |   |     |  | -   |      | 
|Trade receivables          |  |      | 11,226  |   |      |  | -  |     |  |  | -   |   |  |     | 44   |   |     |  | (1  | )    | 
|Trade payables             |  |      | (10,949 | ) |      |  | (4 | )   |  |  | (1  | ) |  |     | (110 | ) |     |  | (10 | )    | 
|Foreign currency loan      |  |      | (29,374 | ) |      |  | -  |     |  |  | -   |   |  |     | -    |   |     |  | -   |      | 
|Net balance sheet exposure |  |      | (23,917 | ) |      |  | (4 | )   |  |  | (1  | ) |  |     | (66  | ) |     |  | (11 | )    | 



The Group’s exposure to foreign currency
risk as at March 31, 2016 was as follows:



All amounts in respective currencies as
mentioned (in thousands)

|                           |  | US $ |         |   | CA $ |  |    | CHF |  |  | EUR |  |  | GBP |      |   | DHS |  |     | HK $ | 
|-------------------------- |  | ---- | ------- | - | ---- |  | -- | --- |  |  | --- |  |  | --- | ---- | - | --- |  | --- | ---- | 
|Cash and cash equivalents  |  |      | 4,297   |   |      |  | -  |     |  |  | -   |  |  |     | -    |   |     |  | -   |      | 
|Trade receivables          |  |      | 12,503  |   |      |  | -  |     |  |  | 12  |  |  |     | 171  |   |     |  | 128 |      | 
|Trade payables             |  |      | (7,428  | ) |      |  | (2 | )   |  |  | -   |  |  |     | (112 | ) |     |  | (17 | )    | 
|Foreign currency loan      |  |      | (24,543 | ) |      |  | -  |     |  |  | -   |  |  |     | -    |   |     |  | -   |      | 
|Net balance sheet exposure |  |      | (15,171 | ) |      |  | (2 | )   |  |  | 12  |  |  |     | 59   |   |     |  | 111 |      | 



Sensitivity analysis



A 10% strengthening of the rupee against
the respective currencies as at March 31, 2017 and 2016 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 2016.



|               |  | Other comprehensive income |   |  | Profit or ( loss) | 
|-------------- |  | -------------------------- | - |  | ----------------- | 
|March 31, 2017 |  |                            | - |  |                   | 
|March 31, 2016 |  |                            | - |  |                   | 



A 10% weakening of the rupee against the
above currencies as at March 31, 2017 and 2016 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.



149







Profile



At the reporting date
the interest rate profile of the Group’s interest –bearing financial instruments were as follows:



|                                |  | Carrying amount |          
|------------------------------- |  | --------------- | ---------
|                                |  | March 31, 2017  |          
|Fixed rate instruments          |  |                 |          
|Financial assets                |  |                 |          
|- Fixed deposits with banks     |  |                 | 449,195  
|- Investment in debt securities |  |                 | 72,943   
|                                |  |                 |          
|Financial liabilities           |  |                 |          
|- Borrowings from banks         |  |                 | 687,461  
|- Borrowings from others        |  |                 | 844,002  
|                                |  |                 |          
|Variable rate instruments       |  |                 |          
|Financial liabilities           |  |                 |          
|- Borrowings from banks         |  |                 | 1,879,615
|- Bank overdrafts               |  |                 | 991,161  



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 2016.



|               |  | Equity |   |  | Profit or (loss) | 
|-------------- |  | ------ | - |  | ---------------- | 
|March 31, 2017 |  |        | - |  |                  | 
|March 31, 2016 |  |        | - |  |                  | 



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.



| | 37. | 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 CEO, 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.



150







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, 2017, these shares are partly paid to the extent of ₹ 7.75 (March 31, 2016: ₹ 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, 2017, entities affiliated with our CEO, Chairman and Managing Director, Raju Vegesna, beneficially owned approximately
86.29% 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.



| | 38. | Corporate Social Responsibility (CSR) expenditure
| | --- | -------------------------------------------------



Section
135 of the Companies Act, 2013, requires Company to spend towards Corporate Social Responsibility (CSR). The Company is expected
to spend ₹ 8,348 towards CSR in compliance of this requirement. A sum of ₹ 8,389 has been spent during the fiscal year
towards CSR activities as per details given below. The balance amount to be spent is Nil.



|Organisation                                                             |  | Amount (₹) |      
|------------------------------------------------------------------------ |  | ---------- | -----
|VIRRD Trust, Dwarakha Tirumala                                           |  |            | 7,000
|Chitoor District Badminton Association                                   |  |            | 1,000
|Dr B R Ambedkar Vidya Academy EM High School                             |  |            | 337  
|Special Children Sports Academy                                          |  |            | 50   
|Book Donations to District Institute of Education and Training, Angaluru |  |            | 2    
|Total                                                                    |  |            | 8,389



| | 39. | Capital Management
| | --- | ------------------



The
Group's capital comprises equity share capital, share premium, and other equity attributable to equity holders. The primary objective
of Group's capital management is to maximise shareholders value. The Group manages its capital and makes adjustment to it in light
of the changes in economic and market conditions. The Group does so by adjusting dividend paid to shareholders. The total capital
as on March 31, 2017 is ₹ 8,264,419 (Previous Year: ₹ 7,500,831). No changes were made in the objectives, policies
or processes for managing capital of the Group during the current and previous year.



151







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    |  | Associate Stock Option Plan 2014                                                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                   
|4.6    |  | Form of Indemnification Agreement. (7)                                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                   
|4.7    |  | 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)
|       |  |                                                                                                                                                                                                                                                                                                   
|4.8    |  | Bank Guarantee, dated as of November 4, 1998. (2)                                                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                   
|4.9    |  | Agreement, dated November 10, 2004, between Sify Technologies Limited, Satyam Computer Services Limited, SAIF Investment Company Limited and Venture Tech Solutions Pvt. Ltd. (8)                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                   
|4.10   |  | Subscription Agreement dated March 24, 2008 between Sify Technologies Limited and Infinity Satcom Universal Private Limited. (13)                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                   
|4.11   |  | Scheme of Amalgamation between Sify Communications Limited with Sify Technologies Limited and their respective shareholders (15)                                                                                                                                                                  



152







|4.12 |  | 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, CEO, Chairman and Managing Director of the company. (16)             
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                             
|4.13 |  | 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, CEO, 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 LLP in respect of the Sify Technologies 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.                              



153







|(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.   
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                              
|(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.



154







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:                      
|                    | Name:                    
|                    | Title:                   
|                    |                          
|                    | By:                      
|                    | Name:                    
|Date: June 15, 2017 | Title:                   



155